Growing Numbers Work Into Retirement

Kathy Frederick always assumed she would retire from her hospital administration job when she was around 60.

But as that date neared, she realized she wasn't ready. She was healthy, enjoyed the work and liked the paycheck. So she decided to stick around. Now 65, Frederick works two days a week on special projects for Scripps Health's human resources department in San Diego.

Frederick isn't unusual. While poor health and job cuts force many people to retire earlier than planned, a growing number of baby boomers want to work longer than their parents did.

Many are healthy and want to remain active. Others are trying to save more after the financial crisis slammed their investments and home values. More than half of those 50 and older surveyed in 2011 by AARP didn't think they would have enough to live comfortably in retirement. As a result, 44.1% said they would like to work part time in retirement and a third planned to delay retirement altogether.

Ideally, workers should start thinking about that decision well before they're actually eligible for retirement. Starting a couple of decades early might seem extreme, but it isn't. Planning ahead gives you time to save more, switch careers, and make the best decisions about healthcare and Social Security. Here are a few ways to plan:

In Your 40s: This is a great time to prepare for an eventual career change, especially if you want to switch fields or turn a hobby into income. Try a writing class, work on a master's degree in social work or computer programming or take advantage of tuition reimbursement programs offered by many large employers. Research that career that you never had and start laying the groundwork now.

Meanwhile, keep saving. Even if you're spending more of your cash paying college tuition right now than saving for retirement, try to sock away as much as possible in your 401(k) plan. The sooner you start saving, the more time those assets have to grow -- and the more financial freedom you'll have to chase a second career that might be less lucrative than the one you are in now.

In your 50s: Start doing the math. Figure out how much you'll need for retirement and get estimates of the Social Security and pension benefits that you expect to receive. That way you can come up with a rough guesstimate of how much you'll need to earn in retirement, when you'll be able to retire, and just how part time you'll be able to afford to be. That number might change, but it's crucial to determine a realistic retirement age.

It's also a good time to ramp up that second career, by developing a business or hobby that could become income-producing after retirement. Options include everything from consulting to construction.

"You really should test the waters to see how much income you can generate in a month," says Chris Fahlund, a senior financial planner at T. Rowe Price. She says one friend has a printmaking business that he's developing while he continues to work his regular job. "He enjoys doing both, and it doesn't put the same financial pressures on him."

In your 60s: Don't leave your current job without thinking about health insurance, Social Security and your work options. Medicare isn't available until your' re 65 and individual private coverage could be expensive.

You can start claiming Social Security benefits at 62, but you may not want to because early retirees face an earnings test that could crimp those benefits. The Social Security Administration will keep $1 in benefits for every $2 you earn over $14,640 until you hit full retirement age. The year you reach 66, it holds back $1 for every $3 that you earn above $38,880.

Once you reach full benefit age -- currently 66 -- you can earn as much as possible and still collect full benefits. The longer you can wait to start benefits, the better, says Fahlund. Waiting also means a higher benefit for your spouse.

Try finding another job before formally retiring. It may take longer than you expected. Or sound out your current employer to see if there's a way to transition gradually to retirement. A growing number of businesses have programs that enable experienced workers to remain in the workplace.

At Scripps, where Frederick works, for example, there is a generous program that allows employees who are at least 55 and have worked for the healthcare company for at least 10 years to work part time while continuing to receive healthcare and retirement benefits.

Frederick says while she likes the flexibility of working part time, she enjoys the work and has been able to delay taking Social Security and touching her retirement fund.

The benefits have gone beyond her bottom line. "The idea of just retiring is not appealing," she says, noting that she feels "revitalized" by the work she's doing now.