The Takeaway: How Much Does Retirement Really Cost?

Discretionary Spending Falls But Health Care Costs Rise With Age: How much money will you need in retirement? Yes, it's a big-and complicated-question. Many retirement planning exercises start by asking you to figure out how much income you'll need to replace after you stop working. But looking solely at income isn't enough, says the Employee Benefit Research Institute ( EBRI). A new report from the nonprofit research group considers the intersection of income, expenses and savings in retirement.

One of the reasons the income replacement method doesn't work is that spending in retirement falls with age-you're not likely to be spending as much at age 85 as at 65, so you won't need a constant replacement rate of pre-retirement income. "The main reason is that health deteriorates with age, and that means people can't necessarily do all the things they planned," says Sudipto Banerjee, research associate at EBRI and author of the report.

But nondiscretionary spending on health care and housing doesn't-in fact, health care costs generally increase with age. In 2009, people in the 50-64 age group spent about 9 percent of their total budget on health care, while those 85+ spent 18 percent.

For the report, EBRI looked at 5,000 retired households nationwide between 2000 and 2009. Overall, retirees spent about 80 percent of what working households spent, but only brought in about 57 percent of the income that working households did. Wealthier retirees used savings and assets to make up for gaps between income and spending, maintaining surplus savings throughout retirement. And less-wealthy retirees?

The gap only becomes wider as low-income retirees age. Demographic groups such as singles, blacks and high school dropouts were struggling most in retirement, EBRI found.

Friday Quick Hits: 

• The budget plans proposed by both Rick Santorum and Newt Gingrich include huge tax cuts that would drastically raise the nation's debt, according to the nonpartisan Committee for a Responsible Federal Budget. Romney's plan would also add to the deficit, albeit less so; only Ron Paul's budget plan would "reduce the flow of red ink" at all.

• A California state senator is proposing legislation that would create a retirement savings plan for private sector workers who don't have job-related retirement plans. The state is currently facing a tidal wave of "discarded seniors" who will retire with little or no financial support other than Social Security, he warned.

• Ways to put savings on autopilot.

• America's 'unbanked' masses? Millions of Americans lack access to checking accounts, consumer loans or other traditional banking services, the Wall Street Journal reports.

• And a new report on older drivers from transportation organization TRIP explores the pros and cons of age-based driving tests. It notes: "Some research suggests that age-based mandatory assessment programs may not effectively identify and manage the small portion of older motorists whose driving should be limited or stopped," it notes. And they may prematurely curtail the mobility of drivers who were already self-regulating and managing their driving."

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