Navigating healthcare costs in retirement

Retirement is all about enjoying life, but it’s also a time when spending and finances can change significantly. Many costs go down as you take a step back from work, but one that can rise is healthcare costs. While it can be uncomfortable to consider our declining health, it’s important to factor it in from a financial standpoint.

Of course, we don’t know what is around the corner, but with 80% of Australians over 65 having at least one chronic health issue [1], it bears some consideration as you plan for robust retirement finances.

How much should you allocate for healthcare in retirement?

Research by Australian Seniors indicates that, on average, Australians spend $1,586 on out-of-pocket healthcare costs each year, but of course, we don’t know what is around the corner, and a chronic health condition can increase costs considerably, so it’s important to plan for the unexpected.

Should you keep your private health insurance?

While your insurance needs will change as you enter retirement, maintaining a decent level of private health insurance tends to be worth the expense if you can afford it. Medicare will typically cover major surgeries through the public system. However, elective surgeries can involve significant wait times, potentially leaving you in discomfort and putting a hold on the things you want to enjoy in retirement.

In addition, ‘extras’ like dental and physio can become incredibly expensive without the right cover, and unfortunately, in many cases, they simply aren’t things you can put off.

It’s worth analysing the cost versus benefits of various private health insurance plans, keeping in mind that premiums will increase as you age. Adequate coverage is key, but it’s also important to balance this with affordability.

How can you manage healthcare costs?

Your health is a critical investment, and while you can’t thoroughly prepare for the costs, you can take a proactive approach to your health in the lead-up to and during retirement. It can help to minimise risks as you age, and is great for your mental health and wellbeing, too.

It’s essential to consider both mental and physical health in your approach, which includes preparing for the emotional transition to retirement. For more information on how a proactive approach to health can lead to a happier retirement, see the article in Aptitude magazine, Winter 2024 Issue.

How can you budget for healthcare costs in retirement?

With so many unknowns, it is impossible to know what your expenses will be. However, there are some steps you can take to put yourself in the best possible position

So here are a few things to consider in your planning:

• Assess personal health needs: Consider your current health status and potential future health risks. If you have pre-existing conditions or a family history of certain conditions, it can be wise to plan for higher healthcare costs.
• Explore your government entitlements: Once you reach the eligible age, you may be entitled to a Commonwealth Seniors Health Card, which can help to reduce the cost of medical treatment and medications. It’s also worthwhile to understand what is covered under Medicare to decide if and what level of private health insurance is right for you.
• Plan for out-of-pocket expenses: Build a contingency to cover out-of-pocket costs, with a plan for how your retirement income streams can fund them, so they don’t become an unexpected burden.
• Review and adjust plans annually: Health needs can change rapidly. Regularly reviewing your private health insurance and budgeting for healthcare expenses can ensure you are always adequately covered without overpaying for unnecessary cover.
• Understand and plan for aged care costs: It’s not something we like to think about, but aged care can come to the fore when health issues arise. While aged care in Australia can be expensive, there are many ways to fund it, so it’s worth talking to your financial planner and building this into your retirement roadmap.

While no one likes to think about their own declining health, it’s important to be realistic when it comes to your financial plans. As we age, health expenses increase. So, planning early, understanding the landscape and investing in your health are key.

Planning your retirement? Download your free retirement roadmap today. If it’s time to stop thinking and start planning, contact the Apt Wealth team to discuss your needs.

General Advice warning

The information provided in this blog does not constitute financial product advice. The information is of a general nature only and does not take into account your individual objectives, financial situation or needs. It should not be used, relied upon, or treated as a substitute for specific professional advice. Apt Wealth Partners (AFSL and ACL 436121 ABN 49 159 583 847) and Apt Wealth Home Loans (powered by Smartline ACL 385325) recommends that you obtain professional advice before making any decision in relation to your particular requirements or circumstances.