(MONEY Magazine) – IF YOU HAVE EVER DREAMED ABOUT retirement -- and in the job-stressed '90s, who hasn't? -- you probably pictured something like this: a spacious condo, perhaps adjacent to a closely manicured fairway, leisurely afternoons driving balls on the back nine, and, of course, fat monthly dividend checks. Well, wake up and smell the $3 caffe latte. Unless you begin saving and investing now, chances are you will be forced to reduce your standard of living in retirement, or to work far longer than you'd like. According to an exclusive MONEY poll conducted jointly with Oppenheimer Management Corp., a New York City investment firm, few working Americans are taking the steps they should to turn their retirement aspirations into reality. For example, the statistically valid poll of 1,238 respondents nationwide found that 73% of adults between the ages of 21 and 64 expect to retire comfortably -- and 74% plan to do so before age 65. Yet less than half of those questioned are investing in assets that are likely to provide the money they will need. To cite one disturbing fact, nearly as many have purchased lottery tickets for retirement (39%) as have invested in stocks (43%). (For more details on the poll, see the box on page 84.)

So just how much money will it take to ease you on down the road? Take a seat: A 35-year-old man earning $50,000 who lacks a company pension or savings plan will need to amass the equivalent of at least $1 million over the next 30 years to retire comfortably at age 65 and support his lifestyle to age 90, according to Paul Westbrook, a retirement planner in Watchung, N.J. Yet 73% of the MONEY/Oppenheimer poll respondents estimated their investment needs to be far lower -- usually 33% to 50% lower. Moreover, three out of five of those polled believe they will be able to live on less than 70% of their pre- retirement income, which most financial planners estimate is the minimum required to maintain your pre-retirement living standard. Warns Oppenheimer chairman Jon S. Fossel: "The average American may end up with less than half the money he or she will need in retirement." This article aims to help you bridge the yawning money gap that Fossel describes. Follow our advice, and you could be on your way to retiring with twice as much dough as you might otherwise have had. That's right: twice as much. But first, a dose of reality: Unless the nation's largest single age cohort -- the 77 million baby boomers born between 1946 and 1964 -- step up their savings pace, they will not glide gently into their so-called golden years. For one thing, they will almost certainly receive a less generous stipend from Social Security than their parents' generation. By 2030, when most baby boomers will have retired, there will be only two workers paying into Social Security for every retiree, vs. a ratio of 3.2 to 1 today. Unless Washington beefs up Social Security financing or reduces its benefits, the system will start running in the red by the year 2019. Indeed, the cutbacks have already started. Last year, Congress increased the portion of Social Security payments subject to federal income tax from 50% to 85% for married couples filing jointly whose total income exceeds $44,000 ($34,000 for singles), a level that is not indexed to inflation. Thus by 2010, assuming 4% inflation, that levy will apply to any married couple making more than the equivalent of $24,000 today. Dwindling Social Security payments are not the only financial hurdle for baby boomers. Rising taxes are a virtual certainty if the government does not cut spending, according to Laurence Kotlikoff, professor of economics at Boston University, who predicts, "If Congress does not take action to reduce the deficit and slow health-care spending, the baby-boom generation could face tax hikes of as much as 40% in retirement." In addition, increasing health-care costs seem certain for baby-boomer retirees. Although it seems virtually certain that major health-care reform is dead for this year, sooner or later Congress will have to hack away at the ballooning Medicare/Medicaid budget, which now stands at $252 billion. Reduced corporate retirement benefits are also likely, as businesses continue to slash costs to remain competitive. J. Carter Beese, a commissioner at the Securities and Exchange Commission, declares: "The retirement crunch will become an even bigger crisis than health-care reform." Affording a gracious retirement will be even more difficult for women than for men. For one thing, women live longer on average than do men -- today's 40-year-old female is likely to live to age 80, compared with only 74 for a 40-year-old male. As a result, a woman needs a larger nest egg than a man to maintain the same level of investment income through retirement. At the same time, she may have a harder time accumulating what she needs. Women earn 30% less than men on average, and they are also less likely to hold jobs that offer a company retirement plan, notes Martha Priddy Patterson, director of employee-benefits policy at the accounting firm KPMG Peat Marwick in Washington, D.C. Judging by the numbers, the 19 million single and divorced women are most at risk, since they are less likely to share a spouse's benefits and full Social Security income. For example, a recent study by Oppenheimer found that the average single woman in her thirties who lacks a pension will retire with only 20% of the income she needs. Don't reach for the Prozac yet, however. Consider this heartening example from a computer model -- a computer with a heart? -- designed by consulting firms WEFA Group and Arthur D. Little for Oppenheimer: Take a successful married couple in their early thirties earning $65,000 with a company pension and savings plan. Assuming that they get steady wage hikes of 1.5% above the rate of inflation each year and inflation averages 3% for the next 30 