It is said that your retirement years are the golden years of your life, which is why you should make provision for your healthcare expenses to maintain a lifestyle fit for what is also known as your “third age”.
However, this is often overlooked, making it very difficult for the majority of South Africans to get quality healthcare in their retirement years. In 2019, Stats SA noted that 47 million South Africans are without medical cover.
According to Stats SA, 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 and would need to be paid for out of pocket.
When planning for retirement, you need to take into consideration that medical inflation is 3% to 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.
Research shows the average replacement ratio – the ratio of the income you receive from your pension once retired – for South Africa’s retirement industry is estimated at just 25% to 30%. Botha notes that this implies that, on average, people with some form of retirement savings can expect to receive the equivalent of just over a quarter of their income at retirement as a post-retirement income. That means that South Africans are seriously underestimating the impact this will have on their quality of life.
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 additional unforeseen expenses.
3. Dread disease cover
“Sanlam goal manager presents a new-age solution to an old-age problem by allowing South Africans to financially prepare to maintain their health and quality of life in retirement,” concludes Botha.
Sanlam’s goal manager is a useful tool that shows South Africans a true picture of what the cost of medical aid will be in the future. It enables you to input any existing provisions, which are then calculated by the goal manager using existing costs, and factors in inflation to show you what the starting premium would be. This will enable you to save and afford medical aid in retirement.