THE DREAM OF RETIREMENT--of a dignified period of ease after a lifetime of work -- is so deeply ingrained in the American psyche that any suggestion that the dream is outmoded and economically impractical invariably invites protest.

Yet, in the near future we will have to radically alter our traditional views of a "working life." The majority of us probably will find it desirable and perhaps necessary to delay our retirements and work many years longer than most people do now.

Widespread doubts are developing about the long-term solvency of Social Security, and of some government and private pension systems. Pressure is growing to scale back pension benefits of future federal government retirees -- and some state and local retirees as well. Labor unions, fighting to save jobs, have had to "give back" future pension benefits won earlier.

Many Americans already sense correctly that they may not have adequate income to support themselves in retirement and will need to to stay on their job longer, or learn skills useable in other jobs. Before the end of the century many more people will want or need to continue working to 70, or even 75 and beyond.

The issue is whether we can change the policies of government, private employers and labor unions to respond to these needs. Instead of pretending that a conflict between the promise and the reality of retirement does not exist, the federal government, with the help of private industry, labor unions and the U.S. education system, should be looking for ways to help older people voluntarily remain in the work force. Only retraining, the abolition of mandatory retirement laws, provision of enough jobs, and the removal of disincentives to working longer will enable the vast majority of future older workers to have economic security once they finally do retire.

A policy of encouraging longer work lives may sound hard-hearted. But it can be both helpful and give hope to many nearing retirement or already retired who often look to their economic future with anxiety and fear, not confidence and anticipation. Thus far, we have been reacting to longer life and the huge expansion of the older population almost as a calamity. We focus on the huge retirement income and health care costs, on the loneliness and ailments of the aged, and on growing burdens placed on families of the elderly. But we completely miss the opportunities arising from a longer-lived population.

Too many employers, educators and government policy makers still write off older people as a productive resource. Even as we struggle to assure the solvency of our retirement and health care systems, we fail to take into account how longer work lives could help ease these demands on the system. It is the missing option in our policy- making considerations.

In a time of longer lives, better health and a more skilled work force, the pro-retirement philosophy that has guided government, industry and labor unions since the end of World War II is increasingly insupportable and counterproductive.

First in 1977, and then again in 1983, Congress and the president had to act to prevent the insolvency of the Social Security retirement and survivors' insurance trust fund. They had to increase the amount of wages subject to the payroll tax each year, borrow from other Social Security funds, tax (for the first time) benefits of many retirees, speed up future payroll tax increases, cut back benefits for some future retirees and delay cost-of-living adjustments for people already retired.

Originally, Social Security was only meant to provide an income floor for retirees. The expectation was that recipients would have other sources of income. Some do. Yet, according to a 1981 Louis Harris survey:

Two-thirds of people 65 or older were receiving no interest from a savings account.

Seventy-eight percent had no investment income.

Sixty-eight percent received no pension income. Eighty-seven percent had no wages.

Ninety-five percent received no money from their children.

Today a quarter of all Social Security beneficiaries 65 or over get 90 percent of their total income from their Social Security checks. Even those with the highest benefits under Social Security are hardly well off, unless they also have good pensions and other retirement income.

A worker turning 65 last January and eligible for a maximum Social Security benefit could get $8,436 a year (or $12,648, if the benefits of a non-working spouse also over 65 are counted). While the number of people getting the maximum benefit is increasing, and more working wives are earning their own benefits, most retirees get less than the maximum. The average annual benefit paid to a couple is $8,865. This is less than $3,000 above the official poverty level income for an elderly couple.

Neither the economy, nor political realities, are likely to allow a signficant hike in Social Security benefits in the foreseeable future.

The economic outlook for workers not yet retired is also not reassuring. Of Americans currently in the work force, slightly more than half are not covered by a private pension plan, and many of those who are will never get the benefits because they will change employers, lose jobs or see their company go out of business before qualifying.

Pensions and Social Security checks are, of course, not the only resources that people have to fall back on when they quit work. There are also savings, homes, insurance policies, stocks and bonds. However, as noted above, the evidence is that most people 65 and over do not have substantial holdings of these kinds. Census Bureau data for 1982 shows that of the 25.7 million people 65 or over in that year, nearly 18 million had an annual income of less than $10,000 from all sources.

It is true that a majority of people 65 or over own their own homes free of mortgages. But while the dollar value of these homes has held up or increased over the years, much of the increase is in inflated dollars. Also, inflation has drastically pushed up maintenance costs so that many owners cannot afford to keep their homes in good condition. Such homes often have to be sold at a discount.

Since 1981, millions of Americans have become eligible to open Individual Retirement Accounts (IRAs), but for many in their late 50s, this has come too late to enable them to build up a substantial nest egg by age 65. And despite the encouragement that Congress and the President have given to retirement savings, most low income workers and young families simply do not have enough money to set aside for their retirement years.

