When Mary and Robert Chen retired last year, they thought carefully about how much they had saved in their RRSPs and other retirement accounts. They planned their income streams, considered their tax brackets and even ran projections for a comfortable lifestyle. One thing they did not fully anticipate was how losing their workplace health benefits would affect their budget.
For the purposes of this article, the Chens are a fictional example, but their situation illustrates a challenge many Canadians face.
“I thought my savings would cover everything,” Mary said. “I did not realize that without our group benefits, things like dental, vision and prescription costs would hit us hard.”
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The reality of losing workplace benefits
Many Canadians rely on employer-provided health benefits during their working years. According to Statistics Canada (1), about 66.8% of employees reported having workplace medical or dental benefits through their main job in 2024.
But most of these benefits do not automatically continue after retirement. Canada Life notesn (2), “While some retirees may be fortunate enough to have healthcare benefits continue into retirement, most won’t.”
The result is that retirees often face higher out-of-pocket costs for services they used to receive at little or no cost. Prescription drugs, dental care, vision care and paramedical services such as physiotherapy or massage therapy can add thousands of dollars per year to a retired couple’s expenses.
Read more: Here are 5 expenses that Canadians (almost) always overpay for — and very quickly regret. How many are hurting you?
Planning for health costs in retirement
For Canadians approaching retirement, factoring in these costs is just as important as planning how to draw from RRSPs or TFSAs. Experts suggest several steps to mitigate the financial impact:
- Review your current benefits: Find out what will continue into retirement. Some employers offer partial coverage or options to extend benefits for a limited time.
- Consider private insurance: Individual health insurance policies can cover gaps, though premiums vary based on age and pre-existing conditions.
- Build health costs into your retirement budget: Use realistic estimates for dental, vision, prescription and paramedical services when planning withdrawals from retirement accounts.
- Use tax-advantaged accounts wisely: Funds from an RRSP or TFSA can help cover unexpected medical expenses, but careful planning can minimize tax impact.
As Shams Talib, head of Fidelity Workplace consulting told Investopedia (3), "Many retirees underestimate how much they’ll need to save to cover health care costs in retirement." Planning is the key to avoiding the pitfalls of not being prepared to absorb unexpected health-related expenses.
Government coverage is limited
While Canadians benefit from publicly funded healthcare, coverage is limited primarily to hospital and physician services. Prescription drugs, dental care, vision care and most other services are not universally covered. Seniors may be eligible for some provincial drug plans or subsidies, but these often do not fully replace private benefits.
In Ontario, for example, the Ontario Drug Benefit Program provides prescription coverage for seniors over 65, but costs like dental care, eye exams and hearing aids remain out-of-pocket. Other provinces have similar programs with varying coverage. British Columbia’s Fair PharmaCare plan helps cover prescription drugs based on income, but dental, vision and paramedical services are mostly not included.
Alberta offers a Seniors Benefit program that provides some prescription coverage and income support, yet most dental and vision care still requires private payment. Quebec provides public prescription coverage through a public drug plan for seniors, but dental and vision costs remain largely uncovered.
Across Canada, retirees often need private insurance or personal savings to cover the gap between government coverage and actual healthcare expenses.
Practical steps for Canadians nearing retirement
In our example, the Chens adjusted by reviewing their health insurance options and increasing the portion of their budget set aside for medical expenses. They also shopped around for supplemental insurance policies to cover dental and vision costs.
For others planning their retirement, experts recommend:
- Start including health-related expenses in retirement calculations at least five years before leaving work
- Explore group retiree benefits if available, or look into individual insurance options
- Track actual health spending during the first year of retirement to fine-tune budgets
- Consider setting up a dedicated health savings fund within TFSAs or other accounts to cover costs without affecting daily living expenses
Take control of your health expenses before retiring
Retirement planning is about more than RRSP withdrawals and income streams. Losing workplace health benefits can have a significant impact on finances if retirees do not plan ahead.
Understanding what is covered, estimating realistic out-of-pocket costs, and exploring private insurance options are critical steps. As our example illustrates, planning ahead makes health expenses more manageable and less stressful.
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Article sources
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
Statistics Canada: Medical or dental benefits coverage (1); Canada Life (2); Investopedia: Health Costs In Retirement Are Rising, And Many Americans Aren’t Prepared (3)
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.