So How’s Your Nest Egg Doing? : In changing times, careful planning for retirement is increasingly important

It’s never too early to think about retirement. When you’re twenty-something, those golden years may look far, far off, but they do arrive--and oh so quickly.

Whatever your age, even if you didn’t get an early start, you should be saving for retirement. Sure, there are seemingly endless expenses--the rent, the car, the kids. But money for retirement should be one of those routine entries in the household ledger.

Don’t kid yourself with the idea that Social Security benefits will provide a decent retirement income. They will not, especially for the baby boomers, whose retirements will put an enormous strain on a system that could be operating in the red by the year 2013. And with corporate America moving away from traditional pensions, companies are shifting the burden of retirement planning to employees. Many, especially middle-size and small firms, are offering a self-directed retirement plan--the 401(k)--that calls for discipline, attention and some risk taking. Like it or not, you have to be a money manager of sort, or at least be savvy enough to make some choices on where to invest your retirement money.

So underused and poorly understood is this corporate benefit that both companies and the government are aggressively informing employees about the 401(k) program and encouraging them to participate. The Labor Department, for example, began a national ad campaign this summer to draw attention to retirement planning and to urge better use of the 401(k) program. Securities and Exchange Commission Chairman Arthur Levitt Jr. has said that educating the public on savings plans is “a critical national policy.” This fall, he will hit the road for a series of town hall meetings to stress to American workers that it is in their best interest to get smart about 401(k) plans.

The 401(k) plan draws its woeful name from an Internal Revenue Service code. Unlike traditional or defined benefit programs in which employers and money managers make the investments, employees themselves must decide how to save and what to invest in, choosing among funds made available by their employers. Understanding and selecting investments are tedious and sometimes time-consuming tasks. No wonder only one out of every four eligible employees participates in such plans. The average contribution is about 7.5% of pretax income.

With patterns of employment changing, it is all the more important to consistently save for retirement. Workers today can expect to change jobs often instead of spending their entire working lives with one company. Reaching retirement is one of life’s common passages. But will you be prepared? That’s up to you.