(MONEY Magazine) – You've been trying to save as much as you can for retirement. Honest! Trouble is, over the years you've had a few other expenditures, like, say, buying a house, paying college tuition for your kids and—okay—a few extravagant vacations and a TV as big as a two-car garage. Now you're in your forties or fifties and retirement looms large. But your nest egg? Not so much.

Catching up on retirement savings is the biggest challenge facing baby boomers today. A study by Boston College's Center for Retirement Research found that some 35% of early boomers (those born between 1946 and 1954) may not be able to maintain their standard of living in retirement. For those born between 1955 and 1964, that figure climbs to 44%. Says Alicia Munnell, head of the center: "For many baby boomers, time is running out."

Sounds dire, but don't let that all that talk about your generation get you down. Granted, there are no quick and easy fixes for laggard savings. Trying to latch on to a high-flying stock fund that will bail you out could leave you with less than you have now. Even if you can't achieve a lavish retirement, however, you can still do a lot to improve your financial security. Of course, boomers have always redefined traditional life stages; they typically married later than their parents' generation and had children later. So reshaping retirement is just the next step. (Hint: It may bear a striking resemblance to work.) Here's the road to start down:

•• Tell it like it is You suspect that you don't have enough, but have you ever stopped to figure out how behind you are? "For God's sake, do a reality check," says Mari Adam, a financial planner in Boca Raton. "You may find you are doing better than you thought. If not, the sooner you find out, the easier it will be to catch up." Studies have shown that the very act of planning can improve the odds of financial success.

Start by pulling together financial information: your latest 401(k) and bank statements, your estimated Social Security benefit (visit ssa.gov) and your projected pension payout if you're fortunate enough to have one. (Ask your benefits office to run the numbers.) Then go online to a retirement calculator, such as Fidelity's Retirement Quick Check, which will tell you how much you need to put away each month to give you the retirement income you'll need. Or you could consult a fee-only financial adviser. (Get referrals at garrettplanningnetwork.com or use the search tool at fpanet.org.) You can also get a rough idea of how much you'll need by checking "Are You on the Bus?" below.

If the numbers look scary, remember, you don't have to stash away whopping sums all at once. And you can continue to work beyond retirement age. But you do have to get moving.

•• Take your savings to 11 And now for a little joy. Last year's Pension Protection Act continued the high contribution levels allowed in tax-advantaged accounts, such as 401(k)s and IRAs. So you can stash away a maximum of $15,500 in your 401(k) this year. (For regulatory reasons, your plan may set lower limits.) And most employers make matching contributions, typically 50% of up to 6% of salary. That's free money you shouldn't pass up. You can also save as much as $4,000 in an IRA. And if you are 50 or older, you can make catch-up contributions as well—this year $1,000 in an IRA and $5,000 in your 401(k).

Even if you do all that, you may not come close to having as much as you need. (See "Catching Up Is Hard to Do" on page 80.) So to avoid spending your golden years in Junior's guest bedroom, you'll have to put money in taxable accounts too. Choose tax-efficient investments, such as index funds or tax-managed funds, whose buy-and-hold strategies minimize short-term capital gains and interest income.

To come up with those extra savings, you'll have to liberate more cash from expenditures. You can start gradually, by resolving to live on less, say, for a three-month trial. Perhaps you can hold off on a new car for a few more years and vacation in St. Paul instead of St. Martin. Either you learn to embrace the rather unappealing idea that you must curb your spending. Or, if you can't restrain yourself, you can simply have money automatically withdrawn from your pay and plunked in savings before you ever see it. "People usually find that they adjust their spending to the cash flow they have," says Adam. "The inconveniences are outweighed by how good you feel that you are on track to a secure retirement."

•• Avoid a walk on the wild side All too often, left-behind savers try to ramp up their funds by plowing a lot more money into stocks. That's not a great idea. Researchers at T. Rowe Price assessed how shifting from a relatively modest 40% stock allocation to a go-for-broke 80% stake would affect the prospects of a catch-up saver, someone 55 years old earning $100,000 with $150,000 in savings. After running thousands of market simulations, they found the larger stock allocation wasn't worth the bumpier ride. The 40% stock portfolio replaced only 27% of pre-retirement income, while the 80% portfolio replaced an almost identical 28% on average. The reason: Though stocks historically deliver higher average returns over the long run, over any 10-year period you are more likely to endure some losing years, and there is less time for your gains to compound. You could luck out and enjoy outsize returns, but the odds say you won't. "By the time you reach your fifties, the game is pretty much over," says Christine Fahlund, senior financial planner at T. Rowe Price. "And by loading up on equities, you may end up ratcheting up risk without significantly increasing your nest egg."

Instead of betting the farm on stock, you should create a well-diversified mix of U.S. and foreign stocks, bonds and other assets. One solution: a target-date retirement fund, a fund of funds that automatically shifts allocations to become more conservative as you approach retirement. (Both the Vanguard and T. Rowe Price series of target funds made our MONEY 70 list of recommended funds.) Or you can build your own customized mix by using MONEY's Asset Allocator at cnnmoney.com.

