Weekend Reading: What Happens to Your Health Benefits When You Retire?
One of the top questions I hear from soon-to-be-retired clients is some version of: “What do I do about health coverage when I leave my employer plan?”
The anxiety is real. For decades, benefits were just… there. Dental cleanings, prescriptions, massage, physio – it felt like free money. Now they're staring down retirement wondering how they'll afford it all.
Here's the reframe I offer: most employer health benefits aren't really insurance. They're deferred compensation. Your employer could have paid that money as salary, but packaged it up as benefits instead. True insurance is for catastrophic loss – not a teeth cleaning.
Recently retired Globe and Mail personal finance columnist Rob Carrick went through this exercise himself. He reviewed plans from several providers and decided to skip private coverage entirely, opting instead to self-insure by setting aside a monthly amount to cover dental, prescriptions, and paramedical services out of pocket.
His conclusion: the premiums don't come close to covering everything, and even expensive plans have significant gaps.
One thing that often gets overlooked in this conversation is what provincial programs already cover for seniors.
In Ontario, turning 65 means automatic enrolment in the Ontario Drug Benefit program, plus annual eye exams covered under OHIP, some physiotherapy, and low-income dental through the Ontario Seniors Dental Care Program.
The Trillium Drug Program can help if prescription costs are high relative to your income.
In Alberta, the Coverage for Seniors program is premium-free and covers prescription drugs, diabetes supplies, ambulance services, chiropractic visits, and limited psychological and home nursing services.
Most provinces have something similar. You likely have more baseline coverage than you think.
One more thing worth noting: we absorb a lot of American media, and horror stories about catastrophic medical bills south of the border can make Canadians anxious in a way that doesn't quite apply here. I'm talking about routine health and dental – predictable, manageable spending that's often better handled out of pocket than routed through an expensive monthly premium.
That said, there's a behavioural case for buying a plan. If paying out of pocket means you'll quietly skip the dentist, put off your eye exam, or talk yourself out of that physio appointment, then a private plan might be worth it because having coverage makes you actually use it, even if the math doesn't quite work out in your favour.
It's the flip side of what we see in the US, where some people avoid the doctor because of cost and end up with worse health outcomes as a result. Sometimes a predictable monthly premium is just the nudge you need to actually take care of yourself.
I'd love to hear from readers on this one. What are you doing for health coverage in retirement? Paying out of pocket, signed up for a private plan, or still covered through an employer or pension plan? Let me know in the comments.
This Week's Recap:
Last week I continued with my retirement planning series – Patricia & Charles just needed a few more years to get to the finish line.
That one followed Cynthia's story, the 56-year-old single renter in Winnipeg looking for reassurance that she is on the right track.
And the inaugural retirement plan showing how Dan & Elizabeth can retire at the end of the year and turn their savings and investments, plus a pension, into a comfortable retirement income for life.
My ideas for future retirement planning case studies have exceeded the amount of time I have to write them, so hang in there. I'll aim to post one per month.
Weekend Reading:
Thousands of federal public servants apply for the early retirement program that allows some federal workers to retire early without a pension penalty. Call me.
Jason Heath explains how to confirm your CPP pension entitlement and make sure it's accurate.
At long last, more Canadians are waiting until age 70 to start their CPP pensions:
“By 2024, the take-up rate at 70 climbed above 7 per cent. The Chief Actuary of the Canada Pension Plan predicts that it will continue to increase.”
Most individual stocks are losers. Here's how to make sure you own the best stocks.
Anita Bruinsma says the current market volatility is a good test for DIY investors (G&M subs).
Ben Felix on SpaceX, OpenAI, and the mega IPO grift:
Many Canadians don't shop around for their mortgage, and sticking with the familiar is costing them.
She's lived in 10 homes in five years and knows exactly how broken Canada’s rental market has become.
Finally, in a real-life Succession tale, an heiress to the McCain french fry empire says she's financially trapped and unable to sell her billion-dollar stake in the family company.
Have a great weekend, everyone!
This is a great post for so many reasons.
1. We do think that our health plan is a benefit… I did too. But as you dig in to the costs and flex benefits, you can see clearly that this is just an alternative form of compensation.
2. My wife and I retired young, and this was one of our concerns. For the first year we grabbed a “follow-me” plan that took our “great benefits” from the group policy to be individual. When I looked at the cash outlay for the policy, the cash outlay for health “stuff”, and the compensation, it was an epically terrible deal – that we paid for for 12 months and then realized it was not a good idea.
