A recent article Five in seven insurers to jack up private hospital premiums under Integrated Shield Plans published in The Business Times on 3 September 2024 brought our attention to forthcoming premium hikes to Integrated Shield Plans and riders. 

Lifetime premiums for the most costly private hospital plans and riders may approach or even exceed $800,000. As I am writing this article, some of the insurers have already raised premiums as of 1 September 2024. 

Health insurance: Most of us can’t do without it 

A common blindspot that I noticed in most people’s retirement planning is the lack of provision for increasing health insurance premiums.

They say there are 2 certainties in life – taxes and death. If I may add in a third certainty, that would be inflation. Given this reality, it is, therefore, vital to plan ahead to effectively manage health insurance premiums and potential healthcare expenses that can become a financial burden. 

A good place to start is to get an idea of the premium rates of your Integrated Shield Plan (IP) provider. 

• Look at the premiums for the base plan and/or rider from your current age all the way to age 90 or beyond. 
• Do a simple calculation by totalling up the premiums (Medisave and cash) of your main plan and the rider. Your financial planner can help you with this, and factor in a reasonable rate of inflation. 
• I would also recommend including an additional buffer (lump sum) in order to be better future prepared. 
• When you have this information, you can then work on a strategy to ensure you have sufficient resources to fund your future healthcare needs.   

Note:

• When affordability is a concern, you may wish to consider downgrading to one tier lower than your current plan type, for example from private to public hospitals. 
• Consider the coverage of your current rider. For instance, do you need a rider covering deductible (which is an upfront fixed amount that you are already aware of)? 
• It is perhaps a good time now for you to revisit your health insurance coverage and get clarity on your healthcare priorities.     

A stitch in time saves nine: Adequate critical illness coverage is vital

Health insurance is a vital component in the foundation of one’s financial plan. To strengthen your healthcare coverage, you should also ensure you are adequately insured for critical illnesses. And always include an inflation buffer because what is sufficient today will not be enough to meet your future needs.

These days, we are spoilt for choice – there are plans in the market that pay out upon diagnosis of early and intermediate critical illnesses as well. Having said that, these plans could look the same to the layman but in fact, they could be “same same but different”. It takes an experienced financial advisor to compare & analyse and identify the nuances, terms & clauses that can make a world of difference when it comes to claims.

So how should we factor rising healthcare costs in our planning?

Health insurance and critical illness coverage are non-negotiables in our financial portfolio. It is my personal view that the most effective way to manage increasing healthcare costs is by creating passive income streams through investments.

By building a diversified investment portfolio that generates fairly consistent returns, you can:

• Create a financial buffer to handle increasing premiums
• Cover out-of-pocket medical expenses as you age
• Retain the flexibility to use the income for retirement if you remain healthy

We don’t know when life can throw curveballs at us but what we can do today is to prepare financially for the unexpected.

Market fluctuations are inevitable. However, as long term investors, we should not panic and allow short term price volatility to affect our decision making. Instead, staying calm and invested is crucial to ensure your portfolio can continue to grow and help fund your desired retirement lifestyle.

As a comprehensive financial advisor, I help individuals to develop a robust retirement plan. Depending on your risk profile – whether you are a conservative, balanced, growth or aggressive investor – we can structure a portfolio that aligns with your risk tolerance and goals.  

If you would like to discuss your retirement and investment strategy, click here for a discovery meeting. Or you can reach me at +65 62528500 for a chat. 

To your financial best!