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Welcome to the CAPCORP Comment
REMINDER: INCOME TAX DEADLINE IS APRIL 30
For the week of April 17, 2017
An interest rate decision from the Bank of Canada, stock markets taking a pause for the Easter holiday, gas prices jumping overnight and a new way to attract online shoppers all made headlines last week. These stories, our regular market updates and a closing comment illustrating the costs surrounding long-term care are presented in this edition of the Comment.
Closing prices (In $US)
No change in rates
In an announcement last Wednesday, the Bank of Canada (BoC) met expectations by holding its benchmark rate at 0.5%, while revising down 2018 growth to 1.9% from the previous calculation of 2.1%. The economy has been performing stronger than expected; Q1 2017 GDP growth is forecasted to be higher than previously thought - expectations are set at an annualized pace of 3.8%. These gains are driven largely by strong household spending, higher oil prices and increased government expenditures. The BoC sees annualized GDP growth of 2.5% for Q2 2017.
Confirmation of a strengthening Canadian economy was unable to help the TSX eke out any gains; it fell 131 points to 15,535. The Dow lost ground to the combined pressures of weak bank and energy share prices, as well as military action in Afghanistan; it gave up 202 points to 20,454. The S&P 500 was off by 27 points to 2,328. The Nasdaq followed suit by dropping 72 points to 5,805.
Gold was the beneficiary of the market weakness and conflicts. It touched on its highest level since November, adding $34.80 per ounce, to close at $1,288.70 per ounce. Another shutdown at Libya's largest oilfield, as well as geopolitical tensions following last week’s US missile strike on Syria, contributed to Oil gaining $0.80 per barrel to $53.05 per barrel. The Canadian dollar moved with oil, adding $0.0049 to close at $0.7502.
Question of the Week: According to a new Time Magazine survey, what are 13% of people willing to do in order to avoid doing their taxes?
What’s going on with gas prices?
The average price for regular unleaded gasoline has risen to almost $1.15 per litre; up 19% from a year ago. Gas price tracking firm GasBuddy, reports that a combination of higher ingredient costs for summer fuel and the lower value of the Canadian dollar have driven prices in Eastern Canada to hit their highest level since October 2014. Gas in Toronto touched on $1.22 per litre, and Montreal has drivers paying $1.27 per litre. Prices are highest in Vancouver at $1.39 per litre; the lowest prices are in the Prairies at $1.03 per litre. Gas is expected to rise a further $0.03 - $0.05 per litre in Eastern Canada.
Walmart vs. Amazon
Walmart has upped the ante in the battle for online shoppers. They are offering a discount for online purchases being shipped to one of their 4,700 US stores rather than to a home or office. Amazon has been unable to compete. For example, let’s consider buying a $1,698 Vizio TV from Walmart’s online website. At checkout, shoppers will be given the option to ship the item to a store or have it sent elsewhere. If they choose to ship the TV to a store, Walmart will knock $50 off the purchase price. They are calling it a “pickup discount”. If the customer chooses to ship it to their home, the price will stay the same and Walmart will deliver the TV for free. The price of the reduction varies from product to product. Some examples include: $2.55 off a $23.99 Lego toy, $7.40 off a $148.05 Britax infant car seat, and $4.46 off a Coleman cooler that originally was $111.49. The only catch is that discounts will be applied only to items that aren't already available in stores. Get ready to see an increase in traffic to your local Walmart.
This week in History
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Plan for long-term care
Everyone’s goal is to live a long, healthy life. What happens when the realities of aging arrive and nursing home care is required? Nursing homes are not part of our universal health care system; therefore, individuals are required to pay a portion of the monthly costs. This additional cost may add a burden to retirement income if not properly planned for. This week we examine the current nursing home care statistics, and some of the expenses associated with long-term care.
In Ontario, the average length of stay in a nursing home facility is 18.7 months. Costs may be significant; especially for the individual who may have already been in retirement for 20 to 40 years. A 2011 Canadian census revealed that of 4.9 million Canadians aged 65 and older, 92.1% were living in their own private dwellings while 4.5% were living in nursing homes, chronic care facilities or long-term care hospitals. According to Statistics Canada, the chances of requiring long-term care are 1 in 10 by age 55, 3 in 10 by age 65, and 5 in 10 by age 75.
Currently, waiting lists for nursing homes vary. It’s not unusual to be waiting anywhere from 1 to 3 years for a space. Individuals waiting to move into nursing homes typically have access to provincially sponsored home care to assist them while they wait; however, if the level of care needed is beyond what is available, individuals may be paying out of their own pockets for enhanced care. For example, in 2015, the average cost of a 24-hour nurse (from a third-party service) was $80,300 per year. This cost is significant for the average individual if this expense has not been planned for in advance.
In most provinces, there are 3 types of nursing home facilities: publicly funded, non-profit, and private. In all provinces, the quality of care is outlined by provincial standards. Typically, the monthly costs are higher in a private nursing home facility. In publicly funded facilities, the government pays approximately 80% of the costs. Wait times to get into these homes can be quite lengthy. This presents a challenge when individuals experience health deterioration or a health crisis, as they may need immediate housing is such a facility. Each province has an assessment process which determines the level of care a nursing home resident requires. Individuals cannot preemptively place their name on the list. They must wait until a health care event occurs.
Monthly costs vary by province. The range for accommodation charges is currently between a minimum of $1,047 (Manitoba) and a maximum of $3,437 (New Brunswick) per month. In Ontario, the minimum rate is $1,775 (for a basic room) and a maximum rate of $2,535 (for a private room). Personal assets are not considered in monthly costs in Ontario. Each province defines “income” differently and some (ie. Quebec and Newfoundland) look at a person’s assets in determining what the monthly long-term care charge will be. The more assets a person has, the more likely it is that they pay the maximum monthly accommodation charge. Individuals should budget approximately $47,000 for their nursing home needs. This figure is based on an 18-month stay and the average monthly accommodation cost of $2,608 in Canada.
If an individual is unable to pay the monthly costs, most provinces allow them to apply for a rate reduction, subsidy or income plan. The majority of their income will be used to pay for the nursing home. They will be allowed between $100 and $350 per month (depending on the province) for items not covered by the nursing home such as: phone, cable, internet, and transportation. Any medications that are not provided under the provincial healthcare plan will also be the responsibility of the individual.
Planning for nursing home costs is typically not a conversation in which many people wish to engage. Preparing for this stage in life, by making it part of a retirement plan, may ease some of the stress. The plan may not be able to cover all of the costs, but the combination of some extra savings and a forewarning of what to expect, is a powerful combination and will provide some solid peace of mind. Happy Investing.
Answer to the Question: Spend a night in jail!
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