Retirement and Medical Aid – the do’s and don’ts

As one begins their career, a number of policies are introduced to ensure that the day you retire you are well taken care off.

It’s a well-known fact that the adoption of western lifestyles by a broad spectrum of South Africans has led to a significant increase in chronic diseases among our population.  In spite of this trend, research points to rising longevity statistics. Factor into the equation rising healthcare costs and the vast majority of employers who make no provision for the healthcare needs of retired employees and your retirement could be an exorbitant exercise and result to be a stressful time which could lead to stress related illnesses.

While retirement funds offering post-retirement medical aid benefits appear to be increasing, members are underestimating medical aid contingency plans. They generally believe that their healthcare needs will be provided for by their employers after retirement, which highlights the dire need for the industry to step up communication around this issue. Most people don’t realise that without a secure plan in place they face the prospect of spending the bulk of their retirement savings on medical aid or having no medical aid at all.

Forewarned is forearmed and therefore it is advisable to consider these factors before you retire:

  • The cost of medical aid contributions after retirement is likely to increase.
  • Medical aid inflation is higher than normal consumer price inflation.
  • Medical health care is most needed from age 55 onwards.
  • Many retirees cannot afford medical aid contributions after retirement.
  • 80% of employers no longer subsidise postretirement medical aid contributions for new employees.

It is estimated that less than 10% of South Africans are able to retire with the same lifestyles as they had during their working years.  Considering that quality medical care is often a question of ‘life and death’, is it not time for individuals and employers to open a dialogue on how best to plan for their future medical costs.

So when choosing your medical scheme, make sure you are fully aware of what your medical aid plan can do for you, i.e. hospitalisation, co-payments and gap cover.

Sources:

http://www.lexisnexis.co.za/our-solutions/private-sector/research-solutions/newsletter-articles/retirement-planning.aspx

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