3. I agree with your behavioural slant… Many will skip when it’s not covered- just like many sell equities during a correction and then buy back too late. If you look at math and benefits and take emotion out – these decisions are pretty easy.
All the best Robb… Appreciate you posting this as it will be beneficial for so many!
Great, super practical article. I had the experience of paying out of pocket tor heath ‘insurance’ during an employment gap and was so surprised by the cost. I wondered at that time if it was worth it. Now as I am beginning to think about retirement I am unsure how to handle moving away from employer benefits. Being relatively healthy, I was wondering if out of pocket payment would be the better option financially. It seems that it might be for me. My husband has had some health challenges, though, and I am curious whether this still holds up for people with more chronic health conditions or whether they would be better to opt for health insurance in that scenario. Any thoughts or experiences on this?
When employment and benefits ended, I too looked into private plans. They made no economic sense for my spouse and me. All the plans on offer were geared toward people whose medical expenses slew towards prescription drugs.
Coverage for dental rarely began to touch the cost of things like implants. Few plans offered much coverage for massage and physio.
We lead very active lives. Our medical expenses are heavily weighted toward massage and physio. We consider those services preventive. Prescriptions rarely account for more than 5% of our annual healthcare costs.
Self-insuring has saved us money over the past 15 years of retirement over the cost of what insurance would cover.
I am incorporated (and not near retirement age) so the math here is a bit different, though the conclusion is similar.
When I left my old employer and incorporated, I was able to sign up my family for health insurance and skip or shorten some of the waiting periods. It’s a few hundred bucks a month, but I can also pay the monthly premium out of the corp as a business expense. That was enough to change the math and say “yeah it’s an expense but it probably works out better vs paying these dental bills out of pocket”.
But then I ended up opening a Health Spending Account within my corp, so now out of pocket expenses are also a business expense (though there is a 10% admin fee). (Whereas I’ve never claimed medical expenses on my taxes). Both the health insurance and the HSA were useful in paying for my children’s orthodontist treatment.
But now, your post reminds me that I should really look at the numbers once more and possibly cancel the health insurance and maybe just stick with the HSA.
Thats a risky strategy. Not recommended by our accountant. Decent chance of CRA disallowing this if they audit you and if the health account is only covering medical costs for the shareholder and his family.
Hmm. Accountant said it’s all good, but noted. HSA administrator also validates each claim.
Anyone else thinking about this strategy should discuss with their own accountant or tax advisor.
All HSA/PHSP administrators include strong tax-risk disclaimers in their agreements. Very explicit that the administrator does not guarantee CRA acceptance of the plan and that you are solely responsible for tax complIance. HSA/PHSP administrators also tend to include language that explicitly or implicitly says the plan is intended for employees, not shareholders/partners acting in their ownership capacity. So they have everything to gain and nothing to lose by approving your expenses.
Accountants have varying levels of risk tolerance, yes.
If the corp is still earning active business income, it should be allowed by CRA. But when it switches to an investment company, then it’s not.
Eligibility is not based on active vs passive income. It is based on shareholder vs employee status. The confusion might be coming from the fact that without active income its even harder to demonstrate that this is a normal employee vs shareholder benefit.
This is my understanding as well when I looked into opening an HSA many years ago. We failed on two tests – one was that (at least for Blue Cross) “less than 50% of employees are immediate family.”
The other was that “Shareholders (whether it be one or many) need to be paid as employees: They should be paid some form of salary (T4 income) rather than exclusively through dividends. This provides further demonstration that the shareholder is an active employee, and can also help when justifying ‘reasonable’ benefit limits.”
Since we were paying ourselves exclusively via dividends at that time we did not pursue the HSA any further.
We pay ourselves salaries but thats not enough. From CRA positions (e.g., IT-339R2, folio S2-F1-C2):
• Benefits must be provided “by virtue of employment”
• Not primarily to “shareholders or persons related to them”.
So, yes, paying salary is obviously a requirement if you are claiming that its employment benefit but its not sufficient. One has to demonstrate its a genuine employee benefit to be eligible. The risk is very real if one is giving this benefit to the owner and family and nobody else. Its a very aggressive tax avoidance strategy. For us its just not worth it.
If a CPA actually recommends this strategy, I would suggest to get this recommendation in writing.
