UAE expats: How to prepare for healthy retirement without breaking the bank

Arun Leslie John, Gulf News, October 25, 2024

Balancing health and wealth for UAE expats nearing retirement can be a slippery slope. How to balance out the two aspects, and prepare for the era of retirement without breaking the bank!
The United Arab Emirates (UAE) has emerged as a favored destination for expatriates (expats) seeking career opportunities and a high standard of living.

However, while the economic benefits are evident, the hidden costs of healthcare in old age can significantly impact financial planning, especially concerning retirement.
As expats navigate the complexities of saving and investing in a foreign land, understanding how future health expenses influence their financial strategies is crucial for securing a comfortable retirement.

The healthcare landscape in the UAE

The UAE boasts a modern healthcare system with advanced facilities and a wide range of services. However, healthcare costs can be surprisingly high depending on individual health concerns

A recent report from the UAE's ministry of health and prevention highlights that the country's healthcare expenditure is expected to reach around $5.9 billion (Dh21.7 billion) by 2024.
For expatriates, this reality translates into the necessity of a robust health insurance, which can vary dramatically in cost based on the level of coverage.
In the UAE, health insurance is mandatory for all residents, while many employers provide health insurance, gaps in coverage or rising premiums can lead to substantial out-of-pocket expenses, particularly for specialised treatments or chronic conditions.

How health costs affect saving and investment decisions

Health expenses significantly impact the financial decisions of expats. The relationship between health and wealth can create challenging scenarios, particularly as individuals approach retirement:
1. Diminished savings potential : High healthcare costs can reduce disposable income, making it difficult for expats to save adequately for retirement. A way to tackle that is that it is legal in the UAE for employers to provide an insurance package for all of their employees. Increasing expenditure on healthcare has a similar effect to decreasing income as it reduces the amount of disposable income available to families to spend on other goods, such as food, education, transport and entertainment. The reverse, too, is true. Consumers have higher spending power and more disposable income, leading to higher healthcare expenditure.
2. Altered investment strategies: With rising health costs, many individuals may lean towards conservative investment strategies. While liquidity is essential, overly cautious approaches can limit growth and prevent the accumulation of sufficient retirement funds. Conservative strategies such as cash reserves and maintaining a larger cash reserve can provide liquidity and security. This allows investors to weather financial difficulties without needing to sell investments at a loss.

3. Debt burden: Some expats may use loans or credit to cover medical bills in emergencies. This reliance on debt can jeopardies long-term financial security and complicate retirement planning. While medical debt often snowballs into a bigger financial burden in the long run, ignoring healthcare costs snowballs debt and hurts wealth too. For instance, someone without financial resources may skip routine care like filling prescriptions or avoid emergency care entirely to avoid medical debt. But this, in turn, not only has larger repercussions on health, but hurts your finances in the long run. Unpaid medical bills can lead to calls from debt collectors, dings to your credit report, and potentially bankrupt you.

How to prevent medical debt from hurting your wealth

Get familiar with your insurance coverage and out-of-pocket costs, like the deductibles, and call the insurer and ask someone to walk you through all the potential out-of-pocket costs. You cannot make changes to your policy except during certain windows of time, such as open enrolment or after a major life event.

• Check whether the specifics of your care are covered: After your doctors map out your treatment plan, check whether all the healthcare providers you need to see are part of your insurance network and whether any part of the treatment needs to be pre-authorized.

• Get a cost estimate: If you're uninsured, ask for a cost estimate in advance. Most healthcare regulators worldwide require providers to give uninsured patients estimates of what planned care will cost.. Track costs as they come up and never assume that just because insurance covers one part of your treatment, it goes for everything else.

• Check for double-billing : Go through each item on your bill. Even if you've already been discharged and gotten behind on payments, it is worth checking to ensure you weren't overcharged as it's common to mistakenly think medical costs are fixed and non-negotiable.

How to balance health costs with financial planning?

Given the potential impact of health expenses, ex-pats in the UAE can adopt several strategies to ensure a balanced approach to financial planning, particularly concerning retirement:
1. Invest in comprehensive health insurance: Expats should carefully evaluate their health needs based on age, medical history, and lifestyle. Policies that cover a wide array of services, including outpatient and specialized care, can help mitigate the financial burden of unexpected health issues.

2. Utilise health savings accounts (HSAs): Expats may explore international health savings accounts that allow for tax-free contributions earmarked for medical expenses. Such accounts can facilitate better financial management of health costs while ensuring that funds grow over time.

3. Prioritise preventive care: Regular health check-ups and preventive measures can significantly reduce future healthcare costs. By addressing health issues early, ex-pats can avoid the financial strain of more serious treatments later on.

4. Adopt a long-term investment mindset: While it’s essential to remain liquid, developing a diversified investment portfolio can promote long-term growth. Collaborating with a financial advisor to create a balanced portfolio that accounts for both immediate health expenses and future retirement goals is essential.

“Investing in long-term financial growth is focusing on investment opportunities that can help build wealth once the debt is under control. Learning about basic investment options like stocks, bonds, and mutual funds can improve financial stability and growth. Investing early and consistently allows compound interest benefits to work in one's favour.” Arun Leslie John, chief market analyst of a Dubai-based investment company.

5. Consider retirement plans with flexibility: Investing in retirement plans that offer withdrawal flexibility can be advantageous. Options like annuities provide steady income streams, helping retirees cover healthcare costs without depleting their savings prematurely.

Source

Gulf News