When people get ready to retire, they tend to focus on the RRSPs, pensions, government benefits and investments as part of their preparation.
One of the last things they think about is getting a medical. So why is a medical so important?
Proper retirement planning requries some assumptions for things like:
- inflation – the future rising cost of living (If your income and assets do not keep up with the cost of living, then your purchasing power and lifestyle will be erroded.
- rate of return on investments – this is a really tough one because more and more people have shifted their investment portfolios to equites, stocks or mutual funds. The problem with these non-guaranteed investments is the future returns are very difficult to predict.
- life expectancy – Ah ha! This is part of the reason why it is important to get a medical before an employee leaves and employer. Some of their key benefits will require some assumption about their health and life expectancy.
Group Life insurance conversion
When an employee terminates whether through retirement or for other reasons, they typically have 30 days to convert their group life insurance coverage into a personal plan without any medical underwriting. Because there is no medical underwriting, the cost to convert a group policy into an individual policy can be quite expensive and it is really beneficial for those employees who are not 100% healthy and would be rated if they tried to get a personal insurance policy on their own.
To properly assess whether the group conversion makes sense for you, you not only need to know the costs of the annual premium for the converted plan but you should compare that to the cost of a personal plan. The problem is 30 day is usually not long enough to get a proper assesment of cost of a personal plan. The bottom line is getting a medical will not guarantee that you will know your future life expectancy but if you discover health issues, that might change your outlook on life insurance.
For those employees that are fortunate to be part of a pension plan, it is important to recognize that pension options can also be guided by your assumptions for life expectancy. Those people that die too early typically subsidize people who live a long life. If you knew for sure that you would live past 90, that would change how you use your RRSPs and Pensions.
How long will your money last?
Typically people do not want to die with too much money. Nor do they want to run out of money too quickly. If you can provide your date of death, we can plan this to perfection. The problem of course is most people do not have their date of death figured out.
The bottom line is getting a medical is good practice. My wife is from the health industry and she constantly reminds me to get an annual check-up. We’ve all heard stories about people who discovered unknown lumps or ailments at routine checkups who are thankful for the ability to take early steps to deal with these health issues. Retirement and termination are no different and my wife would argue, they create the perfect excuse to get a routine check-up.