(FORTUNE Magazine) – Plan as you may, it pays to remember the poignant line from poet Robert Burns, pointing to the "best-laid schemes o' mice and men," which often go awry. Could your retirement plan be on a similar course? What with the vagaries of health, the unpredictable nature of income (unless you're able to predict the future of interest rates), and the seemingly endless nasty surprises from the Internal Revenue Service, you still face a heap of uncertainty about your retirement. Fortunately, there are increasingly better methods of turning these wild cards to your favor, from long-term-care insurance policies to the new Roth IRA, which gives you novel ways to counter the tax collector. Each of the three articles presented here takes up one of the big variables in retirement--taxes, health, and income--and offers up-to-the minute advice on how best to cope. Follow these tips, and you could find yourself holding a winning hand later in life.

GET SMART ABOUT TAXES Your taxes could fall in retirement, but not without help.

After countless hours coping with crowded commutes, budget grinds, and bosses with personality disorders, you're about to be set free. Ahead lie plenty of power lunches with grandkids, afternoons at the beach, and an ever-improving handicap on the links.

But be warned that there is a wild card out there that threatens such blissful liberation, and it's been dealt by Uncle Sam. A basic fact most people forget when they enter retirement is that the IRS is waiting to collect its dues. It's not just the normal tax take that you have to worry about, but the real possibility that your tax rate could actually rise once you retire.

This unhappy state of affairs results from no secret clause in the tax code, just the simple unwinding of years of tax-deferred saving. Do the math yourself: Take all those marvelous tax breaks that encouraged you to sock it away over the years--IRAs, 401(k)s, 403Bs, SEPs, the works--and throw them into reverse. Even if you don't need that money in retirement, the government insists that you start withdrawing it in large chunks beginning at age 70 1/2. Then add on to those sums any pension you receive from your employer, as well as income from social security. When those taxable sources of income are tallied, you may well find yourself with a much bigger tax bill than when you were in midcareer.

The reason is not just the artificial swell in your income, but the fact that you will no longer have mounds of deductions to offset it. Consider: By the time you retire, your mortgage will most likely be paid off, so you'll lose the biggest single tax reducer of all. You will also be without standard exemptions for dependents, since the kids will probably have moved on. Sure, you'll still have property taxes, and in some places that's a handsome deduction, but that won't be enough to offset the tax-deferred savings that have been swollen by years of a bull market. Result: a painful outflow of cash to the IRS.

Think it can't happen to you? Think again. Let's say you and your spouse don't touch your IRAs until age 70 1/2, when it becomes mandatory, and by then they've grown to more than $1 million (even if you didn't contribute much to your IRA, you may well wind up stashing your lump-sum pension payment in one). If you use the term-certain method of distribution with a joint life expectancy of 20.6 years, that first year you're going to get $48,543 in distributions from your IRA (and let's not forget Social Security), on which you owe income tax. By now your good old deductions have pretty much dried up as well. Say hello to a 28% tax bracket, or if your total income tops $100,000, even higher brackets--up to 40%.

Before you start packing for one of those Caribbean tax havens, there's at least one simple move you can make to keep your tax bill in check--stay leveraged. Maybe you don't need a mortgage anymore, but that doesn't mean you shouldn't have one.

Beyond such bold strokes, you'll probably need the advice of a sophisticated planner or tax adviser. That was the conclusion of Shirley and George Waring, who faced the IRA problem when they retired about ten years ago. A hard-working couple all their lives, the Warings, of Long Island, had saved faithfully and invested wisely, resulting in a sizable sum in their IRAs. But as they neared the mandatory withdrawal age, they suddenly realized how vulnerable they were on the tax front: "We own our house, the family business, and all of the business' buildings. Other than some property taxes, we didn't have any big deductions," sighs Mrs. Waring. Faced with an abrupt rise in their tax bill, the Warings quickly enlisted help.

