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Actuarial Science 1021A/B Study Guide - Retirement Planning, Ontario Health Insurance Plan, Savings Account


Department
Actuarial Science
Course Code
AS 1021A/B
Professor
Steve Kopp

Page:
of 15
Module 2
The Problem of Old Age
Introduction
The economic problem of old age consists of the
following:
1. Growing population of older people
2000 – 12.5% of pop. was 65+
2050 – 20% of pop. is expected to be 65+
^ creates problem b/c elderly need to be
supported in retirement
2. Loss of earned income because of retirement
we will be concentrating on this area
some provinces have mandatory retirement at
age 65 (BC, Alberta, PEI, NFLD, NB)
but even those provinces that do not, people
still retire at or before age 65 (ex. Ontario)
3. Longer retirement period
This occurs because:
oPeople are living longer
oPeople are retiring earlier (this may be
reversing)
Why is this a problem?
Longer retirement period means that you need
more money to live off in your retirement
years
Puts more pressure on:
oIndividuals need to save more for
retirement
oGov’t social insurance plans (OHIP, CPP)
oPeople are entering the work force later in
life b/c they stay in school longer  they
have a shorter period in the work force in
which they can save for retirement
4. Insufficient income and assets
the aged are an economically diverse group
and the incomes received are far from uniform
2008: 65+ - 22% annual income of < $10,000
- 14% annual income of > $50,000
Also, aged may have accumulated assets over
time to help offset the loss of income
Ex.
-Aged tend to have more assets and fewer
liabilities than their children (may be
reversing)
-But one of the main assets is a house but
it does not provide income (unless it is
sold)
5. Poor health
We will concentrate on this area in module 3
The aged see doctors more, are more likely to
become disabled, have longer hospital stays,
need more prescription drugs
The aged use the health care system more
OHIP covers many of the healthcare costs, but
not all of them
6. Long term care
we will also focus on this area in module 3
this deals with receiving care in a nursing
home or some other health care facility
(including home care)
one study has reported that 43% of people
aged 65+ will enter a nursing home at some
point. 1 in 11 of those people will spend 5+
years there