If working till you drop is your plan, think again

Half of baby boomers expect to be in their 70s before they fully retire, according to research released last year by First Command Financial Planning. But people laid off in their late 50s and early 60s, often because of their relatively large paychecks and benefit packages, have a hard time getting back to those levels.

"Anyone who is 55-plus working in corporate America has a bull's eye on their back," says Kevin Reardon, a fee-only financial adviser in Pewaukee, Wis. "We tell everyone who's not the owner of a business to prepare."

The unemployment rate for 55-plus workers was 6.6% in August -- lower than the 9.1% rate for the total labor force. But since the start of the recession, both the number of unemployed and the unemployment rate have increased by a greater percentage for the over-55 age group, according to an AARP analysis. What's more, the average duration of unemployment for older job-seekers is a solid year, compared with 37 weeks for younger workers, the group says.

Of course, an economic rebound could change these trends. But few economists are predicting robust job creation in the next few years.

One potential salve is part-time work. Even a modest income could help early retirees give their battered investments a chance to bounce back before they start tapping them.

Reardon, the Wisconsin planner, counseled one couple recently to have the wife hold on to her job three to four years longer than planned. She works part time, running a travel agency and making about $25,000 a year. She didn't view it as a large contribution to the couple's finances, so she considered quitting so they could move.

Reardon explained that if she kept working, their investments should last at least two additional years -- until she's 84, rather than 82. She has continued -- and can do most of the work in six months each year, he says.

Plan for rising health care costs -- especially if you're healthy now

Most boomers realize that care is pricey, but they typically don't grasp the scale of rising costs.

A private room in a nursing home, which now costs $82,125 a year on average, according to the American Association for Long-Term Care Insurance, could escalate to $190,000 a year by 2030, according to estimates by insurer Sun Life Financial. Yet in a survey of 1,015 people who are 50 or older that Sun Life released earlier this month, the median guess was that costs would go up half that much.

Some 70% of Americans older than age 65 will need long-term care, meaning help with daily activities such as eating and bathing, according to the U.S. Department of Health and Human Services. Yet the same survey found that almost none had discussed long-term care with a financial adviser or lawyer.

Financial planners who confront their older clients with such statistics say the clients usually spring for long-term-care insurance, which costs about $2,350 a year for a 55-year-old couple (including discounts for good health and being married), or $4,660 a year for a 65-year-old couple, according to the American Association for Long-Term Care Insurance.

The main moving parts are the length of the benefit, which generally should last at least three years; the daily benefit amount, which should match up to costs where you live; and the "elimination period," meaning the period of time you choose to pay your expenses yourself before coverage starts. Particularly for people under age 70, many planners also recommend paying up for a rider that provides a 5% bump in the benefit each year to protect against inflation.

Another option is a "hybrid" -- an annuity or life-insurance policy with a long-term-care benefit. Bajalia in St. Augustine recently set up an indexed annuity for Barbara Deckman, a 62-year-old retired teacher, which has a lifetime-income benefit and a "double confinement" rider, meaning the policy pays twice as much each year if Deckman qualifies for long-term-care payments.

Don't jump the gun on Social Security

One of the benefits of advance planning is that it can allow you to delay taking Social Security for as long as possible. Depending on your financial situation, life expectancy and other issues, that could be a wise move.

Unless a person is terminally ill, there is little upside for someone in his or her early 60s to tap Social Security. By collecting at 62, rather than at the government's "full retirement age" of 66 for people born from 1943 to 1954, you would slash your monthly benefit. Wait until age 70, however, and you would get 132% of the monthly benefit you would collect at your full retirement age.

A retiree eligible for $18,750 a year in Social Security at age 62 who waits to collect $33,000 a year starting at age 70 could substantially increase the after-tax amount he could spend by age 95, according to T. Rowe Price. Assuming the benefit would increase 3% a year for inflation, and that the retiree was in the 25% marginal income-tax bracket, he would get $850,000 in all by starting the benefit at age 62 -- or $1.4 million by waiting until age 70.

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Becoming a nonagenarian isn't unthinkable: One in four of today's 65-year-olds will live to 90, and one in 10 to age 95. So, if your family members typically live into their 80s or 90s, and you think you could, too, you should consider delaying the benefit as long as you can.

Of course, the big challenge in postponing Social Security is figuring out how to fill the gap between age 62 and whenever you start collecting benefits. Couples in which both spouses worked could try to live off the early benefit of the worker with the smaller paycheck, saving the larger one for later.

Another strategy, living off retirement-account withdrawals for a few years, might help cut future tax bills. Starting in their 70s, retirees generally have to take mandatory withdrawals from retirement accounts, and pretax contributions and earnings are subject to income tax. By lowering those account balances in their 60s, at the same time they aren't drawing Social Security income, early retirees might be able to take smaller mandatory withdrawals later and also pay tax on those withdrawals at a lower rate.

Bottom line, Reardon says: "If there's a good chance one of you will live into your 80s, delaying Social Security is a good way to guarantee your rate of return for your collective lives."