The Retirement Risk No One Wants to Talk About

We all make our retirement plans when we’re healthy and of sound mind. We “see” our future selves as we are today, with the same capacities and energy levels.

And that’s perhaps the most dangerous assumption and biggest retirement risk we face – believing our current health will continue indefinitely.

It won’t.

The reality is aging eventually affects everyone, even those who are active, fit, and healthy today. According to the Canadian Institute for Health Information (CIHI), more than 80% of Canadians aged 65 and older live with at least one chronic condition, and many manage multiple health issues simultaneously. See CIHI’s findings HERE.

Statistics Canada paints a similar picture. Recent research found that Canadians aged 65 to 74 live with an average of 3.8 chronic conditions, while those aged 75 and older live with nearly five. The report is available HERE.

Why Most of Us Don’t Plan for Declining Health

One of the biggest retirement risks is declining health. The reasons we underestimate future healthcare and support costs has less to do with finances and more to do with human psychology.

Psychologists call it optimism bias. Simply put, we tend to believe that bad things are more likely to happen to other people than to us.

Most of us know that aging brings health challenges. We see friends develop mobility issues, require hearing aids, move into assisted living, or need home care. Yet when we think about our own future, we often assume we’ll remain healthier and more independent than average.

Researchers have consistently found that people underestimate their chances of experiencing illness, disability, and even cognitive decline. We acknowledge the statistics intellectually, but emotionally we see ourselves as the exception.

Another factor is what psychologists call present bias. We naturally place more importance on today’s needs than future concerns. Saving for a hypothetical healthcare expense twenty years from now feels less urgent than planning a vacation, renovating a kitchen, or helping our adult children financially.

There’s also the issue of identity. Most people don’t think of themselves as old. A healthy 68-year-old may find it difficult to imagine needing a walker, hearing aids, home support, or assistance with daily activities. As a result, they delay planning for circumstances that feel distant—even when those circumstances are statistically likely.

Ironically, the healthier you are today, the more vulnerable you may be to this type of thinking. Good health creates confidence, and confidence can lead to complacency.

Don’t be Pessimist. Be Realistic

This doesn’t mean your retirement years will be unhappy. Many seniors remain active, independent, and engaged well into their 80s and 90s. What it does mean is that your retirement plan should be based on reality rather than optimism.

The question isn’t whether your health will change. The question is how prepared you’ll be when it does.

Will your home still work if climbing stairs becomes difficult? What happens if you need hearing aids that cost $4,000 to $8,000, regular home support visits, meal delivery, housekeeping assistance, or prescription medications not fully covered by insurance? If one spouse becomes a caregiver for the other, how will that affect your finances and quality of life?

Too many of us assume we will be the exception. The smarter approach is to assume that at some point you will need additional support and build that possibility into your retirement plan. If you never need it, that’s wonderful. If you do, you’ll be prepared.

Read more articles about Retirement Planning HERE>>>