3. Do a Dry Run

As with most things, practice makes perfect. That's why Ed Fulbright, a CPA and financial adviser in Durham, N.C., advises near-retirees to test-drive a retirement budget. "If you can live on your projected retirement cash flow for two to three years without increasing your debt, then you know that you can make it in retirement," says Fulbright.

That's also a backdoor strategy to finding something extra to put away. If you believe you can live comfortably in retirement on 85% of what you're making -- a fair rule of thumb -- then save and invest at least 15% of your gross income.

Paul and Madonna Engle of Marietta, Ga., decided to experiment with a retirement budget before they quit their jobs. "We kept track of our expenses for two years and figured we needed about $4,000 a month after taxes," says Paul. The couple, both 57, contributed the maximum amount to their 401(k) plans plus the additional catch-up contributions. In 2006, you can contribute up to $15,000 to a 401(k) or similar retirement plan. If you are 50 or older, you can kick in an extra $5,000.

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After living on their practice-retirement budget for two years, the Engles decided they were ready for the real thing. In 2005, Paul stepped down after 29 years with IBM, and Madonna gave up her job with a small accounting firm after the 2006 tax season. Paul's pension and their income from four rental properties will provide all the income they need -- even before they start claiming Social Security benefits. At this rate, they may never have to raid their retirement savings -- except for splurges like an upcoming trip to the Gal#225;pagos Islands.