Retirement isn't everything it is cracked up to be. The stereotypical pictures of golf, cruises and visits with grandchildren no longer mesh with the lifestyles of many of today's baby boomers - and it may not fit with the incomes of others.

"Oftentimes, the people I've seen who go back to work were such hard chargers they got a little bored playing golf," says Chris Chaney, a vice president and financial advisor at Fort Pitt Capital Group in Pittsburgh. "They just want to do something they feel is meaningful."

According to an AARP survey - whose respondents ranged from 45 to 74 - 92% of older employees say they stay on the job because they like working and 83% say working makes them feel useful (respondents could choose more than one answer).

But the truth is that 95% of respondents also said they were still on the job because they needed the money. While not all of this demographic will be among the clients of financial planners, even people who have built up a sizable portfolio can find themselves facing the need to work in their later years.

A working retirement is likely to require changes to a client's financial plan. While clients will have more money coming in, they may also face new (and unforeseen) expenses. If clients are embarking on a full second career, make sure they plan for commuting costs, lunches, work clothes, dry cleaning and other expenses a typical retirement budget wouldn't cover.



If clients are drawing Social Security and want to work, pay very close attention to how much they earn, Chaney says. Full retirement age depends on date of birth; it will be 67 for most people still in the workforce.

If your client is younger than full retirement age and makes more than $15,120 in a year, the income exceeding that will affect their benefits, with $1 withdrawn for every $2 above the cap. If they reach full retirement age during a particular year, they will have $1 withheld for every $3 earned above $40,080 until the month they reach full retirement age.

According to the Social Security Administration, a recipient doesn't lose this money entirely, because benefits at full retirement age are adjusted higher to account for the money withheld earlier. This does not hold true for a husband or wife receiving a spouse's benefits before full retirement age, though.

If a client doesn't need the income that Social Security provides, most advisors suggest waiting until full retirement age, filing and then suspending benefits until age 70. Doing so lets a spouse receive benefits, while the recipient earns delayed retirement credits until age 70.



Most people can expect their tax category to change once they stop working. "Three out of four times, they'll usually drop one bracket when they go into retirement," says Mike Piershale, president of Piershale Financial Group in Crystal Lake, Ill.

He adds, though, that "if someone is working during retirement, their income is still going to be higher and, therefore, the taxes they pay are going to be higher."

To keep clients from spending more in taxes than they have to, "make sure they're taking full advantage of all qualified types of plans - certainly putting in the max they can put in a 401(k) plan and seeing if they qualify to get a tax deduction on an IRA," Piershale says.

For married couples filing jointly, he says, eligibility for an IRA deduction has a gradual phaseout between $95,000 and $115,000 in annual income. If a client is covered by a company plan and the spouse doesn't work, an IRA can be established in the nonworking spouse's name and pretax dollars can be put into it, Piershale says. This has a higher deduction threshold: $178,000 to $188,000.

For high-income earners who plan on working well into their 70s, Chaney says a Roth conversion might mitigate - although it won't eliminate - the tax bite. This works better when it's done sooner rather than later.

Piershale says he doesn't recommend converting a retirement account to a Roth IRA for clients close to retirement whose tax bracket is 25% or higher. If a client has an investment account earning dividends that the client will not need to spend down in their lifetime, Piershale suggests putting those assets into an annuity instead.

"Unlike an IRA or a retirement account, you're not forced to take distributions at 701/2," he says. Earned income can also be funneled back into the annuity without triggering income tax.



Generally, the closer a person gets to retirement, the more the portfolio allocation shifts to fixed-income products from equities. "Obviously, the longer they work, that would give their investments that much longer to grow," says Mike Wilson, owner of Integrity Financial in Salt Lake City.

Additionally, an advisor needs to factor Social Security into the management of a client's portfolio, Wilson says. Using a client's monthly benefit and average life expectancy, it's possible to calculate the lifetime value of a client's Social Security benefits as a lump sum.

That sum can then be treated as the equivalent of fixed-income investments in a portfolio - which in turn may shift the rest of the allocation.

"Say they had $200,000 in a 401(k), and let's say their Social Security is worth $200,000," he says. "Now I can adjust the IRA accordingly, so it might entirely be invested in equities."

Of course, this will depend on a client's personal tolerance for risk. Wilson also suggests reserving at least a year's worth of living expenses in cash or cash equivalent products in case a sudden illness or other emergency strikes.



Of course, there's also health care - not an insignificant expense - to consider. Ted Sarenski, president and chief executive of Blue Ocean Strategic Capital in Syracuse, N.Y., estimates that once individuals turn 65 and go on Medicare, they will pay roughly $250,000 over the rest of their lives on premiums, Medigap policies, co-pays, prescriptions and the like.

"You're looking at about $9,200 per person per year, and that's under Medicare," he says.

Working clients may have complicated health care coverage issues. If your client plans to work past age 65, Wilson says, you should help them factor in the likelihood of having to pay for some degree of overlapping coverage since many employers require eligible workers to file for Medicare. "Most of the time your employer's health care plan will be the first provider and Medicare will be the backup," he says.

And remind clients that they need to be proactive once they finally do retire. This is particularly important if you have clients who you only meet with once a year.

"Medicare says you have six months to apply for Parts B and D if you're no longer employed, otherwise you have to wait until the next enrollment period - and there's a monthly penalty," Sarenski warns.

The current monthly premium for Medicare Part B is bit less than $105 a month for most people, but high earners older than 65 can pay more, says Steve Vernon, a research scholar for the Stanford Center on Longevity and author of Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck.

For the top threshold, individuals with more than $213,000 in adjusted gross income or couples filing jointly who earn more than $426,000 will pay a $335.70 monthly premium.

Planners shouldn't be shy about encouraging clients to take better care of themselves, Vernon says.

Whether they're working or not, clients should be encouraged to keep their weight down, and monitor their blood pressure and cholesterol levels; if they do so, they may save a bundle in co-payments and medications, Vernon points out.

"One trend in financial planning is being more holistic," he says. "Clients can save a lot of money if they take care of themselves."



Martha C. White, a New York writer, has contributed to The New York Times, and