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You <i>can</i> quit the rat race, but prepare to ramp up your savings.

Faced with frozen pensions, disappearing retiree health benefits and lengthy retirements, many Americans are choosing to work longer to provide for a comfortable future. Nearly one in four people between the ages of 65 and 74 were working or looking for work last year, according to the Census Bureau, up from 20% in 2000.

Still, the dream of dropping out of the workforce a few years -- or even decades -- ahead of schedule lives on. One such dreamer is Brian Fouch. Fouch lives in Lexington, Ky., where he is a human resources specialist with Toyota. His goal is to call it quits in 15 years, when he'll be 51. To make that happen, he's socking away 21% of his gross salary, including both his personal contributions to his 401(k) plan and his employer's match, and he hopes to boost the total to 24% soon.

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As Fouch has already learned, the key to retiring early is starting early to amass a nest egg that will carry through until traditional retirement benefits kick in. Quit before age 62 and you'll have to support yourself without the help of Social Security. And you won't be eligible for Medicare until age 65.

Access to employer-subsidized health benefits is a critical part of Fouch's plan. By age 51, he'll have 25 years of service with Toyota, and under current company rules he will qualify for full retiree health benefits. Most workers aren't so fortunate: Higher costs and limited availability outside the workplace often make health insurance a major factor that keeps workers on the job longer, reports the Employee Benefit Research Institute.

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Early retirees do have ways to get health insurance (read "You Can Get Health Coverage"), and you can expect more insurers to introduce policies aimed at this market. In the meantime, a big nest egg gives you more choices. So does understanding tax rules that let you have early access to your retirement savings without paying a penalty.

And who knows? You may discover that all you need is a retirement sabbatical to recharge your battery for your second act, which may include a part-time job or a whole new career.

Save like crazy

One widely accepted rule of thumb is that you should save at least 15% of your gross income (including any help you get from the boss) to provide for a comfortable 30-year retirement. Move your timeline up by a decade and you may need to save twice as much, or even more.

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Christine Fahlund, senior financial planner for T. Rowe Price, offers the following example: A 35-year-old who has already saved the equivalent of one year's salary and continues to save 15% a year for 30 years should be able to replace about half of his salary from savings if he retires at 65. Social Security benefits, pension checks and other sources of retirement income, such as annuities or earnings from a part-time job, would make up the rest. (You'll no longer have to save 15% of your salary once you retire, so you should be able to maintain your current lifestyle on about 85% of your preretirement income. But that can vary widely depending on your actual expenses.)

To retire ten years sooner, says Fahlund, that same 35-year-old would have to boost his savings to nearly 40% of his salary. Or, to keep his salary-deferral rate at 15% and still be able to replace half his income in 20 years, he would need to have already saved more than four times his current salary.

To make sure you don't outlive your money, you'll have to be even more judicious when you tap your savings. Withdrawing 4% from your nest egg the first year and increasing withdrawals to keep pace with inflation in subsequent years is a safe plan for a 30-year retirement. But, says Fahlund, if you want your money to last four decades, you'll need to trim withdrawals to about 3% the first year.

Fouch is on the right track to stockpile a substantial nest egg. He invests aggressively in a portfolio of all-stock mutual funds, and at 36, he has already accumulated more than twice his salary in retirement savings. He, his wife, Jennifer, and their three children live modestly in low-cost Lexington, with no credit-card debt or car loans. Their two older children -- Andrew, 11, and Abbey, 9 -- attend public school, and Jennifer teaches part-time at a local preschool in exchange for tuition for 4-year-old Alec. She hopes to return to work full-time once Alec goes to elementary school.

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Despite the Fouches' disciplined spending and saving habits, life's surprises could derail their dream if promised health benefits disappear or future college costs eat into their savings. In the meantime, Brian looks forward to having the freedom to pursue his other retirement dream -- becoming a high school baseball coach.

Dream come true

Even without employer-provided health benefits, Ray Klemmensen managed to retire three days after his 55th birthday two years ago. His secret? A lifetime of saving and taking full advantage of tax rules that give him penalty-free access to his retirement accounts. He also bought a high-deductible health-insurance policy, which holds down his premium, and funds a health savings account, which reduces his taxes.

Ray and his wife, Rosi -- who continues to work part-time in Cedar Falls, Iowa, the small college town where they live -- are enjoying their new freedom. They cycle, play golf and travel, and they are eagerly awaiting the birth of their first grandchild. "It's really nice not having a regular work routine," says Ray, who also works as a volunteer during tax season preparing returns for the elderly. "We have everything we need."

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Withdrawals from 401(k) plans are normally subject to state and federal income taxes plus a 10% early-withdrawal penalty if you are younger than 59 1/2. But there is a special exception, and Ray is making the most of it. Workers like Ray who are at least 55 when they leave their jobs can take penalty-free distributions from their 401(k)s. Now 57, Ray, a retired plastics engineer, plans to draw down those funds until he qualifies for early Social Security benefits at 62.

Other tax rules allow you to take penalty-free distributions from your IRA before age 59 1/2, but the requirements are very strict. You must take substantially equal distributions annually, based on your life expectancy, for at least five years or until you are 59 1/2, whichever is longer. There are three ways to calculate these so-called 72(t) payments (named after the section of the tax code that waives the penalty), all of which can be done using the free calculator at www.72t.net. If you deviate from the distribution schedule, the 10% penalty is imposed retroactively.

Ray opened his IRA in 1982 and rolled his retirement savings into it each time he changed jobs. Thanks to healthy market returns, the balance has increased even though he has been making regular withdrawals for more than two years. Ray and Rosi both have Roth IRAs, which will provide tax-free income when they get around to tapping them.

The Klemmensens pay $329 a month for their high-deductible health-insurance policy. They can contribute up to $5,650 to their health savings account this year and deduct the contribution on their tax return. Any HSA funds not used to pay out-of-pocket medical expenses can be rolled over each year to build another source of retirement savings.