Charlie Farrell with Northstar Investment Advisors says a lot of people don't realize that when they get to age 65, Medicare is not free.
"Medicare can actually be pretty expensive because you have premium costs for part B, part D, out-of-pocket and some long-term care," Farrell said. "That can easily add up to $5,000 to $6,000 per person, and $12,000 to $14,000 per couple when you retire."
He equates this yearly cost to what it would take to pay a mortgage on a $250,000 house.
"In reality, your healthcare costs will about equal your mortgage, so that's why it's really important to get your mortgage paid down before you retire to free up some money," Farrell said.
He says most people don't realize the high cost of health care after they retire because while they are employed they have the majority of their health-care expenses paid for by their employer - through relatively inexpensive monthly premiums and the occasional co-pay for a doctor's visit.
Farrell says there are three things people should consider to prepare themselves for the cost of healthcare when they are retired:
- Figure out if you can pay your mortgage off before age 65.
- If you can't get your mortgage paid off, think about reducing the mortgage cost by refinancing.
- Use a health savings account at work, because you can build a tax-free pool of money to support your retirement health care costs.
For more information on Northstar Investment Advisors, visit http://www.northstarinvest.com/.
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