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I would figure out what you need, absent the mortage and increase that at 4% a year. The projected rate of inflation for baby boomers is 4.5% while in retirement (that figure includes housing and medical care).

Assuming you maintain an active lifestyle in retirement, you are going to face inflation.

For example, the following are CPI-E numbers for various expenses for retirees:

Food: 14.3% increase
Clothing: 2.8%
Transportation (all forms) 13.8%
Recreation: 4.4%
Other 5.6%

This was tabulated by the Fed Board of NY in 2003 for the CPI-E (a number specifically for retirees) of 2001.

It can be the most trivial of things that will see an increase, for example butter has had over a 40% increase in cost since 2001.
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