To retire comfortably, it all boils down to time

— -- When Steve White began preparing to leave his medical practice in a small Georgia town 12 years ago, he and his wife, Charlotte, began searching for a reasonably priced retiree health care policy that would last until they qualified for Medicare.

They never quite found it. Today, the Whites, who are in good health, pay $12,000 for an annual policy with a $20,000 deductible. Steve White, who turns 65 next week, says he knows people in affluent Hilton Head, S.C., where the Whites live, who can't afford to retire until Medicare kicks in at age 65, because private health care is prohibitively expensive.

"Health care premiums," White laments, "hold more people hostage from retirement than any other issue."

Everyone knows that wannabe retirees are in a bind today as they consider whether they have the financial security to make the leap. Shrinking nest eggs, nagging inflation, stagnant wages, vanishing pensions, dubious advice and runaway health care costs are among the obstacles that can block a retiree's escape route.

Despite the long odds, there are still people, such as the Whites, who have managed to liberate themselves from office cubicles, assembly lines and other workplaces. These are people whose paths to retirement weren't paved with stock options, gold-plated executive benefits or multigenerational wealth. Yet they somehow defied the threats that thwart the ability of so many middle-class people to save enough for retirement.

How did they do it? Most of them were habitual savers. They avoided or paid off debt. They invested early and often for retirement. When they needed to, some of them pursued a little extra paid work.

But many of them were also fortunate. They tended to enjoy traditional company pensions and, if they were really lucky, received employer-provided retiree health insurance, too.

Older workers are all too aware that the pension safety net has been unraveling as companies such as IBM, Fidelity Investments, Verizon and Hewlett-Packard have frozen or terminated their pension plans. According to Boston College's Center for Retirement Research, only 43% of workers from 25 to 65 in Corporate America still qualify for traditional employer-provided pensions.

The old-fashioned pension may eventually exist mainly in the government sector alone, where strong legal protections have kept such "defined-benefit" plans the norm in city halls, state capitals and federal offices around the country.

Roger Cook, 64, a retired state archeologist in Lincoln, Calif., and his wife, Rae, 56, an assistant office manager in the state attorney general's office, are taking full advantage of their state pension coverage. The couple didn't start saving for retirement until 15 years ago. But they always knew their fallback was his-and-her defined-benefit plans.

"It's a real boon to anybody to have a guaranteed amount of money that will be coming in every month," says Roger Cook, whose pension plan allowed him to retire at 59½.

In weighing various scenarios, the Cooks decided that Rae would work until next year to boost her eventual pension check. And she's considering not tapping Social Security until she turns 67, thereby raising the amount of her monthly checks.

Worried about having to rely solely on their pensions and Social Security, the couple also started stashing away 25% of their paychecks several years before Roger's retirement. Rae continues to maintain that pace. And Roger, whose frugality includes driving a 14-year-old Ford pickup, is faithfully contributing to a spousal individual retirement account each year.

Don't be in rush to tap into Social Security

If your retirement plan doesn't include a pension, it can be hard not to feel a tad envious of the happily-ever-after retirement stories of others who are covered. But a growing number of Americans, whose retirement prospects might look like financial dead ends, are proving that all is not lost. These workers are finding that they can join the ranks of successful retirees by dawdling at the exit.

When workers resist the temptation to grab Social Security benefits at age 62 and wait until their full retirement age (66, for Boomers near retirement age), they'll boost their monthly benefit check by 33%, says Alicia Munnell, director of Boston College's Center for Retirement Research and co-author of Working Longer: The Solution to the Retirement Income Challenge. Those who can hold off retirement till age 70will see their Social Security payments grow a lot more — by 75%.

"Delaying retirement and delaying Social Security," Munnell observes, "is one of the most powerful tools you have at your disposal to secure a successful retirement."

Michael Rosner, 64, of Melrose, Minn., understands the math all too well. Burned out, he retired as a physical therapist in 2005 and devoted himself to working as a Red Cross volunteer. But two years later, boredom, rather than financial need, pushed him back into the workforce part time.

As a Social Security recipient, though, he triggered a financial penalty when his salary exceeded the allowable limit. Social Security discourages younger retirees from "double-dipping": receiving the federal benefit and a paycheck simultaneously before your full retirement age. Consequently, Rosner faced the prospect of having Social Security deduct $1 from his benefit check for every $2 he earned over the limit of $13,560.

