Every year, Sun Life Financial commissions a survey to take the pulse of Canadians’ perceptions about their health and the health care they receive. In the just released 2014 Sun Life Canadian Health Index, we also asked retirees how they’d planned for retirement and whether they experienced any surprises along the way.

This year’s findings centred around a theme of choice versus circumstance. We learned that almost seven out of 10 retired Canadians (69 per cent) didn’t stop working on the date they planned. Among those Canadians who did not retire as planned, 41 per cent cited personal health as the primary reason for retiring earlier.

Major health events such as a stroke, cancer diagnosis, or a serious injury can trigger long-term absences from work. They can even lead to an inability to return to work altogether. If Canadians aren’t planning for the unexpected, these experiences can lead to unanticipated costs, and an inability to continue to earn a working income.

Eighty-two per cent of Canadians recognize a serious health event could affect their finances, yet if they were forced to stop working five years earlier than planned, six out of 10 aren’t at all confident or don’t know if they could still finance their retirement. And only 33 per cent are somewhat confident.

These insights into health events provide opportunities for advisors to help clients understand and address the risks before they negatively affect their retirement. Creating a plan with solutions—health insurance, investment options, and products offering lifetime guaranteed income—can help them achieve their retirement goals.

Preparing for the unexpected

Canadians who aren’t financially prepared to retire typically say they’ll work longer to increase their retirement savings.1 But if a serious health event forces them to leave the workplace and retire early, they may not have a choice.

Findings from this year’s Health Index show significant health events and their fallout are a fact of life for many Canadians:

  • 45 per cent say they’ve experienced a significant health event.
  • Among retirees who have had a significant health event, 45 per cent ended up retiring for personal or medical reasons.
  • Of those who’ve had a significant health event, 26 per cent have experienced some financial hardship and 16 per cent have experienced significant financial hardship.
  • 25 per cent of those who’ve had a significant health event have reduced or depleted savings as a result.

Although Canadians cite deteriorating health as a top concern as they age (66 per cent), only 22 per cent have saved money or have otherwise planned for extra health-care expenses in retirement.

Getting professional financial advice makes a difference. Sun Life research shows 82 per cent of Canadians who work with an advisor are confident they’ll be able to take care of their medical expenses in retirement. Among those who don’t work with an advisor, just 66 per cent said the same.2

The value of your advice

Encourage clients to take action by explaining how including a part of their savings for premiums toward health insurance (critical illness insurance, long term care insurance, personal health insurance) provides cushions, softening the impact of health risks on their financial and retirement plans. Also clearly demonstrate the alternative—not having these products could shock their portfolios, resulting in:

  • severely reduced or depleted retirement savings, including unexpected withdrawals from bank accounts, mutual funds, RRSPs, TFSAs, etc.
  • the use of other assets, such as real estate
  • lifestyle changes to reduce spending
  • delayed retirement or forced early retirement.

In the years leading up to retirement, it’s particularly important to have critical illness insurance. Otherwise, clients may not have enough time to replace savings or income to cover costs resulting from a serious illness.

Will retirement savings last long enough?

Regarding longevity risk, the survey found 45 per cent of Canadian respondents are worried about outliving their retirement savings, which isn’t too surprising, considering they’re living much longer.3 We’ve written extensively about longevity in a recent Bright Paper, Running on Empty: Are we facing a longevity crisis in Canada?, which provides insights you can share with your clients.

In the Health Index, we also asked Canadians, “If you were to live 10 years longer than you thought you would, how confident are you that your finances would cover your needs for those extra years of retirement?” Half aren’t at all confident or don’t know if their finances would be adequate.

You can show your clients how they can decrease the risk of outliving their money by including products in their portfolio that provide lifetime guaranteed income, such as a payout annuity. This will also increase their confidence, knowing they have appropriate portfolio investment strategies in place to preserve and grow their assets.

Your valuable financial advice can help your clients by:

  • Educating them about the magnitude of the risks and the amount of savings/investments necessary to set aside for an unexpected health event.
  • Working with them to create and manage a plan – including the adjustment of their current investment portfolio—to reflect their financial and retirement objectives, and mitigate health and longevity risks.
  • Including a holistic suite of solutions – such as critical illness insurance, long term care insurance, personal health insurance and payout annuities—to support clients through a serious health event and give them confidence they won’t outlive their retirement savings.

Contact your Insurance Sales Director and Wealth Sales Director to learn more about the Money for Life approach and how it can help you start healthy conversations with your clients about the right mix of life, health, and wealth products to meet their needs.

For more information about the 2014 Sun Life Canadian Health Index, read the news release and report.

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1 2014 Sun Life Canadian Unretirement Index.

2 2014 Sun Life Canadian Unretirement Index.

3 In Canada, a 65-year-old woman’s average life expectancy is almost age 87; a 65-year-old man’s average life expectancy is almost age 84. Thirty-five years ago, those averages were age 84 for women and age 80 for men. Life Tables, Statistics Canada, 2012.

Rocco Taglioni, Senior Vice-President, Head of Distribution, Individual Insurance and Wealth, is responsible for the overall leadership of Sun Life Financial’s distribution organizations across its Retail business in Canada. His role encompasses the leadership of the distribution company, as President Sun Life Financial Distributors Inc., as well as the Insurance and Wealth wholesaling sales organizations. Through the various leadership teams he oversees the development, direction, and execution of the Distribution strategies centered on wealth management, protection, retirement, and estate and financial planning.

Since joining Sun Life in 2004, Rocco has held various executive leadership roles, including Vice-President Business Development, Group Benefits; Head of Individual Wealth Management; Senior-Vice-President, Client Solutions; and most recently Senior Vice-President, Distribution and Marketing, Individual Insurance and Wealth. Throughout his tenure at Sun Life, Rocco has led various business strategies centered on building, transforming, and evolving organizations and teams to drive higher levels of performance and success.

Rocco has 36 years of experience in strategic leadership in the insurance and investment industries. He has served on and is a member of a number of boards. Rocco is currently President and Chair, Sun Life Financial Distributors (Canada) Inc. and is a member of the Sun Life Financial Investment Services (Canada) Inc. board. He is a member of various industry associations, including Advocis, GAMA Canada, the Canadian Pension and Benefits Institute, and the Association of Canadian Pension Management.

Rocco holds a Bachelor of Arts in Economics from York University.