Most of us know we need to sock money away for retirement, but not enough of us are doing so. According to the national 2004 Retirement Confidence Survey, just 58% of workers report that they're saving for retirement. And even with that, 45% of all workers surveyed reported total household assets below $25,000. Anything in the black means you're far better off than the millions mired in suffocating credit card debt, but $25,000 won't last anyone long in retirement.

Fortunately, there's a bit of good news. According to the Investment Company Institute (ICI), the mutual fund industry's trade association, mutual-fund retirement assets rose by a whopping 28% in 2003, to a record $2.7 trillion. As much as we might want to credit a surge in financial savviness and planning, it's surely linked to the stock market's recent strong performance. As the S&P 500 advanced 26% last year, it boosted the value of many funds and investor enthusiasm, as well.

As of the end of 2003, 22% of all retirement assets were held in mutual funds (matching an all-time high), with $110 billion being added in 2003. This isn't necessarily a great thing, because it all depends on which mutual funds folks plunked their money into. Not all funds do well for their shareholders. We've long recommended index funds for most investors, as have respected investors such as BerkshireHathaway's (NYSE:BRK.A) (NYSE:BRK.B) Warren Buffett. Index funds provide an easy way to achieve average market results, a level of performance that otherwise eludes most investors. (If you want to invest in those few funds that have a good chance of outperforming index funds, check out our Motley Fool Champion Funds newsletter, for free.)

The ICI reported that retirement assets were divided fairly evenly between IRAs and defined-contribution retirement plans such as 401(k)s. (Note that 401(k)s generally limit your investment options to perhaps several funds, while in IRAs you can invest in funds and/or individual stocks such as Intel (NASDAQ:INTC), ExxonMobil (NYSE:XOM), or Verizon (NYSE:VZ).) Many of us are smart to participate in 401(k) plans offered by our employers -- especially if matching funds are available. If you sock away $4,000 and your employer matches that by 25%, you reap a little windfall of $1,000 -- free money. Try not to leave free money on the table.

A final bit of promising news: The percentage of retirement money in long-term stock and bond funds increased in 2003 to 45% from 43% in 2002, while the percentage in money market funds dropped. Money market funds are terrific for short-term savings and emergency funds, but they aren't likely to make anyone rich over the long haul. (Learn more about where to stash your cache of short-term cash.)

If you're ready to finally start getting a retirement plan in order, kudos! It's vital for your future happiness. We're ready to help, with our new Rule Your Retirement newsletter (which you can try free now) and via a brand-new book by Fool co-founders David and Tom Gardner, The Motley Fool's Money After 40: Building Wealth for a Better Life.

Longtime Fool contributor Selena Maranjian owns shares of Berkshire Hathaway.