Subscribe to this BlogCan you live on less in retirement?
Maybe it’s a sign that recession really is easing: Once again we’re hearing arguments that you can save a lot less for retirement than the financial services industry would have you believe.
The last time this argument got much traction was in early 2007, when the housing market was still bubbling. Now John Rekenthaler, the well-respected vice president of research at Morningstar, has re-introduced this notion in a recent blog post entitled “The 80% Myth.” Writes Rekenthaler, “The financial services industry misleads the everyday investor by selling the notion that an 80% replacement rate of pre-retirement income is required for a successful retirement.”
As proof, Rekenthaler cites own parents, who retired at age 50 and have lived contentedly for nearly 30 years on just 50% of their pre-retirement income. They don’t eat out often or drink Starbucks, but they have traveled the world over. If his parents had aimed for 80% of pre-retirement income as the prerequisite for retiring, he notes, they might have had to work until age 70.
A modest income may work well for his parents. And it’s certainly true that the average retiree makes do with not that much. The median income for households headed by retirees is just $25,000 a year, according the Federal Reserve’s 2007 Survey of Consumer Finances (the most recent data available). That’s just about half the median income for all families, which is $47,000.
But does that mean aiming for an 80% income replacement ratio is really excessive? Consider that the past three decades have been extremely kind to retirees (2008 aside), who have benefited from strong GDP growth, low inflation, lower taxes, and bull markets in both equities and bonds. That’s undoubtedly helped many of them get by, along with a big boost from Social Security — the largest single source of income for people 65 and older, accounting for 40%.
Future retirees, however, face a very different economy than earlier generations. The problems with funding Social Security are serious. Moreover, given the trillions of dollars in debt being racked up by the U.S. government's bailout efforts, many economists say higher tax rates are inevitable. Meanwhile, forecasts for economic growth and investment returns are lower.
And then there’s the problem of soaring healthcare costs. A recent study by the Employee Benefit Research Institute found that a typical 65-year-old male retiring in 2009 would need savings of anywhere from $68,000 to $173,000 to cover health insurance premiums and out-of-pocket expenses in order to have a 50-50 chance of affording those bills. To have a 90% chance, you would need to set aside $134,000 to $378,000. Women, who tend to live longer, need even more. The current healthcare reform efforts in Washington may slow the rate of increases, but that remains to be seen.
In the end, 50% or 80% of pre-retirement income targets are only rough rules of thumb. The only way to be sure you’re setting aside enough money for your needs is to draw up a realistic retirement budget — something that only becomes possible when you’re actually closing in retirement. But if you add up the economic challenges ahead, it seems pretty clear that it’s better to set your savings target high rather than low. The consequences (and the likelihood) of saving too much are small, while the consequences of saving too little could be disastrous. And by saving a lot now, we can all learn to live on less, which looks to be good practice for the years ahead.
Watch out for health care costs. Not only are they rising steadily (think 30 years out) but just because you live a "healthy" lifestyle doesn't protect you from your genetic time bombs ticking inside your body.
My wife was the first in her family line to come down with rheumatoid arthritis and a bad case of it. She looked healthy as a rosy cheeked farm girl and ten years later she can't walk or use her hands which are crippled and very weakenend. Not only can she not work but her meds cost $3000 a month. She qualified for SSI but the $1100 a month covers only 1/3 of her medical med costs not to mention out of pocket doctor & equipment costs plus every day extras that handicapped individuals need to make their life liveable. Many of the folks posting on here are assuming that their good health will continue and then one day they will die quickly. I'm here to tell you that some of us will face devastating medical costs (my wife's bills have been easily over a million).
It's a statistical certainty that one of you reading this post will be affected by some major medical crisis. If it's not you then you are lucky and blessed but if you win this lottery your retirement savings will be wiped out (even on Medicare) and God help you. I repeat living a healthy lifestyle is great but it doesn't cover the genetic crap shoot.
My father said he would choose suicide. When it came down to it he couldn't do it. I doubt many can when the midnight hour arrives. So don't kid yourself. Save and don't stop working until you must. This is what the first head of SSI counseled in his book. Enjoy life right now even as you work. If need be, change to a career that you like if you hate what you're doing but don't stop out too early. Live on 50% but still have a hunk for 'just in case'. Those that have been retired 20 to 30 years are the ones I want to hear from.
