Healthcare costs in retirement can be staggering. You are older, your body is more vulnerable and prone to disease and medical expenses increase every year. Even though your Mediclaim policy may provide coverage, still you may have to spend out-of-pocket health care costs.

Many retirees are not prepared for the high-cost of medical care in retirement, when they are no longer part of a company plan. And, too many people believe that their Mediclaim policies shall see them through their lifetime.

Well the truth lies somewhere else. Actually, your Mediclaim policies will fall way short of your medical expenses.

When people ask me, how much Mediclaim coverage is sufficient, then for a Retiree, I suggest, at least Rs 30 lakhs. Unfortunately, most of the insurers decline such high coverage at this age, or it costs a bomb!

Anyways, even if they get coverage for this amount, still it will fall short. Let’s understand with the help of this illustration:

If you retire at age 58, with an assumption that you may require Rs 30 lakhs as medical expenses over the remaining life, you chose to take Mediclaim coverage accordingly.

Considering that Medical costs dramatically outpace inflation (as in the past), with 12% annual cost rise, the similar medical facilities shall cost you:

  • Rs 93.17 lakhs when you are 68 yrs. old
  • Rs 2.05 Crores when you are 75 yrs. old
  • Rs 6.39 Crores when you are 85 yrs. old

Are the figures above shaking the ground underneath for you? The figures mentioned above are based on genuine assumptions based on recent 10 years averages. Your Mediclaim policies cannot match the inflation that increases medical costs. 
The cost of medical care has outpaced inflation for the past 20 years. These increases are expected to continue in the years ahead. Some industry surveys predict that costs will rise as much as 15 percent annually. These growths will double the cost of retiree health care in just five years. Furthermore, health spending as a share of after-tax income will rise dramatically. In US, in 2000, health care spending for older married couples was 16 percent of their total income.

According to the Center for Retirement Research, that number is expected to increase to:

– 29 percent in 2020.

– 35 percent in 2030.

Why is healthcare getting more expensive? There is a good reason & a bad reason. The good reason is about medical advancements that is helping you live longer. The bad reason is that many more new types of disease and disorders are affecting the health.

The medical profession is making some astonishing findings and treatments. These developments promise a remarkably long and hopefully good quality of life for the aged – but they will be increasingly expensive.


By Sameer Rastogi

18 years of experience, PG in Finance and has delivered Wealth Management lectures at IIM Lucknow, IBS Gurgaon and IIPM Delhi. Contributed to various newspapers. Strength – Application of Economic fundamentals to Investment

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