(MONEY Magazine) – Like most women these days, you're probably thinking that you should be saving more. After all, you sure don't want to wind up living with relatives like angry Aunt Ida. Well, if you haven't got the message yet, it's time to stop thinking and start doing. According to a 1995 study for Merrill Lynch by Stanford economics professor Douglas Bernheim, a woman who earns $75,000 a year and is eligible for a pension should amass a hefty $124,551 in savings by the time she's 45 if she wants to retire at 65. By contrast, a 45-year-old man with the same salary and retirement benefits would need to save just $68,654 to retire at 65, while a similarly situated married couple would require only $64,617.

You already know why this savings gender gap exists. Women typically live longer than men, and so have a longer retirement to fund. Plus, as the article on page 146 points out, women earn 25% less money on average. They also accrue fewer retirement benefits than men, because of changing jobs more frequently and, on average, putting in fewer total years in the work force. Moreover, if you are divorced or widowed--and one out of every two women over 65 is--you will usually receive smaller Social Security and pension benefits compared with what men receive. It gets worse: Some 40% of women who receive Social Security rely on it for at least 90% of their income--compared with 29% of men. As a result, women make up nearly three-quarters of the elderly poor.

No surprise, then, that women tend to be more anxious than men about their financial futures. Says Martha Priddy Patterson, author of the Working Woman's Guide to Retirement Planning (Prentice Hall, $15.95): "Younger women see the poverty of older women, and they have good reason to worry that it might happen to them." Adds Denver financial planner Eileen Sharkey: "The fear of becoming a bag lady is a universal fear among women." (It's even true among highly successful women; see the box on page 176.)

But take heart--and take charge of your finances. With some disciplined saving and a smart investing strategy, you can achieve financial security in retirement. It must be your first priority, however, coming before seemingly more urgent goals such as saving for your kid's college education. How come? Simple. There are many options out there for meeting college bills--scholarships, grants, loans, student jobs--but you are on your own when it comes to retirement.

The sooner you get started, the better off you will be. For example, three years ago, Tricia Donovan, 28, an account manager at a Boston brokerage firm, began tucking away 5% of her salary, which recently hit the mid-$40s, in her 401(k) plan. Her employer contributes 50' for each dollar she kicks in, and all the money goes into growth-stock mutual funds. Today, her 401(k) account balance stands at about $5,000. Assuming that she increases her contribution next year to the maximum 8%, as she plans to do, and she keeps on socking money away at that rate, she will have roughly $1,724,000 by age 65 (provided her salary rises at a 4% annual rate to match inflation and her money earns a conservative 8% a year). "I enjoy my independence," says Donovan, who is single. "I can't imagine depending on someone else to support me."

Of course, you may be coming to grips with your finances a bit later in life than Donovan. But whatever your age, you can still reach your retirement goals by following these three crucial steps:

--Get serious about saving. Your first move toward a secure financial future should be to figure out where you stand right now. That means determining what savings you already have, as well as what you can expect to receive from your pension and Social Security benefits. The story on page 156 will help you figure out what your net worth is today and what's coming to you from your or your husband's pension. To get a handle on what you'll get from Social Security, call 800-772-1213 and ask for Form SSA-7004 to request your earnings and benefits estimate statement.

If your pension and Social Security are not going to be enough for you to live on, your next step is to calculate how much you must put away on a regular basis to make up the shortfall. Most financial planners say that when you add up all your sources of expected retirement income, they should provide you with 70% or more of your pre-retirement pay. But that's only a rule of thumb, and you may need more--or less--depending on what you plan to do in those years.

For help in calculating exactly how much you need to be saving, see the worksheet on page 87 of MONEY's October 1994 issue, which you can find at most large libraries. Or use financial software, such as Quicken Financial Planner ($39.95; 800-446-8848) or Vanguard's superb Retirement Planner ($15; 800-937-8368). Here's one reasonable estimate: According to Cheryl Holland, a financial planner with J.E. Wilson Advisors in Columbia, S.C., a single 40-year-old woman earning $60,000 a year, with a 401(k) plan and no previous savings, should set aside 15% of her pretax salary each year to retire comfortably at age 66, assuming an 8% return on her money. (By contrast, a man in the same circumstances would need to save only 11%.)

Squirreling away such a big chunk of your paycheck may be daunting. But you can probably free up more cash for savings than you might think. Do you usually get a sizable tax refund from the IRS? Adjust your withholding allowance, and siphon off that extra money into a mutual fund. Bank your raises and bonuses, and don't overlook basic economies. Do you really need to eat out three times a week?

Even if you can't save the full amount you need now, you should set aside a few dollars a month to get into the habit. Then boost that amount as soon as you can. "Most people can save a small amount without noticing any dent in their cash flow," points out Ann B. Diamond, author of Fear of Finance (HarperBusiness, $13.50). "But over time, the growth of that money can make a big difference to your future."

Stash away $100 a month in a tax-deferred account over 20 years, for example, and you will end up with a $57,111 nest egg, assuming you earn an annual average 8% return. Step up your savings, as your salary grows, from $100 a month to $200 a month the following year, and so on until you're putting away a hefty $1,000 a month. After two decades you will come away with a rich $370,928.

Once you get your savings plan in gear, keep it on cruise control by signing up for an automatic investing plan. If you are a fund investor, you can authorize your fund company to transfer a fixed amount every month from your bank account to the funds of your choice. Some fund groups--including Janus and Strong--will waive or reduce their required minimum investments if you agree to make automatic monthly contributions of as little as $50 to $100 a month.

