A Suze Orman exclusive

It is amazing to me how all the discussions of retirement focus on the income you will need. That's certainly a factor, but it ignores an equally important issue: if you reduce how much money you will need in retirement, you don't have to hustle to save so much now. Put simply, lower the outgo and you can lower the income.

Getting out of debt is the most powerful way to create a comfortable and affordable retirement:

• Pay off your mortgage before you stop working. It's not nearly as hard as you may think.
• Get out of credit card debt.
• Pay off your auto loans.

All three of those things have one central cost: interest. The money this nation forks over in interest payments for personal debt is obscene. Get your loans paid off early and you not only have peace of mind, you also save tens of thousands of dollars in interest payments that you can use to finance your retirement.

Paying Off Your Mortgage, Not Your Financial Advisors
Once you are in a home you intend to stay in, I want you to accelerate your mortgage payments so you get the loan paid off well before you retire. Just think about this for a second. For most of us, the monthly mortgage is our biggest financial obligation. So if we can eliminate this cost we are going to need a whole lot less to "make ends meet" in retirement.

This is not nearly as hard as it sounds. Let's review some of the points I made in my previous column on smart mortgage moves:

• Consider a 15-year mortgage. The standard mortgage length is 30 years, but by considering a 15-year mortgage you can save a ton of interest. First, did you know that the rate on a 15-year mortgage can be at least one-half of a percentage point less than the rate on a 30-year mortgage? So on a 30-year fixed mortgage today you might pay 5.5 percent (if you have a good fico score), but on a 15-year fixed mortgage you would be paying as little as 4.7 percent. On a $150,000 30-year fixed mortgage at 5.5 percent, the monthly payment is $851. With a 15-year fixed mortgage, the monthly cost is $1,163. But your total interest payments on the 15-year will be $59,319, compared to $156,208 for the 30-year. You've just saved nearly $100,000 in interest charges - $100,000 that can go toward your retirement.

• Add One Extra Payment a Year. If that 15-year monthly payment is too steep, try another of my favorite mortgage tactics. Send in one extra payment a year. I can hear the groans right about now: "Suze, I am so strapped there's no way I can find the cash to make an extra payment." Come on, it just takes a little bit of discipline. Don't look at the big fat number that is your monthly mortgage amount. Instead, divide that number by 12. That's a much more manageable amount, right? Okay, so all you need to do is send in that amount each month in addition to the regular mortgage payment.

  What's the benefit of this tactic? Well, if we did this on a $150,000 30-year mortgage at today's 5.5 interest rate, we're looking at having the loan paid off in a little more than 25 years, and saving about $30,342 in interest payments. Not bad, eh?

  One quick note: Some people calling themselves financial experts will tell you this is nuts because why would you want to pay off your mortgage at historically low interest rates when it's the only investment that gives you a tax write-off? The answer to those who criticize my advice is to ask them to think about this. As you know, your highest monthly payment is your mortgage. On a fixed mortgage, your payment is the same regardless of how much you owe on the balance. With interest rates as low as they currently are, how are you going to generate enough investment income to offset your hefty mortgage expenses? Look again at the above example . If you go with the 30-year $150,000 fixed mortgage, your payments for all 30 years will be $851 a month, or $10,212 a year. To generate $10,212 a year of income from your investments, assuming the 20 percent tax bracket and a 5 percent rate of return, you would need to have about $250,000. That is $100,000 more than your original mortgage was! Well that makes no sense. Also, remember that as you get more and more into the term of the mortgage, you get less and less of a tax write-off. That's why it makes a lot of sense to pay off your mortgage ASAP, assuming you're in a home you intend to stay in. After all, you can't live in a stock certificate - they get soggy in the rain.

Let the Bank Pay You for Once!
One last reason I want you to own your home outright, and sooner rather than later: if things really get rough and you need extra income, you can do a reverse mortgage if you are 62 or older and have at least half of your home paid off. With a reverse mortgage, the bank pays you a monthly income based on the equity you have in your home, the value of your home, and your age. This can really come in handy; your home is not only something to live in, but something you can live on as well.