Securing your health and wealth: A financial guide to retirement medical costs

Feel free to reach out to PSG Wealth Adviser Chrisley Botha directly.

The burden of medical aid premiums and inflation

Healthcare is a fundamental pillar of retirement planning. The journey begins with understanding the costs involved. For example, a comprehensive medical plan may start at around R4 000 a month. With medical inflation averaging approximately 7% annually, it’s important to recognise that these expenses will likely increase each year, which could significantly impact the long-term viability of your healthcare funding in retirement.

Considering retirement at 65 and planning for a life expectancy of 85, we face 20 years of potential medical expenses. Within this timeframe, the real value of our savings is pivotal. By assuming a modest 5% annual return, we can begin to unravel the complexities of saving sufficiently for rising medical aid premiums, which are bound to escalate annually.

Estimating the financial requirements for health in retirement
When we crunch the numbers, using the abovementioned assumptions, it would cost an individual roughly R3 million in savings to cover medical expenses over 20 years of retirement. It remains a guideline, as unique health conditions, medical schemes, and unpredictable market dynamics could shift these numbers.

Crafting a personalised medical retirement plan

A successful retirement strategy is not one-size-fits-all. It requires a holistic approach, considering several key factors:
1. Health assessment: Start with an honest assessment of your current health status and anticipated medical needs.
2. Medical scheme selection: Choose a scheme that balances affordability with comprehensive coverage.
3. Consider supplementary cover: Investigate gap cover and other insurance products to mitigate out-of-pocket expenses.
4. Long-term care planning: Factor in the potential need for long-term care services, which can quickly erode savings.
5. Stay informed: Stay updated on medical aid regulations and benefits that could affect your coverage.

The imperative for professional financial advice

This is where professional financial advice becomes invaluable. A certified financial planner can provide a nuanced calculation incorporating your unique health profile, lifestyle, and financial situation. They can advise you on tax implications, estate planning, and investment strategies to optimise your retirement savings. Envisioning a retirement free from financial worries, especially concerning health, is not just wishful thinking. With the right planning, it’s an attainable goal. By understanding the costs, considering personal factors, and seeking expert advice, you can secure the peace of mind that comes with a well-funded retirement.

Realising a secure retirement dream

Before retirement, taking proactive steps to accumulate the necessary funds to cover your healthcare costs is important. Begin by maximising contributions to your retirement accounts and taking advantage of tax-deferred growth. Next, consider diversifying your investment portfolio with a mix of assets tailored to your risk tolerance and time horizon; this may include stocks, bonds, and other securities that have the potential to outpace inflation.

It’s also wise to establish a separate healthcare fund, if possible, to address future medical expenses specifically. Review and adjust your savings plan regularly in response to changes in medical costs and shifts in the market. Additionally, reducing debt before retirement can free up more of your income for these savings.

Lastly, consult a financial planner to explore avenues for passive income that can supplement your retirement savings, such as rental income or dividends from investments. With disciplined savings, strategic investing, and comprehensive planning, you can build a substantial nest egg to provide for your healthcare needs in retirement.