It took Shannon three months to convince her father to move into a long-term care home, but now she’s facing a new problem: paying for the long-term care home.
Shannon’s father doesn’t have a lot of savings, but she knows her father has pension and other benefits. However, she is not sure if these benefits could cover for a long-term care home, and the response from each community is different.
If you are in Shannon’s shoes, we’ve got your back. Today, we are going to have a thorough conversation on paying for a long-term care home in Canada.
Brace yourself: it’s going to be a lot of information.
How to Pay for a Long-Term Care Home in Canada
Senior citizens’ most common benefits in Canada are Old Age Security (OAS) and Canada Pension Plan Benefits (CPP).
Old Age Security (OAS)
When a person residing in Canada reaches the age of 65, they are eligible for Old Age Security (OAS). There are three additional supplements to the OAS that allows the senior to gain more benefits:
The Guaranteed Income Supplement (GIS): Old Age Security (OAS) pension recipients eligible for the GIS receive a monthly non-taxable benefits; this is only available to people with a low income who reside in Canada.
The Allowance: OAS participants’ spouses and common-law partners can get an Allowance
Allowance for the Survivor: People with low incomes, reside in Canada, and have lost a spouse or common-law partner are eligible for Allowance for the Survivor.
Canada Pension Plan Benefits (CPP):
Another most used benefit would be the well-known “CPP”. As you may have started putting money in it since your first job. And now, it’s time to return.
A full CPP retirement pension is available at the age of 65, but you can apply for and get it as early as the age of 60 with a reduction, or wait untill as late as the age of 70 with an increase. All those who have contributed to this during the course of their working careers are entitled to a monthly benefit.
An additional benefit for those who have paid into the CPP system while receiving CPP benefits is the Post-Retirement Benefit (PRB). CPP Disability Pension and the CPP Survivor’s Pension are two other variants of CPP. So check your eligibility and “get the most of it.”
Workplace Pension Plan
Many people benefit from workplace pension plans that are privately administered by their employers. So, if your loved one’s employer offers a generous pension, you’re unlikely to have a problem paying for high-quality senior housing.
Investments means the home equity, savings, and other accounts that allows your loved one to use the money to pay for a long-term care home, rather than dipping into the their monthly benefits.
It also includes dividend stocks, mutual funds, index funds, bonds, Guaranteed Investment Certificates (GIC), etc. They do carry some risks alongside with the rewards, but as long as the market is “favorable”, they can also be used in later life planning. But before you or your loved one make any decision, don’t forget to seek out the advice from an experienced financial counsellor first.
If your loved one keeps investing in financial products such as long term care insurance, then it is the time to use it during his or her retirement year.
If your loved one is diagnosed with a critical or chronic disease, and are no longer able to care for themselves, long-term care insurance will cover a fixed part of the expenses, tax free. In addition, long-term care insurance may also cover some personal care services, however, it depends on the policies of each home care agency, so consult with the administrator to see if your loved one could get reimbursed.
Personal Savings and Incomes:
If your loved ones have managed to have a lot of savings, or continue to work by choice, then the payment will become much simpler.
Personal savings do not just refer to the money in the account. Equity, Registered Retirement Saving Plans (RRSPs) and investments can also be considered as part of personal savings.
Another common method that many seniors would choose is renting out their primary home and using the rent payment to cover the long-term care home expense.
What If I Can’t Afford Long Term Care Homes?
It happens. The cost of living in a long-term care home could be huge, and not all families can afford the full payment. However, in Canada, there are several financial assistant programs for long-term care that can help seniors spend their later years in peace with fewer expenses.
Financial Hardship Assistance is a government subsidized service for those who are experiencing significant financial hardship and in a long-term care home. Financial hardship means the client, the client’s spouse, or the client’s children can’t help to pay the following each month:
Home Energy (Hydro)
Telecommunications (Phone Bills, Internet)
The amount that the program offers depends on assessment of the client’s income statement, and how much the family can afford.
Government-Subsidized Nursing Home
Although health insurance in Canada does not pay for nursing-home care, there are government-subsidized nursing homes that offer rates based on the senior’s income. It doesn’t mean that the government will pay the full cost of the nursing home; the residents would still be required to pay a portion of their “room and board”.
In the End:
Paying for a long-term care home does not necessarily mean you have to pay it in full from your pocket. Make sure you plan your finances well, and make the best use of benefits, insurance and tax credits – these will all make the transition go more smoothly.