By Scott Burns

Q. I have 10 years left on a 15-year mortgage at 5.75 percent. The payment is $909 a month. The pay-off is $84,000. So I could save about $25,000 in interest by paying it off. I also have a CD coming due for the same amount. If I could average 5 percent on a new $84,000 CD for 10 years, I would earn over $54,000 in interest. What should I do? —B.W., by email

A. Earning 5 percent on a CD is a pretty heroic assumption. According to www.bankrate.com, the best yield on a 5-year CD is about 3 percent. The yield on a 10 year Treasury is only 3.5 percent. So you’ll do much better paying off the mortgage. You’ll also reduce your taxable income by the interest income you forego. Your cash flow will improve and you may be able to increase your IRA or 401(k) contributions to make up for the loss of tax deductions.

It doesn’t work to compare the interest cost of a declining debt with the interest earnings of a fixed investment.

Q. I’m 55 and my husband is 63.  We have four grown children. Three are married, all are financially independent.  Our income is about $250,000 plus some dividends from investments.  We’ve owned our home for 20 years, now worth over $1 million. We also have about $1million in a 401(k) and $150,000 in various IRAs, CDs, stocks and bonds.

We have a home equity loan of $298,000 (the result of four college and post grad educations, three weddings, and some home improvements). We will finance one more wedding.  We also have car loans that cost $1,200 a month.  Our property taxes are $15,000 a year, and annual insurance for auto and home is about $4,000 a year.  HOA fees are $2,500 a year.             

What should we do to retire in the next 4 to 6 years to support our current standard of living?  I would like to downsize, selling our current home, payoff the home equity loan, set aside money for a wedding, add to our retirement savings and pay for a much smaller home or condo.  My husband would like to stay in our current home if possible. Your thoughts?  —C.S., by email from Austin, TX

A. Most people would assume you've "got it made." There seems to be lots of money, and it can be rearranged to provide a nice retirement. In fact, even with your current assets, you'll find that Social Security benefits are very important. And how much you save between now and retirement will make a big difference because every dollar saved today is a dollar of income that doesn't need to be replaced tomorrow.

So here's the big question. How much of that $250,000 income will need to be replaced to sustain your standard of living as a couple? If Social Security didn't exist, you could need as much as $5 million or $6 million in financial assets to replace $250,000 of income. With $1 million on hand and only 3 years until your husband is 66, that's not likely. Even extending his working career 4 to 6 years may not allow you to accumulate enough to sustain your standard of living.

The more of your income you save today and the more you spend on your children rather than yourselves, the lower the amount of income you'll need to replace in retirement. The missing number here is how much the two of your spend on yourselves as a couple.

Here are some rough estimates that will put the size of the project in perspective. If your husband retires at 66 his Social Security benefit should be about $2,400 a month in today's dollars. Your benefits, at 62, should be about $900 a month. That’s nearly $40,000 a year in benefits. If your husband retires at 70 and you take benefits at age 66, the total should be about $57,000. Either way, that's a good running start.

Everything else must come from investment income. If you can live on Social Security plus $100,000 of investment income, you'll need about $2.5 million, assuming a 4 percent annual withdrawal rate. That's $1.5 million in new savings or appreciation of the existing $1 million. Either way, it's a long shot.

Your plan B— downsize and pay off all debt— could make everything easier.