Q. Over the last 40 years my wife and I raised seven children. Consequently, we find ourselves in our mid-sixties with only about $35,000 in IRA's. My wife has retired to baby-sit our youngest grandchild. She has a small pension from the school system and Social Security, a total of about $800 a month. Our home is worth about $130,000 and should be paid off in 6 years.

I work for a small family owned business with an annual salary of $55,000. The family that owns the business wants me to work for another 6 to 8 years. They have plans to start a 401k or Simple IRA for employees, which would really facilitate larger tax deductible contributions compared to my current $3,500 IRA limit.

I will be 65 next March and plan to begin drawing my Social Security benefits, about $1,800 per month. This will allow me to invest about $25,000 annually, with the maximum going into the company plan and IRA contributions.

Can I do all this? What are the tax ramifications due to the additional Social Security? Are there alternatives if the company plan doesn't materialize? Should I continue investing with only 10 percent in bonds? My current investments are all no load, low cost funds with 45 percent in a balanced fund, 15 percent international, 20 percent moderate allocation, and 20 percent mid and small cap funds. The first two are Dodge and Cox, the other three are T. Rowe Price.

---J.N., by e-mail from Houston, TX


A. Imagine that you are building a railroad across the country. One side of the country is called "Working." The other side of the country is called "Retired." Your first task is to make sure the tracks meet. That means knowing what your current expenses are and how you can get to retirement without a gigantic drop in your standard of living. This may sound obvious but you would be amazed at the number of people who have never thought about it.

The good news is that you may not get to be a Donald Trump, but you can do a great deal to improve your future.

Your current working income is $55,000, about $4,585 a month. Your known retirement income is the $800 your wife receives and the $1,800 you expect from Social Security, a total of $2,600 a month. Note that I don't include your wife's retirement income in your current income: if you do that, you'll never "catch up."

While the gap may appear enormous--- about $2,000 a month, particularly since your $1,800 Social Security benefit figure is probably high--- some of your current expenses will disappear or be smaller in the future.

You won't, for instance, be paying $350 a month in employment taxes. You won't have the costs associated with working, probably at least $100 a month. And you won't have your current mortgage payment. Let's assume that's another $350 a month. That takes the gap to about $1,200 a month.

You can fill a good deal of that gap by NOT collecting Social Security benefits at 65. They will grow by 7 percent a year (excluding inflation adjustment) if you defer taking them. I think your $1,800 figure is high but 7 percent of that is $126 a month. To get that amount of income safely from invested savings you'd need to put away at least $30,240, after taxes. So deferring Social Security benefits will benefit you much more than taking them, paying taxes on them, and trying to invest the money.

Work an additional 5 years and your tax-free benefits could increase by about $630 a month. The other benefit is that your spouses' survivor benefits will increase, making your wife more secure if you die before she does.

That, of course, means that most of your future security depends on the Social Security program. So I think you need to be an aggressive saver as well.

If you save both your wife's retirement income and maximize your personal saving via the existing IRA and other savings, say $800 a month plus $400 a month, you'll be putting away 2 months of the $600 gap each month. You've already got about 58 months of the $600 gap put away in your IRA account.

Work another 6 years and you'll have about 202 months of gap income put away (72 months times 2 months plus the 58 months you already have). Work another 7 years and you'll have about 226 months of income gap put away (84 months times 2 months savings plus the 58 months you already have). Note that I haven't mentioned return on investment. The actual accumulation should be significantly better.