You will build a healthcare cost line for the years before and after your payout age and add it to your model.
The healthcare line in your spending base has been a placeholder since lesson 1.4: one rough figure, the same at every age. You now know that is wrong in a predictable way. Premiums step up by age band, MediSave pays only part of them, riders are all cash, and outpatient costs grow as you get older. This exercise replaces the placeholder with a line built from real tables, then feeds it into your model so you can see what it does to your number and your date.
Allow about thirty minutes. Have your insurer's premium table from lesson 7.2 and your model from lesson 4.4 open.
In a new tab, make one row for each five-year age band from your stopping age to at least 85. For each band, enter the premiums from your insurer's table at today's prices: the shield plan, any rider, and CareShield Life or any supplement if its premiums are still running at that age.
Use the age at the start of each band. Premiums move within bands too, but the band figure is close enough for planning.
If you plan to drop a rider at a certain age, as lesson 7.2 suggested deciding in advance, stop entering it from that band.
Premiums are only part of what you pay. Add a column for everything else: GP and specialist visits, dental, optical, regular medication, health screening, and the part of any hospital bill your insurance does not pay, such as the deductible and co-payment if you have no rider.
These are harder to look up. Start from what you spend now, adding back what your employer currently pays, using the list you made for lesson 7.1. Then increase the figure gently by band. A figure you have thought about is better than a precise-looking one you invented.
Split each band into two columns: MediSave and cash. MediShield Life premiums and the private part of a shield plan up to the Additional Withdrawal Limit can go in the MediSave column. Riders, the private part above the limit, and most outpatient and dental costs go in cash.
Then check the MediSave column against your balance. Without contributions, a MediSave balance that pays premiums every year will shrink. If the total MediSave column over the years exceeds what your account is likely to hold, move the excess to cash.
Only the cash column belongs in your spending base. Average it over the bands before your payout age and over the bands after, at today's prices. Replace the old healthcare line with the new figure for each period, then rebuild the two-part number from lesson 3.4 and rerun the model from lesson 4.4.
Priya, from the earlier modules, uses made-up figures that stand in for her insurer's real table.
Her cash costs per year by band, including the cash part of her shield plan, her rider until she drops it at 70, and other out-of-pocket costs: S$2,800 at 50 to 54, S$3,300 at 55 to 59, S$4,000 at 60 to 64, S$5,100 at 65 to 69, S$4,600 at 70 to 74, S$5,600 at 75 to 79 and S$6,800 at 80 to 84. The dip at 70 is the rider ending.
Her MediSave column runs from S$1,000 a year at 50 to S$3,200 at 80. She notes it as a question to check against her balance.
The averages are about S$3,367 a year before 65 and about S$5,525 after. She rounds them up, to S$3,500 and S$6,000, as a margin for revisions to the tables.
Her old healthcare line was S$2,300. So her spending before 65 rises by S$1,200 to S$45,200, and after 65 by S$3,700 to S$47,700.
Rebuilding the two-part number: the bridge is fifteen years at S$45,200, which is S$678,000. The gap after payouts is S$47,700 minus S$16,800, or S$30,900, and divided by her 3.5% rate that is about S$882,857. The new two-part number is about S$1,560,857, up about S$123,714 from S$1,437,143.
On her model at a 4% real return, her balance first passes the new target at 51, one year later than before.
For Priya, healthcare added about S$124,000 to her number and about a year to her date. Most of that came from the later years, where premiums are highest and the portfolio has to fill the gap above CPF LIFE for the rest of her life. The early years changed less.
Your result may be larger or smaller, depending on your plan, your riders and how early you stop. What matters is that the healthcare line in your model is now built from tables, split between MediSave and cash, and different before and after your payout age.
A finished sheet has a row for each age band to at least 85, premiums and other costs at today's prices, a MediSave and a cash column, two averages, and a note on your MediSave balance. Your model now uses the new line. Keep the before and after figures side by side, because the activity asks you to report how much they changed.
Complete the healthcare cost sheet and write how much it changed your two-part number and your target year.
Junxiong-WFG Organisation is an authorised representative of AIA Financial Advisers Private Limited (Reg. No. 201715016G).