This is a guest post by Mandy Hiew, the co-author of Money Tips for Doctors and founder of SAC Wealth Management Sdn. Bhd.
As reported in Star paper in 2009, medical inflation rate in Malaysia is estimated to be around 15%, whereas global medical inflation averages about 10% each year.
If you cannot imagine how the high medical inflation rate might affect your life, here is the actual figure to help you plan better.
Assuming:
1) Today Medical Cost = RM50,000,
2) Medical inflation is estimated at 15% (as reported in the Star)
Your future medical cost will be:
Medical Cost @ Year | No of Years from Now | Future Medical Cost |
2023 | 10 | 202,278 |
2033 | 20 | 818,327 |
2043 | 30 | 3,310,589 |
2053 | 40 | 13,393,177 |
When looking at this chart, even I got a shock by the figure and quickly asked my assistant to check my medical insurance coverage. I was under-estimating the impact of medical inflation because when I planned for my medical coverage few years ago, I did my calculation based on inflation rate of 8% (instead of 15% as shown in the statistic).
A lot of people prefer to use high return (always associated with high risk) investment vehicles to hedge against high medical cost.
The table below gives you a clearer picture on how much to invest per month in order to catch up with the medical inflation.
No of Years from Now | Future Medical Cost | Target Yearly Saving @ 8% Return | Target Monthly Saving @ 8% Return |
10 | 202,278 | 12,929 | 1,077 |
20 | 818,327 | 16,558 | 1,380 |
30 | 3,310,589 | 27,059 | 2,255 |
40 | 13,393,177 | # 47,870 | 3,989 |
# As illustrated in the below calculation using Financial Calculator
In short, if you were now 30 years old and would like to have RM13 million to cater for future medical cost 40 years from now, you have to invest RM47,870 (approximately RM3,989 per month) in investment vehicles gaining 8% per annum (continuously without fail) in order to achieve your target.
Do keep in mind that the money accumulated is not for you to enjoy, it is eventually to be transferred to doctors & hospitals. Alternatively, you can do what I did just now, review your medical plans to ensure your medical coverage is inflation-proof or at least will increase in value so that you will not be badly affected during old age.
Note:
Medical plans refer to health card and critical illness coverage. If you need to find medical cards to suit your needs, you can find more information here.
