Rising healthcare expenses may derail retirement plans: Experts

• Medical costs continue to rise faster in India

• Hospitalisation and treatment expenses remain key cost drivers

• Medicines, diagnostics add to the burden

• Rising medical bills increase health insurance premiums

The rise in living costs, rapidly escalating medical inflation and increasing life expectancy in India are making retirement planning more crucial than ever

Mumbai: Medical inflation in India is running at nearly 13 per cent annually, more than three times the general inflation rate of 4.2 per cent. The impact is already visible. Treatments that cost Rs 1–1.5 lakh just a few years ago can cost Rs 2–3 lakh today, and the trend shows no signs of slowing down. At the same time, with life expectancy now crossing 72 years, many people will have to spend well over a decade in retirement, relying entirely on the wealth built during their working years.

Talking to Bizz Buzz, Rakesh Kumar MD and founder Square Insurance says, “The challenge, however, doesn’t begin after retirement. It begins much earlier. As incomes grow, so do our aspirations. A bigger house, a better car, more holidays, premium memberships, there’s nothing wrong with enjoying the rewards of hard work.”

The problem arises when every increase in income is matched by an increase in spending, leaving very little for long-term investing, he added.

This is lifestyle inflation, and unlike medical inflation, it’s entirely within our control. Together, these two forces can quietly erode even a well-planned retirement corpus. What makes it worse is that nearly 47 per cent of healthcare expenses in India are still paid out of pocket. A single major medical event in retirement can consume years of accumulated savings overnight.

Retirement planning, therefore, is not just about building wealth. It’s about protecting it. Increase investments before increasing lifestyle. Review health insurance regularly. Build a dedicated medical emergency fund. The success of a retirement plan isn’t measured only by how much you save, it’s measured by how long those savings support the life you want to live.

The rise in living costs, rapidly escalating medical inflation and increasing life expectancy in India are making retirement planning more crucial than ever. While individuals spend years building a retirement corpus, an equally important consideration is ensuring that those savings can provide a reliable income throughout retirement. A corpus that appears adequate today may not necessarily offer the same level of financial comfort decades later, particularly as healthcare costs continue to rise.

This is where annuity solutions can play an important role. Their primary objective is to provide a dependable and lifelong income stream that supports financial independence during retirement. By converting accumulated savings into regular income, annuities can help meet day-to-day living expenses while also addressing longevity risk, helping minimize the possibility of outliving one’s savings.

They also offer flexibility through options such as joint-life income for the spouse or dependents and return-of-purchase-price options for beneficiaries.

Ashok Manwani, Vice President – Products, Go Digit Life Insurance says, “Increasingly, retirees are asking not just how much they can accumulate, but whether their savings can continue to support them throughout retirement. This is driving greater interest in solutions like annuities that provide predictable and dependable income in an increasingly uncertain environment.”

The process of planning for retirement today is not only about having sufficient money, but also it is necessary to work out how to deal with increasing medical expenses. In India, the effect of inflation in healthcare has always been significantly higher than the effect of inflation in the economy as expenditures on medicine increase at a rate of approximately 12-14 per cent per year. This is why it has become one of the fastest-growing parts of expenditures of families. In addition, life expectancy is increasing and so are the cases of lifestyle diseases that require a lot of medical care in retirement.

“Besides, the medical inflation, there is also what is lifestyle inflation which can also inhibit an individual from successfully saving for retirement called. Indeed, unforeseen medical emergencies, long processes of treatment, or control of chronic diseases can lead to one being left without any savings for retirement,” says Co- Founder Arun Ramamurthy, Staywell.Health.

A successful retirement plan will be based on careful planning of medical expenditures through planning, following the plan, and up-to-date insurance.