At that point, Rosner decided to pay back the two years of Social Security he'd already collected so he could wipe the slate clean. He realizes now that resisting the allure of early Social Security checks will pay off handsomely with larger checks when he eventually retires for the second time.

Rosner is urging others, including his director of nursing, to avoid grabbing the cash at the first opportunity. "I told her," Rosner recalled, "that she better think twice before drawing Social Security at age 62."

Don't be in a rush to retire, either

Delaying retirement will, of course, sound like a downer to many people. But aging employees don't have to live like hermits during their extra working years. That's the conclusion of a recent study by T. Rowe Price that suggests that people who delay their career exit can treat themselves well during their extra years on the job.

T. Rowe Price researchers examined what it would take for a 62-year-old to turbocharge his eventual retirement purchasing power from his own savings and Social Security. If he managed to save 25% of his paycheck each year, he could boost his annual retirement income by 8.2% for every year that he continued his herculean savings. So if he quit work at age 65 rather than at 62, his retirement purchasing power would jump nearly 25%. (The formula assumes the saver is invested in a retirement account and keeps 40% of his investments in stocks, 40% in bonds and 20% in shorter-term bonds.)

That savings regimen would strike most people as extreme, especially for those who don't want to boycott Starbucks. But it doesn't have to be painful, insists Christine Fahlund, a T. Rowe Price senior financial planner.

How come? Because even if a worker doesn't save a dollar more after passing up early retirement at age 62, she could retire with roughly the same 25% boost of income just by working till age 66 — just one year longer than the aggressive saver.

Many people, Fahlund explains, choose to retire early because they're eager to start having fun. Yet if they stay put in their jobs and stop contributing to 401(k) and IRA plans, they can use the extra cash they would have paid into their retirement accounts to enjoy more elaborate vacations and splurge in ways they probably thought weren't possible until retirement. (Get a copy of the research at the fund family's website, www.troweprice.com, by typing Price Report into its search engine. The study is discussed in the summer 2008 issue.)

The research is good news for late savers, and there are plenty of them. According to the Employee Benefit Research Institute, more than three out of four Americans 55 or older have saved less than $250,000.

An early start is always best

By contrast, many of today's successful retirees had begun stashing money away at a young age. In fact, experts say, retirees who were diligent savers at the start of their careers gave themselves a big cushion if they happened to stumble later. Many people count on earning their peak salaries during their 50s and early 60s. But catastrophes, such as layoffs and debilitating illnesses, during these years can suddenly gut nest eggs.

If older Americans are forced to retire earlier than they'd planned, or are stuck in part-time work or underpaying jobs, they might no longer be able to afford to contribute to their retirement accounts. Still, this won't be so crippling if their nest egg has been growing exponentially for decades, thanks to the power of compounding.

An early start can also inoculate small-business owners whose dreams of cashing in when they sell their medical practice, travel agency, plumbing outfit or other enterprise never materialize.

Henry Hebeler, a retired Boeing executive and founder of AnalyzeNow.com, a financial website for retirees, knows several dentists who had sizable portions of their net worth tied up in the commercial buildings where they worked. Selling their practices and the property during the real estate slump has hurt them.

Small proprietors, Hebeler says, often don't enjoy many options when they're ready to retire and cash out: "It's not easy to sell some of these small businesses."

Successful retirees also tend to display financial prudence and sound judgment. White, the retired doctor, recalls that he never succumbed to the temptation of questionable dot-com or real estate investments that so many investors gobbled up.

"I've never been into things that seemed like gambling," says White, who has two-thirds of his retirement portfolio invested in diversified stock index funds.

White recalls younger colleagues in their 40s who were planning early retirements during the giddy late 1990s, when their tech portfolios seemed to be printing money. Their chatter fell silent once tech's golden goose turned into an albatross.

Instead, White began hearing people complain that they "had too much house." In his area, White says, that's code for, "I've lost my shirt, and now I'm going to have to sell the house."

Play it safe with stocks

Taylor Larimore, a moderator on the popular Bogleheads investment forum, which attracts lots of retirees, says he understands how easy it is for investors to be swept up in the market's mood swings. Larimore, a former IRS employee, used to publish a market-timing newsletter but ditched that strategy in the 1980s and embraced index funds instead.

Larimore sees plenty of retirees who continue to make foolhardy mistakes.

"The majority of new investors come to the forum seeking hot funds to beat the market," he says. "However, studies tell us that by simply buying and holding a total stock market index fund, we'll outperform about 80% of long-term investors with less risk and less taxes."

READERS: What are you doing to plan for retirement?