Retirement. We dream about it, whether it is five years or 15 years away. We fantasize about the day when we march into the bosss office and declare that we are retiring in one month and plan to take off to Bora Bora to unwind from decades of stress and office politics.

Retirement can indeed be the golden years, if you are not bogged down with money issues such as keeping current on mortgage payments, affording medical insurance, buying a car, taking vacations, enjoying golf, enrolling in continuing education, etc.

Retirement means that you will need less money because expenses such as professional attire, lunch, weekly parking and commuting gas will be gone. However these expenses will be replaced with other expenses.

It is estimated that the average American will need 70% of the income that they earned during their peak earning years for retirement. In other words, if you make $50,000 per year when you are nearing retirement then you will need approximately $35,000 per year as a retiree. This may seem like a lot of money but consider these facts:

Medical Expenses. Your medical expenses will be higher since you are older. In addition, since you are not working, you may have to foot the entire bill yourself. To give you some idea of your medical expenses per month, a family of two on a Kaiser Permanente plan with a copay of $10 - $20 will be around $1050 per month. This is a nice chunk of change.

Leisure Expenses. Now that you have all the time in the world, you will want to do something nice for yourself. Your leisurely activities such as golf, vacations, and shopping will take up a bigger portion of your budget. You may also want to go back to school and take that Astronomy or photography class that you always wanted to take.

During you working years your monthly expenses looked something like this:
Mortgage and Insurance
Auto Payment and Insurance
Utilities
Food
Credit card

Some of these expenses are what I term persistent expenses, meaning that you will always have them. These expenses include items such as insurance, utilities and food. The other types of expenses are those that you can purge permanently, namely: Credit card, Mortgage and Automobile loans. Relieving yourself of these debts should be your number one priority in the quest to retire debt free.

Credit Cards. This is your number one enemy expense. Obliterate it from your life. If you walk away with one lesson after reading this article, let it be the motivation to get rid of credit card debt before you retire. Credit management has become one of the biggest challenges facing Americans today. It is estimated that 30 million Americans struggle with some form of bad credit stemming from living beyond their means via excessive credit card debt.

Take the time to Analyze your current debts and create a systematic plan to achieve a $0.00 balance on all your open accounts.

Automobile Payments. If you are carrying a car note, try to pay it off before you retire. You do not want a car payment looming over you at this point in your life. A car does not appreciate - you will not get much value out of it, once you drive it off the car lot. It is a necessary evil. After all, how will you visit those grandkids now that you have all this extra time?

Mortgage Payments. This is your biggest and most important expense. You need a place to live. There is no way to get around this expense but you can get rid of it. Start making an extra mortgage payments every year. If your mortgage is $1000 per month then you should send an extra $1000 to your mortgage company at the end of the year. In lieu of sending a big check at the end of the year, you can send an extra $85 every month for a total of $1085 per month. On a 30 year loan, this will reduce your mortgage term to approximately 23 years.

Once your mortgage is paid off, your biggest expense will be gone. If you run into financial difficulties in the future, you can always take out a reverse mortgage or a home equity line of credit (HELOC).