More than half of all employed American households are not saving anything - not one single dime - for retirement. For the past five years, Merrill Lynch & Co. has been conducting surveys to track attitudes and behavior of pre-retirees and baby-boomers, and its findings are sobering. Only 46% of pre-retirees (aged 45-64) and only 35% of baby boomers (aged 25-44) are saving for retirement.

For years, economists have been warning that Americans have not been saving enough, and yet matters are getting worse. Merrill's survey found that pre-retirees are saving less now than they were saving four years ago - 14% of their income in 1989, only 8% on 1992.

Women, the Merrill survey discovered, have good reason to be worried about retirement. They live longer but earn less, may spend fewer years in the work force (often dropping out and then returning because of child-care responsibilities), receive less Social Security, and have smaller pension benefits.

Baby boomers have their heads in the sand. More than half expect to retire before 65 and a quarter say they'll stop working before 60. Three-quarters of these blithe boomers expect to enjoy the same standard of living in retirement as they enjoy now, or higher. Yet their actual savings rate for retirement (7% on income) is far below their estimates (27%) of what would be needed to live comfortably in retirement.

The obvious response to Merrill's survey is to increase long-term savings - a lot.

With the outlook for Social Security questionable (76% of the preretirees in Merrill's survey said they did not expect to get out of Social Security what they put into it) and with corporations reducing pension benefits, individuals must rely more on their own thrift. And, after all, 58% of baby boomers and 48% of pre-retirees, according to Merrill's survey, say they could save twice as much if they put their minds to it.

Better 401 (k) plans and expanded Individual Retirement Account tax incentives will help because tax-advantaged savings is beneficial. Tax-exempt bonds can play a significant part, and municipal bond issuers and dealers can stress the need to save and the benefits from bonds more than they do. The amount of increased saving that is needed is so great that 401 (k) plans, IRAs, and tax-exempt bonds must all be utilized. The point is not to keep IRAs restricted but to get Americans to save more overall.

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