Planning for Long-Term Care Costs in Ontario: What $1M Doesn't Cover
The sobering truth about healthcare costs in retirement and how to plan for them before it's too late
Of all the risks that threaten a financially comfortable retirement in Ontario. Healthcare costs and specifically long-term care costs may be the most underestimated. Many affluent Ontarians assume that with $1 million or more in assets, they'll be able to afford whatever care they need. The reality is more complicated.
Ontario's long-term care system has changed dramatically in recent years. Wait times are long, publicly funded options are limited, and the cost of private or semi-private care has escalated significantly. For those who want choice, comfort, and quality of care in their later years, the financial requirements can easily exceed $10,000 per month or more.
Planning for these costs while your assets can still be deployed strategically is one of the most important and most often deferred elements of retirement planning.
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How Long-Term Care Works in Ontario
Ontario funds a network of long-term care (LTC) homes regulated under the Fixing Long-Term Care Act. Residents pay a co-payment (called 'accommodation costs') based on the type of room:
Basic (ward) room: a provincially regulated daily rate approximately $65–$70/day (approximately $24,000/year)
Semi-private room: approximately $78/day (approximately $28,500/year)
Private room: approximately $110/day (approximately $40,000/year)
No one is denied a basic room for inability to pay, the province subsidizes the accommodation cost for those who qualify financially. However, the reality is stark:
Wait times for a bed in a preferred home can exceed 1–3 years. In the interim, many individuals are placed in whatever LTC home has a vacancy. Which may not be their first choice.
The provincial LTC system does not cover all costs. Privately contracted medical care, specialized memory care, private companions, premium accommodations, and many ancillary services are additional costs borne by the resident.
The Real Cost of Private and Semi-Private Care in Ontario
For affluent Ontarians who want choice, quality, and flexibility in their care. Rather than the provincial lottery for LTC placement. The market for private retirement communities and home care has expanded significantly.
Assisted living in a private retirement community: $4,000–$8,000/month for a basic suite with care services
Memory care in a specialized private facility: $8,000–$14,000/month
Private home care (in-home nurse/PSW support): $25–$40+/hour, easily reaching $5,000–$12,000/month for significant daily support
Luxury continuing care retirement communities: $7,000–$15,000+/month
For a couple where both spouses eventually require significant care, the combined annual cost can easily exceed $150,000–$200,000. Potentially for multiple years. Even a $1 million portfolio can be materially depleted by an extended care episode.
The Longevity Multiplier
The probability of requiring long-term care increases significantly with age. Statistics Canada data shows that if admitted approximately 1 in 4 Canadians will spend more than a year in a care facility before death. For couples, the probability that at least one partner will require significant long-term care is substantially higher. Planning for a low-probability event means being ready for a high-probability one, when you look at couples.
The Role of Long-Term Care Insurance
Long-term care insurance (LTC insurance) is specifically designed to cover the cost of care when you can no longer perform a defined number of daily living activities independently. A policy pays a daily or monthly benefit when triggered, which can be used to fund home care, retirement community costs, or supplemental LTC home expenses.
Key considerations for LTC insurance in Ontario:
The best time to purchase LTC insurance is in your 50s or early 60s, while you are still in good health and premiums are manageable. Waiting until your late 60s significantly increases premiums and risk of uninsurability.
Policies vary significantly in benefit amount, elimination period (the waiting period before benefits begin), benefit duration, and inflation protection. A 90-day elimination period with a $5,000/month benefit and a 3% annual inflation adjustment is a common starting point.
Some policies are 'use it or lose it'; others include return-of-premium features. Hybrid products combining life insurance with a LTC benefit rider are also available.
LTC insurance premiums can be significant. Often $3,000–$7,000+/year for a healthy 60-year-old, depending on coverage. But premiums should be compared against the potential cost of self-insuring through portfolio assets.
Self-Insuring: The Alternative Approach
Some affluent Ontarians choose to self-insure for long-term care, setting aside a dedicated pool of assets (ideally in a TFSA for tax-free access) intended to fund future care costs. The advantages: no insurance premiums, no policy complications, and complete flexibility in how the funds are used.
The risk: underestimating the cost or duration of care, or depleting the fund through a combination of care costs and other large expenses. For most Ontarians with $1–2 million in total assets, pure self-insurance for extended care is a meaningful risk. For those with $3M+, the calculus shifts.
The Decision Framework
The right approach to long-term care planning typically involves a combination of:
An honest assessment of your family health history, personal risk tolerance, and current health status
A review of what care you would want and what it realistically costs in your preferred area
A financial plan stress-test showing the portfolio impact of 3, 5, and 10 years of significant care costs
A comparison of the cost and coverage of available LTC insurance products versus self-insurance
Have You Planned for the Costs of Care?
Long-term care planning is one of the most important and most deferred conversations in retirement planning. We help our clients model the financial impact of various care scenarios and build a strategy that protects their assets and their choices without unnecessarily over-insuring.
Contact us today for a complimentary retirement income consultation.
Disclaimer
This publication is for informational purposes only and has been prepared from public sources which are meant to be reliable. None of the information in this should be construed as investment advice. Speak to your Investment Advisor to learn if this product is right for you. Designed Securities Ltd. (DSL) is regulated by the Canadian Investment Regulatory Organization (CIRO), and a Member of the Canadian Investor Protection Fund (www.cipf.ca). Christopher Burke is registered to advise in securities to clients residing in Ontario. The views expressed are those of the author and not necessarily those of DSL. This report does not constitute an offer or solicitation in any jurisdiction in which such offer or solicitation is not authorized or to any reliable person to whom it is unlawful to make such offer or solicitation. Content is accurate as of the date of publication, and subject to change without notice.
