Baby boomer strategies for slowing down

Most people in their twenties and thirties are scrambling to get ahead – working long hours to advance their careers, buy a home or start a family.

Fast forward a few decades and, while not necessarily ready to retire, many 40– and 50–somethings have begun to slow down their career merry–go–round. Some contemplate part–time work, others want to switch to less–demanding jobs or launch new careers more closely matching their interests.

If you're wondering whether you can afford such a major work–life change, consider these factors:

Could you live on less? You probably don't want to revert to your student lifestyle, but review your budget for items you could comfortably eliminate or reduce: Things like pricy vacations, frequent restaurant meals, premium cable channels, unneeded new clothing, etc. Although you won't be keeping up with the Joneses, more free time and increased happiness are more important than who has the fanciest car.

Are you saving enough? Before considering scaling back your income, make sure you've covered your short–term savings needs. Most financial experts recommend setting aside three to six months' living expenses for unexpected occurrences like car or home repairs or major medical bills.

Retirement planning. Even more critical is ensuring that you're saving enough for retirement, particularly if you plan to retire early. Remember, Social Security and pension benefits are largely determined by how many years you've worked and at what income level. Similarly, the longer you contribute to a 401(k) plan or IRA – particularly if you max out contributions – the more your account will appreciate. If cutting work hours means you'll no longer be able to save for retirement, you could be in for a rude awakening.

Cover yourself. Before changing your work status, make sure you'll have access to adequate health insurance, whether through your employer, your spouse's plan or independent coverage (which can be very costly). Medicare doesn't kick in until age 65, so being uninsured is just too risky, especially as you get older. Also, be sure to factor homeowners, car and life insurance into your new budget.

Are you debt free? One of the best ways to live on less income is to lower your debt load. If you pay down your credit cards and loans and resist taking on new debt, you can subtract those interest payments from your monthly expenses.

Form a back–up plan. Unexpected occurrences could sabotage your plans so have a strategy for getting back into a higher earnings bracket if need be. Consider costly situations like your spouse losing his or her job, helping your kids pay for college, or caring for sick or elderly parents.

Scaling back your work isn't all doom and gloom. Here are a few potential positive economic outcomes of reducing your work schedule and lowering your income:

• Employment–related expenses like commuting, meals and work clothes could decrease.
• Childcare expenses would be lower if you're home more.
• Less income means lower taxes, especially if you itemize deductions, since they'll represent a larger percentage of your taxable income. Consult a financial planner for different scenarios of how this might work for you.

If you need help creating or revising your budget, check out the interactive budget calculators at Practical Money Skills for Life, Visa Inc.'s free personal financial management site (www.practicalmoneyskills.com).

Slowing down doesn't have to mean going out to pasture; it's just means you'll have more time to smell the clover and run with the bulls.