Retirement Blog

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Retirement planning gurus often say flatly that you MUST replace 80 percent of your income and you can ONLY spend 4 percent of your nest egg annually.

These are great rules of thumb, but for some people, they don't make a lot of sense. I propose a different rule, one that works for almost everyone  -- owe less and live better.

For instance, I have a widowed friend who is living quite comfortably on her late husband's Social Security -- about $1,600 a month. Plus, she withdraws $600 a month -- about $7,200 a year -- from life insurance, invested very conservatively. It doesn't add up to a whole lot -- $26,400 -- but she says she's doing just fine because her house and relatively new car are both totally paid for. Her only regular bills are for real estate taxes, utilities, insurance, gas, food, and her cellphone. She watches TV via an antenna, and since her late husband retired from the U.S. Air Force, she continues to get free health care from a military health plan.

Two years ago, she put a quarter in a slot machine at the casino and won about $4,000. That has become her entertainment fund, which she replenishes with other occasional windfalls of various sorts such as the sale of some antique furniture she discovered in the attic when she cleaned out her late mother's home.

Aaron Katzman, wealth manager at Lighthouse Capital, says controlling expenses is the most important thing someone approaching retirement can do. It may seem obvious, but the less money you spend, the less money you need. Paying off big bills like mortgages, credit cards and cars while you're still working can buy you the freedom to use your retirement nest egg like my friend does -- for dinner out, an occasional vacation and pampering the grandchildren.