Worth noting that some medical costs are not subject to HST, and that if they are large enough, you claim them on your tax return. You can also combine family expenses and claim on your spouse’s return.
Retired ar 58. Bought private health insurance which we plan to cancel once we turn 65. Premiums definitely cost more than our annual meds, dentist visits, etc. We bought it primarily for the “what if” scenarios. A one off expensive medication, etc.
Thanks Robb
I have an employer sponsored plan in my retirement, and frankly without it I am not sure how we would have coped without it. We both retired in our 50’s- my husband at 50 and me at 58. I have a chronic disease and my cost of my medications are about $1800 per month. My husband ended up with cancer and his drugs if not covered would have been extreme- let alone ambulance costs, etc. etc.. Self insuring is all well and good if you are healthy with no chronic diseases- and if you are covered by the provincial government after a certain age- but I seriously think you should think long and hard about self insuring- the same way of thinking about retiring to say northern Ontario and then wondering why you cannot get the medical specialist help you need…..but must travel to Toronto, and incur all of the expenses that go along with that.
Hi Ruth, thanks for sharing this side of things. I want to reiterate that the article was just discussing routine health and dental coverage that most employers offer, and that retirees seem to be craving when they leave the workforce.
My wife has MS, and while she is not currently taking any disease modifying therapies, these drugs can run in the tens of thousands a year.
We signed up for AB Blue Cross non-group coverage as a family, paying $354 per quarter ($1,416 a year). It provides some modest coverage for prescriptions and therapy, but the key coverage is for all of the drugs listed on the Alberta Drug Benefit List.
So, we’re paying $1,416 to get maybe half of that back in routine reimbursements, but to protect against the catastrophic loss that would come from having to pay out of pocket for these treatments. Pretty fair trade-off in my book.
when I retired at 61 my wife was adamant that we needed health “insurance” through her retired teacher’s plan (OTIP). The purpose of insurance is to cover low-probability, high-cost catastrophic events. These plans are the inverse of this – they cover common high-probability events with NO coverage for catastrophic events. These plans are all CAPPED on reimbursement at low levels. The OTIP plan has caps on drug coverage ranging from around $750 to $4000 a year and caps on dental coverage too. In the 3 years we have been part of the plan we have never had a year where our coverage came close to the premium cost – which makes sense – how would the carrier turn a profit if our benefits exceeded our costs? In short save your insurance $ for low-probability, high cost events like life insurance, home insurance, and auto insurance – where a loss is a high cost event.
The one advantage to OTIP is that it is not only health insurance as it also includes travel insurance. Depending on how much you travel that could add a significant cost with premiums that escalate as you age. OTIP premiums are the same regardless of age.
I retired 12 years back and did the analysis then. We concluded the private plans made no sense for basic coverage. Concerned about a scenario where major expenses might arise we bought a plan that kicked in only if we had a catastrophic health issue that required expenditures running thousands of dollars per month. This plan costs about $500 per year for us as a couple. We are fortunate to have never needed to make a claim but the plan does provide wonderful peace of mind.
Folks also may want to look at the deductible selected for home and car insurance policies. Does it really make sense to pay the higher premiums for a low deductible? How likely are you to make a claim for $2,000 in damages? We opted for $5,000 as a deductible level and have had no regrets.
Very interesting. Would you provide a bit more detail on the insurance policy you have for catastrophic health issue? Is it an off-the-shelf type policy that is offered or did you have to work with an agent to customize? Thanks!
Hello Greg. Off the shelf with Manulife. No agent involved.
Manulife CoverMe might have something like this:
“Some types of coverage can be purchased as standalone plans. For example, if your plan doesn’t include travel, catastrophic drug coverage or hospital coverage, you can buy these as standalone plans. Catastrophic drug coverage offers unlimited drug coverage once you’ve paid a certain amount in annual drug expenses.”
No idea how expensive that premium would be, though.
Would the idea of “Catastrophic drug coverage offers unlimited drug coverage once you’ve paid a certain amount in annual drug expenses.” be the same as what is covered under the Trillium plan? Since it says it kicks in after you spend a certain amount. Isn’t that the same way Trillium works, so what would be the benefit? I’m curious if I’m missing something.