And to prevent a last-minute retirement disaster, lighten up on company stock in your 401(k). If your employer runs in to trouble, you could see your stock crash and lose your job too, as Enron employees did. That's why many financial advisers recommend keeping no more than 5% to 10% of your portfolio in company stock. Until recently some employers required you to hang on to your shares. But under the Pension Protection Act, companies must now permit 401(k) participants to diversify out of employer-contributed stock, typically over a three-year period. Be sure you do.

•• Don't trust any funds with expenses over 1.5% One of the simplest ways to boost your retirement savings is to lower your investment costs. Research has repeatedly shown that funds with high expense ratios tend to underperform their cheaper siblings. That's because high fees are no guarantee of superior performance. In fact, they take a bite out of performance. So all things being equal, a lower-cost fund is more likely to give you a higher return without your taking any additional risk. For example, if you invest $100,000 in a fund with a 1.5% expense ratio (the average for U.S. stock funds) and the fund gains an annualized 8% over 15 years, you will end up with $317,000. If that same fund had an expense ratio of just 1%, you would earn an 8.5% return, which would produce $340,000, or $23,000 more.

If you currently own funds with high expense ratios, consider swapping into low-cost substitutes. It's easy to make an exchange in a 401(k) or an IRA, since there are no tax consequences. In your taxable accounts, you'll need to weigh the possible tax bill before cashing out, but you can at least begin directing new money into lower-cost funds. Again, the funds on our MONEY 70 list all carry below-average expense ratios.

•• You can work it out If, after all this, you still can't afford your ideal retirement, you may have to redefine what you mean by ideal. Can't stop working by age 62? Postpone retirement to 65. In fact, Fahlund points out that if you work longer, your employer underwrites your living expenses, including that ultraexpensive health insurance, while you continue to add to your savings. Moreover, you have that many fewer years in retirement to finance on your own. As the Center for Retirement Research found, by working for two or three more years, most Americans would substantially improve their retirement security. And, as the chart above suggests, if you combine a few more working years with catch-up saving, you can pump up your holdings.

For many in the Big Chill generation, delaying retirement is not necessarily a hardship; it may be a goal. "People are increasingly recognizing the psychological benefits of staying active and involved in work, whether on a full-time or part-time basis," says Art Koff, author of Invent Your Retirement. "Stopping work at 62 doesn't fit reality," says Stephen Utkus, principal at Vanguard. "There's actually a transition period from your fifties to age 70, when people often work part time or full time, typically out of choice as much as financial need."

Still, finding a satisfying post-retirement career can be difficult. Many employers are reluctant to hire older workers, and for some boomers, bad health (or at the least, creaky knees) may be an obstacle. You'll have to consider—better now than later—whether you want to or can work full or part time. You'll also have to decide whether you can or want to continue what you already do or whether you'll need retraining or further schooling to qualify for your next career. "It's easiest to find work you like if you plan ahead while you are still in your regular job," says Koff. Check to see if your current employer offers flexible work arrangements that would allow you to continue on a part-time or consulting basis after your retirement date. If you want to start your own business, try it as a hobby now so you'll know whether you like it before you invest all your savings.

As those now aging boomers once said (sang, actually): "You can't always get what you want, but if you try sometimes you just might find you get what you need." And so it goes with retirement. It may not be the idyll you once imagined, but by getting serious now, you should have enough to let the good times roll.

Are You on the Bus?

Here's the daunting amount of money you should have saved for your retirement at various stages.

NOTES: Assumes 80% pre-retirement income replacement, including full Social Security; no pension; 4% annual real rate of return; 4% inflation-adjusted distribution rate; 30-year life expectancy in retirement. SOURCE: Charles Farrell, Dorman Farrell LLC.

CATCHING UP IS HARD TO DO

Getting your retirement funds up to where they should be takes gargantuan effort. Both savers start with $100,000 in annual earnings and $150,000 in a 401(k). Rocket Man contributes the maximum to his 401(k) and puts 5% of his salary in a taxable account. Space Cadet contributes 10% of his salary to his 401(k). Both boost savings if they work past age 65.

Space Cadet

Contributes 10% to his 401(k)

401(k)

Rocket Man

Maxes out his 401(k) and puts 5% of his salary in a taxable account

TAXABLE ACCOUNT BALANCE

401(k)

50

$176K

$191K

55

$348K

$464K

60

$616K

$892K

65

$1.0 MILLION

$1.5 MILLION

70

$1.6 MILLION

$2.6 MILLION

NOTES: Each saver receives a 3% annual increase and a 3% match for his 401(k). Rocket Man's 401(k) contribution also includes a maximum of $5,000 in catch-up funds. Their accounts earn 8% a year, but Rocket Man pays 15% in capital-gains taxes and 25% in income taxes on the money in his taxable account.

SOURCE: T. Rowe Price.