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.

And work during "retirement" doesn't necessarily mean toiling at the same job you've hated all those many years. Thanks to a dramatic demographic shift that is just starting to play out, older workers with skills will be in demand in many professions and in certain areas of the country as boomers retire and the much smaller Generation X is unable to replace all of them.

It's already happening in places like Omaha and Pittsburgh, says Beverly Goldberg, vice president of the New York City think tank The Century Foundation, and author of

Age Works: What Corporate America Must Do to Survive the Graying of the Workforce


Outsourcing to other countries or relying on immigration isn't going to solve the problem, she says, because the demographics are the same globally, and all countries are competing for younger workers. What's striking about this shortage, Goldberg says, is that for the first time, companies cannot rely on the usual fallback -- female workers -- as in World War II. Rosie the Riveter is already otherwise well-employed in the workplace.

While workers in their 50s might worry that their employers are about to give them the ax at any moment, the bigger picture will get brighter every year, says Goldberg. Older, skilled workers will have the opportunity to take part-time work, flex time and consulting jobs.

"Keep in mind, you will have the upper hand," she says. "You will be in demand. They will want you. You might work -- but it doesn't mean you have to work nine-to-five on a killer schedule."

Even working part time after officially retiring from full-time work can help boost financial security.

Having income can help you forestall tapping your IRA or retirement savings, and allow them to continue growing tax-deferred. It can also let you postpone taking Social Security benefits, which pay out at a lower rate for early retirees, at least under the current rules.

Penny Marlin, a fee-only certified financial planner with Lubitz Financial Group in Miami, prepared a retirement plan for a doctor who wanted to retire at age 58 from a practice he owned. Although selling the practice would provide him a large nest egg, her computer forecasts, through good and bad economic times, found that he only had a 96% chance of having enough money to last until age 89 and a 91% chance until age 94.

She recommended that he work part time as a doctor, earning only a fraction of his former income, $30,000 after taxes, through age 67. With that income, the computer model spit out much better odds, a 100% chance for age 89 and a 99% shot for age 94.

Marlin, who works with many pre-retirees, says, "Using extended life projections where the clients don't run out of money is tricky. What choices do they have? Work longer. Spend less. Die younger," she deadpans. "Most don't elect for that."

Michael Helffrich, a CFP with PFP Advisors in Minneapolis, had a client approaching retirement age who was in the construction business and came to him with one question: Could he take a permanent vacation at age 65? Helffrich ran the numbers and found it wasn't quite that simple.

The client needed to earn another $12,000 a year until age 70 to meet his retirement goals. Although it wasn't much money, says Helffrich, "It was that much that made the difference. It will work that much better. Each year is an extra year of not drawing on retirement money."

One Senior Sets the Agenda

For workers already anxious about the future, Fed Chairman Greenspan's Aug. 27 remarks at a Jackson Hole, Wyo., symposium were no comfort.

Noting the nation's population of age 65-plus citizens will double by 2035, Greenspan said he fears we have promised more to prospective retirees than workers will be able to afford in real income, and "we must recalibrate our public programs so that pending retirees have time to adjust through other channels."

The Social Security Act was signed into law by President Franklin D. Roosevelt on Aug. 14, 1935, and monthly benefits began in 1940. The original retirement age was set at 65 years of age, but not because so few people lived to that age, according to the Social Security Administration. While life expectancy at birth was less than 65, most Americans upon reaching adulthood at that time could expect to reach age 65.

While longevity has increased significantly, the agency says it's the sheer size of the baby boom generation that presents the biggest challenge.

Already, the agency is trying to ease the pressure by raising the age at which retirees receive full retirement benefits, from age 65 for those born before 1937 to age 65 and two months for those born in 1938 and so on. The revised schedule marches upward, to age 66 for those born between 1943 and 1959, and to age 67 for those born after 1960.

Anyone can elect to retire early at age 62, but benefits are reduced a fraction of a percent for each month before full retirement age. A 62-year-old today opting to start receiving a Social Security pension this year takes a permanent 24.17% cut in prospective full benefits.

If you choose to work while taking Social Security before your full retirement age, however, you will be penalized $1 in benefits deducted for every $2 earned above $11,640 in 2004. Once you reach your full retirement age, you can receive benefits with no limit on earnings.

Just consider Gene and Dee Balliett of Balliett Financial Service in Winter Park, Fla., ages 73 and 72 respectively, who happily practice what they preach.

"We've long told our clients that retirement can mean being unemployed and useless at 65, or it can mean finding a way to continue working in a job they love," says Gene. They recommend either getting a new career, or cutting back on a current one, as the couple have done, by delegating tasks they dislike to others.

The Ballietts had put off taking Social Security benefits until the maximum age of 70. Ditto for their retirement plans at age 70 and a half. They now receive $42,000 plus from Social Security and say they still make a decent living by working.

It works for them.

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