Enjoy the Climb

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Long in denial about the savings and financial planning needed for a comfortable retirement, baby boomers may finally be catching on. A growing number say they'll retire after age 65, and 70% of all workers now plan to labor at least part-time after quitting their careers, according to a survey by the nonprofit Employee Benefit Research Institute (EBRI). Three years of slumping stocks and a crummy job market have taken their toll, but eyes have been opened. The future can be good — really — if you focus on the positive aspects of extending your career and make a few smart financial decisions along the way.

Working longer as you live longer (and in better health, thanks to modern medicine) has many benefits beyond simply repairing the damage from your miscues during the Internet boom. For starters, working at something you enjoy has been linked to physical and mental wellness in later years. So continued employment may make sense, even if you don't need the money. If you are newly reconciled to a longer work life, consider these issues:

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Chances are you'll need coverage longer. Many low-cost term-life-insurance policies expire and are nonrenewable when you turn 65. That's O.K. if you'll have enough savings, pension and other income to protect your surviving spouse's lifestyle. But if you'll be working out of need, your spouse may require more security. Universal and whole-life policies (which have a savings or investment component) cost more but accrue cash value as you go and are guaranteed renewable as long as you live. Reasonably priced sources include TIAA-CREF and New York Life.

Keep up, or step up, the pace. Working longer doesn't always work out. Health problems and corporate downsizing explain many of the 40% of today's retirees who exit the work force earlier than they had planned, according to the EBRI survey. If you do save less — reasoning that you'll have more work years to reach your financial goals — consider buying long-term-care insurance, which most people never do but which you may need if you become unable to work and require special treatment, like nursing-home care.

This is no time to duck the stock market; you would miss the inevitable recovery. Rebalance your portfolio to create your desired mix of stocks, bonds and cash (60%-30%-10% is reasonably conservative). Lean more heavily toward stocks if you're under age 55. Don't pile into a traditional IRA, because these accounts require withdrawals starting at age 70 1/2. "That defeats the purpose of working longer to keep your capital invested and could throw you into a higher tax bracket," says Ed Slott, author of The Retirement Savings Timebomb and How to Defuse It. Instead, favor a Roth IRA — you'll never have to take a distribution in your lifetime — or a 401(k), with no distributions required as long as you work.

Before taking a part-time job just for extra cash, consider your bottom line. Many people put in the hours not realizing that work-related expenses (gas, clothes) and taxes can eat up a lot of a little income, notes David Chilton, author of The Wealthy Barber. If it's all about pocket money, try to cut expenses instead. One strategy: scale down your housing before retirement — or even better, stay full time at a job you like.

To contact Dan, send e-mail to danielkadlec@aol.com