(MONEY Magazine) – It is an article of faith that a lifetime of hard work will be rewarded with a comfy retirement financed largely by pensions and Social Security. But this long-held belief is not as well founded as it once was. To enjoy the retirement that you would like, you may have to rely heavily on your own investments. As the chart at right shows, Social Security currently provides an average of 22% of the income collected by retirees who live on at least $20,000 a year. But how long can that go on? While one in eight Americans is now over age 65, by 2025 nearly one out of five people will have reached the threshold of their golden years -- all expecting Social Security checks. Another key concern is the cost of health care during retirement, which rose 81% from 1981 to 1986, nearly four times the general inflation rate over the same period. On average, Medicare pays only half of a retiree's medical bills, according to a federal government study in 1984. Further, many of the costs of long-term care, such as that required for Alzheimer's disease, are not covered at all. To fill some of the gaps, Congress is likely by June to pass legislation that increases Medicare's coverage. But the pending bill does not address the costs of long-term nursing care. Also, this proposed legislation would raise the $298 annual Medicare premium now paid by retirees to as much as $848 for people with taxable incomes of at least $60,000 a year. In any case, unless your employer provides generous health insurance as a retirement benefit, you will need a policy to supplement Medicare. Premiums run $400 to $1,000 a year. In an effort to control costs, many corporations are shifting the responsibility for meeting retirement needs onto employees. ''The trend in benefits packages is toward defined-contribution plans and savings plans such as 401(k)s,'' says Robert Friedland, an economist at the Employee Benefit Research Institute in Washington, D.C. Unlike defined-benefit plans, for which the employer promises to pay an income after you retire based on your salary history, benefits from a defined-contribution plan are based on the size of your contributions and the amount your investments have grown. While companies often match a part of your contributions to plans such as a 401(k), ''the risk of inflation and bad investments rests with you,'' says Friedland. If you are under 50 and all this talk of rising costs sounds ominous, sit down and take the quiz at right. It will give you a quick indication of where you stand. If you are ready to start a retirement savings plan -- or already have one -- the worksheet on the facing page will help you gauge how much you should be putting away. The worksheet assumes that inflation will average 5% a year -- as many economists project -- before and after you kiss your job good- bye.

BOX: Are you on your way to a comfortable retirement?

By age 50, most people are planning seriously for retirement. But younger people often lack a specific strategy. If you are under 50, this quiz will tell you whether you are doing enough for your retirement. Give yourself a point for each yes answer.

1) If you are under 40, are you saving 10% of your annual salary? If you are 40 or older, are you setting aside 10% of your salary specifically for retirement?

2) Is part of your savings in a tax-deferred account, such as an Individual Retirement Account or 401(k) plan?

3) Do you have three to six months' worth of living expenses in a cash account available for use in emergencies?

4) If you are under 35, do you own growth investments that you plan to leave untouched for at least a decade? If you are 35 or older, do you have a well- diversified portfolio that includes cash, bonds and real estate?

5) If you have children, have you established a college tuition fund? (If you have no children, count this as a ''yes.'')

6) Do you own your own home? If not, and you are under 35, are you saving to buy a home?

7) If you are under 35, do you work for a company with a pension plan? If you are 35 or older, do you have a vested pension?

HOW YOU RATE

1 point or less: You are in the pits when it comes to retirement planning. Start putting money away using techniques such as payroll deductions.

2 to 4 points: You're off to a good start. Once you have an emergency fund, invest for long-term growth.

5 to 7 points: Pat yourself on the back. After filling in any cracks, all you will need is the discipline to stay the course.

BOX: How much you must save to maintain your life style

Your investments will probably have to provide a third of your income after you retire. This worksheet will help you calculate how much you should be saving if you want to maintain your present standard of living. (The notes at right and the four tables below will help you complete the worksheet.) Line 10 shows the amount you should save this year; in future years, you should increase your contribution to keep pace with inflation. If you are just starting out and cannot put away as much now as you would like, try to save a regular percentage of your income each month.

1. Annual income you would need if you retired today (80% of your current income)

2. Assuming a 5% inflation rate, the annual income you will need to retire at a future date (line 1 times multiplier from Table A)

3. The amount your pension will provide

4. Social Security income you will receive (the current benefit for your income level times multiplier from Table A)

5. The income you will need from your investments (line 2 minus lines 3 and 4)

6. The capital you should have at retirement to provide enough investment income to last for your expected life span (line 5 times multiplier from Table B)

7. Value of your current investments

8. What your current investments are likely to be worth when you retire (line 7 times multiplier from Table C)

9. Additional capital you will need to provide sufficient investment income (line 6 minus line 8)

10. Annual amount you should be saving to reach your retirement goals (line 9 divided by divisor from Table D)

Notes: Line 3. Ask your employer's benefits office to project your pension assuming inflation runs 5% annually -- as many economists forecast -- between now and when you retire. Line 4. If you retired today, Social Security would pay you a benefit based on your salary history. If your salary is $45,000 a year or more, you probably would qualify for the maximum benefit of $10,056 a year. If you earned less than that, assume you would get the average annual benefit of $7,512. To calculate what your benefit could be when you actually retire, multiply the benefit you would get today by the appropriate figure from Table A. This calculation assumes that the Social Security Administration will increase benefits by 5% a year to cover inflation. Line 6. The multiplier you choose from Table B depends on what type of portfolio strategy you prefer. The Income multiplier assumes you invest in ! high-quality intermediate-maturity fixed-income assets and average a 7% annual return over time, which is reasonable by historical standards. If you are comfortable with more risk, you might opt for the Equity multiplier, based on a portfolio of blue-chip and growth-oriented stocks that could earn 10% a year on average. The multipliers also assume that, given a 5% rate of inflation, you will need to withdraw more income each year to maintain your standard of living. Line 7. Current investments include those that you have earmarked for retirement, such as corporate savings plans, Keoghs, Individual Retirement Accounts and the cash value of life insurance policies. Line 8. Choose the multiplier that corresponds to your portfolio strategy. Line 10. Choose the divisor that corresponds to your portfolio strategy.

Table A Years to retirement Multiplier 5 1.3 10 1.6 15 2.1 20 2.7 25 3.4 30 4.3 35 5.5 40 7.0

Table B Multiplier Years capital Income Equity must last portfolio portfolio

20 16.8 13.3 30 23.1 16.6 40 28.3 18.6

Table C Multiplier Years to Income Equity retirement portfolio portfolio

5 1.4 1.6 10 2.0 2.6 15 2.8 4.2 20 3.9 6.7 25 5.4 10.8 30 7.6 17.4 35 10.7 28.1 40 15.0 45.3

Table D Divisor Years to Income Equity retirement portfolio portfolio

5 6.8 7.4 10 18.1 21.2 15 36.4 46.2 20 65.1 89.6 25 109.2 163.9 30 176.0 288.8 35 276.1 496.9 40 424.5 840.8

CHART: Social Security 22% Pensions 18% Earnings 24% Investments 34% Other benefits 2%

Who will pay for your retirement? - Americans hoping to retire with an in come of $20,000 or more a year should not count on Social Security to provide very much. Here are the current sources of income for such well-off retirees. CREDIT: CHARTS BY WARREN ISENSEE (7) Source: Social Security Administration CAPTION: See above. DESCRIPTION: Portion of retirement funds generated from pensions, earnings, investments, Social Security and other benefits.