There’s no shortage of horror stories associated with the “gap” years – the lingering time between healthy life expectancy and actual life expectancy.
You often hear of the fallout from poorly planned end-of-life financial decisions, ill-managed expectations of family members or the onset of dementia resulting in an inability to properly sort out financial affairs.
The issue is, while healthy life expectancy for men and women in Canada is 69 and 72 years, respectively, many are living nine to 11 years beyond the “healthy” time – and these extended final years are causing havoc with their finances and savings.
A Growing, Aging Demographic
In 2011, nearly 15 per cent of the population – about five million people – was 65 or older. It’s an issue RBC Wealth Management tackled in “Mind the Gap: What Canada’s Baby Boomers Need to Know to Protect Themselves.”
“These changing demographics present challenges that we haven’t seen before in Canada,” said Tony Maiorino, head of RBC Wealth Management Services, in a release with the report. “Specifically, while we have always been keenly aware of the financial vulnerabilities faced by persons over the age of 65, our concerns lie equally with the growing demographic of Canadians who will no longer be able to manage their own financial affairs due to health issues.”
According to the report, more than 100,000 Canadians will develop some form of dementia this year – in addition to over 500,000 Canadians who currently live with it. Factor in that the rate of dementia increases significantly over 85.
“This means an increased need for resources and concern for those who have not planned for the possibility that they may be unable to act or make decisions for themselves,” said Maiorina. “There is a growing urgency around this issue and Canadians need to be aware of it.”
Make The Gap Years Part Of Your Financial Plan
If you’re nearing 65, it might be time to plan ahead for incapacity, keeping in mind that your spouse or next of kin can’t make decisions or access your financial information and assets without some sort of official nod from you.
The key to protecting yourself may lie in drafting up a Power of Attorney – a legal document where you designate an “attorney’ to act on your behalf in light of incapacitation.
“Without question, creating a Power of Attorney (POA) is a prudent course of action,” said Maiorino. “While the document itself is an essential estate planning tool, of equal importance is who will take on the role – appointing the most appropriate person or people to take on the role of attorney is a vital decision.”
How To Choose The Right Power Of Attorney
For starters, look for someone who knows how to manage money. If cousin Billy has a bit of a gambling problem – he might not make the best fit.
Next, consider your attorney’s ability to be there quickly in the event of an emergency.
Age is also an important requirement. Keep in mind, your attorney is expected to help you as you age so if they’re in the same predicament as you, it wont do you any good.
Fourth, make sure they’re organized enough to balance their life while keeping tabs on your affairs.
And finally, avoiding appointing a family member your POA can help alleviate potential emotional biases. It may be cruel to say, but, realistically, if the attorney is a family member, they could be more concerned with their inheritance than doing what’s best for you.