KANSAS CITY, Mo., June 10 (Reuters) - Jean Johnson is 81 years old and suffering from diabetes. But instead of relaxing in retirement, she recently started a new job.

“I need money. My social security check just doesn’t make it, with rent and the gas bill to pay,” said Johnson, who took a job in March at a library in Danforth, Illinois. “I need to work.”

Amid the economic downturn, shrinking retirement accounts, increasing costs for food and medicine, and stiff competition for even entry-level jobs, evidence is building that the dream of a comfortable retirement is dying for many Americans.

The ranks of the elderly looking for work has swelled more than 120 percent to more than 1.8 million in the last year. Among that group, those who were 75 and older increased by 80 percent, according to data from the National Council on Aging.

There are some 29 million seniors - those 55 and older - employed or actively looking for work in the United States, which is about 18 percent of the civilian labor force.

And their numbers are expected to grow.

“This economic crisis has had just a horrible impact on the entire population, but it has had a very severe impact on older people,” said Sandra Nathan, workforce development vice president at the National Council on Aging.

Nathan said her organization was seeing a record number of people seeking assistance with job training and employment.

“Before people used to retire and stay retired. Now what we have are people 75 years old and older who are still in the workforce,” Nathan said.

With a national unemployment rate at 9.4 percent, the highest in more than 25 years, the odds are stacked against older Americans seeking work. An array of new or expanded programs, however, are aimed at leveling the playing field.

The U.S. government has allocated stimulus dollars to bolster programs targeted at getting older workers onto private payrolls and off of the shaky U.S. social security system. Even individuals over 75 are being encouraged to get training and job hunting help.

“The recovery act funds came about at exactly the right time,” said Judith Gilbert, who heads the older worker program at the U.S. Department of Labor.

STIMULUS MONEY

The department is funding efforts in all 50 states that employ low-income earners who are 55 and over and employed in government or nonprofit jobs that are considered to benefit communities.

The goal is to provide these workers an immediate source of income and ease entry into similar jobs in the private sector.

Lorraine Loy, 59, found work in Raymondville, Missouri, through the program as a U.S. Forest Service clerk. Johnson also found her job through the government program.

Loy said her job, which she started June 8, was needed to pay living expenses for herself and her 65-year-old disabled husband. The idea of retirement is a “farce,” Loy said. “I don’t ever see myself able to retire.”

The Labor Department’s Gilbert said the program, with a budget of $571 million for 2009 and $120 million in stimulus money received this spring, could pay wages to more than 100,000 seniors over the course of a year.

People must have annual income less than 125 percent of the federal poverty level, or about $14,000, to qualify.

“The money ... is a really direct stimulus to the economy. Our folks ... they are not saving it. They’re spending this money on groceries, rent and medicine,” said Gilbert, who added that the program only served an estimated 1-2 percent of seniors who wanted and needed to work.

This demand has spurred similar programs.

AARP, a nonprofit organization for people 50 and over, is promoting a national “employer team,” and its website features guidance on how senior can prepare a resume, handle tough interviews, and find coveted work-from-home jobs.

Some private employment specialists, such as “RetirementJobs.com,” work on ways to keep seniors in the labor force.

And the National Council on Aging also is offering job training and employment assistance.

“We are really having to work hard and get creative,” Nathan said. “But the thing that will get this economy turned around is putting people back to work.” (Editing by Paul Simao)