When planning for retirement, securing a medical safety net is crucial to protect against healthcare risks – one of the five major risks that retirees face.

At Havend, we find that there are two types of insurance policies that you should continue to keep even after you retire. That is, a health insurance policy that you can afford, and a long-term care insurance plan.

Medical inflation continues to rise at an alarming rate. It is projected to be 12% in 2025, mirroring the high rate in 2024.

As a Singaporean, you are covered by the national health insurance scheme, MediShield Life. Despite that, many individuals opt for a private Integrated Shield Plan (IP) to match their healthcare expectations. For example, if you prefer treatment at private hospitals, then you should purchase an IP that covers private hospital stays. However, the rising cost of these premiums poses a significant challenge – particularly in old age when there is no regular income.

To put this into perspective, let’s examine the total capital outlay required for an IP from age 65 to age 100. Based on the average cost across the seven IP providers:
• For coverage in private hospitals: $540,969.20
• For coverage in public hospitals, Class A ward: $177,084.90

Let’s break these numbers down further into an estimated cost on a monthly basis:
• For coverage in private hospitals: $1,288 per month
• For coverage in public hospitals, Class A ward: $421 per month

These figures are based on the current premium rates. But what happens when we project this cost into the future? Let’s assume that the IP premiums increase by 3% per annum. By the time a 35-year-old adult reaches retirement at age 65, the estimated lifetime cost would rise to:
• For coverage in private hospitals: $1,313,074.24
• For coverage in public hospitals, Class A ward: $429,831.53

This means that if you rely on an IP for private hospital coverage, then you may face a monthly premium of approximately $3,126 from age 65 to age 100. These rising costs underscore the importance of planning ahead to ensure affordability in old age.

Another major healthcare cost that is often overlooked is long-term care. According to Mr Gan Kim Yong, Minister for Health, in 2018, it was projected that one in two Singaporeans who were healthy at age 65 could become severely disabled at some point in their lifetime and require long-term care.

Moreover, there is also uncertainty about the duration a person remains severely disabled. Although the median duration of disability is four years, 30% of individuals could remain severely disabled for 10 years or more.

At this time, the average cost of long-term care stands at $2,952 per month (according to a study by Singlife). This far exceeds the monthly payout of $649 from CareShield Life in 2024. This means retirees must rely on either their own personal savings or consider a CareShield Life supplement plan from insurers like Great Eastern Life, Income Insurance, or Singlife to bridge the gap.

Both health insurance and long-term care costs are significant yet often underestimated expenses in retirement planning. Without careful financial preparation, retirees may struggle to maintain their desired standard of living while managing the escalating medical costs.

Even with the relevant insurance policies in place, there is still a cost to bear – the cost of the insurance premiums. Moreover, these premium rates are often non-guaranteed, meaning insurers may adjust them over time. As such, it is crucial to allocate a portion of your retirement savings towards maintaining these insurance policies. Otherwise, without adequate coverage, you may have to bear hefty medical and long-term care expenses yourself. 

 By factoring in these costs early and securing the right insurance coverage, you can better safeguard your financial well-being and ensure a comfortable retirement. 

This is an original article written by Pang Zhe Liang, Lead of Research & Solutions at Havend.

Secure your retirement with the right protection. Align your Integrated Shield Plans and Long-Term Care Plans today for complete peace of mind. Find out more here.