When Critical Illness Affects Your Financial Plan
Janea Dieno JBD Financial Planning 217-3501 8th Street Saskatoon 306.979.5000 c: 306.281.3891 janea@jbdfinancialplanning.com www.jbdfinancialplanning.com
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recently met with Tom and Jen Smith*. Tom, age 43, and Jen, age 39, have two children, a house, a mortgage and dreams for retirement. The couple has been saving their entire marriage and have managed to jointly accumulate $150,000 in RRSPs. They have life insurance in place that will ensure their family is taken care of should anything happen to either one of them. Jen was recently diagnosed with breast cancer. Her treatment is aggressive and will require her to take six to eight months off work. Tom must now become the primary
caregiver and also take time away from work, affecting his own income. Jen’s doctors have recommended a treatment plan that is not covered by her provincial health insurance. Jen and Tom do not have the money to pay for the treatment, so consider RRSPs as their only answer.
The question is: Will they have enough? The answer is: No, they will not. Tom and Jen estimate they will need $95,000 to fund the treatment and supplement their loss of income. With their tax rate of 44 per cent, even if they withdraw the full $150,000 in RRSPs, they will only net $84,000. A critical illness can have a devastating impact on your finances. The most thorough retirement income projections do not make allowances for the additional costs of living involved when someone suffers from a critical illness such as cancer or heart attack. If Tom and Jen leave their RRSPs alone, $150,000 invested for 20 years until retirement at 6 per cent compound interest will create $481,000 in retirement. Using their RRSPs to offset
the costs of dealing with a critical illness will result in spending their entire retirement savings.
The right insurance Luckily, Tom and Jen do not have to take out their RRSPs. Four years ago, they listened to me as their financial advisor when I recommended they buy a $150,000 critical illness insurance policy. For the cost of a cup of coffee a day, Tom and Jen can leave their RRSPs as is, take time away from work to focus on Jen’s recovery, pay their bills and have peace of mind. Critical illness is an important part of your overall financial plan. You can either take the chance and hope that a life altering illness will not deplete your savings and affect your income, or protect yourself by adding a critical illness insurance plan to your overall financial planning strategy. For more information on your best options, please give me a call at 306.979.5000. *Names have been changed to protect identity
Financial Planning For Women Only Seminar Series (P.I.N.K) – Join Janea Dieno this fall for an exclusive women only financial planning seminar series. For more details visit www.pinksaskatoon.com. FLS
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