The one factor that could seriously strain your retirement income.
Australians are living longer, putting pressure on retirement incomes, the Age Pension and government spending on welfare, aged care and support for older people. But, as revealed in the Retirement Affordability Index™ June 2018 – The Longevity Issue, the real cost of living longer is healthcare.
It’s no secret that the population is ageing. In 2016, 15 per cent of the population was aged 65 and over, with almost 13 per cent of those 85 years and older. So, of 24.3 million Australians, 3.65 million are aged over 65. By 2056, this number is expected to increase to 8.7 million.
With this increased longevity comes a heightened risk of health problems – which hits the hip pocket of both the individual and the economy.
The cost of private health insurance rises each year. While 75.8 per cent of YourLifeChoices members surveyed in the YourLifeChoices Insights Survey 2018 say their health is either good or excellent, the cost of healthcare remains a great concern to those aged 54 and older.
More than 71 per cent of our members who participated in the Retirement Income and Financial Literacy Survey 2018 do have private health insurance, but there is a real fear they will not be able to keep paying for coverage throughout retirement.
“It is ridiculously expensive, and I fear that when I retire I will no longer be able to afford it,” said one member.
Others question the affordability and efficacy of health insurance.
“Currently, gap payments make it worthless,” said another member.
Private health insurance is a major cost for most older people – especially the 70 per cent on a part or full-Age Pension who struggle to make their money last between payments.
According to the YourLifeChoices Retirement Affordability Index™ June 2018 – The Longevity Issue, released on Sunday, Australia Institute senior economist Matt Grudnoff said that Constrained Couples – those on an Age Pension who own their own home – are currently bearing the brunt of rising healthcare costs.
“This is primarily because Constrained Couples spend the largest proportion of their income on health. Cash-Strapped Couples and Singles spend the smallest proportion of their income on health and so it impacted them the least,” said Mr Grudnoff.
Then there’s the cost to the Government, specifically, Medicare.
The last Census found that Australians aged 65 and over accounted for 28 per cent of the 123 million claims for GP visits – twice as many claims per person for that group than for those aged under 65.
There were also 12.5 million specialist visits claimed through Medicare in 2014–15, four times as many than for people aged under 65.
A Monash University-CSIRO report in 2016 estimates that as a result of an ageing population, health expenditure per person will rise from $7439 in 2015 to $9594 in 2035 – an increase in total expenditure from $166 billion to $320 billion or an average annual growth of 3.33 per cent.
The most recent numbers show that hospital and medical costs for those over 54 have risen by 1.5 per over the last quarter alone.
Read about this in detail in the YourLifeChoices Retirement Affordability Index™ June 2018 – The Longevity Issue
How much do you spend on healthcare? Do you find it difficult to manage the cost of health insurance? How much do you sacrifice to maintain your insurance?