I agree wholeheartedly with some of the posters here. I believe the concept of acquiring certain amount of money before retirement is what has gotten many people needlessly overworked, stressed, unhappy, and delayed in enjoying the life as they should. An old saying goes, "It's not what you make, but how you spend." The focus on making more is fundamentally a flawed one. People should focus on learning "how to spend money wisely and to live with as little resources as only necessary."
For the past six years, my wife and I have lived comfortably off the same $1,300/mo core budget (including all expenses except travel and vacations), which has enabled us to save a significant portion of our income for the future. We are healthier and happier. And, we intend to carry this practice well into our retirement.
But, when we first started, many of our friends and family members were highly skeptical and some were down right negative. As years passed by and in particular during the last two years of the economic down turn, they have all come to realize the success of our reorientation and envy the way we live.
I believe learning to spend wisely is more important than making "more". It is for one very good reason as many have discovered: making more will burn off more of the precious life that we want to enjoy.
The notion of needing a certain amount of preretirement income for retirement itself is the fatal flaw that few seem to grasp. In order to determine retirement income one has to concentrate on preretirement spending and develop a budget from there. My wife and I, for example, live on 40% of our income and project to need the same in retirement. Anyone who lives beyond their means, for example, lives on 120% of preretirement income (via credit) will also be sadly disappointed to hear that they would have to essentially live only one about 100% of preretirement income (assuming the 80% rule). Bottom line, don't fall for the fatal flaw in retirement planning – do it the hard but right way by determining a realistic retirement income by taking the time to do a budget now to see what you actually need to live on and go from there.
Mike,
You make a good point, but I read something recently that mentioned returns for the average investor. I apologize for not having the source at the moment, but the average mutual fund investor underperforms the S&P by several percentage points due to emotional investing. I think the average investor barely keeps up with inflation. So, settling for index fund returns is much better than most people do, and about 60% of actively managed funds underperform their benchmark index.
Hi Mike, MA
You are absolutely correct. The point of the post is to target the people who post negatively about their situation due to their own personal saving habits or lack thereof. The vast majority doesn't do the right thing and saves inappropriately, but if a select few that care enough to take control of their retirement, a millionnaire is what I offer. For my own selfish reasons I hope/expect/know that people will not take my advice and hence my own personal wealth and purchasing power will increase.
Another MUST is to do all you can to get/stay healthy. While the premiums don't go away, the out-of-pocket expenses will be lower as a result AND you can actually ENJOY retirement!
I agree with Ron – making a budget is the first step. The percentage approach is wrong because some people spend 20% of their income while working, and some spend 105% (or did before the Great Recession). For us, we live on about 80% of our income, but we still have a mortgage and kids at home. I surely hope, even with increased medical expenses, that we can live on 50% or less of our income once our mortgage is paid off and the kids are grown.
Tyler from Hoboken,
If everyone has a million dollars, then a million dollars will be worthless and will buy nothing. That's what causes inflation. That's why government handouts and printing money don't work.
The only way to "get ahead" is to do better than average: save more than average, get better returns than average, preferably both. It's one of the real risks that has to be managed with mutual funds, particularly index funds, because by investing in them you are inherently settling for average returns.
I'm semi-retired now, doing some consulting in health care (my field during my corporate life). It's not regular living expenses that drive the need for a big nest-egg, it's incremental health care costs. I've got expertise in the health policy field and can state that the EBRI or Fidelity Investments numbers are unrealistically low. Health care costs go up at a rate of 2.5% faster than general inflation and have for four decades now. If we don't succeed with health care reform soon, a retiree will need anywhere from $750,000-$1,000,000 just to cover the 50% of health care costs not paid for by Medicare. That number doesn't change by your pre-retirement income either–it's what you'll need whether you made $30,000 a year or $3,000,000 a year prior to leaving the workforce.
Also, my critique assumes no debt aside from perhaps a modest mortgage. The crux of my argument is trading off the highly unnecessary, high-spending, high-debt way of today, for the more prudent and careful habits shown of the Post-War generation That tradeoff is not considered with the 80% rule.
John
Penelope -
All valid points. I told one side of the story with some accuracy, and you told the other side.
Please note that the actual spirit of my article was to get people to save more, not less. I continue to worry that the (exaggerated) drumbeat of 80%, 80%, 80%, or else you are toast, does more damage than good to the vast middle class. The goal seems so unattainable that many people tune out entirely — it's like going to the dentist when you know he's going to tell you that you haven't flossed enough. So you don't go.