"Their tax bracket would have gone through the roof," concurs Seymour Goldberg, the Warings' tax attorney in Garden City, N.Y. Fortunately, Goldberg had a partial solution--the Warings should use their IRA money to establish trusts for their two grandchildren. Such a move would change the distribution schedule on the IRA from one that was based on the Warings' ages to a schedule that took into account the life expectancies of the grandchildren as well. So if the original life expectancy was 20.6 years for the couple at 70 1/2, it was now 26.2 years, according to a complex IRS formula. Going back to the $1 million IRA example, under this distribution method, $38,167 would be paid out the first year, significantly less than the $48,543 under the other method. Also, as long as the IRA money that's earmarked for the trust is less than $1 million upon the surviving Waring's death, the generation-skipping tax (55%) can be avoided.

Many other tax-reducing moves are simpler. A schoolteacher for more than 30 years, Teresa Latorre, 65, of Hamden, Conn., had invested conservatively in annuities that were ready to be rolled into IRAs or cashed out when she retired. Since retiring five years ago, Latorre has been taking out modest sums from her IRAs, which, along with a payout package from the last school at which she taught, kept her in the 28% tax bracket. "I didn't want to go above that bracket," Latorre says. But that happy circumstance was threatened as she approached 70 1/2. Therefore, with the help of her niece, Mary Ellen Gordon, a financial planner at Aetna Financial Services in Hartford, Latorre converted about 20% of what she held in regular IRAs into the new Roth IRA, which doesn't have a mandatory withdrawal date. "She just didn't think she'd have to tap into the money at 70 1/2," says Gordon. "Now that money can grow tax-free so her heirs will get a much larger chunk of money than they would have."

Take note that if you convert your existing IRA to a Roth IRA, you're going to have to pay the income taxes on the earnings that have accumulated. But if the conversion occurs in 1998, those taxes can be spread equally over four years. That's great, but also be aware of a few caveats, because the Roth IRA is by no means for everyone. First, if your adjusted gross income is more than $100,000 a year, you can't do it. Period. Also, the money to pay the taxes should come from outside the IRA, or you'll lose much of the benefit of conversion.

But if the Roth IRA does fit your needs, it can mean a big difference in income later in life. Let's say an investor who's 57 and has an adjusted gross income of less than $100,000 decides to convert $100,000 from a regular IRA to a Roth. Assuming an 8% annual return, a 28% federal income tax rate, and a 6% state tax rate, the Roth IRA can mean the difference between having $277,000 after taxes in 20 years and having $249,000 after taxes. Which would you prefer?

One tax problem that is buffeting retirees with increasing frequency is something akin to a success tax, because it's a byproduct of the bull market. Say the bulk of your 401(k) is in your company's stock when you retire, increasingly the case these days. Worth merely nickels and dimes when you received it 30 years ago, it's now valued at hundreds of thousands, perhaps millions. If you roll the stock into an IRA when you retire, you're going to end up taking a big income-tax hit later. But if you take a lump-sum payout at retirement, there's an often ignored way to pay the lower capital-gains rate on the bulk of the stock, says Howard Averbach, a fee-only financial planner and attorney in Pittsburgh. "The employee can take possession of the corporation's stock from the retirement plan at retirement and pay ordinary income tax only on the value of the stock when it was contributed to the plan, not at the current value," explains Averbach. When the stock is eventually sold, the proceeds will be taxed at the lower capital-gains rate.

Once you've figured out how much you'll have going into retirement--and how much you'll probably need--it makes sense to start doing some estate planning. One of the biggest mistakes people make is arranging to give after they're gone, when estate taxes are levied, as opposed to while they're alive, when taxes can be deducted from their estate. "The maximum estate tax is 55%, which is very painful," says Diahann W. Lassus, a financial planner in New Providence, N.J. "But it's a sliding scale. The more money you have, the higher percentage of tax your beneficiaries will pay. The lower the dollars, the lower the tax liability on your estate." Bottom line: Give generously while you're alive.

