Some workers this year have managed to tuck away slightly more into their retirement accounts than last year, according to new analysis. But that doesn't mean tax-deferred account balances are increasing.

The average pretax amount employees contributed to retirement plans was $3,187 in the first half of 2008, up 1.4 percent from $3,142 in the first half of 2007, according to an analysis of Fidelity's 16,723 corporate defined contribution plans representing 11.5 million participants. But the typical account balance is over $5,000 lower than last year.

No one is quite sure how much of their current salary employees should aim to replace in retirement. Recent estimates have ranged from 65 to 85 percent of preretirement income (Government Accountability Office) to an astonishing 126 percent of final pay (Hewitt Associates).

The latest study entering the fray calculates that most people should aim to replace 77 to 94 percent of their preretirement income, according to Georgia State University and Aon Consulting Worldwide, an arm of the insurance giant Aon. The numbers are less than 100 percent of income because expenses often drop in retirement. "This is primarily due to the following factors: Income taxes go down after retirement; Social Security taxes end completely; Social Security benefits are partially or fully tax free; and saving for retirement is no longer needed," says Cecil Hemingway, U.S. retirement practice leader with Aon Consulting.

Americans like to think that we can pull ourselves up by our bootstraps to create our own wealth. And this image usually includes financing our own retirement to a large degree. But that's not true everywhere in the world, at least according to a massive survey of 21,000 people in 21 countries by HSBC Insurance and the Oxford Institute of Ageing.

Fewer than a quarter of those surveyed (all between 40 and 69 years of age) in the United States, Japan, Mexico, India, Malaysia, Singapore, Hong Kong, and Saudi Arabia believe that their government should bear most of the financial costs of supporting them in retirement. But in other areas of the world, folks wouldn't mind government help, as in Scandinavia (almost 65 percent), Europe (45 percent), Brazil (50 percent), and China (around 40 percent). You can see the numbers broken down by country and other interesting statistics here.

Tell us, should the government step in by mandating additional private savings, raising taxes, or increasing the retirement age? Or should diligent savers and frivolous spenders alike be left to their own devices in retirement?

 "You know, writing about this is dangerous in the current political climate," is what a Democratic congressional aide just said to me concerning my blog posts about how liberal Democrats seem to want to disappear the Investor Class. By "dangerous," I assume he means it doesn't play well with voters. (Indeed, John McCain has picked up on this theme in his stump speech.) If you are tuning in late, let me recap the reasoning behind the accelerating movement to tax retirement plans:

1) Investors tend to be for things liberals don't like, such as big tax cuts, smaller government, and Republicans. This is the political rationale behind Republicans pushing for an Ownership Society.  It's kind of like how government workers tend to prefer bigger government and Democrats.

Here's a bit more on that plan floating around Democratic/liberal circles to eliminate the tax advantages of 401(k) and other retirement plans, via an interview with the author of one plan, Teresa Ghilarducci, professor of economic policy analysis at the New School for Social Research in New York. 

Tons of self-employed people aren't saving for their retirement as they could be because they don't think they're able to start a 401(k). But solo 401(k)'s are quite possible, as I have written about. They just got more advantageous:

From the AP:

For self-employed individuals with a simplified employee pension—a SEP plan—or a solo 401(k) designed for independent contractors such as consultants or real estate agents and sole proprietors, the contribution limit increases from $46,000 to $49,000.

I wrote in my previous article about how the annual $46,000 allowed for a solo 401(k) could drop someone a tax bracket. It's now an even better tax shelter thanks to this limit increase.

Of course, 401(k)'s have gotten a bad rap in the media recently after so many lost value because of the drops in the market. But really, despite the ups and downs of the market, over a long period of time, your 401(k) will very likely benefit.

I hate to use the "S" word, but the American government would never do something as, well, socialist as seize private pension funds, right? This is exactly what cash-strapped Argentina just did in the name of protecting workers' retirement accounts (Efharisto, Fausta's Blog). Now, even Uncle Sam isn't that stupid, but some Democrats might try something almost as loopy: kill 401(k) plans.

House Democrats recently invited Teresa Ghilarducci, a professor at the New School of Social Research, to testify before a subcommittee on her idea to eliminate the preferential tax treatment of the popular retirement plans. In place of 401(k) plans, she would have workers transfer their dough into government-created "guaranteed retirement accounts" for every worker. The government would deposit $600 (inflation indexed) every year into the GRAs. Each worker would also have to save 5 percent of pay into the accounts, to which the government would pay a measly 3 percent return. Rep. Jim McDermott, a Democrat from Washington and chairman of the House Ways and Means Committee's Subcommittee on Income Security and Family Support, said that since "the savings rate isn't going up for the investment of $80 billion [in 401(k) tax breaks], we have to start to think about whether or not we want to continue to invest that $80 billion for a policy that's not generating what we now say it should."

Despite the ailing economy, 401(k) investors are saving more, according to a new study from Fidelity, which analyzed the 11.5 million participants it administers. In the first half of the year, investors who participated in the same plan both this year and last set $3,512 aside, on average, from their pretax earnings, up 7 percent from $3,283 in the first half of 2007.

Fidelity says the average retirement plan account balance dropped 7.5 percent in the first half of 2008, to $64,000, down from $69,200 in the first half of 2007. By comparison, Standard & Poor's 500 stock index dropped nearly 15 percent in the first half of this year. Surprisingly, the average balance for employees who stayed in their plans for both years fell less than 1 percent in the first half of 2008. Translation: 401(k) investors are diversifying!

Not surprisingly, Fidelity also found that few of us are contributing the annual maximum of $15,500 to our 401(k)'s: Just 3.8 percent of employees earning less than $100,000 contributed the max, although 28 percent of those making $100,000 or more did.

I've written in the past about how consumer-driven health plans haven't exactly caught fire with consumers. Turns out the high-deductible health plans often end up costing consumers more out-of-pocket than they can afford, especially if they actually, you know, get sick and need to use them. Plus, the plans are complicated: You've got your high-deductible plan, with its myriad coverage rules and limitations, and then you've got the tax-advantaged health savings account that goes along with it, which has its own raft of rules.

No wonder consumers to date haven't embraced these plans, no matter how much employers try to encourage their use. What we're experiencing with consumer-driven healthcare, benefits consultants say, is very similar to what happened 30-odd years ago when employers began to shift away from regular company pension plans and into 401(k) plans. Remember those days, when you not only had to start funding your own retirement but also learn the intricacies of asset allocation and rebalancing your portfolio? A similar shift is happening today with consumers and healthcare, these experts say.

Dear Alpha Consumer,

I am currently working and plan to attend business school in fall 2009. I want to save as much as I can in advance and also avoid as much tax as possible. If I contribute toward my 401(k) plan, will it be possible to withdraw the money without any penalty and taxes?

The short answer is no. In general, workers with 401(k) accounts can't make early withdrawals without paying a 10 percent penalty. There are exceptions, including for "hardship" situations, but going to business school is not likely to qualify. And it is possible to take a loan out against a 401(k), but there are plenty of reasons to avoid that, including the fact that you'll miss out on years of compounding. However, if you are confident that you will repay it and catch up on retirement savings later, a loan is one option to consider. (Be sure to check that your company's plan allows taking out the loan even while you're not employed there; some plans don't.)

An even better option, suggests Perry Chlan of the Fidelity Research Institute, is to save up in a 529 plan, which is a tax-sheltered account designed for college savings. Such accounts generally can be used for graduate school, too. That way, you can avoid paying taxes and a withdrawal penalty.