Note also that while other critics of the 80% rule have preceded me, many differ in regarding this as some sort of conspiracy by asset managers. In contrast, I think that asset managers are fairly ethical by and large, and that the 80% rule has developed for reasons that can be justified. I don't happen to agree with those reasons, and thus the outcome, but I believe that they were honestly generated.
So I think you and I are arguing tactics more than anything else.
Thanks for noticing, reading, and commenting!
Yours -
John
What is the problem people? Everyone can retire a millionnaire. EVERYONE! forget 401ks or 403bs and just focus on maxing out your roth IRA every year starting with your first job out of college at age 22. If you put 5k away from 22 to age 60 and save nothing else, using an 8% rate of return which is quite reasonable, you will retire a millionnaire. I don't care what your situation is or what your income is, everyone can save 5k per year.
I retired living on 74% of my previous salary. However, my wife works and after 13 months in retirement, I became bored and went back to work at 1/2 the salary I made before "retiring". We feel fortunate because our combined salaries places us in in a category of 3 times the median income as stated in your article. Except for mortgage,one car loan, and minimal credit card debt we live comfortably, go and do whatever we want, purchase what we need and are putting a son through college at Notre Dame (whose on scholarship to start with). And yet, why don't we feel "rich"?.
Proper planning and thinking ahead is the secret of retirement. Planning is more than the money port. You also must plan on what you are going to do after you retire. I retired over 6 years ago at 55. I was the only breadwinner in my family and had a moderate income. My 401K is more than it was when I retired and I live on about half of my pre-retirement income. As has been said, you have to be debt free with no mortgage when you retire. You also need to live where the cost of living is low (taxes on my 4,700 sq. ft. house were $1,240 last year).
Percentages are a poor guide. You need to calaculate your monthly expenses accurately as well as your monthly income. Slightly overestimate your expenses and underestimate your income. Set aside enough money for emergencies and you will know when you can afford to retire.
Many good points. It is critical to be debt free, I believe. Another option is to choose the RV lifestyle, which in my experience, is a much cheaper way to live. You do have to plan for the eventuality of getting off the road or for illness, but there are RV communities and even an RV club that offers assisted living and care for Alzheimers for RVers.
RVers can also do volunteer work and obtain an RV site, saving on that portion of their budget. And, they can get jobs or even have their own business using the Internet. There are many options to reduce expenses in this lifestyle.
Jaimie Hall Bruzenak
author of Support Your RV Lifestyle! An Insider's Guide to Working on the road
With everyone noting how they will be set for retirement from the financial perspective nobody mentioned what they will actually do in retirement aside from sitting on their front step being bored to death. It may take several years before retirement to plan what I will actually do…ie volunteer work, part time consulting, etc… I may work a bit longer, at least part time, just to stay busy.
The percentage game is not the right starting point in retirement planning. The starting point is making a budget and determining how much money you will actually need. If you can't plan your retirement around a budget then you might just make the biggest mistake of your life.
You need to add up all your known yearly expenses and see what the damages are going to be. You also need to bone up on what taxes you will be paying when you retire.
It's going to take a little homework to come up with a realistic working budget but it's necessary. Basically if you fail to plan, you plan to fail.
Only after the budget planning you can calculate the magic percentage number.
After two years of retirement we are spending about 55% of my pre-retirement income. But our total retirement income is 110% of my previous salary. The excess goes into savings.
The 80 rule is crap. Currently working, I make $100K/year and I live on roughly $20K per year. I don't do without at all, live in one of the country's most expensive cities (Los Angeles). What helps most is I own my home and my car, live in a modest climate, have a very good diet and exercise regularly so have no health costs, and know how to fulfill and make myself happy without unduly identifying with having to buy "things". I will retire in about six years with more than enough.
One can live on 50% of preretirement income if you have no credit card debit, pay off the mortgage on you house, and completely off-load any children you have. Don't travel much either.
Is this the kind of life that you really want? Maybe it's OK for settle for this if you are retirement age and get eliminated from your job and can't get another one because you are old, but why choose this? Work until health or job eliminations part you from your job.
Sure 50% is a good number…if you're a practicing frugalite, and intend to be one until you die. Unfortunately, inflation will come and knock the legs out from under you every time. Sluggish or downward stock market activity will get you every time. Runaway tax plans from Congress (coming) will get you every time.
