Retirement. Today's economic turmoil has changed the equation for many who are either nearing retirement age or who have recently left the workforce. Millions of Americans are finding that their savings aren't adequate -- or that they miss the challenges and rewards of the workplace. Whatever the reason, the financial and psychological implications of that decision can be significant. Here are some things to think about as you decide if you are going to stay on the job or go back to work.

Good for Your Bottom Line

If you're still in the workforce but nearing retirement, think about working longer -- particularly if you enjoy your work. Or think about going after that new job you've always dreamed about -- the one that might pay less but be more rewarding. The personal benefits can be immense. It's important to feel needed and engaged, and that you're making a contribution. But working longer can also give a real boost to your financial health.

Obviously, working longer helps you build assets: You won't need to tap your retirement assets as early, which means you'll have more opportunities for your existing assets to grow. That might be especially important for folks around retirement age now with a lot of assets tied up in the stock market. And, of course, you can continue to put assets away for future use. As long as you're working, you can contribute to workplace retirement plans regardless of your age. (Note that although there is no age limit for contributing to a Roth IRA, you are no longer allowed to add to a traditional IRA starting in the year you turn 70 1/2.)

And that raises an interesting issue for people working in their 60s and beyond: Should you contribute to a tax-advantaged 401(k) or an IRA, or should you just invest in a traditional -- i.e., taxable-account? If your employer offers a plan with a match, definitely contribute enough to capture the maximum match. But beyond that, you'll need to think about your current and anticipated tax situation to decide how to proceed.

A Roth IRA or Roth 401(k) might be a good choice if you're eligible and expect to be in a higher income tax bracket when you take withdrawals or expect to leave the balance to your heirs (no tax break now, but qualified withdrawals are free from income tax). Otherwise, a tax-deductible traditional IRA or regular 401(k) is a great choice if you expect to be in a lower tax bracket when you start taking withdrawals. If you're not eligible for either a Roth or a tax-deductible traditional option, saving and investing in a regular taxable brokerage account could be a better choice than making a non-deductible IRA contribution. There's no upfront tax deduction, but you'll give yourself the ability to eventually withdraw funds (that you've held for over a year) at the long-term capital gains rate rather than your ordinary income rate.

Of course, tax law is subject to change! Under current law, taxes on long-term capital gains are considerably lower than taxes on ordinary income. But these rates are scheduled to expire after 2010. Also realize that you're required to begin taking minimum distributions from an IRA account once you turn 70 1/2, but there are no such requirements for taxable accounts (or, for the record, for Roth IRAs).

Given the myriad of choices, if you keep working, you'll want to do some comprehensive financial and tax planning to determine the optimal approach to your retirement savings. The main thing to keep in mind is that by postponing your retirement you are able to continue saving and investing.

Increasing Social Security Income

The other tremendous benefit to postponing retirement is that it allows you to increase or possibly maximize your Social Security benefits, which for many people represent a key component of retirement planning. Continued...