The Home Stretch - Your 50s and 60s

Try to boost your retirement savings goal up to 20 percent or more of your income. Workers age 50 and over can invest extra dollars into their employer's retirement plan once they've maxed out their regular contributions. The catch-up amount is $5,000 through 2008 and will be adjusted for inflation in the future.

You also can put catch-up amounts into your IRA if you are over age 50. The catch-up amount is $1,000 through 2008. Once you maximize contributions to your retirement plans, save additional money in investments that don't create much taxable income.

Investment Strategy

Investing at this stage typically needs to be a little more cautious. Planners recommend shifting a portion of your higher-risk investments into less volatile-and usually lower returning-assets such as bonds, although bonds have different sorts of risk, mainly based on what happens to interest rates in the future.

In addition, most planners recommend maintaining a substantial exposure to stocks. You'll need some assets that can help you stay ahead of inflation and preserve the purchasing power of your income.

What Kind of Retirement?

It's also time to start focusing on what kind of retirement you want and what financial resources you have to pay for it. Planners often advise people to "practice" their retirement. Try out that hobby you've always thought about. Share your dreams with your spouse. It's important that both of you explore and work out differences.

Calculate what your dream retirement will cost. Expenses may vary during phases of retirement: Typically high at first, lower in the middle, then higher later if health declines. Calculate what realistic financial resources you'll have to pay for your retirement. Also, begin thinking about how you'll roll over your retirement assets in ways that either preserve their tax deferral or reduce potential taxes.

Little Time to Save?

Your options are more limited at this stage:

• Reduce expenses and invest the savings
• Increase income through a second or better-paying job
• Maximize retirement plan contributions
• Invest more aggressively, but not recklessly
• Postpone retirement or work part time
• Make smart withdrawals from retirement accounts once you retire

Retiring Early?

The big challenge is that we're living longer. You'll need a larger nest egg than if you retired later, yet you'll have fewer years to build that nest egg. Early retirement means smaller monthly Social Security benefits. The same applies to traditional pension plan benefit amounts.

If you retire early, you may need to replace corporate benefits you lose. You also may need to come up with health insurance to cover the gap until you qualify for Medicare at your normal retirement age. Retiring before age 59 1/2 also can present tax problems, since taking money out of your retirement plans may trigger a 10 percent tax penalty.

The challenges of early retirement are not just financial, however. Many CFP professionals find their retired clients returning to work, often part time, out of boredom.