Retirement trade-offs: Work longer? Play now? Save more? Save less?

“How’s the rainy day fund coming along?” I get this question every time I talk with my financial adviser. The answer: not so well. And I write about personal finance and retirement issues for a living.

At age 60-ish, my wife and I still work and save diligently in our tax-qualified accounts. But the goal of setting aside six months in liquid funds for a rainy day remains elusive. The extra money we have on hand is often spent on travel, especially when we can convince our young adult children to join us. We don’t plan to retire anytime soon, and using the money to enjoy family time and see the world while we’re both still working feels like a decision we won’t regret.

How can you balance short-term needs and desires against long-range goals, especially in the critical years leading up to retirement? The question goes far beyond rainy day funds. Late-career years should be peak years for earning, saving and investing. But the numbers show that people who want to mix work and play – often at the expense of saving – actually could be doing the best possible thing for their retirement security because of the benefit that working additional years provides.

I explored these issues in my column this month. You can also find some interesting numbers on how the math works at the website of T. Rowe Price, which has developed a theme around the notion of “practicing retirement.” Here’s a PDF that projects typical trade-off scenarios.