Rethinking retirement

When the stock market and housing prices were soaring not so long ago, many baby boomers figured they could retire early and live comfortably on their profits. Today that situation has reversed: Many folks are now postponing their retirement or even being forced to reenter the workforce, either to supplement diminished savings or because they underestimated how expensive retirement would be.

In fact, according to the Department of Labor, the number of people over 55 still working has increased by more than 800,000 since the recession began, despite rising overall unemployment.

If you are wondering about the right time to retire, here are a few considerations:

How much will you need? Financial planners often suggest people may need 70 to 90 percent of pre-retirement income to maintain their current lifestyle, but individual circumstances make it hard to generalize. For example, some folks downsize their housing or retire to less expensive areas and therefore may need less. Others can anticipate high medical bills or other heightened expenses.

Crunch the numbers. Start estimating your retirement needs by using online interactive calculators, including:

• Social Security's Retirement Estimator now automatically enters your own earnings information from its records to estimate your projected Social Security benefits under different scenarios, such as age at retirement, future earnings projections, etc. (www.ssa.gov/estimator). They also have a more detailed calculator you can download to make more precise estimates.
• Check whether your 401(k) plan administrator's website has a calculator to estimate how much you will accumulate under various contribution and investment scenarios. If not, use the 401(k) calculator at www.bankrate.com under the "Retirement" tab. They also provide calculators to estimate the impact of retirement plan contributions on your current take-home pay, minimum IRA distributions, and much more.
• AARP offers a calculator designed to help determine your current financial status and what you'll need to save to meet your retirement needs (see www.aarp.org/money/financial_planning under "Tools").
• Another good resource for retirement planning information is Visa Inc.'s free personal financial management site, Practical Money Skills for Life, which features several games and calculators to estimate retirement needs (www.practicalmoneyskills.com/retirement).

Consult a professional. After you've explored various retirement scenarios, it might make sense to invest in a few sessions with a financial planner to help you work out a specific investment and savings game plan. Ask around for referrals, or visit www.plannersearch.org to begin your search.

Drawing Social Security while working. If you begin drawing reduced benefits between age 62 and your full retirement age (65 for those born before 1938 and gradually increasing thereafter) while still working, your benefit could be significantly reduced, depending on your total income. However, those reductions aren't truly lost since your benefit will be recalculated at full retirement age. Read "How Work Affects Your Benefits" at www.ssa.gov for more details.

Also remember that Social Security benefits may be taxable on federal income taxes, depending on your income level. Publication 915 at www.irs.gov has full details.

Don't wait until the last minute to plan your retirement date: Start crunching the numbers now so you'll have plenty of options if the economy should change course again.