The transition to acceptance of longer work lives will require a radical change in attitudes adopted by the American people in the last 40 years. Since the end of World War II, this nation has induced older people to leave the work force prematurely. Indeed, government, industry and labor unions all encouraged early retirement, and workplace policies and practices were put in place that discouraged even those who wanted to work longer from staying on the job.

Under the Social Security Act of 1935, age 65 was enshrined as the "normal" retirement age, with repercussions that we are still experiencing today. After World War II, jobs had to be found for large numbers of young workers, and the practice of mandatory retirement at age 65 and even younger became pervasive. (The federal civil service did not require individuals to retire until 70, but only rarely did workers stay that long.).

State and federal laws sanctioned these mandatory practices in business and industry. In 1967, Congress passed the Age Discrimination in Employment Act, which said employers could require employes to retire, provided no worker be retired for age alone before turning 65.

In 1978, Congress raised the minimum age for mandatory retirement to 70, and at the same time eliminated mandatory retirement entirely for most classes of federal workers. In 1983, Congress, by then concerned about the solvency of the Social Security system, passed another law that will gradually raise the age for receiving full Social Security benefits from 65 to 67 after the year 2000.

However, in taking these steps, policy makers failed to address the powerful disincentives to delaying retirement that have been built into the system over the years. As a result, the pro-retirement philosophy still hangs on.

Older workers are still under pressure to retire rather than work longer. Most employers refuse to retrain workers after they reach their mid-50s. And in 1983, nearly 60 percent of pension plans did not allow an employe who works beyond the age of 65 to build up additional retirement benefits on account of additional service.

Most retired workers stay retired. Many people over 50, once out of work, often experience major problems getting jobs of interest to them. Also, both Social Security and some private pension systems reduce the benefits of retirees who return to work and earn more than certain minimum amounts. Currently, Social Security beneficiaries who earn more than $6,600 a year forfeit one dollar of benefits for every two dollars of work income above that. (After 1989, the forfeiture will be reduced to one dollar of benefits for every three dollars earned above the minimum.)

The effect of all this has been as intended. In 1900, 63 percent of men over 65 were in the work force. In mid-1984, only 15.9 percent were. Moreover, as a result of pressures and incentives for early retirement, only 68.5 percent of men between 55 and 64 were counted in the work force. While many women entered the work force in the late '60s, those still in the work force after 65 amount to only 7.2 percent, and only 42.3 percent of women 55-64 were counted.

The pro-retirement philosophy may have made sense to policy makers and employers in the 1950s and 1960s, when high U.S. productivity and low inflation made it seem possible to support a large retired population.

At that time, the philosophy seemed fair and constructive. Younger workers needed jobs. Most older workers had been engaged in farming or other work requiring heavy manual labor. Many were physically spent or in poor health, and average life expectancy, though gradually rising, was still below age 50 for people born in 1900. In the circumstances, those who survived to their early 60s tended to welcome the prospect of having a few carefree years.

But policies that encourage premature retirement are no longer appropriate in a time when the solvency of our retirement systems is a growing problem, older people are healthier and longer-lived and most jobs do not require heavy labor.

Consider the evolution of the term "old" since the turn of the century. In the 1890s, people in their 50s were thought of as "old." Today old means something different. When Shirley MacLaine won the Academy Award for Best Actress she was near her 50th birthday. Few people would call her old. A woman who reaches 60 today can expect to live nearly 23 more years, and a man of the same age can look forward to almost another 18 years. This trend is still evolving.

It is true that many retired people today suffer from various illnesses and disabilities. But it would be a serious mistake to accept the old stereotype of people over 65 as infirm, ailing and in need of help. Of Americans over 65, only 5 percent are in institutions and only another 10 percent suffer from some kind of disability. However, the vast majority of people over 65 are vigorous and alert and prefer to be independent as long as they can.

The question still remains, of course, whether even these healthier, longer-lived people would want to work if they had the option. Many retirement experts are skeptical that they would. They note that the raising of the mandatory retirement age to 70, effective in 1979, did not substantially increase the number of employes working longer. Ask people in retirement communities in Florida or Arizona whether they would have preferred to keep working, and it is likely that most would say emphatically no.

But current retirees are not a good measure of attitudes. When they were working they had few incentives to stay on the job; there was seldom an option other than retirement; many had limited skills; and most accepted the prevailing dream that they could find economic security after they quit work.

There is now plenty of evidence that attitudes are changing. In 1981, a survey by pollster Louis Harris found that "most working Americans in all age groups don't look forward to retiring and nearly half of retired Americans (46 percent) said they do not look forward to their retirement."

