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Status on America's retirement

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"The majority of people who have opportunities to participate in a 401(k) do so," says David Wray, executive director at PSCA. "But the errors they make are they don't save enough to get a full match or they don't have a full program in place to rebalance (assets) every year."

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Saving is the first step. Investing wisely is another. But Guy Patton at Fidelity Research Institute sees signs that "people are engaged in the process of preparing themselves financially."

In fact, 42 percent of respondents in the Fidelity Retirement Index took steps in the past six months to improve their retirement readiness. Among them, 25 percent reallocated investments, 21 percent saved more in retirement accounts and one of five sought guidance from financial experts.

"We think action will translate into higher income replacement rates," says Patton. "At a minimum, people should be looking at their portfolio or construction of investments as their life changes, as they have kids, their marital status changes, when they buy a home. But taking stock at least once a year is a pretty good idea."

That's not to say there aren't signs of trouble. For example, a large number of young people -- who are best positioned to weather risk -- are over-invested in conservative holdings rather than stocks, which promise the most growth over time, says Patton.

Currently, workers in their 20s typically invest 80 percent of their 401(k)s in stocks, analyses by ICI and EBRI show. But only 35 percent of individuals ages 20 to 29 have more than 80 percent in equities. And nearly 20 percent hold no stocks at all.

Meanwhile, company stock represents a significant share of 401(k) balances -- up to roughly 22 percent of a typical 401(k), says Hewitt Associates. EBRI and ICI put the numbers at slightly less than 13 percent for savers of all ages.

"We've seen company stock has fallen back a bit," says ICI's Sarah Holden, director of retirement and investor research. Workers apparently learned from the widely publicized losses suffered by employees who had too much of their retirement portfolios invested in company stock. Think Enron. "The diversification message seems to have gotten through."

New tools, potential improvement
The good news? Employers are offering tools to help individuals avoid missteps. Nearly half -- 48 percent -- provide free retirement education to their workers, who seem eager for counsel. In fact, one-third of wage earners who received financial guidance made adjustments to their retirement plans based on that information, EBRI found.

Next: "An expensive variable"
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Over-50 saving strategies
Surviving 'sandwich years'
De-cluttering your finances
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