NOTE The data is a little sketchy, but small-company stocks probably deliver average returns of around 12 to 13 percent over long periods of time. Small-company stocks are, however, very risky over shorter periods of time.

The flip side of this is that it becomes difficult to save for retirement if you start thinking (and saving) late in your working years. If you're 60, haven't started saving, and want $25,000 a year in income from your retirement savings at age 65, you probably need to contribute annually more than you make.

Say you're in your 50s—or even a bit older. With the kids' college expenses, or perhaps a divorce, you don't have any money saved for retirement. What should you do? What can you do? This situation, though unfortunate, doesn't need to be untenable. There are some things you can do.

Just say no

One tactic is not to retire. After all, you save for retirement so the earnings from those savings can replace your salary and wages. If you don't stop working, you don't need retirement savings to produce investment income.

Note, too, that “not retiring” doesn't mean you need to keep the same job. If you've been selling computers your whole life and you're sick of it, do something else. Get a job teaching at the community college. (Maybe you'll get summers off.) Join the Peace Corps and go to South America. Get a job in a daycare center and help shape the future.

Give yourself extra breathing room

A second tactic is to postpone retirement a few extra years, which, of course, also reduces the number of years you're retired. Rather than working to age 62 or 65, for example, working until age 67 or 69—a few more years of contributions and compound interest income—will make a surprising difference, and you'll boost substantially the money you receive from defined-benefit retirement plans. If you're paying a mortgage, maybe you can pay that off in those few extra years, too.

Redefine your sense of affluence

A third and more unconventional tactic is to decide that less is more and tune into the art and philosophy of frugality. A good book on this subject is Your Money or Your Life by Joe Dominquez and Vicki Robin (Viking Penguin, 1992). And if you decide to live on less while you're still working, you'll end up saving a lot more over the remaining years you work.