Planning for your healthcare during retirement might seem daunting, but understanding the Basic Healthcare Sum (BHS) can make it a lot easier.
As someone who’s navigated the intricacies of Singapore’s healthcare financing system, I’m here to break it down for you in simple terms.
In this post, you’ll learn:
- What the Basic Healthcare Sum is
- How much the BHS is and how it’s determined
- The benefits of reaching the BHS
- What happens if you exceed the BHS
Did you know that the BHS can significantly reduce your cash payments for healthcare and earn you attractive interest rates?
Stick around, and by the end of this post, you’ll feel confident about managing your MediSave account for a secure retirement.
Let’s dive in!
What Is the Basic Healthcare Sum?
The Basic Healthcare Sum (BHS) is a crucial component of Singapore’s healthcare financing framework.
Essentially, it represents the maximum amount of money you can set aside in your MediSave account to cover healthcare expenses during your retirement years.
This cap ensures that you have sufficient savings to address medical costs without the need for additional financial strain.
Once your MediSave savings reach this limit, any further contributions are redirected – which I’ll explain more later.
Understanding the BHS is vital for effective retirement planning.
It’s designed to provide a safety net, ensuring that you have adequate funds to meet your healthcare needs as you age.
This proactive approach helps mitigate the financial impact of medical expenses, allowing you to focus on enjoying your retirement without undue financial worry.
How Much Is the Basic Healthcare Sum?
| Age in 2024 | The year when cohort turned age 65 | Cohort BHS (fixed for life) |
| 65 | 2024 | $71,500 |
| 66 | 2023 | $68,500 |
| 67 | 2022 | $66,000 |
| 68 | 2021 | $63,000 |
| 69 | 2020 | $60,000 |
| 70 | 2019 | $57,200 |
| 71 | 2018 | $54,500 |
| 72 | 2017 | $52,000 |
| 73 and above | 2016 or earlier | $49,800 |
The amount of the Basic Healthcare Sum (BHS) varies depending on your age and the year in which you turn 65.
This differentiation ensures that the BHS remains relevant and adequate for covering healthcare costs throughout your life.
For CPF members aged below 65 in 2024, the prevailing BHS is set at $71,500.
This amount is subject to yearly adjustments, reflecting the ongoing changes in healthcare costs and usage patterns among the elderly.
The annual adjustments ensure that your MediSave savings can keep pace with rising medical expenses, providing you with sufficient funds to cover your healthcare needs.
Once you reach 65, your BHS is locked in, and subsequent yearly adjustments no longer apply to you.
This fixed amount offers predictability and stability, helping you to better plan your finances for your retirement years without the worry of future increases.
How is the Basic Healthcare Sum determined?
The Basic Healthcare Sum (BHS) is calculated based on an estimate of your expected medical expenses from the age of 65 onwards.
This estimate is derived from historical trends in MediSave usage by the elderly.
The BHS is designed to cover your basic subsidised healthcare costs, along with premiums for health insurance and long-term care insurance during your senior years.
If you’re trying to project the BHS for your cohort, I tried measuring the percentage increase in the table above and historical increases typically range between 3.79% and 5.00%.
The average annual increase has been approximately 4.63%.
You can use these percentages to make an educated guess about future adjustments to the BHS.
Benefits of hitting the Basic Healthcare Sum
Reaching the Basic Healthcare Sum (BHS) offers multiple advantages that can significantly enhance your financial and healthcare security.
Firstly, hitting the BHS means you’ll have lesser cash payments for healthcare.
With a fully funded MediSave account, you can use your MediSave savings to cover medical expenses, reducing the need to use your cash.
This is especially helpful for managing routine medical bills, hospital stays, and long-term care costs without causing financial stress.
Secondly, once you achieve the BHS, you can benefit from a 4% interest rate on your MediSave balance.
This attractive interest rate helps your savings grow quickly, ensuring they keep up with inflation and rising healthcare costs.
Over time, the compounded interest can significantly enhance your savings, providing a stronger financial cushion for your medical needs during retirement.
Thirdly, you can receive tax relief from making voluntary MediSave top-ups.
Contributions made voluntarily to your MediSave account not only help you reach the BHS faster but also offer tax benefits.
These tax reliefs can reduce your taxable income, effectively saving you money while simultaneously boosting your healthcare savings.
Lastly, your funds will generate enough interest to remain stable even as you withdraw money to make payments.
The interest earned on your MediSave balance can help replenish the funds you use for medical expenses, ensuring that your account remains robust.
This stability provides peace of mind, knowing that your healthcare savings will be sufficient to meet ongoing and future medical needs.
By maximising your MediSave account to the BHS, you not only secure better coverage for healthcare expenses but also take advantage of favourable interest rates, tax reliefs, and financial stability, ensuring a more secure and worry-free retirement.
What if you have more than the Basic Healthcare Sum?
If your MediSave account exceeds the Basic Healthcare Sum (BHS), the surplus funds are not wasted or left idle.
Instead, they are automatically transferred to your other CPF accounts, continuing to benefit your overall financial health and retirement planning.
| Age | Condition | Account that Mandatory Contributions & Interest Goes To |
| Below 55 years old | If you’ve not met the prevailing FRS in your Special Account | Special Account |
| If you’ve already met the prevailing FRS in your Special Account | Ordinary Account | |
| 55 years old & above | If you’ve already met your FRS (or BRS with a property) in your Retirement Account | Ordinary Account |
Once your MediSave account reaches the BHS, any additional contributions will be channelled into your Special Account (if you’re below 55) or your Retirement Account (if you’re 55 and above).
This ensures that your excess savings continue to grow and earn interest, contributing to your retirement funds.
The Special Account and Retirement Account also offer attractive interest rates, typically higher than your CPF Ordinary Account , further enhancing your retirement nest egg.
This strategic allocation ensures continuous growth of your savings, maximises interest earnings, and provides a robust financial safety net for both healthcare and retirement needs.
What Happens if You Don’t Meet the Basic Healthcare Sum?
If you don’t meet the Basic Healthcare Sum, your MediSave contributions will continue to build until you reach the required amount.
Not meeting the Basic Healthcare Sum means you might have to use more cash to cover your healthcare expenses, as your MediSave funds may not be sufficient.
However, you can still make voluntary top-ups to your MediSave account to help reach the BHS and benefit from tax reliefs and attractive interest rates.
Conclusion
Wrapping up, we’ve explored the ins and outs of the Basic Healthcare Sum (BHS).
We started by defining what the BHS is and how it’s crucial for your retirement healthcare needs.
We looked at the specific amounts, noting how it varies with age, and discussed how it’s determined based on trends in MediSave usage.
We also highlighted the benefits of reaching the BHS, such as reduced cash payments for healthcare, earning attractive interest rates, receiving tax relief from voluntary top-ups, and maintaining a stable fund balance.
Lastly, we covered what happens if your MediSave exceeds the BHS, ensuring your extra savings are wisely allocated to your Special or Retirement Account.
Understanding the BHS is essential for effective financial planning – making sure that you have enough for your healthcare while protecting your retirement funds.
If you’re worried about retirement planning and want to understand what’s the best way to maximise your CPF funds for retirement and for healthcare, we’re here to help.
Feel free to reach out and chat with one of our trusted financial advisor partners.
They can provide personalised advice and help you navigate your healthcare and retirement planning.
It’s free, and it’s a great way to ensure you’re on the right track.
