(MONEY Magazine) -- Charles Parmalee will still be going to parent-teacher conferences in his seventies. Like a lot of late-life parents, he and his wife Jan didn't plan it this way; it just kind of happened.

Married when he was 44 and she was 32, they had two kids in the early 1990s and figured they were done. Then, in 1997, the couple saw a TV show about the austere conditions at an orphanage in Asia that pulled at their heartstrings. Within five years, they'd adopted two precious little girls from China.

The Parmalee family of Albany, N.Y. is holding at 6.

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Now the Albany, N.Y. family is happily holding at six - including kids Colin, 16, Meredith, 13, Lianne, 9, and Lark Jane, 8. But they are also nearing a scary financial crossroads.

Charles, 62, may retire from his job as a sales consultant for ACT, the educational testing firm, around the time that Colin packs up for college. Big bills, coming soon. Add to those the full complement of child-rearing expenses for the three at home - braces, ballet lessons, summer camp, SAT prep courses, clothing, groceries.

Ouch. "Can we really pull this off?" worries Jan, 50, a teacher.

That's a question many others will be asking themselves in the years ahead. As couples increasingly postpone parenthood - the National Center for Health Statistics reports that a record number of women between the ages of 40 and 44 gave birth in 2003 - more retirees find themselves rearing young children.

How daunting a financial challenge is that? Consider the Parmalees: If Charles retires at 65, their combined income of $125,000 will fall by more than half (Jan will keep working) at exactly the time their expenses will rise by $15,000 to $45,000 a year, depending on which college Colin attends.

The $32,500 the couple have stowed in 529 plans won't begin to cover all four children's college expenses. So how can they - and anyone else in this situation - ease the squeeze? By employing these strategies:

Not what you wanted to hear, probably. But you don't have to keep working forever - even an extra year or two can make a huge difference.

For example, if Charles were to leave his job at age 65, the family will need to withdraw some $100,000 from savings over the next two years to maintain their lifestyle and pay Colin's tuition.

But if he stays on until 67, the couple could pad their $850,000 nest egg with another $42,782, since Charles currently contributes $8,715 a year to his 401(k) at work, and ACT's generous matching policy kicks in $12,676.

Then, by the time Charles retires, Meredith will be ready to leave home, and the family will have an extra cushion to help them through what could be a trying few years with two kids in college.

Did you know that when you qualify for Social Security retirement benefits, your unmarried children under the age of 18 can receive benefits too? Each one can collect up to half of what you get. All together, your family won't be able to receive more than 180 percent of your benefit. But your annual Social Security income of $18,000, for example, could turn into $32,400 if you have two kids. For more information, visit the Social Security Web site.

When you're putting money away for college and retirement simultaneously and both goals are near, you might be tempted to split savings between, say, your 401(k) or IRA and 529 accounts. But particularly for older parents, the retirement plans should get the bulk of your saving dollars, advises Chris Cordaro, wealth manager at RegentAtlantic Capital in Chatham, NJ.

After all, you can use the money in these accounts to pay either your kids' college bills or your own living expenses. (Withdrawals from 401(k)s and IRAs after age 59½ are penalty-free, and IRA money specifically can be used for higher education expenses without paying a penalty before then. The money in 529 plans, on the other hand, can be used only for college.)

Then too, your retirement accounts are not counted in the federal financial aid formula, which means your family could qualify for more assistance in terms of grants and low-rate student loans.

Plus, you might end up with more money in your pocket because of differences in how these accounts are taxed. Contributions to a 529 are made with after-tax dollars, while those to a 401(k) or deductible IRA are made with pretax dollars. So if you're in a lower tax bracket after retirement, your withdrawals from the 401(k) or IRA will be taxed at a lower rate than your savings in the 529.

It's the great and often unspoken fear of older parents: What will happen if one of us gets sick or dies while the children are still young? While it's awful to think of this, it's also essential to make plans for how the kids will be cared for.

Your No. 1 priority should be to create a will that names a legal guardian. Next, make sure you have adequate life insurance coverage; you will want enough to replace any income lost until all the children are at least 18.

Also, while you're younger and still working, consider disability insurance, advises Cordaro; these policies can usually replace up to 60% of one's salary. "And the closer you are to retirement, the more important it is to invest in long-term-care insurance," he adds.

With Jan continuing in the work force and Charles planning to leave it soon, the Parmalees are well prepared with both kinds of coverage.

The bottom line: Once you retire, you likely won't be able to afford everything for your kids (or yourselves) that you could while working. At the end of the day, there's only so much money you can spend. Figure out now what's a priority. Then be ready to say no when a junior member of the household asks for an Xbox 360 or a pair of Juicy jeans.

"It's hard to turn down a kid who really, really wants something," Cordaro says. "But if you have a budget, it's easier not to let emotions run away with you."

Jan and Charles know they are fortunate in having a good-size nest egg to help see them through. But they also know they will still have to sacrifice some of the luxuries that their retired peers might be enjoying - extended vacations and days of leisure at the golf club.

That's okay with them, as long as their kids can have music lessons, class trips and college. "We know we have to be resourceful," says Jan. "And we're committed to do it so that our kids will have a solid future."

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