When Nicole Maliteare visited a retirement residence last month to see if it could accommodate her ailing father, sticker shock set in. "To be honest, I was stunned," says the 45-year-old single mother of two children, 8 and 6. "How do people afford this?"
Ms. Maliteare was quoted $5,000 a month for a private room with a shared kitchen and living space at a retirement residence in Toronto's Etobicoke suburb. She wants to move her 72-year-old father, who has just been diagnosed with Alzheimer's, to Toronto from Alliston, Ont., financing the retirement home with the sale of his house. But she knows that the $350,000 she might fetch for the house may only cover five or six years at a retirement home, and she's convinced "his body will outlive his brain." She also has her children's expenses to pay for, car payments and a mortgage.
Like many Canadians in their 40s and 50s, Ms. Maliteare never saw this coming. Though she started saving for her own retirement at an early age, she doesn't have savings to cover her father's care. "It's not something you think of growing up – that you're going to have to pay for your parents," she says. "You have to worry about your own retirement years."
It's a situation that's increasingly common, the result of parents who live much longer, have fewer defined benefit pension plans and face high retirement costs. According to a 2014 BMO Nesbitt Burns study, 55 per cent of the sandwich generation (defined as those between 45 and 64) is caring for an elderly family member.
In the past, more people had defined-benefit plans, says Sylvain Brisebois, regional manager, Eastern Canada, for BMO Nesbitt Burns in Ottawa. "But those are very expensive plans and a lot of employers are doing away with [them]."
Mr. Brisebois points out that families are also a lot smaller than in the past, with one or two children shouldering the financial burden of their parents' care – not four or five.
Kelly Chow, a licensed insolvency trustee with BDO Canada in Vancouver, agrees. Having been in the business for 30 years, he says the trend of retirees needing a lot of financial help from their children is a relatively new one. "In the early eighties, it was extremely rare to see an insolvent pensioner. Nowadays, 20 to 25 per cent of the people we see are pensioners."
Mr. Brisebois says he sees many clients who, in addition to raising their families, are stepping in to help out their financially challenged parents who require assisted living. "It's rarely a planned event – it's an event that lands in your lap."
Many in this situation don't have adequate retirement savings for themselves. Collectively, the sandwich generation is half a million dollars short on average of the retirement savings they need to retire comfortably, according to BMO. And at the same time, retirement-age boomers are $400,000 short of that dream retirement on average.
What does that mean for those who are sandwiched? Thirty-nine per cent of them are worried that paying for the retirements of their parents will erode their own living standards, according to the BMO survey.
"The sandwich generation has to be aware of this potential reality and they have to take retirement planning and financial planning and budgeting a little more seriously and they have to consider the situation of their parents more than we did in the past," says Mr. Brisebois.
That means it's time to dial back on expenses and max out tax-free savings accounts, says Tom Davidoff, associate professor at the University of British Columbia's Sauder School of Business in Vancouver. He says those in Gen X and Gen Y need to start cutting back on lavish lifestyles – high-end cars, vacations every year – while putting aside money for registered education savings plans, registered retirement savings plans and safer investment vehicles, such as index funds and exchange-traded funds.
"You've got to anticipate this in your 30s," says Mr. Davidoff. "Don't pile on debt. The 40s are rough and the 50s are rough. You have to plan for that."
Mr. Chow can't emphasize enough the power of saving. "Budgeting is supreme – you can't put enough away," he says, adding that he sees elderly clients daily who only have Old Age Security and Canada Pension Plan and are being supported by their children.
He suggests considering such vehicles as life annuities for elderly parents, as annuities are purchased from an insurance firm for a lump sum but then provide a fixed, predictable income in retirement.
A less-secure option, when the elderly parent has a home but few savings, is to explore a home equity line of credit or a reverse mortgage. However, Mr. Chow cautions potential buyers to read the fine print and ensure that the interest rates charged aren't too high (a typical interest rate on a CHIP five-year reverse mortgage is 5.9 per cent), and that they are fully committed to paying it off, either monthly or when they sell the home.
And finally, when housing costs become too much for a child, and the parents are still in fairly good health, there is always the option of having the elderly person move home with the son or daughter in lieu of a retirement residence, says Mr. Chow.
"Some might have to make some drastic choices," concedes Mr. Brisebois.
That's something Ms. Maliteare is well aware of. "It's a bit of a reality check right now," she says. As an only child, however, she is committed to getting her father the care he needs.
Mr. Davidoff feels that the sandwich generation is coming around to the idea that when it comes to their parents' retirement, it's payback time: "Saving for retirement is a lifetime thing. Your parents invest in you as a kid by getting you an education. They've got to get a return on that investment. You're going to pay that back in their retirement and you've got to be prepared for that."
A Globe and Mail Worksheet
How much does long-term care cost?
Canadians are living longer and as we age, we require more hands-on care and medical attention. That can include staying at a long-term care facility, a place that offers seniors 24-hour nursing and personal care.
For many Canadian families, the long-term care system represents a “safety net” should they become unable to care for themselves or a loved one. But staying in such a facility, despite being subsidized by the government, is generally not free. Accounting for the cost of long-term care can be an important part of retirement planning.
We developed this calculator to help readers understand, estimate and plan for the cost of long-term care in government-subsidized facilities. Select your province and the amount of time for which you think you might need care, and the calculator will show you the total estimated cost at current rates.
Keep in mind that although the calculator shows a lump sum, the costs are charged monthly by the facility and can be offset by any monthly income you or your family members have. In addition, long-term care facilities often have different options (such as private or semi-private rooms) that can affect the total cost. Where possible, we’ve included these options to illustrate how different choices affect the final tally.
The average length of stay in a long-term care facility is about 18 months, according to the Canadian Institute for Health Information.
Notes and Assumptions
Unless otherwise noted, costs listed are maximum rates. For provinces that list daily costs, a monthly rate was calculated by finding the annual total and dividing it by 12. Individuals may also be responsible for other costs, such as prescriptions and hygiene products. Some provinces use a formula to calculate a rate based on the individual’s financial means. Depending on the province, subsidies may be available to cover a portion of the resident’s fees. Different pricing may apply for married residents and common-law couples. The rates listed for Nova Scotia are for nursing homes, rather than residential care facilities. Check your provincial website for up-to-date pricing as rates are subject to change.