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(Ryan McVay/Ryan McVay/PHOTODISC)
(Ryan McVay/Ryan McVay/PHOTODISC)

Adviser Secrets

Why Canadian retirees are better off than Americans Add to ...

Despite the best efforts of Barack Obama, if there is one thing (other than gun control) that separates Canada from the United States, it is our health care system.

From a retirement-planning perspective, Canadians should be extremely thankful.

I have recently heard of a couple of reasonably wealthy American couples who had to declare bankruptcy in their 70s and 80s as a result of overwhelming health care costs. These were people who had health insurance, but because of the types of illnesses they suffered from, the health insurance only covered a certain percentage of their costs. In a matter of three years, $1-million (U.S.) of their savings disappeared.

A study published in the American Journal of Medicine reports 62 per cent of all U.S. personal bankruptcies in 2007 were medical-based, and among those who filed for bankruptcy, 75 per cent had some level of health insurance.

As a Canadian, it is hard to imagine. Not only is there public health care for illnesses and surgeries, but at age 65, even most prescription costs are covered. I know that there are always exceptions to the rule (long-term care, in-home nursing, etc.), but for most Canadians, health care costs do not play a major role in retirement planning.

Despite that fact, we constantly hear from clients about their fears of future health care costs.

I believe this is for two reasons:

1) The U.S. media has been so focused on health care coverage. So much of that news reaches Canadians that we can't help but join in the fears we keep hearing about.

2) It serves the purposes of the investment industry to maintain these fears.

On the second point, people who are worried about the eventual health care catastrophe that might ruin their finances will keep saving and be afraid to spend. In many cases, this is exactly the opposite of the advice they should be receiving.

It reminds me of those who play upon fears that we can't rely on the Canada Pension Plan to provide part of our retirement income.

As a general rule, Canadian retirees are in a better financial position than they think. In many ways, we can blame and thank the United States for that.

As we head into a holiday weekend, that's one more reason to enjoy being Canadian!

How prepared are you for retirement? Share your story with Globe readers.

Ted Rechtshaffen is president and CEO of TriDelta Financial Partners, a firm that provides independent financial planning advice. He was vice-president of business strategy at a major Canadian brokerage firm and found that the interests of the client were often not aligned with the interests of the adviser or the interests of the company.

This is part 14 in a series that looks inside the financial services industry at what advisers tell their clients and - more importantly - what they don't.

Other articles in Ted Rechtshaffen's Adviser Secrets series:

  • Do you want to protect your lender or your family?
  • You can be too rich
  • Your company pension plan: Demand a great deal
  • How taxes affect your financial health
  • How much can you afford to give?
  • Is your adviser a good one?
  • How to find a good financial planner
  • Will I have to manage my parents' finances?

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