Thanks to medical advances and healthier lifestyles, Canadians are living longer. According to Statistics Canada, a 55-year-old today can expect to live an additional 29 years to age 84.A longer life expectancy means you must ensure your income needs will be covered for 20, 25 or 30 years, depending on when you plan to retire.

A lot can happen to you in two or three decades, and much of it can be unexpected – with financial consequences.

Health care and helping family

In a nationwide survey of Canadian seniors, 58% of the respondents reported experiencing a major life event that upset their financial life.2 The most expensive events involved health care costs and helping family members with their financial problems.

During your working years, health insurance may have been covered by your employer. During retirement, however, coverage must come out of your own pocket. Health-related expenses may be at their highest at this point if you encounter additional health issues. Without insurance, you might face costly dental, hearing, vision and prescription drug expenses not covered by government health plans.

Then there’s the largest potential health expense: long-term care. Government health care, depending on your circumstances, will cover only a small percentage or no part of the costs of a residential-care facility. Paying the bill largely falls on you.

Long-term care is expensive and a stay of several years could significantly diminish your savings. And as you age, the likelihood that you or your spouse will need long-term care increases — almost 30% of Canadians 85 and over live in a special-care facility.3

Remember to take health care into account when you’re planning for retirement. You may find that you need to increase your savings or purchase long-term care insurance.  

Cost of living and inflation

Some people believe that the cost of living decreases in retirement, but that’s not necessarily true. Sure, when work ends, expenses like transportation and clothing may decrease, but other expenses may increase in a big way, like travel, recreation and home repairs if you’re in the same now-aging home.

You may not expect inflation to be much of a retirement issue since inflation rate has remained relatively low in recent years – but longer life expectancy adds to the issue. Two or three decades of retirement can devalue savings considerably, even with low-level inflation. Also, there’s no guarantee that inflation rate will stay low. A possible solution is to aim for investment yields and growth that outpace inflation, not settling for an overly large portfolio amount held in low-interest savings.

Use the inflation and your retirement income calculator to see how inflation would affect your retirement income.

Plan for the unexpected

It’s easy to think that you’re saving up for two things — for retirement income and for a legacy to leave your loved ones. But there’s more. You also need to plan for unexpected events that life may throw your way, whether that turns out to be health care costs, supporting family members or anything else.

Ultimately, saving for retirement is about planning for the expected while accounting for the unexpected. Talk to your advisor to make sure you have everything covered.

Ninety years of change in life expectancy, Statistics Canada, 2014
Financial life stages of older Canadians, Ontario Securities Commission, 2015
Living arrangements of seniors, Statistics Canada, 2011