My point: just when you think you have enough, someone or something comes along to tell you otherwise.
THERE IS NO SUCH THING AS "ENOUGH" FOR RETIREMENT!
Yes you can live on 50%. The 70 to 80% is in fact a scare tactic used by the financial institutions. I have been retired for a couple years and we live on less than 50% of what we earned. Once you no longer contibute to your 40k, IRAs, Savings, social security,etc, it is a piece of cake to live on less. Yes one should save as much as possible, but the numbers required are WAY OVERSTATED.
Re the comments about not getting better advice than "save all you can"… Keep in mind that life can sometimes throw you a curve that may make it impossible save much when you're older (e.g., a spouse becomes disabled, you become downsized in your 50s, etc.) You can always stop saving further if you successfully reach the point where you have enough for your goals.
If I (and a theoretical spouse) had the ability to max a 401k, 403b, 457, and two Roth IRAs in any down market, I'd do it in a heartbeat as long as I had a healthy emergency fund and enough to live on otherwise. This market has been a real opportunity to "be greedy when others are fearful".
I made the mistake of letting up on my saving for 3 months and I wish I hadn't; it will have a magnified opportunity cost at retirement, but oh well.
I would agree with "save as much as possible", especially during a down market.
The percentages approach is, at best, a very rough guess and if it comes from a financial planner, it is likely to be too much. It is also a function of what you are earning. Sure, if you are going to live a jet setting lifestyle in retirement, it's going to cost. But if you are debt free, in good health, and without other "obligations" it really should take that much. In our case, probably only about 25 to 30% of earnings made in the last full year of employment for the two of us.
The nut on our house is around $30,000. Cars, clothes, and food for two kick up our cost of living to around $50,000. This is the last full year my wife will be working, and I'll continue to remain self-employed on a part-time basis but will have very little taxable income between a health savings account, an employer sponsored plan to pay for any out of pocket medicals, and a SEP. We'll convert a ton of stuff to Roths in 2010, and what will be left in my taxable earnings may just about pay for the nut.
But we will nonetheless be dipping into savings – not for us, but for our two kids still in high school (sophomore and senior this year) and very likely for our eldest (senior in college) who will likely have a very hard time obtaining employment and will be coming back home after graduation. The eldest I expect will be able to pay for herself (i.e. car, insurance, etc.) and contributing at least towards food from any job she is able to get. The two younger one have both got college ahead of them, and being princesses of entitledment, each will get a good used car and be supported through undergrad school.
It is those numbers that are going to be incurred over at least the next six years that push our "retirement" needs to the higher range. Without those costs, retirement costs will be easy to cover.
Our ages? 50 and 54, so none of this includes social security.
Yes, it is true! My husband and I retired a year ago. We are still young (57 and 63, respectively) I was so afraid that we didn't have quite the 80% that so many experts say you need. We are lucky in that we both can continue our health insurance with our former employers. We scrimped and saved also to pay off our mortage in about 12 years. We saved and saved and now that we are retired we live on about 40-30% of our income. We had bought most of the toys we wanted when we were both employed and we always paid off our credit cards. We invested conservatively. So far so good. I am amazed how cheaply we live and we are happy. We plan to go to Europe next year. We don't miss work. Life is great. And the bonus is that we are still young enough to enjoy it!
How much you save now all depends on how much you want to spend later instead of today.
More than half of retirees currently live on Social Security as their only income averaging $13,000 per year and rely on Medicare for health care. This pretty much takes care of food, clothing, shelter, and health care.
People should save for retirement, mostly in TIPS and GNMA bonds for secure growth plus some stocks for the risk-takers (certainly not more than 50% of the portfolio). But, these retirement savings are present fun delayed to allow for retirement fun.
It's not realistic to expect the average American making $19 per hour to self-fund all of his retirement expenses. That's why we have Social Security and Medicare, to provide a safety net for when we can no longer work and don't want to go back to living in caves.
So, save now for retirement, invest it carefully, and spend wisely when you get to enjoy it.
We are in the current economic situation because far too may people spent beyond their means. These people had to have the latest gadgets such as wireless/cell phones, cable/satellite TV, big SUV's, and homes they couldn't afford. How many homes are in foreclosure because the owners used mortgage money to pay their cell phone or cable TV bill.
Lending institutions encouraged these habits through sub-prime mortgages/loans with high interest rates until too many people defaulted. Now innocent workers are unemployed and many people who are at retirement age are in debt and can't retire.
