Rules prevent retirees from saving for LTC

Rules prevent retirees from saving for LTC

Overhauling pension rules that discourage older citizens from saving could help manage the doubling over the next 20 years of the number of Canadians 75 years of age and older who will need long-term care (LTC).

In a C.D. Howe Institute ‘Intelligence Memo,’ Don Drummond, the Stauffer-Dunning Fellow at Queen’s University and fellow-in-residence at the C.D. Howe Institute, and David Jones, a master of public policy candidate at the Munk School of Global Affairs & Public Policy, say action is needed on LTC costs which will more than triple over the next 30 years. “This aligns with a Queen’s University report that also projects that –without a significant change in policy – LTC costs as a share of GDP (using the narrow definition of institutional care) could triple by 2041 from its 2018 level,” they say.

One action they recommend is the end to forcing seniors to draw down their registered retirement savings as of age 71. In the year an individual turns 71 years old, they are required to withdraw the funds in their registered retirement savings plan (RRSP), transfer them to a RRIF (registered retirement income fund), or use them to purchase an annuity.

The authors suggest removing this restriction will give retirees funds they may need in later years to pay for their care.