Coping with health-care costs a burden on some retirees
THE challenges of health-care costs can be a vexed issue for many retirees. Recently I had discussions with several clients and concerned individuals about the rising costs of health care in Jamaica. With many pensioners receiving a fixed income for life and rising inflation, it has proven quite difficult for some retirees and their family members to cope with health-care costs.
Last week a retired couple asked my advice on managing their health cost. They both receive monthly pension income, but rising health cost is depleting their funds. Another retiree is a cancer patient, who went on early retirement. She is not yet 60 years old and her mortgage is more than her monthly pension. I asked her how is it that she has been able to cope. She made reference to the financial assistance she has been receiving from her children which has become her lifeline. Another retiree informed me that his pension was adequate 15 years ago but has now proven inadequate to meet his financial needs. Though working on a part-time basis, he is not able to maintain the lifestyle that he previously enjoyed, and managing health-care costs has become a major concern.
The abovementioned scenarios underscore the importance of planning for retirement early and ensuring that retirement plans are reviewed at least annually. Too many employees delay saving for their retirement. Illnesses, accidents, and redundancies can force employees to retire early. A retirement plan should consider all factors, including a diversification strategy that will create streams of income in retirement. The three major costs that retirees may encounter in retirement are housing, transportation, and health costs. Health-care inflation is likely to grow faster than general inflation and with people living longer, retirees should anticipate huge costs for health care in retirement. Health-care costs increase with age. Therefore, health and medical costs should not be overlooked in planning for retirement.
I am encouraging self-employed individuals, and in particular employees, to increase retirement savings. This can be done by contributing the maximum allowed by law to your pension plan and investing in long-term investments such as mutual funds, unit trusts, and real estate. Life and health insurance must be included in your retirement plan. Make regular contributions to your investment accounts. Based on research it’s recommended that retirees replace at least 80 per cent of their gross pre-tax income to maintain the standard of living they had before retirement. This is a general principle. The thinking is that retirees are expected to spend less in retirement, as they don’t have the same financial responsibilities that existed prior to retirement. However, I suggest that due to inflation and the specific needs of individuals with regard to desired lifestyle, health, and financial obligations, it may be necessary and realistic to replace 100 per cent or more of one’s pre-retirement income. It is a fact that the cost of living will be higher for some retirees. With people living longer, employees should plan to spend more money in retirement. No one wants to run out of money in retirement.
Today I will share health-care options that retirees can benefit from while resident in Jamaica. Pre-retirees should explore possible support from organisations that can assist with lowering health costs in retirement, especially since the inflationary cost of health is unpredictable. Individual health insurance in Jamaica is rather expensive and for some persons, the cost is prohibitive, while others are denied health insurance benefits due to ill-health or pre-existing medical conditions.
One organisation that has proven to help retirees in reducing their health insurance costs is the Caribbean Community of Retired People (CCRP). The good news is that the minimum age to join this organisation was reduced to age 40. Therefore, self-employed persons and employees who do not have health insurance benefits can be members of the organisation and apply for health insurance under the CCRP Comprehensive Group Health Insurance Plan and its Group Major Medical Health Insurance Plans. It has an extensive range of discount partners that provide numerous and varied services for the CCRP members. Property and auto insurance are also available for members.
Another organisation that has proven beneficial to retirees is First Care. Retirees or individuals who are uninsurable are able to benefit from a wide range of health and medical benefits. For those persons who cannot afford health insurance, the organisation is seen as an alternative for meeting some of their health-care needs. Members benefit from a plan that offers no age limit or medical restrictions at an affordable cost. I believe that any savings in health and medical costs during retirement can prove beneficial to retirees whose retirement journey may prove to be a long one.
– Grace G McLean is a financial advisor and retirement specialist at BPM Financial Limited. Contact her at gmclean@bpmfinancial or visit the website: www.bpmfinancial.com. She is also a podcaster for Living Above Self. E-mail her at email@example.com