As you head toward retirement, you may be wondering how you're going to make ends meet with a lot less money.

The answer lies in cutting costs. The best place to start is with the biggest monthly expense of all: your mortgage payment.

One way to save a couple of hundred dollars a month is to refinance before you retire.

But that won't be enough for many of us.

The way to save -- and save big -- is to sell your current home and use the equity you've built over the years to pay for a new one in a more affordable part of the country, without having to borrow a cent.

If you have as little as $100,000 in equity, you can reduce your expenses by thousands of dollars a month and wind up with enough retirement income to live very well.

Mortgage payments haven't been a problem for previous generations because they routinely paid off their homes before they retired.

That won't be the case for the majority of Americans leaving the workforce over the next 10 to 20 years. They'll still owe lots of money on their homes.

Experts say those new retirees will need between 70% and 90% of their current incomes to maintain their standard of living -- a goal nearly half of all seniors will be unable to reach.

But let's say you're paying $2,750 a month on a $400,000 mortgage for a house that's worth $500,000.

As you head toward retirement, start shopping in parts of the country where there are lots of houses or condos that cost $150,000 or less.

Places like Silver City, N.M.; Louisville, Ky., and Brownsville, Texas, have more charm and amenities than you might think for a fraction of the cost of relocating to Arizona or Florida.

Take advantage of that and you'll have cut your expenses by more than $2,000 a month -- enough to offset a pretty dramatic drop in your income.

You can save even more if you're reasonable about how big a home you really need now that the kids are gone. Opting for a smaller place will mean smaller utility and property tax bills.

Moving from a high-tax to a low-tax area can save you thousands more every year, according to Where to Retire magazine.

For example, a retired couple that relocates from Pittsburgh, Pa., to Myrtle Beach, S.C., with a $30,000 income and $175,000 home would see their taxes (primarily property and state income taxes) drop from about $6,900 to $2,400 a year.

For a couple with $60,000 in annual income and a $225,000 home, that move would cut yearly taxes from $10,700 to $3,500.

Here are some places where you'll find affordable homes and a growing number of retirees:

Silver City, N.M.: This little gem, hidden in the southwestern part of the state, has low taxes and plenty of outdoor activities, such as hiking and golf.

Johnsonville, S.C.: Just 45 minutes from Myrtle Beach, it's a great alternative to Florida.

Jackson, Miss.: This historic city has Southern hospitality, beautiful magnolia trees and a climate retirees will appreciate.

Eufaula, Ala.: Set on a 45,000-acre lake about 90 miles southeast of Montgomery, Eufaula offers great fishing and a wildlife refuge with hiking trails and observation platforms.

Binghamton, Elmira or Rochester, N.Y.: Upstate New York winters are brutal, but these college towns have lots of continuing education courses and cultural activities.

Louisville, Ky.: Sip a mint julep and watch the ponies go by.

Topeka, Kansas: Home of the Kansas Senior Olympics and a six-acre Old Prairie Town complex.

Brownsville, Texas: Located at the very southern tip of the state, it has palm trees and bougainvillea, Mexico just across the Rio Grande River and gulf beaches a short drive away.

And if you're really adventurous, bargains abound throughout Central and South America, particularly in Mexico, Costa Rica and Belize.

Arriba!

By Regan Doherty

Interest.com Associate Editor