Where there does seem to be value is in the area of travel insurance included in the follow me plan we took out. Up to 60 days at a time with no annual limit. Retired at 58 to be able to do those extended vacations so matched up well and balances the knowledge that coverage limits on dental, vision, etc don’t cover the premium outlay on their own. Worth reviewing based on your own lifestyle and needs
We can relate. My husband (currently age 60) and I (currently age 48) retired nearly 4 years ago. We shopped around for health and dental insurance, doing a cost benefit analysis. We decided it was not cost effective to buy in-Canada health insurance. However, while we wanted to buy only an out-of-country emergency travel health policy, we couldn’t find one that was cost effective and had the provisions that we wanted (i.e., no restriction on travel within 3 months of a prescription medication change). To get the out-of country coverage we wanted, we had to buy it as part of a package with an in-Canada basic health policy. Not cheap, but we can afford it. Once we reach the point where we are no longer healthy enough to travel, we will most likely drop all coverage as it will likely be cheaper to pay all expenses out-of-pocket.
Another thing to note, though, is that health and dental insurance premiums can be claimed as medical expenses on your income tax return.
Excellent topic! Insurance has always been a topic shy’d away from,probably due to conflict of interest with many financial businesses. Thank you for this Robb!
When I retired a few years ago at age 59, my employer offered free basic or optional extended (paid) health coverage. The paid option made sense for us since drug costs for my spouse and I well exceed the annual premium, which by the way is tax deductible. However, dental coverage is minimal and vision/hearing coverage almost non-existent, even with the extended plan. And because I have some insurance, I don’t qualify for the government dental plans. Fortunately we haven’t needed physio or hospital coverage. To me, paying for extra health insurance has given us peace of mind. Now I need to figure out what to do about travel medical insurance. The free out-of-country insurance offered by my credit cards ended when I turned 65.
Dan, check out the National Bank World Elite MasterCard – it provides travel medical coverage for 15 days for those aged 65-75: https://www.rewardscanada.ca/ultimate/65plus.html
Thanks for the link, Robb. I’ll have a look at these suggestions.
Thanks for the great tip, I looked up my card, The mbna Mastercard world elite, and they have travel insurance for UNDER 65 for 21 days up to $2 million. (Amongst some other good benefits I utilize, particularly the rental car damage waiver) Maybe makes sense to get the NA card after I reach 65…
https://www.mbna.ca/en/credit-cards/rewards/mbna-rewards-world-elite-mastercard
Travel Medical Insurance
Up to $2 million of coverage for the first 21 days of your trip. Available for an insured person under 65 years of age. (click on the little “C” for terms and conditions)
Going through this exercise right now as we consider retirement. Our first step was to look at our claims from the past few years and see what we were using and what we did not get much out of in terms of health and dental benefits.
The most expensive was prescriptions because I have a drug I use for my skin. That said, after talking to my dermatologist, he said there were other cheaper options that could be used if I was considering retirement and a cheaper plan. Dental was next. Again, I was the most frequent user because I have bad teeth. Two implants and crowns in the past two years added up to $10k. Assuming I have been through the worst of it, we could opt for a cheaper dental plan or just try to cover the costs out of pocket. It all depends on your comfort level. No different than investing in stocks vs bonds.
In the end you have to calculate how much you were spending yearly and try to predict what that might look like in retirement. You may be better off with a hybrid type plan until you reach 65 and your provinces senior based plan kicks in to help out.
Thanks for bringing up this practical topic. Like many, we also investigated various health insurances before our retirement with employment insurance ended. We found the dental insurance did not make a sense, so did not purchase it. We bought private health insurance mainly for Rx coverage, hospital private room and travel coverage. Due to one of us takes medication, the insurance expense covered most of the medication cost monthly, therefore for our case, we believe the insurance is better than paying everything ourself. Overall, buy or not to buy private health insurance has lots to do with each family situation. Having a peace of mind was one of the factors for our decision too.
This is a great topic and great advice!
When I started my own home-based business, I looked at the various options for health benefits. There are many such as through the local chamber of commerce, a professional association I belonged to and Blue Cross. For all of them the the premiums were very high for what I was getting. My spouse and I did the same as Rob Carrick – we set aside an amount each month to cover all medical expenses. It worked out much better than we anticipated and because we had the money set aside, the big expenses (e.g. new glasses) were not a problem.
Now in retirement, we keep doing the same.
