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Live for Today, Save for Tomorrow

What if working longer meant more fun, not less, and a bigger nest egg, too?

En español | As a senior financial planner, Christine Fahlund is not in the habit of telling people to stop saving for retirement. You wouldn't expect her employer, T. Rowe Price, to be wild about the idea, either. They are in the business of gathering investors' money into mutual funds and 401(k) plans. (Disclosure: Among those plans is the one for employees of AARP.) But in a new strategy that the company has been promoting this year, not only do Fahlund and T. Rowe Price suggest that you stop saving for retirement once you hit age 60; they encourage you to take the money you were previously putting into your 401(k) or other retirement account and — brace yourself — spend it. On fun stuff.

See also: Try AARP's Social Security benefits calculator.

Illustration of Live for today, save for tomorrow

More Americans are torn between retirement and working. — Illustration by Dan Page

"Your 60s should be a time when you start to enjoy yourself more," Fahlund says. "Take more trips. Spend time with the grandkids. Buy the boat or put in the pool you've been dreaming of."

And here's the kicker: If you follow their advice, you could end up with a higher income in retirement than you might have otherwise.

Is this a joke? Did Fahlund and company just snooze through the Great Recession? It's not, and they didn't. What T. Rowe Price calls "practice retirement" could, in fact, be a realistic option for you. But there's a big catch. Two catches, in fact. You have to have significant savings by the time you hit 60. And you have to commit to working well past your early 60s, because you're going to live off that income while your savings and your Social Security benefits sit untouched, gaining in value.

You may already be postponing your retirement: More than 60 percent of workers say they expect to retire at age 65 or later, according to the most recent survey by the Employee Benefit Research Institute, up from 45 percent in 1991. But few view the prospect with enthusiasm. Working longer is Plan B, a sign that something went wrong in your retirement schedule.

"Practice retirement" operates from a different set of assumptions. Steven Sass, director of the Financial Security Project at the Center for Retirement Research at Boston College, says most people think the point of working longer is to sacrifice and save. That's not it. "The payoff of working longer," says Sass, who coauthored Working Longer: The Solution to the Retirement Income Challenge, "is that you can preserve your retirement savings and delay taking Social Security." Medical researchers have long known that staying on the job pays benefits to the mind and body. By protecting your nest egg, enhancing your benefits, and limiting the number of years your stash needs to support you, working longer has a similar effect on your financial health.

And that creates some opportunities, including the one at the heart of Fahlund's suggestion: Put yourself in a position where you can afford to stop saving, or at least slow down, when you reach 60. Then: Live a little. "Get back to looking forward to your 60s as a time to be enjoyed," she says. "You are delaying retirement, but you don't have to delay enjoyment."

Still sound too good to be true? On the following pages, you'll find answers to your probable concerns:

Next: How much should you save so you can retire at 60? >>

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