In my opinion there should be no bailout, let the lenders and debtors crash and burn. Then the rest of us can get on with our lives.
One must be debt free for 2 years prior to retirement and have saving equivalent to 5 years income in order to avoid financial problems in retirement!
The basic 80% rule, or 50% rule or whatever, are for folks who are too lazy to do the real planning. If one took the time to see what he/she spends and plans to spend, then extrapolate based on a moderate inflation rate (not too aggressive, not too conservative), then fit that into their anticipated returns from investments plus any other income, adding cushion that makes them feel comfortable, it is not too hard to figure out how much you need. …and it is not too hard to figure out what you need to cut out of the budget if you want to retire before age 75. Its all about choices.
Further, the 50 or 80 or whatever rule will not work with highly compensated people who live way below their means. I'm a case in point. Based on my calculations, I could live on 25% of my salary because I live on about that amount now, and as Norm said, I've controlled my fixed costs by paying off the mortgage and staying out of other debt.
Also retired and at 56 because we paid off the mortgage and set aside cash equal to 2+ years living expenses so we do not have to make emergency decisions when the market fluctuates. You do have to set out a realistic/honest budget for yourself so you have an idea what the annual living expenses are for you. If you want to have a blow-out vacation or a new car every couple of years, put it into the plan. We did pare back to the bone during the last 6-8 months but if we could do it to go to college, we could do it again to see ourselves through and not return to work. It worked!
Percentage of income is not a good rule of thumb. I've never gotten a straight answer on the base expenses that any person needs to live on. Someone should start with that (food, shelter, clothing, healthcare). Especially healthcare -since most older folks are likely to have at least one chronic health condition. Knowing how insurance companies can reject your coverage for any error or omission on the application form.
The retirement outlook for future generations is anyones guess. Retiring in the future will not be like those born before the baby boomers. That generation saved and relied more on pensions, social security and medicare to carry them to death. Retirement in the future will look very different than anytime before. Technology and medicine will lead to different lifesytle decisions for most. Personal wealth will be pooled with family and others to meet the basic needs of most people. It won't be a bad thing, just a different time. To survive through good and bad humans have always adapted, and future retirees will do the same.
A lot depends on how you live now, and how you want to live when you are retired.
If you expect to travel and dine out a lot and do all the thins you missed out on while working it could get expensive. There's no end in sight for health care costs so that will be a big factor.
OTOH if you plan to live simply and don't need much health care, you can do on a lot less.
As others have said, whether or not your mortgage is paid off will make a big difference. Housing is the biggest share of most people's income, so if you pay off debt — especially the house — before retiring, you are in a much better position.
It won't do you any good to save up a lot for retirement. The current direction in this country is to take wealth from those you worked hard, saved and became well off, and give it to those who spent beyond their means. Might as well have a good time while you can and plan to go on the public dole when all the money is gone.
I agree that you don't need 80 percent to live on. Life style has a lot to do with it. Your expenses decrease. For an example, cleaning bill, contribution to 401k, retirement contribution among other things either go away or decrease. You must strive to be debt free .
This topic is one of the things that really irks me about financial advisers. They are motivated to encourage oversaving. They seem entirely focused on coaching under-savers and completely incapable of giving guidance to those of us with personalities that tend toward oversaving.
My wife and I are both around 30. In theory, this year we could contribute $16,500 this year in each of my 401(k), her 403(b), and her 457 (some state loophole allows her to do both), plus maybe (depending on how our income comes out for the year) $5000 each to Roth IRAs. For a possible total of $59,500 in tax-deferred retirement savings, which would be an absurdly high fraction of our household income.
When I asked an adviser to give guidance on how much we should save, he said "as much as possible." I responded with saying look, in theory, we could put nearly all of my wife's gross income into retirement plans, and a huge chunk of mine, and still "live," though not comfortably. Are you really saying we should do that?
Again, he said save as much as possible. 
I'm 100% sure it is possible for us to be saving too much. I felt it during the market decline when I realized that I could have saved less, replaced my 10-year-old car with the difference, and ended up losing much less money in the decline. But no adviser seems willing to give assistance answering how much retirement saving is too much.
@Ryan, first, good (great!) for you.
Unfortunately, as you are in your 20's, your projections are useless. Save as much as you can, disregard published formulae, and best wishes to you.
