The average American is working harder than ever, and thanks to increasing wages, Americans are contributing more money to their 401(k) plans than since the Great Recession. According to Fidelity Investments, the average worker contributed 8.4% of his or her income to a 401(k) in the fourth quarter. Are your contributions keeping pace? 

Contribution rates for American workers grow

Contribution rates to defined contribution plans such as 401(k)s depend a great deal on the worker's age and income, but overall, the average American worker is setting aside 8.4% of his or her income in these accounts, which is up from an average employee contribution rate of 8.1% in the first quarter of 2015.

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Fidelity reports that worker contributions to 401(k) accounts last quarter was at its highest since the second quarter of 2008, and if you combine worker contributions and employer matching contributions, the average worker saved a record $10,200 in a 401(k) in 2016.

Growing contribution levels indicate that Americans are becoming increasingly more serious about retirement planning, but many people still run the risk of outliving their retirement savings.

According to Fidelity, the average 401(k) balance is $92,500, and although that's up from $88,200 last year, it's still probably not going to be enough to generate the kind of income retirees need. It's commonly recommended that retirees withdraw no more than 4% from their retirement accounts annually so that they avoid drawing their account balances down too quickly. Obviously, withdrawing 4% from an account of this size isn't going to cover many day-to-day expenses.

Making up the difference

Income and age have a lot to do with workers' saving strategies. For instance, competing expenses such as student loans make it difficult for millennials to stash away as much money as baby boomers. According to Vanguard, people in their mid-20s to mid-30s contribute about 5% of their income to 401(k) plans, while workers between 55 and 64 contribute 8.7% of their income.

While baby boomers contribute more to their 401(k) plans than people of other ages, very few of them contribute the maximum amount allowed every year. In 2017, workers can contribute up to $18,000 of their income to a 401(k) plan. If they're 50 and up, they can contribute up to $24,000. 

Across all ages, Vanguard reports that just 12% of 401(k) plan participants hit those maximum limits in 2015, and only 16% of workers over 50 contributed the additional $6,000 that's allowed.

If you're currently contributing less than your peers to your 401(k) plan, or less than the limits, increasing your savings rate is the best action you can take to make up ground. It can be daunting to consider increasing your contribution rate all at once, so a better plan may be to increase your contribution by 1% to 3% annually. By increasing your contribution rate in small yearly increments, your annual pay raises can cover a lot of the additional contributions, and that can keep you from busting your budget.

Overall, contributing to a retirement plan without planning is a lot like getting in a car and driving somewhere without a destination. To achieve financial security in retirement, you need to determine how much money you want to spend every year in retirement and then come up with a plan to build a nest egg large enough to fund that amount. You can use the 4% withdrawal rule as a starting point, but don't forget to consider your Social Security income, too. After all, learning about Social Security strategies that can increase your retirement income is an important part of retirement planning.