Q. Like you, I am a biker (Harley). I'm nearly 62 and make about $32,000 a year. While reading your " less cash more time" column, I thought about having never saved much of anything, but I do have a 401k from work. What can I do now to have some thing to fall back on when I retire?

---T.G., Houston, Texas, by e-mail



A. Here are some suggestions:

• Don't panic: 40 percent of retirees derive over 80 percent of their income from Social Security but we have fewer elderly people living in poverty than at any time in the last 30 years.

• Max the 401(k) so you'll have something beyond SS. Do it now. Invest conservatively. You'll save taxes now and you can withdraw it with no tax liabilities after you retire. This assumes your withdrawals never exceed the sum of your personal exemption and standard deduction.

• Plan to work longer. If you work to age 67 you'll have five full years to save and adjust. The longer you work, the higher your Social Security benefit.

• Explore low cost lifestyles. This will do more for you than any investment you make.

The most interesting low cost lifestyle I've seen is the RV communities that are big all around Arizona particularly places like Yuma and Apache Junction. On different motorcycle trips I've met people who are, for all practical purposes, living on Social Security benefits.

How do they make it to work? They scraped together enough money to buy an RV, often a "Park Model" that never moves. These look like a 399 square foot one bedroom house. They own it outright and rent their RV park space for about $200 a month. Units cost $20,000 to $40,000 new and can often be bought for much less used. They don't pay much in utilities, tend to be handy (or have friends that are), know where the $1 movies are, and know where all the budget buffets are.

Yes, they give up certain luxuries--- dry cleaning and valet parking come to mind. Then again, I've never seen a Harley valet parked, so there's no need to soak any bandanas with tears. While there is much attention to top-end luxury in this country--- I recently saw a $12,000 stainless steel vent-hood in a Home Expo store--- a great deal of it is down right silly. The same $12,000 will buy a used, but fully functional, RV.

One of the under-appreciated wonders of America is its extra-ordinary low cost retail distribution system.



Q. My wife and I just bought a house we plan to live in for 5 years, at which time we want to buy a house in another area of town (for the school district). We will need a pretty hefty down payment and we are trying to decide on the best strategy to save it. We have come up with three options: (1) pay down our current mortgage as much as possible--- our interest rate is 4.875 percent; (2) pay into our existing "emergency fund," which is in a money market account; or (3) start another investment account specifically for the purpose of saving for the house. Which is best?

---B.J., Dallas, Texas, by e-mail



A. Go for the first option, paying down the mortgage. It provides you, in effect, with a guaranteed 4.875 percent return. To get the same return elsewhere you'd have to take a good deal of interest rate risk. If you are in the 27 percent tax bracket, the net after-tax-benefit cost of your borrowed money is 3.56 percent.

Paying extra principal on your mortgage is also very easy to do, which means it is more likely to happen.

The only negative is that your equity is "locked-in" but in this case it doesn't matter--- if you can't sell your current house, you won't be in a position to buy a new house.