If you're charitably inclined, a way to have your cake and eat it too might be to set up a charitable remainder trust. Into this you can put your IRA or any other asset that has appreciated greatly and on which you probably owe income or capital-gains tax, and earmark it for a charity of your choosing. But you can also spin off 5% or more annually to yourself and your spouse for your lifetime. "If a person wants to leave $500,000 to Princeton and he's got stock in Microsoft that he bought for $10 and it's now worth $500,000, he can put it in a charitable trust and pay himself and his wife a taxable 9% a year," says William D. Zabel, a partner at the New York-based law firm Schulte Roth & Zabel. "They increase their income, avoid the large capital-gains tax they would have incurred had they sold the stock outright, get an immediate income tax deduction figured on the value of what Princeton will get when they pass away, and Princeton gets the money." That looks good from all angles. --Julie Creswell

A HEALTH PLAN TO LOWER RISK Long-term-care policies, assisted living, and other stress reducers

Researchers at the National Institutes of Health in Bethesda, Md., announced earlier this year that in about a decade they would finish mapping virtually every human gene. At that point, effective treatments for diseases ranging from genetic cancer to arthritis may start to materialize. Consequently, the quantum leaps in life expectancies that we've seen in the 20th century may continue into the 21st century.

Yet even such impressive strides in medicine cannot erase the one indelible fact of our later years: In retirement, your health is on the downward side of the slope, so it is likely to consume a higher share of your income than it does now. Health will also become an ever more important issue in where--and how--you choose to live.

Fortunately, there is plenty of help to enable you to meet those challenges, from Medigap insurance policies that bridge the difference between doctors' bills and Medicare payments, to ever-improving long-term-care policies, to new communities that are designed to adapt to changes in your health.

The important step you need to take now is to plan. Not only are health-care costs rising, but today's generation of retirees is paying a much larger share of the tab than their parents did. If you had entered a nursing home several decades ago, for example, the government through Medicare and Medicaid would have paid most of the cost. Now Medicare pays full benefits for only the first 20 days in a Medicare-approved facility and scales back to zero after 100 days, reimbursing only 4% of the nation's long-term-care expenses. "Soaring out-of-pocket medical costs among older Americans is one reason the savings rate has fallen so low in the 1990s," says Stephen Roach, chief economist at Morgan Stanley Dean Witter. "The trend shows no signs of slowing down."

To keep those trends from robbing your retirement, take charge of the possibilities. Self-empowerment was exactly why Rhoda Scheiner, a 68-year-old retired bookkeeper in Bayside, N.Y., decided in early July to purchase a long-term-care insurance policy. A variant of disability insurance for retirees, these policies provide substantial benefits in the event that purchasers require home care or must move into a nursing home. To trigger benefits from most policies, you must demonstrate that you are unable to perform at least two in a list of five or six activities of daily living, such as bathing, eating, and getting in and out of bed. In other words, as you rev down, these policies rev up.

Scheiner admits to being confused about whether to purchase the insurance, a Travelers policy with annual premiums costing her about $2,500, but she concluded she'd rather be safe than sorry. "I have children, and I wouldn't want to be a problem," she explains. "The greatest pleasure would be if I don't need it."

That's one reason that long-term-care insurance, which typically starts paying full benefits after two or three months of home or institutional care, has emerged as the fastest-growing type of insurance in the U.S. When these policies were introduced in the 1970s, most paid benefits only if the insured entered a nursing home. Since then, most insurers have liberalized benefits to cover home care.

So is a long-term-care policy for you? Before deciding, consider several important questions. First and most important, would an extended stay in a nursing home devastate your savings? If you're under 50, you're probably too young to have thought about it. But if you're older, it's worth asking. You should also look beyond your own family's genes and consider some statistics: A retiree has a 43% probability (52% for females and 33% for males) of entering a nursing home, according to The New England Journal of Medicine. Data on home-care usage are all over the map, but experts generally agree that retirees have a 55% to 65% chance of requiring such services.