years, they would be earning the equivalent of $155,000 in today's dollars when they reach retirement at 67. Since their total outlays, including taxes, should be 20% to 30% lower in retirement, they could probably maintain their pre-retirement standard of living on an annual income equal to roughly $109,000 today. But if they save and invest like most Americans in their income bracket -- that is, if they put away only 5% of their pretax salary each year -- they shouldn't figure on generating more than $62,000 a year in income, including pension and Social Security. That would leave them roughly $47,000 a year shy of what they need. What would it take to prevent such a shortfall? According to WEFA/Arthur D. Little, if the couple promptly reapportion their investment mix so that 84% of their assets are in stocks (compared with an average of 43%, according to MONEY's Small Investor Index), and triple their savings to a conscientious but not draconian 15% of income, their annual retirement income would nearly double to $120,000. And by stashing more of their savings in tax-deferred accounts, such as 401(k)s and IRAs, the couple could get a full 100% increase in retirement income, estimates Scott Hoyt, director of research at the WEFA Group. The easiest way for most investors to accumulate such retirement riches is through mutual funds, which make it easy for you to put away regular amounts of money. The table on the opposite page lists 12 performers worthy of your consideration. Before you start calling for prospectuses, though, consider these basic retirement strategies:

Save, save, save You probably have some kind of savings plan in place already, but there's a good chance that it's not enough. Today the national savings rate stands at a mere 4%, which is only half that of 20 years ago. Says Stanford University economics professor B. Douglas Bernheim: "To avoid a steep decline in living standards when they retire, baby boomers must triple the amount they are saving today." Of course, the exact amount to sock away depends on several factors, including your age, the generosity (or stinginess) of your company's retirement benefits, the amount you have already saved and your income goals. For a rough idea of your savings target, complete the worksheet on page 87. On average, a man in his thirties should be setting aside a little over 10% of his salary, while one who waits until his forties ought to aim for 15% or more. And women, with their longer life expectancies, may need to be even thriftier. Cheryl Holland, a financial planner with J.E. Wilson Advisors in Columbia, S.C., calculates that a single 40-year-old woman earning $50,000 a year with a typical company retirement plan should save 14% of her salary, compared with 11% for her male counterpart. The earlier you begin, the easier it will be. For example, Mark and Kathleen Romeo of San Diego (pictured on page 76) are already seasoned savers at ages 29 and 25. Thanks to Mark's military benefits -- which include a housing allowance and medical insurance -- the couple spend far less than the average household on living costs. And they have taken advantage of the extra cash flow to stash away an impressive 30% of their income. After just four years of saving, their portfolio now stands at $90,000. If they save only 10% of their income from now on, they would have a wholly sufficient $2.1 million nest egg by age 65. "We've seen people in our grandparents' generation who required financial support in retirement," says Mark, "and we want to avoid that." Few families can keep up with supersavers like the Romeos, of course, but you can probably put away a lot more than you think. To free up cash for savings, scrutinize your budget like a Whitewater investigator. Do you really need to eat out three nights a week? Or even twice? Can you forgo that luxury coupe for the less costly sedan? And what about basic, money-saving moves such as shopping at warehouse clubs or improving your home's energy efficiency? Says Marilyn Capelli, a financial planner with Citizens Banking in Flint, Mich.: "Many families can save 10% or more just by cutting back on unnecessary expenditures." Before you start locking away that newfound money, however, first make certain that you have built up an emergency cash reserve equivalent to three to six months' worth of expenses. You should keep that money in a safe account -- a short-term CD or money-market fund, for example -- where you can get your hands on it quickly and without penalty. You can find some excellent choices listed in Money Monitor on page 42. Once you get your savings plan under way, keep it in the groove by signing up for an automatic investing plan, authorizing your fund company to transfer a fixed amount every month from your bank account to funds of your choice. Most fund groups offer such automatic investing programs. And many -- including Janus, Twentieth Century, Strong and T. Rowe Price -- will waive or reduce their investment minimum if you agree to make automatic monthly , contributions of as little as $50 a month. A tax-deferred savings plan, such as a 401(k) or an IRA, can speed you along the road to retirement wealth. Not only can you get an immediate tax deduction for your contribution, but over the years, the effects of tax-deferred compounding can be awesome. Just compare: If a 35-year-old earning $60,000 a year routinely contributes 6% of his salary to a taxable account earning 8% a year, he would have $185,744 by age 65, assuming a 30% tax rate, according to John Scarborough, an investment manager with Bingham Osborn & Scarborough in San Francisco. But if he were to invest that money in a tax-deferred account, he would amass a hefty $407,820 -- more than twice as much. And even if he then withdrew the entire amount and paid taxes at a 30% rate on the proceeds, he would still be ahead by 54%. Sadly, many investors do not take