By Sheryl Smolkin

If you haven’t seriously thought about the possible impact of health care costs on your retirement budget and lifestyle, you may find recent research from the University of British Columbia as disturbing as I did.

The study reveals that one in 12 Canadians age 55 and older skipped prescriptions due to cost in 2014, the second-highest rate among comparable countries. The ten years before provincial drug plans kick in for most seniors at age 65 is the period of time when the highest percentage of older people can’t afford the drugs they need to stay healthy.

In order to “stretch” their drugs some people skip doses, while others may split pills or try to manage their conditions without drugs. “When patients stop filling their prescriptions, their conditions get worse and they often end up in hospital requiring more care which in the long run costs us more money,” says Steve Morgan, senior author of the study and professor in UBC’s school of population and public health.

The research draws on the 2014 Commonwealth Fund International Health Policy Survey of Older Adults (persons aged 55 years or older) in 11 high-income countries: Australia, Canada, France, Germany, the Netherlands, New Zealand, Norway, Sweden, Switzerland, the United Kingdom, and the United States. Among countries with publicly-funded health-care systems, Canada is the only one without coverage for prescription medications.

In an analysis of survey responses from all 11 countries, the researchers found that Canada had the second-highest prevalence of skipped prescriptions due to cost, at
8.3%.  Access was worse only in the United States, where 16.8% of respondents reported such financial barriers to filling prescriptions. In contrast, fewer than 4% of the populations in most other comparable countries reported skipping prescriptions due to cost.

In a separate analysis of the Canadian survey responses, researchers found that Canadians aged 55 to 64 face the greatest barriers to filling their prescriptions. One in eight Canadians aged 55 to 64 reported that they did not fill prescriptions because of cost in 2014, in comparison to one in 20 Canadians aged 65 and older – who, by way of age, qualify for comprehensive public drug coverage in many provinces.

Morgan points to gaps in drug coverage available to Canadians as a problem. Unlike other countries with universal public health care, public drug plans in Canada generally only cover select groups, such as social assistance recipients and people over age 65. Other Canadians may receive drug coverage from private insurance through their workplaces or none at all.

The survey found that Canadians who did not have insurance were twice as likely to report not filling prescriptions because of cost. It also showed that low-income Canadians were three times more likely to report financial barriers to filling prescription medicines than high-income respondents.

Morgan said the 2014 findings were consistent with studies that date back a decade, indicating affordability of prescription drugs is still a public health issue in Canada.

“Our problem hasn’t gone away. Financial barriers to prescription drugs are still high, both in absolute terms and relative to our peer countries.”

The research was described in two studies published in BMJ Open and CMAJ Open.

By Sheryl Smolkin

I don’t often review personal finance books because it seems to take an inordinate amount of time to wade through yet another statement of the obvious just to glean enough cogent information to give readers a taste of what the book is all about.

But when I read accolades from the likes of Gail Vaz-Oxlade, Preet Bannerjee, Roma Luciw, Dan Bortolotti plus a whole bunch of my other favourite personal finance bloggers in the introductory pages of the book, I thought I’d better keep on going to find out what all of the fuss is about.

Author Robert R. Brown says Wealthing Like Rabbits is written to be a fun and unique introduction to personal finance and suggests that any book that includes sex, zombies and a reference to Captain Picard is “an absolute must read,” regardless of genre.

Brown starts out by asking how many rabbits there would be after 60 years if 24 rabbits were released on a farm on a great big island. Before providing an answer to this question, he introduces the need to save for retirement, although he doesn’t begin to predict how much you or I will need. His only conclusion is that “more is better” because it is better to be 65 years old with $750,000 saved than 65 years old with $75,000 saved.

Then he reveals that there would be 10 billion rabbits after 60 years and launches into a discussion of the history and key features of registered retirement savings plans (RRSPs) and tax-free savings accounts (TFSAs). Subsequently he riffs about how many zombies there would be in England if France sent 100/week for 40 years.

If you are still with me, you may wonder — what is the point of all this?

Not surprisingly of course, it’s to illustrate the power of compounding, whether in relation to rabbits, or money or zombies. We learn that just $100/wk deposited in an RRSP earning 6% for 40 years will add up to a nest egg of $624,627.

But the positive and the negative impact of compounding interest are also very cleverly brought home in later chapters. I particularly liked the comparison of brothers Mario and Luigi who both had similar incomes and $100,000 for a down payment on a house. They went to the bank to find how big a mortgage they were eligible for.

Mario’s banker told him “he could afford” to buy a house for $525,000. Luigi told the mortgage specialist he needed $10,000 for closing costs and the $90,000 balance had to cover at least 20% of the purchase price of the house so the most he would be willing to spend is $450,000.

The story continues with Mario buying a 3,000 square foot home for $525,000. Luigi sticks to his budget and buys a 1,600 square home nearby for $350,000. Over 20 years, compound interest on the mortgage means that Mario ends up paying $807,538 for his house while Luigi only has to fork out $538,359.

Similarly, when it comes to debt, Brown illustrates that high interest credit card debt can quickly escalate if balances are not paid off every month. Even I did not realize until recently that if you miss your payment due date by even as little as one day, the interest-free grace period completely disappears. In fact you have to pay interest on the amount of each transaction from the date each and every purchase was made.

Brown also reviews the characteristics of a line of credit; a home owner’s line of credit; bank loans and consolidation loans. While generally he believes all of these can cause severe damage to your financial health, he recognizes that when handled properly, they each have their place.

But he draws a line in the sand when it comes to payday loans. Never, ever get a payday loan, Brown says.

He gives the example of Buddy who borrows $400 from a payday loan place because his furnace broke down. He is charged $21 for every $100 he borrows for just two weeks. Two weeks later he pays the payday lender $484. That’s 21% for only 14 days, which works out to 546% annually. And that’s only the beginning.

If Buddy can’t pay in two weeks the payday loan company will charge him an NSF penalty and continue to accumulate stratospheric interest rates on the whole amount. Further defaults mean he will likely be hounded both by telephone at home and at work day and night. The file may be handed over to an even more aggressive collection agency.

In the second last chapter, Brown offers a brain dump of financial tips (which he doesn’t call “Fifty Shades of Brown”):

• Spousal RRSPs are cool.
• MoneySense magazine is a great source of personal finance information.
• Eat dinner at home. Then go out for a fancy coffee and desert to Starbucks.
• Buy life insurance, not mortgage insurance from your bank.
• Read Preet Banerjee’s book Stop Overthinking Your Money for the skinny on life insurance.
• Use the noun“wealth” as a verb. So instead of saving $150/week in your RRSP you will be wealthing your money.

And finally, Brown’s parting words at the end of the book are “you’ve got to show up.” Put some money away for your future. Live in a house that makes sense. Be smart about how you spend your money. Spend less than you earn. Be comfortable living within your means. He says it really is that simple.

Wealthing Like Rabbits is funny and engaging and it hits all the personal finance bases. Regardless of whether you are a Millennial, a Gen Xer or a Boomer, you will find lots of tips on how to save more, spend less and still have a lot of fun along the way. 

The book can be purchased in hardcover for $16.95 and the epub and kindle versions are available for $7.99.