Almost four in 10 workers have no retirement savings at all, but among those who do save, the 401(k) is the most popular method of putting aside money for retirement. 

If you work in the private sector, your 401(k) is probably the only pension plan your employer offers, if you're offered a pension plan at all. Since living on Social Security alone is difficult, your 401(k) may be the key to ensuring you don't spend your senior years struggling. But, are you putting enough into it if you're contributing? 

Most Americans aren't. You can find out here how you compare with your fellow earners, and get some tips to help boost your 401(k) contributions so you can beat the average. 

Alarm clock and coins next to jar full of coins labeled retirement.

Image source: Getty Images.

How do your 401(k) contributions compare?

The Employee Benefits Research Institute (ERBI) recently published a report on the state of employee 401(k) contributions among U.S. workers.

ERBI included details on average 401(k) contributions among workers at different income levels, with data based on information from millions of 401(k) record keepers. Here's what this research showed as average 401(k) contributions from workers at different income levels.

Salary Range Average Contribution
$10,000-$24,999 $3,203
$25,000-$49,999 $2,710
$50,000-$74,999 $4,197
$75,000-$99,999 $6,622
$100,000.00 $11,112

Data source: EBRI.

For workers making contributions at these levels, unfortunately people in most income groups are likely to end up with far too little investment income as a senior.

Consider this chart showing how much average contributions at each salary level would be worth by age 67 if you made these contributions throughout your career starting at different ages and earning 7% annual returns. The chart is adjusted for inflation, which means it shows what your savings will be worth in future dollars if you start saving today. 

Age Contributions Started $3,203 $2,710 $4,197 $6,622 $11,112
25 $205,536 $173,901 $269,322 $424,934 $713,058
30 $166,397 $140,785 $218,035 $344,015 $577,273
35 $133,200 $112,698 $174,537 $275,383 $462,105
40 $104,822 $88,688 $137,352 $216,714 $363,656
45 $80,312 $67,950 $105,235 $166,040 $278,623
50 $58,856 $49,797 $77,121 $121,681 $204,187
55 $39,754 $33,635 $52,092 $82,190 $173,919

Calculations: Author

For all but the highest earners who start early, the amount workers are saving each year just won't be enough to support a secure retirement. 

While it's true you're unlikely to save exactly the same amount throughout your career and should increase savings as you get older and your income goes up, the data shows annual contributions don't rise dramatically as salary goes up until income exceeds $100,000. While you may save slightly more as your salary rises, even workers in that $75,000 to $99,000 salary group are likely to end up with financial shortfalls based on current savings rates. 

How can you increase retirement savings?

If this chart has you concerned you're saving too little, you're probably right to worry.  Vanguard's How America Saves report indicates workers with a 401(k) saved just 6.2% of income on average in 2016, while many financial experts now believe even the standard rule of saving 10% of your income isn't sufficient. Thanks to longer life spans and lower projected returns, you may need to save around 15% to 20% of your income to have a nest egg that will support you as a senior. 

Saving this amount of money can seem almost impossible, but there are steps you can take -- especially if you work up to saving so much. Some of the key ways you can increase retirement savings include:

  • Emulating the habits of retirement super-savers. A study of workers who max out their retirement accounts revealed they tend to drive older cars and work longer hours.
  • Cutting spending. Living on a spending plan and, if necessary, switching to temporarily using cash only to get your spending under control, could help you to free up more cash to save. 
  • Taking on a side gig: About 44 million Americans have a side hustle, and 36% of those who do earn at least $500 a month in extra income, according to Bankrate. If you can earn and invest $6,000 per year from a side job, you'd more than double the retirement savings for most income levels. 
  • Banking your raises: When you get a raise, immediately divert as much of the increased income as possible to your 401(k) or other retirement savings account via automatic contributions. HR at work or your brokerage firm can set these contributions up for you, and you won't get used to living on the extra income. 

While you want to increase your savings as much as possible, even a small increase in the amount you're contributing can make a big difference. 

You can do better than average

If your contributions to your 401(k) are higher than the average for your income level, you're on the right path -- but you'll still want to make sure the amount you're contributing will be enough to meet your savings goals.

If your contributions are lower than your fellow earners, it's never too late to take steps to increase your savings so you can beat the average and build the nest egg you need. Just get started today on finding a plan to increase your contributions so you can have the money you need to enjoy your golden years.

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