David Bach The Automatic Millionaire

Summer is over, the kids are in school, and the rest of us are back at the office.

With only a few pages left on the calendar, September is the perfect time to make sure you're on track to fully fund your retirement plan at work. Maxing it out should be your goal.

A Challenge to the Underfunded

The truth is, people simply aren't saving enough right now to support themselves in retirement. In fact, last month the Center for Retirement Research showed that almost 45 percent of American households will fall short of meeting their expected retirement income needs.

What's worse is that the 2007 Retirement Confidence Survey from the Employment Benefit Research Institute (EBRI) reports more than half of Americans have less than $25,000 in their retirement accounts.

With these shocking statistics in mind, I challenge you to change your future in a big way beginning this month. Saving a bundle for retirement really doesn't have to be that difficult. All you have to do is make the decision to do something most people don't do -- pay yourself first.

Fortunately, hundreds of thousands of companies in the United States offer employees the perfect way to pay themselves first automatically through an employer-sponsored 401(k) plan. (If you happen to be self-employed, read my column "Six Retirement Plans for Small Business Owners.")

Slow and Steady Wins the Race

Other recent news about 401(k) plans is more encouraging. Just last week, EBRI and the Investment Company Institute (ICI) released the results of their latest study on 401(k) participation.

Employees who contributed to their 401(k) plans on a regular, long-term basis with the same employer between 1999 and 2006 saw their account balances grow from $67,760 to $121,202 on average. That's an annual compounded growth rate of almost 9 percent.

In a recent MarketWatch article, Jack VanDerhei, a Temple University professor and EBRI fellow, said, "If you focus on consistent participants, you can see how people who stay in the system tend to build significant account balances. With the discipline of saving little by little through 401(k) plans, workers can successfully build a nest egg for retirement."

How Are You Doing?

If you're under age 50, the IRS limit for pretax 401(k) contributions is $15,500 for this year. If you're over 50, there's a $5,000 catch-up provision that increases that limit to $20,500.

Of course, you'll need to know what your employer's maximum allowable contribution for the plan is as well. It could be lower -- some plans won't allow you to save more than 15 percent of your gross income, and certain "highly compensated" employees may be limited even more. So be sure to check with your HR department.

In any case, your goal should be to max out your plan. If you're currently on track to do so, congratulations -- you're accomplishing something the vast majority of Americans can't or won't do. If you're not on track, follow these simple steps to finish strong in 2007 and be on your way to finishing rich when you retire:

1. Save at least one hour's worth of your daily income.

Even if you've been contributing consistently to your savings plan, you may not be on target to max it out. Most people who sign up for 401(k) plans contribute around 4 percent of their income. Most people also retire poor, dependent on Social Security or family to survive. So you should actually be contributing a lot more.

In fact, at the very least you should be contributing one hour's worth of income each day; on a percentage basis, that's about 12-1/2 percent of your gross income. If you feel you're getting a late start with your saving, aim to contribute two hour's worth of income per day, or 25 percent of your gross pay.

I realize this is ambitious, but it's your future we're discussing. Keep in mind that most of us tend to underestimate how much we think we can manage in payroll deductions. As a result, we wind up low-balling ourselves -- and our future.

2. Determine how much money you'll need.

The traditional rule of thumb for retirement savings is that you'll need to replace at least 70 percent of your current income in order to live comfortably after you retire. In my experience as a financial advisor for almost a decade, however, I've found that most people need 100 percent of their pre-retirement income or even more due to their desire to enjoy their golden years.

So my recommendation is to create a plan that replaces 100 percent of your current income, unless you truly plan to live on less. And the only way you'll be able to do that is to save more now.

Yahoo! Finance offers a great calculator to run your financial numbers. Check it out to get a rough idea -- and possibly a wakeup call -- of what you'll need for your retirement. But I highly recommend meeting with a financial advisor to work out a solid plan of action.

3. Increase your contributions today.

Most employees are paid twice a month. So if you have six pay periods left in 2007, calculate how much you'll need to increase your contributions from now until the end of the year to meet your plan's maximum. Doing so now could amount to literally hundreds of thousands of dollars over the long term.

If you're skeptical about being able to afford the temporary increase, determine how you can turbo charge your Latte Factor in order to make this happen. Dig deep to come up with an amount that will bring you as close as possible to maxing out your plan.

You can find the money, and you'll be excited at how fast it will pile up -- especially if you're one of the millions of Americans whose employers contribute matching funds to their retirement accounts.

Once you've made the necessary calculations, contact your HR department to make the change to your plan. Don't put this off -- delaying your savings increase even another week may require you to bump up your contributions even more in the future to reach your goal. Do it today.

Tell Me How You Do

If you take me up on my challenge, post a comment below to share your success with the Yahoo! Finance community.

And let me know what else you'd like to see on the topic of 401(k) plans. Between investment allocation, loans, rollovers, and withdrawals, there's enough information for an entire series of articles. What specifically would you like to know? Post your questions and I'll work to answer them in upcoming columns.