Why? Inflation, rising living standards and higher expectations of what retirement should be have all increased peoples' sense of what incomes they need in their older years. At the same time, many older people nowadays simply do not feel "old," and resent the idea that they should be considered non-productive and dependent.

There is also the new factor of huge numbers of working women who, for economic and personal reasons, simply cannot afford to retire early, or even to retire at age 65, since many entered the work force too late in life to qualify for adequate retirement and health benefits.

These growing doubts about retiring prematurely are occurring at the same time as demographic developments of criticial significance to policy making. Between 1980 and 2000, the number of people over age 65 will have jumped by nearly 9 million, an increase of 35 percent. By 2020, when most of the "baby boom" generation will be at today's retirement ages, there will be over 25 million more people above 65 than in 1980, an increase of 100 percent. As the debate in 1982 and 1983 over the fiscal solvency of Social Security brought out, the burdens on the system will rise drastically after the turn of the century, if these huge numbers of people retire at the ages workers do today.

Many private pension systems are also overburdened and in serious trouble because of early retirement, longer life expectancy, the recent recession (which hastened the departure of employes from the working rolls) and major adjustments in the U.S. economy that have bankrupted or economically threatened companies in a number of basic industries. The federal Pension Benefit Guaranty Corp. has had to pick up the pension obligations of over 130 corporations since 1980. To cover its growing obligations, the agency has asked Congress to triple the insurance premiums that employers pay to it.

Such an increase will, unfortunately, raise labor costs and discourage some companies from starting, or even continuing existing pensions plans. These developments could further reduce the money available to future retirees.

Stabilizing this shaky situation requires a major break with the past. Retraining, further education, removal of disincentives to staying at work, and more job options are essential.

Longer work lives could delay the time at which workers claim benefits, and could keep people paying Social Security payroll taxes and (in some cases) private pension contributions longer. And when retirement finally came, the period of drawing benefits would be shorter.

Up until now we have tended to think of the American employment picture as a zero sum game. The conventional wisdom has been that if we keep one person on a job longer than planned, that is one less job for younger people in the workforce. But employment is not a zero sum game: It is possible to preserve existing jobs and create new ones.

As we go through our budget-cutting exercises, we must stop being paralyzed by the thought that more jobs to meet public needs means more costs. Needless "make work" jobs do produce unnecessary expense and waste. However, jobs that address costly community and individual problems produce tangible savings in both money and human terms. Consider just a few possibilities, all of which would be cost-effective for communities in the long run:

Home health care and home help. We could use at least 400,000 to 500,000 people to visit and assist home-ridden or ailing individuals and their families. Currently, many kind kinds of home help aren't covered by health insurance (including Medicare). Therefore many needs are either neglected, or the people have to be helped in hospitals, nursing homes, or by skilled nursing care at home -- services that are insured but which also are extremely ostly. Many require public assistance to pay these high bills.

Employment services. If we took just a few billion dollars from the funds we currently pay for unemployment benefits and used them to expand job counseling, job finding and retraining services, it would provide productive jobs for hundreds of thousands of older people who could help put many unemployed back to work.

Community work. Older people living alone, and their relatives, are often bewildered by the complexity of health insurance forms and rules, overlapping insurance entitlements and other red tape. Many would be willing to pay small fees for help in paperwork if it was conveniently available close by. Able older people could be trained to provide the help and earn some extra income.

Day care. Why should millions of younger working women with children suffer guilt and worry about the care of their children when almost every block has an older person who could look after one or more children and earn extra money?

Paralegal services. There are programs in Washington and other communities that train older persons to help lawyers handle many kinds of cases. Paralegals are finding expanding employment opportunities in law offices, helping prepare forms, verifying citations for legal briefs and gathering information for busy lawyers.

Older persons also can be a major resource for small businesses, who need part- time clerical, accounting and other help but may not be able to afford the services of full- time workers. Other people have skills that could help small businesses unable to afford expensive consultants.

As part of a jobs strategy, both federal and state governments could also offer businesses tax credits for loaning their employes to work on community projects. Many older workers might prefer this option to retirement.

We can ill afford to squander one of the most precious resources we have: our older population. Also, given the pressing needs in such areas as health care, infrastructure and education, it is counterproductive to commit more resources to this older population than we need.

Unless leaders in both the private and public sector act quickly and imaginatively to tap the social and financial dividends that could accrue to the nation from longer lives, our country will find itself preoccupied with the inordinately high costs of supporting many older people who would prefer to lengthen their productive years and earn more toward their own support.

This is a challenge that confronts young and old alike. Meeting it does not have to set the young against the old, as some fear. Older people often are perceived by the young as an increasingly dependent group who are and will be making steadily larger claims on the economy, and on younger workers. If more older people are enabled and encouraged to remain productive longer, people of all ages will see that older people can strengthen rather than drain the economy.