Cover you need for medical costs in old age
Post-retirement healthcare costs are often underestimated
Many workers underestimate their post-retirement healthcare costs and use their current health status as a blueprint for what their future health will look like. However, the truth is that many diseases and chronic conditions are a function of ageing. Farzana Botha, segment solutions manager at Sanlam Savings, says when planning for retirement, you need to take into consideration that medical inflation is 3%-5% higher than standard inflation.
“This means that the ability to afford your medical aid and related expenses, years down the line will be hampered by the eroding effect of inflation on the buying power of money,” says Botha. To be able to afford the same medical care you are accustomed to today in 20 years’ time, you must budget a larger part of your income towards medical expenses than you do currently.
Data from Stats SA shows that 38% of South Africans over the age of 60 use chronic medication, around 20% use assistive devices such as spectacles, 10% wear hearing aids and 5% use wheelchairs, all of which are not necessarily fully covered if you are on medical aid.
Below, Botha explains what forms of cover should be considered to manage healthcare expenses in retirement.
1. Retirement annuity
A retirement annuity can be useful for funding medical expenses, gap and dread disease cover and offers tax deduction within allowable limits while contributing to your retirement annuity and post retirement.
2. Medical aid and gap cover
With medical aid in place, you are covered for in and out of hospital expenses. By having gap cover as well, you are safeguarding yourself by being able to cover any shortfalls in medical expenses or emergencies that result in unforeseen expenses.
3. Dread disease cover
This is an important consideration to cover against severe illnesses like dementia or cancer, which can have immediate consequences for your lifestyle, with big financial implications. With cover in place, you will receive a lump sum upon diagnosis, which will help with expenses and lifestyle adjustments.