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Save until it hurts, experts suggest

Afraid Social Security won't be all you wish it would when you retire? You may be right. Here are some tips to make sure you'll be financially secure no matter what happens to Social Security.

+ Save until it hurts: Make saving a priority. Save at least 10 percent, if not 20 percent, of your income if you hope to retire at 65 and maintain your standard of living until death, say most financial experts. Can't possibly save that much? Think again. Do you really need to eat out three times a week, rent dozens of videos a year, buy a new TV or a new car every few years? Think before you spend, and you may realize you can do without a lot. And you'll be a lot closer to your goal.

+ Save automatically: What you don't see, you don't miss. Have money automatically withdrawn from your paycheck and deposited into a savings account and your company's stock purchase plan. You also can buy mutual funds by having as little as $50 monthly withdrawn from your checking account. Do this and you won't have to come up with $2,000 or more to open an account at some mutual-fund companies.

+ Stash the max in a 401(k): It is one of the last remaining tax shelters because you don't pay taxes on what you contribute or earn until retirement. It's also the fastest way to get your savings to grow. If your employer allows you to put 15 percent of your pretax income into a 401(k) every year, put in the full 15 percent. Some may allow closer to 20 percent.

This year the government allows a maximum pretax contribution of $9,500 to 401(k) plans. If your plan doesn't allow you to save that much, ask why. It may be because your plan was set up years ago and can be increased. Too many employers don't review their plans often enough. If it can't be increased, the plan may be limited by IRS rules involving contributions to pension and profit-sharing plans.

+ Push your employer to help: If your employer doesn't kick in cash to your 401(k), ask your employer to match your contribution in some way, preferably dollar for dollar.

Beg if you have to, says Karen Field of the accounting firm KPMG. One way or another, help your employer understand the match is not only good for you, it's good for your employer. Companies that don't have contributory 401(k) plans are at a competitive disadvantage, Field says, and less likely to recruit and keep the best employees. More than half of 401(k) plans have a corporate match of 50 percent or more.

With an employer match, you can save more than the $9,500 allowable. But the amount you save with your employer's match cannot exceed 25 percent of your total compensation. If you make $30,000, that means the total contribution would be $7,500 this year.

+ Invest all you can in IRAs: If you haven't invested in an individual retirement account because you could no longer deduct the $2,000 from your taxable income, start investing again. Even if your investment isn't deductible, it should grow faster than other investments because it can't be taxed until you withdraw it after age 59.

+ Invest more aggressively: The longer you have until you retire, the more aggressive you can be in your investments. If you're age 20, you have more time to benefit from investments in small-stock funds or aggressive-growth funds. Because these funds carry more risk and can gyrate wildly, they're not for the faint of heart. They're also not for someone nearing retirement who can't afford to lose money. As you age, you should put more of your money into more conservative investments, such as short-term bonds, T-bills, mutual funds with a mix of stock and bonds, or cash.

+ Know your pension benefits: Many people have no clue what they're likely to get in a company pension. For most people, it won't be much because frequent job changes mean many employees aren't around long enough to rack up good benefits. And many companies have cut back on pension benefits.

Call your employee benefits office and ask when you become eligible for benefits and how much you can expect. Even if you've changed jobs, you may get a pension check from your previous employers once you retire. Even if the sum is small, every little bit helps. But a benefit worth $200 today may not cover your utility bill in 2029. So ask if what you're owed will grow over time. You may be surprised to find it won't.

How much to save

Want to know how much to save by retirement to protect your standard of living? These examples show what percentage of your gross income you need to stash away under Social Security plans.

Current yearly income $50,000 $100,000

Percent Total at Percent Total at

35 years old+ of income retirement of income retirement

Full SS benefit 12% $1.3-million 16% $3.5-million

Half SS benefit 16% $1.8-million 18% $4-million

No SS benefit 20% $2.3-million 20% $4.5-million

45 years old++

Full SS benefit 24% $900,000 31% $2.3-million

Half SS benefit 32% $1.2-million 36% $2.7-million

No SS benefit 40% $1.5-million 40% $3-million

+ Assumes no current savings, current SS benefit, retirement at age 67, death at 90, 80 percent of current income in retirement, a 25 percent tax rate, 4 percent inflation, 8 percent average return, and tax-deferred savings.

++Assumes factors above, except retirement age is 66.

Source: Vanguard Group