(MONEY Magazine) – At the ripe old age of 30, Kathryn Scott is determined not to get a late start on saving for retirement. "I went back to school at 27," she explains. While studying photojournalism at Western Kentucky University in Bowling Green, Scott couldn't exactly sock any money into an IRA account. But the bachelor's degree she picked up there helped her land a dream job in 1994, photographing news and sports events for Portland's daily paper, the Oregonian. "It feels great to be making money finally," she says of her $35,000 salary. When it comes to her future, in fact, Scott is acting more grown up than people twice her age--and income. In October 1995, the instant she became eligible, she began putting 5% of her salary into the newspaper's 401(k) plan. "I had just bought a house, and 5% was all I could manage," she says. "But I know I need to be as aggressive about investing as I possibly can." Last April, Scott doubled her contribution to 10% of pay. (The Oregonian's 401(k) has a 15% maximum.) Her nest egg is still a hummingbird-size $650--but with the 10% contribution, it grows $292 a month. Scott's foresight isn't much shared by her peers. According to the benefits consulting firm Hewitt Associates, some 41% of workers ages 25 to 34 who are eligible for 401(k)s don't take advantage of the plans, compared with 31% of those 45 to 54. Women in particular fall behind in the retirement regatta, according to Long Island University's National Center for Women and Retirement Research in Southampton, N.Y. Only 41% of the country's 135 million women are making any kind of preparations for a financially secure retirement, compared with 61% of the men. Kathryn Scott, however, is a woman with a plan. Last March, she achieved her first goal of buying a home, an $85,000, two-story 1940s fixer-upper in north Portland. She used $3,500 in prize money from a William Randolph Hearst photojournalism contest to pay off credit-card debt, then put her savings toward the down payment. She took out a 30-year, fixed-rate mortgage at 7.25% interest ($748 a month). Now that she has the house, she'd like a family. "And when I have kids," says Scott, "I want to be able to give them anything they need." As for retirement, she envisions enough extra cash to go globetrotting. "I want to go to Russia," she says dreamily. "And I'd love to buy a small house in Mexico." Financial planners Michael Chasnoff of Advanced Capital Strategies in Cincinnati and Alan Cohn of Sage Financial Group in Bala Cynwyd, Pa., who reviewed Scott's 401(k) strategy as well as those of the families profiled on pages 116 and 130, say that Scott's goals are well within reach. "Assuming she puts 10% of her income in her 401(k) throughout her career and her investments earn a conservative 8.5%," says Chasnoff, "she should be independent by age 60--even without a penny of Social Security benefits." Cohn goes even further. If Scott keeps investing in stocks, he says, she may be able to earn as much as 10% a year. Saving 10% of her salary and earning 10% annually for 35 years would allow her to retire with more than $1 million. Not bad for $650 in seed money. Though Scott still owes $10,000 on a student loan at 8% (payments: $250 a month), Chasnoff advises her not to pay it off early and shortchange her 401(k). "She'll make more in the long run by allowing as much money as possible to compound in her 401(k)," he says. As for her investment selections, Chasnoff and Cohn say Scott has the right instincts. In May, her company replaced its former 401(k) asset manager with mutual fund company T. Rowe Price. Scott transferred her money to one of the most aggressive of the plan's six choices, T. Rowe Price Mid-Cap Growth (800-638-5660). (Like other funds in the Oregonian's 401(k), this one is also available to the general public. It has no load; 12-month return to March 31, 42.5%; three-year average return, 23.2% a year; return since 1992 inception, 26.7% a year.) Cohn recommends she spread her money among several equity funds. "She may not think $650 is enough to diversify," says Cohn, "but that's still 100% of her assets right now." Cohn suggests an equal division among four of the T. Rowe Price funds offered by the plan. In addition to Mid-Cap Growth, they include Equity Income (12-month return, 29.4%; three-year average annual, 16.5%; return since 1985 inception, 16%), New Horizons (12-month return, 50.5%; three-year average annual, 27.6%; return since 1960 inception, 12.2%) and International Stock (12-month return, 19%; three-year average annual, 15.1%; return since 1980 inception, 14.9%). "These four funds," he says, "give you large, small and midcap domestic stocks, plus internationals." Cohn deems the plan's other two offerings--Spectrum Income and a stable value fund--as too conservative for an investor with 35 years of investing ahead. Scott is looking forward to 2001, when she will have paid off her student loan and can boost her 401(k) contributions to 15%. An extra 5% of salary saved every paycheck will bring her $1 million reckoning that much closer. For now, Scott is sticking to her plan. Never mind that her new house has empty rooms to fill. Scott knows these early years of saving are crucial. "I'd much rather plan for the future," she says.

--Karen Cheney