--Turbocharge your savings in tax-deferred savings plans. Say you work for a company that offers a 401(k) plan, which allows you to tuck away as much as 15% of your pretax income, to a maximum of $9,500, in a tax-deferred account. Many employers also contribute a matching amount to the plan, typically 50% of your deposits up to 6% of pretax salary. Not only will you get immediate tax savings on your contribution, since your taxable salary is reduced dollar for dollar by the amount you contribute, but your money will grow tax-free. You'll pay taxes on your gains only when you begin withdrawals.

Suppose a 35-year-old socks away 6% of a $60,000 salary in a taxable account. She keeps up that 6% contribution as her salary grows, and her funds earn an 8% annual return. By age 65, she would have $283,925, assuming she paid taxes at the 28% federal rate. But were she to invest that money in a 401(k) instead, she would end up with $571,738--more than twice as much. And if her company matches as much as 3% of her salary, that stash could grow to $857,608, or $285,870 more.

There's one thing to watch out for: When you change jobs, don't derail your retirement savings by cashing out of your 401(k) plan. That move would not only jeopardize your financial future, but you would end up owing taxes on the withdrawal, plus a 10% penalty if you are younger than 59 1/2. Instead, keep that money growing tax deferred by rolling it over into your new company's plan if that's permitted, or by leaving it with your former employer until you retire, or by rolling it into a fresh Individual Retirement Account.

If you are self-employed, like a growing number of women these days, you might be assuming that your booming business will provide your retirement cushion. That's not a smart idea. To secure your retirement, you've got to diversify by investing in a separate tax-deferred savings plan. For example, business owners with few or no employees might consider a simplified employee pension, known as a SEP, that allows you to defer taxes on as much as 15% of your earned income. One drawback: You must make commensurate contributions into SEPs for anyone who has worked for you for any length of time in three of the five preceding years--a nuisance if you have high turnover. Otherwise, SEPs, which you set up with banks, brokerages, insurance or mutual fund companies, are usually the easiest and cheapest retirement plans to administer.

A SEP is the key to retirement security for Marijean Hall, 47. A development consultant for nonprofit corporations, Hall had never given much thought to her personal finances until she was divorced last year. "I realized then that I'd raised millions for organizations, but I hadn't made much money for myself," she says. So last year she opened her own consulting business in Vienna, Va. with one employee, and this year she expects revenues of $150,000. "I'm planning to contribute the max to a SEP plan this year," Hall declares.

Small business owners might also consider setting up a Keogh plan, which permits you to contribute up to 15% of your firm's net income not to exceed $30,000 per person. One advantage of Keoghs for business owners is that only workers who have put in 1,000 hours a year are eligible. But these plans can be complicated and expensive to administer.

If you are an employee of a small business that does not offer a retirement benefit, consider urging your company's owner to set up a so-called Simple plan, which was recently approved by Congress. Starting in 1997, employees of businesses with fewer than 100 workers can contribute as much as $6,000 annually to a tax-deferred account, as long as the employer meets one of two conditions. She can contribute at least 2% of payroll to the plan for all employees whether they participate or not, or she must match as much as 3% of salary for those who do participate.

Those who do not have access to any employer savings plan should park the maximum $2,000 a year in a conventional Individual Retirement Account. You can write off your contribution if you or your spouse is not covered by a retirement plan at your job, or if your adjusted gross income is $40,000 or less for married couples ($25,000 or less for singles).

Finally, if you are staying home while your husband works, you can put $2,000 in an IRA starting next year. And you'll also be glad to know that the account must be opened in your name. "Go ahead and fund your own plan no matter what your spouse is doing," advises Ginita Wall, author of The Way to Invest (Henry Holt, $10.95). "Having that amount growing tax deferred over the years might mean the difference between a comfortable retirement or a financially strapped one."

--Invest in stocks to boost your returns. Equities are the yellow brick road to a rich retirement. That's because, in the long haul, stocks outperform all other investments. For example, if a 35-year-old invests $1,000 a year in large-company stocks, her stash would swell to $199,874 pretax by age 65, assuming these stocks turn in their historical 10.5% annual gains. By contrast, the same investment in long-term bonds would give her just $72,342, while cash equivalent investments like Treasury bills would have delivered a mere $55,330.

Of course, you will have to ride out plenty of downdrafts with stocks. But over time, equities are still less risky than fixed-income investments. Stocks have never lost money, according to data from Ibbotson Associates, a Chicago investment research firm, in any one of the 56 15-year holding periods since 1926. What's more, stocks have outpaced inflation in all but four of those holding periods, while bonds lagged consumer prices in 34 of them.

Even so, your equity allocation should be calibrated to your ability to withstand the gyrations of the market in between those 15 years. Younger investors, who have the time to put up with a lumbering bear market, might keep 70% or more of their portfolios in stocks, spreading the wealth among blue chips, mid- and small-size companies and international firms. As you head into your mid-fifties, you could start to trim back gradually until, by the time you retire, you have 60% of your portfolio in stocks. But as long as you're alive, you'll need some portion of your investments in equities to offset inflation.

Once you've settled on the right portfolio mix, you'll need to review your holdings at least once a year to see whether you need to make any adjustments. For example, a frisky small-stock fund may have surged in value to a point where it accounts for too much of your portfolio's value. So you'd sell some of it and reinvest in a more sedate blue-chip fund. When you adjust the balance of your holdings periodically, you automatically buy low and sell high. And that's a winning recipe for retirement riches for anyone.