full advantage of their opportunities to shelter money. For example, a recent survey of employers by KPMG Peat Marwick found that only 61% of eligible workers participate in 401(k)s, even though nearly 85% of employers match their contributions -- typically 50 cents on the dollar up to a specified percentage of salary (usually 6%). Comments Patterson: "It's appalling that people are throwing away free, tax-deferred money." Thus if your employer offers a 401(k) or other defined-contribution plan, put in the maximum allowed -- usually 10% of your salary up to a limit of $9,240 in 1994. If you truly cannot afford to contribute the maximum, at least put in enough to get the full matching amount offered by your company. If you have no pension or company retirement plan at your workplace, you should do some disciplined saving and investing on your own. Fortunately, there are several plans that allow you to shelter your retirement money. Self- employed people can use simplified employee pensions (SEPs) that allow you to defer taxes on 15% of your annual income, up to $30,000. And a business owner can set up a Keogh plan; there are three types -- defined-benefit, profit-sharing and money-purchase -- which allow you to contribute anywhere from 15% of gross income to $118,800. And don't overlook the humble Individual Retirement Account. Even though Congress has limited the deductibility of IRA deposits, you can still write off some or all of your contribution if you're not covered by a retirement plan at work or if you're married and have an adjusted gross income of less than $50,000 ($35,000 for singles). That strategy is helping to build ; retirement funds for Pat Waggoner (pictured on page 79). The divorced 49-year- old has been steadily contributing $2,000 a year to her IRAs, and today her accounts have grown to $22,800 from $2,000 in 1984. "The older I get, the more I realize how important it is to get all the tax-deferred growth that I can," says Waggoner. Even if you can't get an IRA deduction, you could still contribute $2,000 annually ($2,250 for married couples with one working spouse) and watch those earnings grow tax deferred. Since taxes were raised last year, nondeductible IRAs have become much better bargains, notes Holland. She recommends them for many people in the 31% tax bracket or higher.

Power your portfolio with stocks The single most effective way to double your money is to invest in stocks, rather than in bonds and cash. If you haven't already memorized these numbers, do so: Over the past 68 years, stocks have returned an average of 10.3% annually (before taxes), more than twice the 5% returns for long-term Treasury bonds. And cash investments like Treasury bills merely matched the inflation rate at 3.1%. Yet the MONEY/Oppenheimer poll found that less than 25% of the average household's assets are currently invested in stocks, compared with roughly 50% in fixed-income assets, and the rest mainly in real estate. The chief reason for this equity aversion: fear of volatility. But take note: During long periods of time, equities are actually less risky than cash investments like savings accounts. "Over any 20-year holding period since 1926, stocks have never lost money," points out Scarborough. "But if you hold cash for that same period, the likelihood that you will lose purchasing power to inflation and taxes is 100%." True, stocks are likely to deliver a bumpy ride along with those higher average returns. Thus the percentage of your portfolio that you devote to equities should depend on your ability to tolerate the roller-coaster movements of the market. In the table on page 80, we offer suggested portfolio allocations for bold, moderate and cautious investors. If you are at least 20 years from retirement, however, consider putting some 80% to 100% of your assets in equities, with the remainder in fixed-income issues, since you have many years to recover from any market swoons. And even if you have recently retired, you should keep at least 50% in stocks, because you will need inflation-whipping growth to make your money last for the next 20 or more years. , Unfortunately, that's not what Tom and Linda McElhone (pictured at right) are doing. Right now they have only about 30% of their portfolio in stocks, and the rest mainly in cash. To make matters worse, more than half of that equity money is held in the stock of Linda's employer, Westvaco, a paper manufacturer. "Investing in a single stock is very risky," notes Steve Ames, a fee-only financial planner in Annapolis, Md., "and if it's your company's stock, you are betting both your job and your portfolio on its performance." To diversify right, purchase a variety of stocks, including blue chips for relatively stable returns and small companies for zippy gains that have averaged 12% annually over the past 68 years. To add even more variety, spice up your mix with international stocks; many investment experts predict that foreign markets are likely to outpace the U.S. over the remainder of this decade by two to four percentage points a year. As for the fixed-income portion of your portfolio, consider a no-load, low-cost fund that holds a mixture of government and corporate bonds; investors in the 28% bracket or higher (married couples with taxable income of $38,000 or more; $22,750 for singles) might earn higher after-tax returns in a muni fund. You can find some excellent candidates in each of these categories in the table on page 81. A smooth-running retirement plan requires regular tune-ups, so plan to re- evaluate your investments once a year. Adjust your portfolio if needed, selling assets that have surged beyond your intended allocation and buying those that have slumped below. With a few adjustments here and there -- and a bit of luck -- you can still look forward to sipping mai-tais alongside that manicured fairway. (Worksheet follows on page 87.)