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Your retirement years should be the golden years of your life, which is why it is critical to make provision for your healthcare expenses so that you can maintain your lifestyle into “your third age”. Sadly, this is often overlooked, making it challenging for most South Africans to access quality healthcare in their retirement years. In 2019, Statistics South Africa (Stats SA) noted that 47 million South Africans are without medical cover.

Farzana Botha, Segment Solutions Manager at Sanlam Savings, explains how people do not realise that providing for medical costs will account for a large chunk of their income in retirement. According to Stats SA, 38% of South Africans over the age of 60 use chronic medication, around a fifth use assistive devices like spectacles, 10% use hearing aids, and 5% use wheelchairs, all of which are not necessarily fully covered if you are on medical aid, and may need to be paid for out of pocket.

Factoring in medical inflation

Medical inflation is 3-5% higher than standard inflation. “This means that the ability to afford your medical aid and related expenses in future will be hampered by the eroding effect of inflation on the buying power of your money,” explains Botha. To afford the same medical care you are accustomed to today in 20 years’ time, you need to budget a larger part of your income towards medical expenses than you do currently.

Medical inflation is 3-5% higher than standard inflation. “This means that the ability to afford your medical aid and related expenses in future will be hampered by the eroding effect of inflation on the buying power of your money,” explains Farzana Botha, Segment Solutions Manager at Sanlam Savings.

Your income replacement ratio – the ratio of the income you receive from your pension once retired – should also be taken into account when estimating how your finances will fare against medical expenses. The average replacement ratio for South Africa’s retirement industry is estimated at just 25- 30%. 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, as a country, we are seriously underestimating the impact this will have on our quality of life.

The cover to consider

Retirement annuity

  • For help with funding medical expenses, gap and dread disease cover
  • Offers a tax deduction within allowable limits while contributing to your retirement annuity and post-retirement

Medical aid and gap cover

  • With medical aid in place, you are covered for in- and out-of-hospital expenses
  • Gap cover can safeguard your finances, covering any shortfalls in medical expenses, or emergencies that result in additional unforeseen expenses

Dread disease cover

  • Cover for severe illnesses like dementia or cancer, which can have immediate consequences for your lifestyle, with major financial implications
  • Receive a lump sum upon diagnosis, which will help with expenses and lifestyle adjustments

Sanlam’s Goal Manager is a useful tool that shows South Africans a real picture of what the cost of their medical aid will be in the future. It enables you to input any existing provisions, which are then calculated by Sanlam 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. Sanlam Goal Manager is a new-age solution to an old age problem: allowing South Africans to financially prepare to maintain their health and quality of life in retirement,” concludes Botha.

Access Sanlam Goal Manager by speaking to your financial adviser, who can incorporate it into your reviews and planning, giving you access to the portal whenever you want. Get in touch with a financial adviser today.

 

 

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