I retired about seven years ago and get along fine. The number one thing making this possible is that I don’t owe anybody. I bought a small house a number of years ago and paid it off before retirement. I had seen how my parents and others had, decades ago, gotten along fine in retirement the same way. Many people struggle in retirement for the same reason they struggled before, they spend more than they can afford.
After I paid off the mortgage, I had a few years to put the additional money away for retirement. I was already living well below my means. So I have a 401(k), a small pension and some other investments. There is nothing complicated about this. It’s just having the will to do it. http://www.santaclaussyndrome.com
After 2008, I was three years from retirement, but lost when my company defaulted on the retirement accounts of thousands of workers. The company stock nose dived from 65 to 19 and so did all of our retirement savings, which are control by the company and tied to the stock value of the company.
Today my new retirement age is 82; I can not even afford to take my SSI.
If you really want to determine what you need to live on during retirement, I strongly suggest you purchase S$Planner software. Go to esplanner.com for more information. I have been using this software for about a year and have planned expenses, taxes, etc until passing away. The Plus version utilizes Monte Carlo stimulations so you can have credibility in the numbers.
Being retired I can give some perspective from experience.
One thing and only one thing dictates retirement income value and that is controlling fixed cost i.e. monthly expenses. Where retires go wrong is not paying off houses, cars, and credit cards while improperly budgeting for medical expenses. Controlling fixed monthly expenses is the first and foremost retirement goal that directly impacts the income stream. Once fixed costs are controlled then your income percentage of fixed to discretionary costs moves in the retires favor. Rule one and only rule is manage fixed costs then apply your income stream to these costs (factor a bit of inflation) to see if you are able to manage retirement. The end result after managing your monthly costs in most cases is much less then the 80% rule.
These things are so relative. It is a joke to try to fixate too much on whether the right number is 75%, 80%, 85%, or what have you. If the person gave away 25% of their income to charity and for years gave another 10% to their kids, then obviously they are accustomed to a lifestyle that does not require a large portion of their income. If on the other hand they spent money as fast as they got it they probably need a large portion of their income (and probably don't have it).
Until you are near retirement I think looking at percentages of income is mostly useless (and by then it is too late to make a major difference). It is much more useful to look at things in terms of saving toward a target nest egg (e.g. 12 times your peak income is a commonly used guideline). Doing that puts you in the ballpark in a simple way. As you near retirement you can fine tune and/or adjust your own expectations based on where you are.
What I've never been able to get a straight answer on is this: I'm in my mid-20s with a mortgage and a career that's just starting to get off the ground (recent college grad): 80% of my annual income for everything seems like a LOT more than I need or use currently. Once you take out the cost of taxes, retirement savings, and paying my mortgage (which I won't have when I retire, god willing), I'm really only living on far less than 50% of my annual income (and I'm living quite comfortably). Health care really couldn't suck up 30% of my current income in retirement, could it? That'd be 40% of my retirement budget going towards health care premiums. If anything, this observation gives strength to John Rekenthaler's argument that 80% is too much.
In another vein, I'll be mortgage-free many years before my retirement and I'm almost certain that the resultant standard-of-living bump that we'll see after that could bring my lifestyle expectations during retirement in-line with the 80% rule. Or it would give me an extra $1200 per month to save for an earlier retirement and stop working sooner!
The flat percentage of pre-retirement income is a fallacy. A study I did in 2001 proved that expenditures actually peak after retirement, when people take trips, buy boats or retirement homes, at around 125% of pre-retirement income. After 3 years, it drops down to 75%-80% of PRI. Then, 3 years before death, it zooms up to 125%-150% of PRI due to rising medical bills. Households who plan on flat amounts are being poorly-served by their advisors with poor planning tools. Better discernment is necessary.
It seems to me that one can easily live on much less than 80%. I have a couple of alternatives in mind. One is to take 80% of your income that DOES NOT go to things like retirement contributions, etc. The other, which is much easier if you're near retirement, is to look exclusively at discretionary income.
Not having retirement contributions and tax savings will save a ton of money. One thing that is definitely advisable is to pay off your mortgage before you retire. Do the above and retire with 2-5 years of expenses in cash (for the purpose of protecting your other investments), and you'll be fine.
Many responses mentioned paying off your mortgage prior to retirement. My mortgage is ony $1300 a month and I thought it would be a good idea not to pay it off prior to retirement, so that I'd still get the interest write off on my taxes to help offset my monthly 401k distributions. Am I wrong?