Concerns related to rising healthcare costs are weighing on the minds of Canadian retirees and pre-retirees, says a Munich Re study.
These concerns are cited as a key factor for individuals deciding to delay retirement. More than 60% of those nearing retirement plan to work longer to hold onto their benefits. Among active employees receiving healthcare coverage from their employer, 30% cited continuation of health and dental benefits as the main reason to keep working past 65 years of age.
Read: You need a Plan B
“As Canadian workers have taken on a greater share of the burden for post-retirement healthcare expenses, too many find themselves financially ill-prepared to do so,” said Richard Letarte, senior vice president, group reinsurance at Munich Re. “Working longer to receive employer-sponsored benefits may be a solution for some, but over the long run this is not a sustainable plan of attack for those nearing retirement.”
Private insurance, as part of a sound financial plan, can provide Canadians with a safety net to protect against potential future healthcare costs which continue to rise at a rate outpacing inflation, he adds.
Canadians expect to spend an increasing proportion of their retirement income on health-related needs as they age, with nearly seven in 10 (68%) in agreement that healthcare will account for a greater percentage of their expenses.
Read: Canada vs. the U.S: Does our retirement funding stack up?
At the same time, relatively few are financially ready for or understand the magnitude of potential future healthcare costs. The survey found, less than one-third (32%) are financially well-prepared to deal with health needs during their retirement years and only 26% are confident they could financially handle a sudden, unexpected illness or accident during their retirement without compromising their lifestyle.
Further, almost half of survey participants estimated the total cost of their employer sponsored health benefits to be less than half of the actual cost.
“Whereas in the past the majority of Canadian workers could rely on their employers and the government to cover a significant share of their healthcare costs in retirement, the landscape has changed,” said Faizel Alladina, vice-president, group development at Munich Re. “Canadian retirees will be responsible for a much larger percentage of their healthcare costs.”