About two-fifths of households with heads aged 60 through 64 have primary mortgages and about one-fifth also have secondary mortgages, including home equity lines of credit. Obviously, having to pay interest on debt will cut into your retirement lifestyle. Some planning can help you keep more money in your pocket:

 

* Pay down debt before you reach retirement.

 

* Start with credit card debt. Interest rates are high (usually in double-digits) and the interest is not tax-deductible. Thus, paying down a 12 percent credit card is like earning 12 percent, after tax, risk-free. Before you put money into investments, pay off your credit cards.

 

* Once you pay off your credit card debt, start with other debt. Pay off student loans, where interest rates may be relatively high.

 

* Finally, address your home mortgage and other home equity debt. There’s no rush to pay down these low-rate, tax-deductible loans. Still, you should plan to be out of debt by the time you’ve retired. One strategy: after you pass age 40, use 15-year rather than 30-year home mortgages.