As the chart above shows, you have two ways to play those odds: Purchase a long-term-care policy, or set aside sufficient funds to cover all late-life possibilities. Choose the latter, and you'll have to set aside considerably more than if you had just gone out and bought the policy, assuming that you want enough savings to cover one year in a nursing home. If you never require long-term care, of course, you win. But is that a risk you're comfortable taking?

For most new retirees, here-and-now health insurance is a more immediate concern than long-term care. Many government and private-sector employees can take some coverage with them, but those policies should be checked to see how they dovetail with Medicare. To cover the expenses that neither Medicare nor former employers' insurance picks up, there's Medigap, which comes in ten different policy types ranging from A (the most basic) to J (comprehensive). While Medigap benefits are standardized, insurance premiums can vary by as much as 100% within the same state. It's worth shopping around, though purchasing a reasonably priced policy from an established company often is wiser than going for the cheapest policy. For retirees with modest incomes, Medicare HMOs are another option.

Oldsters today are hiking and playing tennis and golf into their 80s, and baby-boomers are likely to be even more active. But those little knee sprains you got jogging in your 40s could turn into torn ligaments in your 80s, so it's important to retire near first-rate medical facilities, particularly if you live far from family members.

To meet the living needs of retirees, a variety of retirement communities are being designed for disparate lifestyles. One can enter an assisted-living facility as an independent person and move into an on-site nursing home eventually. One appeal of these setups is the ongoing diversity. "Couples with different needs can live down the hall from each other," explains Meredith Beit Patterson, an elder-care consultant in Concord, Mass. Marriott International and Holiday Corp. are among the biggest players in this field. Even more traditional retirement communities, like those built by Del Webb and U.S. Home and designed primarily for active living, offer a nod to the changing needs of retirees. For example, most are single-story homes with wide doors (to accommodate walkers) and convenient electrical outlets. A few even have onsite medical- and convalescent-care facilities.

Continuing-care retirement communities, which ensure all stages of late-life care, may charge high entry fees ranging from $60,000 to $300,000, but those fees are often treated like the bonds you might put up to join a club--up to 90% ultimately returns to your estate. Also, these communities may charge monthly fees of between $1,500 and $5,000 in return for services. As yet, there is no uniform policy defining what aspects of assisted living a long-term-care insurance policy will cover, so it's important to check the terms of coverage before buying a particular policy. --Evan Simonoff

HIS PAYCHECK IS HIS PEP PILL To stay young and wealthy in retirement, stay employed.

We keep, all of us, a mental calendar of our lives: We know when we're in our spring, we know when autumn approaches. But all of a sudden that calendar is out of whack. Summer lasts far longer than it used to; the fall is gentler. Plan your life by the old schedule, and you'll put up storm windows on your life long before the first snow. --Maybe One: A Personal and Environmental Argument for Single-Child Families, by Bill McKibben

Bill McKibben is an essayist and a nature writer. He comes to the subject of retirement indirectly, by way of hoping to persuade more of us to be content with having fewer babies. The overburdened planet would be grateful, yes, but what about the overburdened Social Security system? Aren't we going to need those extra workers to support us in our old age? Maybe not, is McKibben's provocative point, not when so many of us are living longer and choosing to work beyond 62, or 65, or whatever people mean nowadays by the phrase "normal retirement age."

For most of the postwar era, the average retirement age was falling. But the latest data show something altogether new developing. "It's very clear that somewhere around 1985, the downward trend ceased and leveled off," says the Wharton School's Olivia Mitchell. Joseph Quinn of Boston College goes one step further: He believes that the average retirement age may already be creeping back up, reversing a decades-old trend.

The contributing factors are many. They include the outlawing of mandatory retirement; changes in Social Security that have reduced the actuarial penalty for choosing to work longer (and will soon eliminate it altogether); and the decline of traditional defined-benefit pension plans, most of which have built-in disincentives for staying on the job, in favor of 401(k) plans, which are age-neutral.

