Lifestyle | What is the price of peace of mind?

Recently widowed and aged 63, Marie-Josée* wants to retire peacefully soon. Serenity is the delicate point.

The situation

“My financial advisor is very insistent [le mot est faible] to sell me critical illness insurance, she explains. No matter how much I tell him that I don’t think I need it, he always uses the argument that if tomorrow morning I fell seriously ill or had a fall while skiing, I would need money for my care and that selling my house could not be done in the time necessary to pay all the costs linked to my condition [hypothétique, bien sûr] or to pay my basic bills. »

Her husband died suddenly in 2021 of a heart attack. Without children, Marie-Josée decided that she would not be caught off guard if an accident or health problem left her unfit.

“I have a notarized incapacity mandate which specifies that my sister [plus jeune] and my brother will be able to make all decisions concerning me,” she says.

“I would like to know if this incapacity mandate can give them access, for example, to my investment portfolio, to my non-RRSP funds [régime enregistré d’épargne-retraite] and to my bank account. Can they come to my bank or contact my financial advisor directly to obtain funds for my care, for example? »

The proposed critical illness insurance premium, the amount of which she forgot, is $361 per month. “It’s a lot of money for someone who is retiring,” she comments.

“If something happens to me, if I fall while skiing and I’m in a coma, couldn’t my sister rather leave with my incapacity mandate, take money out of my investments, going to the checkout, doing all my things while I’m not there in my head? »

In short: “Are there ways other than taking out critical illness insurance, which I find very expensive and unnecessary, to have some peace of mind? »

A deserved retirement

Marie-Josée spent most of her 35-year career as a freelancer.

“I have saved since I started my own business, every month,” confides the worker.

She was 26 years old.

“I am very proud of the results of my investments. I started in 1986 with $50 per month and I didn’t give up. »

She has nearly $800,000 in retirement savings, during which she wants to travel. Finally.

“I’m going to try to spoil myself a little because all the time that my friends were in the South, going out, staying up, I was working. »

After the death of her partner and the settlement of the estate, Marie-Josée sold the property to build a small house which she was able to pay for in full, “just for me and then my dog”.

In this context of imminent retirement, does Marie-Josée need the assurance that her advisor insists on?

“He has good intentions, he is a reliable gentleman and I trust him, but I just wonder the relevance of having all this. »

The answer

Can you buy peace of mind? Is she insured? Does it save itself?

This is the basis of the situation submitted by Marie-Josée. Financial planner Nathalie Bachand and notary Guylaine Lafleur, of the Bachand Lafleur Groupe Conseil firm, attacked the problem by first assessing whether one’s retirement income would be a reason for peace of mind.

By digging into the question, they learned that Marie-Josée was receiving surviving spouse’s pensions from the Quebec Pension Plan. (QPP) of $10,500 per year, and $6,200 from his late spouse’s retirement plan, both indexed.

By adding the Old Age Security (PSV) pension and her own QPP pension, “that gives her an interesting guaranteed income,” observes Nathalie Bachand.

Marie-Josée also told them that her current expenses were around $35,000 to $40,000, “which corresponds to her net income.”

The planner added generous leeway, setting the target for her retirement cost of living at $60,000 per year, with indexation, until the end of her days. “It’s more than she spends now, but she wants to travel more often in the coming years,” notes Guylaine Lafleur.

Under these conditions, Nathalie Bachand calculates that Marie-Josée would only exhaust her comfortable and meritorious savings at the age of 102.

Enough to sleep soundly until then.

The serious question of insurance

In this overall very solid budgetary context, how would serious illness insurance fit in?

Our two advisors have no other information on the policy offered to Marie-Josée other than its cost of $361 per month.

“In any case, it is always very difficult to assess the needs for serious illness insurance,” says Nathalie Bachand. It’s often more emotional than real need. »

Marie-Josée certainly has the means to pay a premium of $361 per month, she says.

The question is whether this expense is necessary. Are its assets sufficient to “self-insure”? Would they allow him to absorb the additional expenses of a serious illness?

The projected cost of living of $60,000 already provides a comfortable margin of maneuver given his current budget.

“She may not spend that, and if she ever falls ill, she may travel less and she will be able to direct the unused amounts towards her health needs,” observes Guylaine Lafleur.

As an insurer’s website indicates, this insurance intervenes “in the event of covered serious illnesses such as cancer, heart attack or stroke”.

The amount paid will be used, for example, to pay for medications, treatments or medical care that are not reimbursed by the health insurance plan, or to “pay for unforeseen expenses, such as travel, accommodation or parking of the ‘hospital “.

We can already think that Marie-Josée will have the means to pay for hospital parking. There remain other possibilities.

However, once retirement has come, which is also imminent, a serious illness would in no way reduce one’s income, which is guaranteed.

“If she needs $50,000 or $100,000, she has it,” argues Guylaine Lafleur.

“She has $185,000 in TFSA [compte d’épargne libre d’impôt] and in investments that she can exit with little or no tax impact, adds her colleague. If she needs money in the short term, she has the money she needs. »

In the long term, the projection shows that she can maintain expenses 50% higher than her current standard of living.

“The issue here is that serious illness insurance does not seem to turn it on,” notes Nathalie Bachand. There are people for whom this type of protection allows them to sleep better. »

It is rather the insistence of her advisor in offering it to her that seems to disturb our reader’s calm.

Mandate and serenity

Marie-Josée seems to see the protection mandate as a substitute for serious illness insurance. But she worries whether her agents could make the necessary withdrawals from her investments and pay her bills while she was unable to do so.

Indeed, if Marie-Josée became incapacitated, a protection mandate, once approved, would allow her agents to act on her behalf with her financial institution and the managers of her investments. But it will first have to be approved.

“The delays, unfortunately, are getting longer and longer to have the psychosocial assessment and the medical report,” underlines the notary. There are always urgent expenses for which we can obtain authorization, but it is still complicated. »

For a temporary incapacity, a power of attorney would be more immediate.

“If she cares about her bills being paid regularly, and if she trusts her brother or sister, she could consider signing a general power of attorney that would include a protection mandate in the event of incapacity or a banking power of attorney,” suggests Guylaine Lafleur.

The first, signed before a notary, would give them access to his entire portfolio. The second, agreed with their financial institution, would authorize them to supervise current operations.

If Marie-Josée became incapacitated, the general power of attorney would allow her brother or sister “to represent her and pay her bills from her bank account, while the protection mandate provided for in the power of attorney is approved.”

Peace of mind insurance.

* Although the case highlighted in this section is real, the first names used are fictitious.