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The Hidden Retirement Cost: Healthcare Expenses Are Overlooked

Author
Gary Feldman
Date
3 February 2025
5 min read

As an employer, you invest in your employees’ future through retirement benefits, but one critical factor is often overlooked - healthcare costs in retirement. Rising medical expenses can significantly impact retirees' financial security, leading to unexpected reliance on family, government aid, or even delaying retirement all together.

Why Employers Should Care 

Healthcare inflation outpaces general inflation, making medical expenses one of the biggest threats to a secure retirement. Employees who underestimate these costs may struggle financially post-retirement, potentially returning to the workforce or relying on financial assistance. This challenge affects both productivity and long-term workforce planning.

A recent Just SA survey highlights the issue:

  • 57% of respondents plan to rely on their children and grandchildren.
  • 42% expect support from siblings or other family members.
  • 27% plan to depend on government aid.
  • 14% hope to rely on friends.
  • 10% have no plan at all.
  • Only 9% believe their retirement savings will be sufficient.

These figures underscore a lack of preparation, leaving many employees vulnerable to rising healthcare costs they have not accounted for.

The Reality of Healthcare Costs in Retirement

Many employees assume their medical aid will cover all their needs in retirement, but essential assistive devices and chronic medication are often excluded. According to Statistics SA:

  • 38% of South Africans over 60 require chronic medication.
  • 20% use assistive devices like spectacles.
  • 10% wear hearing aids.
  • 5% require wheelchairs.

Healthcare inflation is outpacing general inflation. Rising healthcare costs can rapidly deplete retirement savings, leaving employees with fewer options to maintain a comfortable lifestyle. Without proactive planning, these costs can erode financial security, increasing the risk of financial dependence post-retirement.

Forward-thinking employers can take steps to ensure their employees are better prepared:

  1. Educate Employees on Healthcare Costs in Retirement: Offer financial wellness programmes that include education on the impact of healthcare inflation and the need for dedicated retirement healthcare savings.
  2. Introduce SmartAid as a Retirement Healthcare Solution: NMG SmartAid provides employees with a way to save specifically for medical aid contributions in retirement. This solution includes a personalised assessment to determine if they are on track and an annual statement reflecting their progress.
  3. Encourage Early and Tax-Efficient Savings: The earlier employees start saving, the less they need to put away each month. Encourage tax-efficient savings options, such as tax-free savings accounts or retirement annuity funds, to help employees prepare for healthcare costs.

Investing in employee financial wellness today ensures a stronger, more resilient workforce - one that can retire with dignity, rather than uncertainty.

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