There may be a generational factor as well, just now coming into play as the leading wave of baby-boomers tumbles toward retirement. A lot of them are people for whom work counts as living. They chose their careers deliberately, so as never to wind up like Joe Mento, for example, who was quoted in the newspaper the other day. Mento, 63, used to own a company that rebuilt automobile air conditioners. He sold it as soon as he could in order to spend more time golfing and gambling. "I wanted out," Mento explained to the New York Times. "It was just a way of making money, and I hated it."

When my own father retired at age 70, after a long, rewarding career as an insurance executive, he shocked us all by saying, "I feel like I've been in prison for 50 years and didn't even know it." Within weeks, however, he had officially formed Whitford Group (a harmless spin) Consulting, and was back behind bars. He's 83 now, still billing hours and still answering the home-office telephone, "This is George Whitford. May I help you?"

It now appears that my father's version of retirement, not the Mento model, is increasingly the norm in two respects. One, he kept his career job much longer than he had to; and two, he never really retired, easing instead into a transitional stage for which labor economists, struck by this development, have lately coined a new term: bridge job.

Using the latest data from the National Institute on Aging's far-reaching Health and Retirement Study, Professor Quinn found that about one-third of men and two-thirds of women who were not working at the time of the survey had last worked in some version of a bridge job. Among his conclusions: "The importance of gradual retirement is likely to increase in the future."

Think about what that means. It may be, first of all, that instead of the usual three sources of retirement income--pension, savings, and Social Security--you'll want to consider the possibility of having four, and structure your retirement savings accordingly. "Historically, stocks have outperformed bonds," says Barry Shapiro, a chartered financial consultant in Garden City, N.Y. "If you think you'll still be working anyway and won't need the income, you can position more of your portfolio toward growth."

Second, what kind of work do you have in mind? Do you want to stick with what you're doing, or try something new? Do you have enough contacts to branch out? Do you have the right skills? Do you want to live off in the woods somewhere, or close to the city? Is income the key variable, or job satisfaction, or family time? Is it really a new job you're looking for, or a freelance gig, or a chance to start your own business? In short, are you ready for this?

John McMorrow spent 31 years in human resources at AT&T, working his way up to vice president for education and training. While still in his 40s, McMorrow began assembling his bridge job. He wanted exposure to a broad range of companies; that got him thinking about consulting. He knew he didn't want to spend all his time selling; that nudged him toward joining a firm rather than going independent. And he and his wife were sure they didn't want to stay in New Jersey, so they began choosing vacation spots with an eye toward scouting new places to live. "I describe this as very logical and precise," says McMorrow. "It doesn't work that way. Planning equips you for something, even if it's not what you planned for."

At 58, their children grown, the McMorrows took an early-retirement package and moved to Bozeman, Mont. Today John is CEO of Talent Alliance, a not-for-profit consortium funded by 13 companies (including AT&T). It has a program called Bridges that helps displaced workers and retirees learn new skills and pursue second careers. For potential bridge jobbers like himself, McMorrow offers these four issues to think about.

--Balance: "When we were younger," says McMorrow, who's 60 now, "we were trying to balance money, time, and health, and we often had to sacrifice time and health for money. As we become older, we can reassess that equation."

--Networking: Keep up with friends, acquaintances, and business contacts. McMorrow says about three-quarters of all job vacancies are filled informally, through networking.

--Support: "Family, friends, fitness, and faith. If you're going through transitions, you'd better be sound in those areas, because they're the support mechanisms."

--Leverage: Have fun, be creative, try something new. But consider leveraging skills you already possess. "Generally, engineers don't become bakers," he says.

Having planned on a half-time bridge job, McMorrow instead finds himself working close to 40 hours a week, plus traveling a lot, which is okay for now. "I think I will always work in some way, although I expect over time the balance will change," he says. "If your value for 60 years has been hard work and achievement, it's very difficult to try to change that."