So lucky to have belonged to a Trade Union that has Excellant benefit Coverage. Retired at 60 and hade 18 months of fully paid up coverage. After that we had a choice of buying just Dental or Full Benefits with the stipulation you can not get the More extensive package at a later date if you cheap out off the bat. We currently pay $632 quarterly for both of us and we are now both over 65. The benefits are amazing including $800 per person per year for eyeglasses, Physio, massage,orthotics, $500 for Out of Country Travel Insurance $500 per year to any item you go over your maximum. A full slate of legal Benefits including real estate, wills even fighting speeding tickets. lol Also great Dental coverage and never pay a cent for prescritions.
Retired about 5 years ago. Opted to self-insure fore health costs, as premiums cost more than our typical costs and didn’t cover much in the way of dental anyway.
We pay out of pocket for cleanings, eye exams, massages, etc.
The need for 2 dental crowns caught us by surprise, but we’ve budgeted a yearly amount for health ‘stuff’ and have room to cut back elsewhere if something major happens, health-wise.
Interestingly, when my father retired from his union job many years ago, it cost only ONE DOLLAR to keep his employee benefits, which were really good. Given that same deal I would have gladly kept my employee benefits when I retired. Alas…
AB Blue Cross has a plan for retirees coming out of an employer sponsored plan. Most of our medical expenses are prescription drugs and the plan covers what AB Blue Cross for Seniors does not. In our case, I believe we benefit from the coverage which also includes some chiro, physio, dental expenses
I retired in 2018 from a full time job with good benefits. I was given the option to continue with a slightly less comprehensive plan for a monthly fee. At the time I did include the dental plan as well. For a few years I rarely used much from the plan but sat down about a year ago to assess whether the cost was worth the benefits. Since I had always maintained good dental care and fixed anything potentially costly before I retired I ended up discontinuing the dental portion which was essentially costing me $600 in payments for nothing.
As I am now 73 and in fairly good health I find the physio/chiropractic and masseuse therapies are worth it on my plan because the plan pays the whole fee up to $500 each per year. Some plans only pay a small amount per session so not worth it.
OHIP is de-listing more drugs every year and I am starting to use more prescription drugs now. I am covered for travel insurance up to 60 days at a stretch unlimited trips per year. I also have compression stockings, glasses and medical devices to a limit also covered. I also have some hospital semi private coverage and accident dental coverage and other perks I rarely use. Although the province covers physio they may as well not bother because the one time I used the provincial physio they were terrible compared to private physiotherapists. For now I will pay the out of pockets expenses as I feel I am getting value for my money.
Hi Robb,
I retired last fall (Oct, 2025). Being an excel nerd, I compared the cost of plans from 3 providers to what my Spouse and I used while I was working, with some expected add-ins such as major dental work. I came to the same conclusion as Rob, and chose to self insure by maintaining a separate fund for it. Since the house always wins, I was not surprised with my conclusion.
CJ
Would loveeeee if you could share your excel spreadsheet to use as a template to go through the same exercise!! My email is palapi29@gmail.com if you’re willing to share!
Hubby and I retired early (late 40s), healthy with no prescriptions, and we travel 6+ months a year after 20+ years of comprehensive employer sponsored health plans. Did all the research and came to the same conclusion to self insure. We are now 2 years in… and it has worked great so far. Travel vaccines and emergency medical are eligible medical claims with CRA, we have experimented with prescription eyewear, dental care and comprehensive health assessments in Thailand, Vietnam and Malaysia, and lo and behold, thanks to low living costs & associate taxable income, and no longer having work or professional association access to medical plans, we are actually eligible for the Canadian dental plan and BC fair pharmacare, should we need it. There is a fear that comes with such a dramatic change in “control” over finances, especially as trust in institutions seems at all time lows. But i can say that 2 years in we are very happy with our decision to self insure.
Thanks Robb for another very informative post.
I retired at 56 and bought private health insurance. I reside in Québec and it’s costing me 756$ a year. Last year, I was reimbursed by Canada Life for 950$ of services: vision care, Acupuncturist, Dietitian, Massage therapist, Physiotherapist, Osteopath, etc… I’m very active, so I check the service I’m entitled to and I use them. I performed a yearly review to see if the cost/benefit/peace of mind is worth it. As long as it does, I will purchase it.
Robb, thanks for writing about a subject which concerns me a lot and honestly I thought the best option is to setup my own health savings plan, similar to Rob Carrick’s conclusion.
The part that bothers me the most is the cost of dental procedures and would love to learn from other’s experiences. Short of going overseas for complex dental procedures, what options do we have in Canada where no serious dental insurance exists for retirees ?
Have a good day and good health you ALL !