The cost of health care increases sharply with age. This startling reality was made clear in a discussion I had with a retired senior. She disclosed that her monthly pension was only sufficient to cover basic monthly expenses. Any medical check-up or unforeseen expense that occurs becomes difficult to fund.

She retired over 10 years ago and her current monthly pension is approximately $100,000. Her last salary income before retirement was $300,000 monthly. This reflects a retirement income that’s a third of her pre-retirement income.

Inflation has also eroded the purchasing power of her pension. She has no other source of income and struggles to pay her medical bills, which are now more frequent.

A worrying credit card debt has become a drain on her finances. She decided to settle the debt and avoid any interest payments. Family support has proven to be quite helpful in offsetting income shortfalls.

But what if the family support ceases due to the death or medical conditions of her loved one? This is a question I pondered as I listened to her. Medical bills can erode savings and investments in no time, not to mention long-term care expenses, which may include caregiver and nursing home services should she experience mobility challenges.

Living on a shoestring budget with dwindling investments and a short-time horizon is a haunting state of affairs.

She cannot afford health insurance as, with pre-existing health conditions, accessing health insurance is costly.

There is not much one can do in retirement to offset the cost of health care. Therefore, pre-retirees should pay special attention to the impact of health care and long-term care on their retirement plans.

Some retirees invest pension lump sums to provide for their health care, medical expenses, and long-term care, since they may spend 20 years or more in retirement. It’s best to plan for a long stay in retirement than regret not planning.

Prescription drugs are a fast-rising health care cost. Patients with non-communicable diseases (NCD) such as stroke, diabetes, and heart disease may require long-term management of lifestyle and health. NCDs require long-term treatment and costly medical intervention. Hospitalisation from chronic NCDs such as diabetes adds to rising health-care costs.

Retirees have no control over rising inflation, and those with streams of income are in a better position to weather the financial tide. A report by the Pan American Health Organization listed cardiovascular diseases, diabetes, and chronic lower respiratory diseases as the main causes of death in Jamaica and “a major public health burden” due to the long-term treatment and management of NCDs.

Jamaica and the rest of the Caribbean faced similar health-care challenges and have inadequate resources such as professional health-care staff and infrastructure. The United States has the highest health-care cost in the world and, according to an Organisation for Economic Co-operation and Development (OECD) report, the country with the lowest out-of-pocket health-care cost is South Africa. Wherever in the world retirees go or reside health-care costs can be daunting.

Will you have enough money for health care in retirement? This is a question for all stakeholders. Navigating health challenges and costs is a difficult task and so financial planning needs to start early.

You don’t need to have a lot of money to start putting aside funds for health-care costs, but family support and co-operation are crucial for retirees who did not factor the cost of health care in their retirement plan during the working years.

I interviewed a family who have put in place an investment strategy that will assist with future health-care costs as well as cover any emergencies. The retiree received a paltry pension of a mere $10,000 monthly. A standing order was established and this sum is sent to the retiree’s investment accounts monthly. Five thousand dollars monthly to each investment adds up and compound over many years, while his family takes care of his basic needs. The retiree is building a fund to assist with his welfare, so he won’t have to be a financial burden to his family as he ages.

Health-care cost should be included in everyone’s retirement plan. Employees should start saving and investing early in their working years and gradually increase the amount they invest each year in a long-term investment account, such as a pooled fund while contributing the maximum contributions to a pension plan. If investment habits start early the sacrifices will pay off.

Automated savings and investments aid in maintaining good money habits. I can’t overstate that stocks should be included in the asset mix for exponential growth. Seniors should encourage their adult children to invest early. There are seniors who are investing for their grandchildren as they seek to leave an inheritance that can last from one generation to the next. Having financial freedom can help in enjoying a healthy life.

“Health is not valued until sickness comes.” — Thomas Fuller

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 livingaboveself@gmail.com.

Jamaica and the rest of the Caribbean faced similar health-care challenges and have inadequate resources such as professional health-care staff and infrastructure.

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