Financing Alzheimer's Care

In the Comfort Life Spotlight

Several years ago, Pierre’s mother Helene tested positive for senile dementia of the Alzheimer's type or SDAT in Hull, Quebec. Since that time, Helene has progressed through the first three stages of the disease and is now being treated for advanced dementia, the final stage of this cruel and debilitating affliction.

While Pierre and his wife, Suzette, assumed the role of caregivers throughout the first five years of Helene’s illness, they decided that they could no longer deal with the psychological impact of watching a once active, intellectual and loving mother deteriorate. The physical challenge of 24-hour care had exhausted them both to the point that their marriage and family relationships had become strained. As legal representatives of Helene’s affairs, they decided to place Helene in a special retirement community that could better administer to her needs.

Since Helene now suffered from advanced dementia, she was completely dependent on others for her daily well-being. She could no longer bathe or dress herself or brush her teeth. She couldn’t speak and did not recognize her family on most days. Helene had lost a great deal of weight, and her muscles had long lost their strength. For all intents and purposes, she was bedridden and unable to feed herself properly. Pierre and Suzette needed to find a community that provided extensive 24-hour care. Not only this: they required a community that could provide such services at a cost Helene could afford.

They eventually chose an aging-in-place community that specialized in memory care for people suffering from an impairment of acuity symptomatic of advanced dementia. The cost of this full-service community amounted to $6,000 per month, comprised of administration, dietetics and nutrition counselling, full-time personal care, housekeeping, meals, medical care, medical and dressing supplies, medication, nursing,occupational, language, speech and physiotherapy, onsite and in-house doctor care, utilities and travel.

Fortunately for Pierre and Suzette, Helene had built up enough financial assets as a federal employee to cover the cost of her new caregiver services before she became ill. She had contracted early stage SDAT when she was 63 and had retired shortly thereafter. Helene’s work pension amounted to $2,800 net per month. She also received about $1,425 per month in Canada Pension Plan (CPP) and old age security benefits (OAS). As a federal employee, Helene was able to contribute only modestly to her own Registered Retirement Savings Plan (RRSP). Still, over the years she did manage to accumulate $80,000.

After consulting with Pierre as his financial adviser, we were able to fund the monthly shortfall of $1,775 by converting Helene’s RRSP to a Registered Retirement Income Fund (RRIF). If her RRIF capital earned five per cent per year, her RRIF income would last five years until Helene was 73, a point that her doctor and other medical professionals considered more than sufficient given Helene’s present medical condition and rate of decline.

If Helene’s medical condition deteriorated slower than projected and she lived beyond age 73, Pierre could access anytime, if required, the accumulated cash value of a permanent life insurance policy that his mother had purchased when she was 40, an estimated tax-free cash value of $34,000.

Helene's financial breakdown

Retirement assets
  • Home equity $190,000
  • Savings $10,000
  • RRSP $80,000
  • Monthly after-tax work pension $2,800
  • Monthly CPP and OAS benefits $1,425
  • Permanent life insurance cash value $34,000
Monthly cost and shortfall
  • Aging-in-place community monthly cost $6,000
  • Current monthly income $4,225
  • Monthly cash shortfall $1,775
Revised retirement finances
  • Home equity $190,000
  • Savings $10,000
  • RRIF $80,000 ($1,775 per month)
  • Monthly after-tax work pension $2,800
  • Monthly CPP and OAS benefits $1,425

Stephen Gadsden is a chartered financial planner and author.

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