This is one of the biggest expenses for older people. Even if you belong to a medical aid fund your share of bills and increases in premiums could cost you a small fortune. Older people present a problem for medical aid funds. The more senior citizens they have as members the higher the number of claims. Funds increase their premiums every year (and simultaneously reduce their contributions for claims) to make up any shortfalls. The result is many older people can’t afford to keep up with the costs and are forced to resign from their funds.
Relief was made when government introduced a new rates equalisation fund. Everyone who belongs to a medical aid fund pays an equal amount into this central fund. The fund distributes the money among medical aid funds but the more older members a fund has the bigger its cut will be so it can keep the premiums affordable for older people. You can also save money by insisting on being prescribed generic medicines. Adopting a healthier lifestyle and maintaining a sensible body weight also go a long way towards cutting medical expenses.
South Africans can also take out reverse bonds on a portion of the value of their homes. This means if you’ve paid off your bond you can enter into an agreement with the bank whereby it pays you a monthly sum which is deducted from the value of your home. In the event of your death or if the house is sold the bank will deduct the payments it has made to you plus interest from the selling price. Reverse bonds are structured so you’ll never be in a situation where the bank has to repossess your home before you die or sell the house. Provided the money is used responsibly it could provide a handy income for older homeowners. If you’ve retired and are still repaying a bond or spending a packet on maintenance you should consider selling your house and downscaling by moving to a more affordable home. Alternatively you could rent out a room or outside quarters for extra income.
Senior citizens are entitled to discounts on loads of things, from museum entry fees to newspaper subscriptions. Banks also offer older people lower rates. If you’re a member of an organisation for older people such as SAARP you’re entitled to discounts on certain products and services. Membership of SAARP is free.
Draw up a financial plan
The key to trouble-free retirement has and always will be a realistic financial plan. You should know exactly how much money you have at your disposal and how much you can draw annually. The rule is you shouldn’t use more than the inflation rate of your retirement money annually or else you’ll start chewing into your capital. You should also know by how much your investments increase each year. Any downturn in their growth should set alarm bells ringing and you should either tighten your belt or invest your money elsewhere. Discuss your affairs with a financial adviser before making any hasty decisions.