Time to Rethink Your Social Security Plan

Once a year, we honor those who work with a day of respite called Labor Day.

And most of us dream of a much longer rest from toil, known as retirement.

Federal Reserve Chairman Alan Greenspan, however, has once again intruded on our daydreams with a reality check, warning as he did recently that the Social Security Insurance system would be running short of money in the next decade as much of the huge baby boom generation retires. Pensions might shrink, and the age for full retirement benefits, already on the increase from 65 to 67, could be ratcheted even higher.

The writing is on the cubicle wall.

Most of us will need to work beyond the traditional retirement age of 62 or 65 to pay to support ourselves for the final third of our lifetime. People are living longer and healthier lives. Financial advisers drawing up retirement plans routinely must assume that their clients will need enough money to live until 95 or 100 years of age.

While it might seem unpalatable now, tacking on several years of full-time work to an anticipated retirement age or working part time during typical retirement years can significantly boost your chances of securing financial independence, according to financial advisers.

"The decision to work a few more years is really the ultimate in financial flexibility," says Lucas Hall. If computer projections show that prospective retirees might not have enough to last through retirement, he says, "usually that's the easiest and the least painful alternative. People would rather work one or two more years than hear the words 'spending cutback.'"

Working into your 60s and 70s has other plusses. For those who haven't given it any thought, employment answers the question of what to do with yourself for the start of what could be your next 30 years. It can also help keep you youthful and active, and it might encourage you to try something new or turn a hobby into a business.

Maybe Life Is a Job, After All Advice for the Soon-to-Be Working Retired
Don't stick your head in the sand until retirement day. "If you find yourself in a situation where you have to work, it's much better to figure that out at age 55 than 65," says Rick Miller, CFP, with Sensible Financial Planning in Cambridge, Mass. Don't assume your spending level will drop. It's been a rule of thumb to project living expenses of 70% of pre-retirement years. But no more. In their 60s and 70s, what financial planner Penny Marlin of Miami, calls the "go-go" years, retirees spend on travel and fun. In the 80s and 90s, expenses for health care kick in.