Unless you want to work for the rest of your life, you know you need to save for retirement. After a disastrous period for retirement savers during the market meltdown two years ago, workers have gotten the message that when it comes to putting money aside for their golden years, they're on their own -- and it's up to them to make sure they build the nest egg they'll need to retire on their terms.

Comparing two groups
Yesterday, Fidelity Investments came out with its annual look at employer-sponsored 401(k) plan accounts. With more than 11 million employees participating in plans that Fidelity oversees, the investment company has a vast pool of data that it can use to analyze trends among workers saving for retirement.

In stark contrast to the situation during the bear market at the end of 2008, when 401(k) balances fell an average of 27%, the news from Fidelity was largely good this year. The average balance among 401(k) participants rose to $71,500, the highest level since Fidelity started tracking worker balances 10 years ago.

One lesson that Fidelity drew from the results was that consistently adding to your retirement plan at work paid dividends, even during the so-called lost decade for stocks. Among workers who stayed at the same employer and kept their 401(k) accounts open throughout the period, average balances more than tripled, from $59,100 in 2000 to $183,100 at the end of 2010.

Still further to go
Despite the good news, workers haven't managed to make a comfortable retirement a sure thing. Savers aged 60 to 64 had an average of $120,600 set aside for their retirement. But even that sizable sum doesn't come close to what most retirees will need in order to keep up their pre-retirement standard of living.

To make up the difference, you need to take a close look at your own retirement plan. Fidelity reported that on average, workers saved 8.2% of their salaries in their 401(k) plan. With limits of $16,500 for those under age 50 and $22,000 if you're 50 or older, most workers have plenty of room to increase their contributions beyond the 8.2% level.

In particular, it's essential to make sure you're not giving up an employer match, since it represents free money your employer is giving you as an incentive to save. Even though some employers cut back on matching contributions during the recession, Fidelity reports that only 8% of its plan sponsors made cuts -- and half of those have restored them. Ford (NYSE: F), Weyerhaeuser (NYSE: WY), and Micron Technology (Nasdaq: MU) are just a few of the many companies that have gone back to matching 401(k) contributions after suspending or reducing matches in the past three years.

Fill in the gaps
Unfortunately, many 401(k) plans are lacking when it comes to smart investment choices. If you suffer from a bad 401(k), follow this simple three-step plan:

  • Contribute at least enough to get a full match from your employer.
  • If your plan has at least one low-cost option, such as a stock index fund or ETF, then put all of your 401(k) money into that plan option.
  • That will leave your 401(k) undiversified, so you'll need to fill in gaps by investing outside your 401(k), either in an IRA or with a taxable account.

Often, the best of a bad 401(k) lot will be a simple large-cap U.S. stock fund. So that means that in an IRA or taxable account, you'll want to cover other asset classes. If you like ETFs, a combination of iShares Russell 2000 ETF (NYSE: IWM), Vanguard Emerging Markets Stock (NYSE: VWO), and Vanguard REIT Index (NYSE: VNQ) can round out the stock side of your portfolio. Add an array of fixed-income options, such as the iShares Aggregate Bond ETF and SPDR Barclays High-Yield Bond (NYSE: JNK), and you'll have a well-balanced savings strategy that can get you to retirement a lot more safely than a 401(k) alone.

Save smarter
Your 401(k) plan is a critical part of your overall retirement savings strategy. But it doesn't have to be the only part. With the right combination of investments at your disposal, you can get yourself a lot closer to having the retirement you've always wanted.

If you want to retire rich, you need to be confident that you've got the basics of your investment strategy down pat. See if you're on track by following the 13 Steps to Investing Foolishly.

Fool contributor Dan Caplinger thinks the IRS should come up with a catchier name for 401(k)s. He owns shares of iShares Russell 2000 and the Vanguard Emerging Markets and REIT ETFs. Ford Motor is a Motley Fool Stock Advisor pick. Motley Fool Alpha has opened a short position on iShares Russell 2000 Index. The Fool owns shares of Vanguard Emerging Markets Stock ETF. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool's disclosure policy always makes the smart moves.