The magnetic tool has a narrow, elongate, rigid shank having a handgrip end and a selectively extendible and retractable magnet at the opposite working end. Various mechanisms are provided at the handgrip end to extend and retract the magnet. The working end of the tool may be provided with a polygonal (e.g., hexagonal, square, etc.) receptacle for the removable installation of a tool bit or square drive socket therein. The retracted magnet retains the bit or socket within the receptacle as desired. The magnetic tool is particularly well-adapted for insertion into a pushrod passage in the cylinder head of an overhead valve engine, for retracting a valve lifter away from the lobe of the camshaft to facilitate removal and replacement of the camshaft. A linear scale depth gauge may be provided, and an adjustably positionable collar may be provided to hold the tool with the lifter retracted.