McMorrow has an elder soul mate in Dave Cooley, 69, who stepped down three years ago as president of the Memphis Chamber of Commerce. For nearly half a century, almost everywhere he lived, Cooley was the Chamber Man; it's how folks knew him and how he knew himself. Cooley's career was a working life spent always at the center of things, "involved," he says, "in community issues and things that affect more than just me." But by 1995, the time had come to wrap things up. He could see that himself, without waiting to be told. "I didn't want people standing around the corner whispering, 'How we gonna get rid of this son of a bitch without hurting his feelings?' "

So Cooley came home to Hendersonville, N.C., the little mountain town where he was born, transformed after all these years into a retirement mecca. Income from Social Security checks totaled $184 million in Henderson County last year, second to the combined payroll of all the county's manufacturers. The Catholics are building a roomy new sanctuary, and the Methodists are adding on, the state is widening the roads, and developers are planting vast stands of townhouses on what used to be lonely Appalachian hilltops. The newest invaders are members of the tribe known locally as Halfbacks: Northerners who moved to Florida, missed the change of seasons, and came halfway back.

Cooley has acquaintances among the idle Halfbacks. And sometimes he joins his townie friends for coffee at the old Justus Pharmacy on Main Street, now known as Days Gone By ("a place where a bunch of old farts eats breakfast," is how Cooley describes it). He has a library card, a membership at the Y, and an abiding interest in Abraham Lincoln. He drives around with a bag of golf clubs in the trunk of his BMW, just in case. But all that's just noise. The melody of Cooley's life, even now, is real work for real pay. "I exercise and travel and have hobbies and those kinds of things," says Cooley, "but I think it's important to do something where your credit comes on the top line of a check."

Cooley is first of all a consultant to Towery Publishing, a Memphis company that publishes directories for local chambers of commerce. He mans the Towery booth at trade shows, takes clients to dinner, and generally spreads the good word among his wide circle of professional contacts, cultivated over a lifetime. "And for that I get a modest fee," says Cooley. "Plus I get an opportunity to hook up with my old buddies at meetings on somebody else's nickel."

Cooley also does accreditation reviews for the U.S. Chamber of Commerce, which take him to cities and towns all over the country. ("I meet new people and hopefully help them do something a little bit better because I suggested it to them.") He and his daughter-in-law have a deal going with the American Osteopathic Association, which wants to build a viable chapter in North Carolina; Cooley knows something about how to do that, having spent several years in Washington, D.C., as head of the American Chamber of Commerce Executives. And most thrilling for him, he travels the globe for CIPE, the Center for International Private Enterprise, promoting the American way in developing countries. So far he has been to Ghana, Russia, Hungary, and Ukraine. This summer he's traveling in Egypt.

For all that, Cooley insists he's not busting his hump. He may work 40 hours one week, ten the next, and zero the week after that. "When I get up each morning," he says in his singsong Carolina lilt, "I know I don't have to do anything if I really don't want to do it. And that's a good feeling." Most of the money that touches his hands doesn't stick; it's just for expenses. Until he's 70, he can't earn more than $13,500 a year anyway, not without cutting into Social Security. But for Cooley, even that little bit of extra income is key. It's been the difference, so far, between tapping his retirement nest egg for living expenses and just letting it grow.

Cooley's business partner--the other half of Coo-Coo Enterprises--is his kid brother, Art, 63, who owns and manages the local AM radio station, WHKP ("where the heavens kiss the peaks"). On a hot day in July, Dave and a visitor stopped by Art's office for a chat.

"The people who are retired have to have somewhere to go," Art was saying. "So Mama prepares this big list of honey-do projects, and they do a few of them and get tired, and they go out to the mall and walk around and sit down on them benches and watch people go by."

"Get 'em an ice-cream cone in the middle of the day!" Dave said.

"Yeah. And you have people all over town doing this. Not only in the mall, but they go downtown--nice downtown area--sit on benches. But they're looking for something to while away their time."

"Uh-huh."

"Because time is heavy on one's hands in retirement years." The Cooley brothers lingered for a few minutes more. Then Dave stood up and glanced at his watch. He had things to do, places to be. --David Whitford