1. Create a realistic budget. Add up your essential living expenses and match them with your guaranteed sources of income, such as Social Security. If there's a shortfall, you'll have to fill the gap by drawing down your savings or using a chunk of your nest egg to buy an annuity.

2. Strive to pay off your mortgage. Do it before you retire and you'll cut your expenses significantly. But establish a home-equity line of credit first so that you'll have access to credit with tax-deductible interest.

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Mary Beth Franklin
Former Senior Editor, Kiplinger's Personal Finance