Apr 07, 2023  | Tags: financial planning, health

Our insights

How much money do you need in retirement? It’s a question that has so many variables when formulating a response.

One of those variables many fail to consider is health.

Whenever plotting a financial plan at any age, your health is a significant factor in when and how much money you will need.

It stands to reason that someone entering their 60s in peak physical condition can expect to live longer and need more money than someone in failing health.

Logic says the fit 60-year-old should be planning for funds to sustain them for at least the next 25 years.

Conversely, those with medical challenges should be spending money now to maintain the level of health care they need and enjoy life while they can.

The reality is that squirreling away significant amounts of money for years down the track may not be necessary.

Here are the primary considerations when building a financial plan and why health is such an important consideration.

Ability to work

The pension age in Australia will rise to 67 on July 1, 2023.

It is not outside the realms of possibility this could continue to climb in ensuing years.

Your health is critical to your ability to be able to work and earn an income for as long as possible to supplement and build on your savings.

Your ability to access sick leave or disability benefits also need to be considered.

If poor health prevents you from working, this needs to be factored into your financial plan.

If you can no longer work your traditional job, it may be worth considering if you are able to perform any other work.

The pandemic has created many work from home opportunities.

Medical expenses

Anyone with a chronic illness will face ongoing medical expenses that can prove a significant drain on their nest egg.

Ongoing doctors appointments, prescription medication and hospitalisations can quickly add up, even with health insurance.

These all need to be factored into any financial plan to ensure you can afford the level of care you need.

Insurance costs

There are many different types of insurance you may need to consider.

Health insurance - If you have been an ongoing member of a fund, it will cost you significantly less than if you attempt to join one later in life.

If you wait until you have a pre-existing condition, you will find premiums become even higher, unaffordable or you may even be denied coverage.

This could have a huge impact on your financial plan.

Consider too how much you are paying for health insurance, how much you use it and what benefits you might need in the future.

Life Insurance - This pays a sum to your beneficiaries when you pass away.

But the cost of premiums rise significantly as you age and will also be influenced greatly by your health to the point where it may become unaffordable.

Income Protection or Disability Insurance - One gives you an income stream, the other a lump sum if you are unable to work.

If you have a pre-existing condition, premiums will be much higher or you may be refused cover.

Aged care

There is no insurance available in Australia for aged care.

This means that in the event you one day need help with basic activities like feeding, bathing or dressing and you have no family members to help, you may need to rely on Commonwealth and state programs.

Most of these require a level of co-payment.

Permanent residential care is means tested and generally costs more depending on your assets.

Conversely, if you remain relatively healthy and are more financially stable, you will have more options at your disposal and may have a wider range of facilities from which to choose.

Estate planning

Keeping your Will up to date is an important part of your financial planning but you should also consider other important documents, including an Advance Care Directive.

This dictates your wishes in terms of healthcare and treatment in the event you become seriously ill and unable to convey them.

A valid Advance Care Directive is a legal document and must be followed.

You should also consider appointing an enduring Power of Attorney to look after your legal and financial affairs in the same circumstances.

Look after yourself

Given the importance of your health to your financial plan, it is yet another reason to invest in your body! Eat well, get active, take care of your mental health … and see the long term benefits.

While the financial impact is huge, there’s also the lifestyle benefits. Even the best wealth strategy doesn’t count for much if you can’t enjoy the benefits in your later years.

Get advice today

Making clear and informed decisions now about your financial future makes great sense.

Everyone needs a financial plan.

By taking your health into consideration now, you can make the very best judgement calls about accumulating and preserving your wealth as well as knowing when is the right time to begin drawing on your savings.

That’s where Calder Wealth Management can help.

We are wealth experts who can help you make the best financial decisions for your long term interests.

There really is no substitute for quality financial advice from someone personally invested in your future.

At CWM, we pride ourselves on leading our clients into the future with structure, financial stability and confidence.

Contact us today to discuss all of your financial needs and concerns.

Written by James Herriman

The information contained in this article is general in nature and does not take into account your personal situation. You should consider whether the information is appropriate to your needs, and where appropriate, seek professional advice from a financial adviser.

Taxation, legal and other matters referred to on this website are of a general nature only and are based on Calder Wealth Management’s interpretation of laws existing at the time and should not be relied upon in place of appropriate professional advice. Those laws may change from time to time.

CWM specialises in wealth management with a focus on advice, investment, sustainability, insurance and finance.