Photo: NeilsPhotography via Flickr.

This article was originally published on November 29, 2014, and was updated on August 12, 2015.

Investment management specialist Vanguard issued some seemingly positive news last year, about current 401k balances in Vanguard accounts: The average workplace retirement plan balance topped $100,000 for the first time at the end of 2013, having nearly doubled from where it stood at the end of 2008.

The news isn't quite as rosy as it looks, though, because you should aim to far exceed that average 401k balance by retirement.

A critical difference
The near-doubling in 401k balances is good news indeed. But that six-figure sum is the average. The median workplace retirement account balance at the same time was just $31,396 -- and the median is a more appropriate number to assess. As you surely know, the average is attained by adding all the accounts' values together and then dividing the sum by the number of accounts. Seems simple enough, but this figure can be distorted by a handful of extreme values.

The median number reflects what you would get if you ranked all the accounts by the size of their balance and then picked the one right in the middle. Imagine a series of five numbers: 50, 50, 50, 50, 300. Their average is 100, but their median is 50. If they represented 401k balances, which number would more accurately reflect the typical saver's situation? Given the average and median balances of $101,650 and $31,396, respectively, it's clear that some people have very big balances, while most do not. The "typical" saver has just $31,396.

Photo: via Flickr.

Not enough
So the situation is worse than it seems. And even if everyone had a 401k balance of $101,650, that wouldn't be ideal. Yes, young people would be in good shape, because they could grow that balance into $1 million or more over the course of decades. But someone in their 50s or 60s would be in poor shape. The average 401k at retirement, according to Fidelity and Vanguard, is well below $200,000, and the median 401k balance is likely lower still. That's just not enough for most folks.

Think about it this way: A widely accepted rule of thumb is that you can withdraw 4% of your retirement nest egg to live off of in your first year of retirement, and then adjust further withdrawals for inflation. That might sound good until you crunch the numbers. Four percent of $200,000 is a mere $8,000. Even if you add the average annual Social Security benefit for retirees of about $16,000, you're still below $25,000.

The good news
Despite the worrisome scenarios above, unless you're retiring today, there are probably some steps you can take to improve your financial condition. Here are some effective strategies to consider:

  • Don't cash out that 401k! According to stats from Fidelity, about a third of 401k participants in plans managed by the financial services company have cashed out of their retirement account, typically when moving on to a new job. That can be lethal to retirement savings. Even if you're "only" cashing out, say, $20,000, that could grow to $135,000 in 20 years (assuming average stock market returns), serving as a meaningful cushion in retirement, rather than helping you pay for a newer car this year.

  • Save and invest more. That old rule of thumb to sock away 10% of your earnings might be fine if you start at age 25, but for most folks, who are not close to reaching their retirement savings goals, it's smarter to aim for 15% or 20% or more.

Photo: via Flickr.

  • Invest more effectively. As you save more, don't just stuff those savings into a coffee can or a low-interest rate account -- at least not if you have many years ahead of you before retiring. Make the most of those dollars and favor stocks over bonds. A simple and inexpensive broad-market index fund is hard to beat -- even for most professional fund managers. Healthy and growing dividend payers are also great for building long-term wealth with low risk. 

  • Work longer. Few people want to work longer than they planned (and not everyone gets to choose when to stop working), but if you can swing a few extra years, you can boost your nest egg powerfully. Imagine, for example, that you've socked away $300,000 by the year you would retire. If you delay retiring for three more years and achieve average annual growth of 8%, that nest egg can approach $380,000 -- and you won't have to start drawing down your savings as soon.

  • Be tax-smart. The Vanguard report also noted that the average 401k plan participant socked away $8,327 into his or her account in 2013. That's far below the maximum allowed, which was $17,000 in 2013 and is $18,000 in 2015 (with those aged 50 and older able to chip in an additional "catch-up" contribution of $5,500 in 2013 and $6,000 in 2015). Aggressively take advantage of tax-deferred accounts such as traditional IRAs and 401ks and tax-free retirement accounts such as Roth IRAs and Roth 401ks.

  • Be smart about Social Security. Read up on when and how you should start taking it, as there are pros and cons to many options. Delay taking it, and your eventual checks will be bigger. Take it early, and the checks will be smaller, but there will be more of them. There are also some smart spousal strategies to consider.

  • Think outside the box. Be creative in your thinking about how to accumulate more money and/or spend less. You might, for example, turn a hobby such as woodworking into a side business. You might take in a boarder. You might carpool or bike to work. Relocating might seem extreme, but a dollar goes a lot further in certain parts of the country. A part-time job for a year or two could add thousands or tens of thousands to your nest egg.

The average 401k at retirement is insufficient to support most people in retirement, so don't let it be your benchmark. Aim higher, and with some strategizing, your financial future can be considerably improved.