This Is the Average 401(k) Balance. How Does Yours Compare?

Saving for retirement is important, because if you end up having to live on Social Security alone, you could end up taking a serious pay cut. And there's some good news on the retirement savings front -- 401(k) plan balances grew in 2023.

As of the fourth quarter of the year, the average 401(k) balance was $118,600, according to data from Fidelity. By comparison, the average IRA (individual retirement account) balance was $116,600.

Now to be fair, one thing that may have fueled 401(k) growth late in 2023 was a period of stock market gains. But it could also be that workers contributed more to their savings. Either way, if you'd like to see your 401(k) balance increase, here are a few key things you can do.

1. Snag your full employer match

Fidelity reports that as of the end of 2023, 78% of 401(k) plan participants were contributing at a high enough rate to secure their full employer match. If you want your balance to grow, try to do the same. Not only does that give you free money for your retirement, but you can invest your employer matching dollars to grow that sum into a larger one over time.

Let's say your employer is willing to put $3,000 into your 401(k) this year. And let's assume your 401(k) returns an average 10% over the next 40 years, since that's in line with the stock market's average return. This means that in four decades, the $3,000 your employer gave you will be worth almost $136,000.

2. Boost your income with a side job

Inflation is still lingering, so you may be struggling to carve out money for your 401(k). If so, look to the gig economy for a side hustle and earmark your earnings for your retirement plan.

You don't necessarily have to push yourself to earn an extra $8,000 or $10,000 a year. That's tough! But try to earn enough so you can contribute to your 401(k) at a rate that gives you your employer match in full.

As far as finding a gig goes, you have many choices. It'll help to first find out what match you're entitled to so you can set a monthly income goal and then find a suitable job to meet it.

3. Move your money out of a target date fund

With a retirement account you open yourself at a brokerage firm, you have a much wider choice of investments than with a 401(k). But many 401(k) plans are set to default to a target date fund. What this means is that if you don't choose investments for your 401(k), your money will land in one of these funds automatically.

Target date funds adjust your risk profile so that when the milestone you're saving for -- in this case, retirement -- is farther away, your money will be invested more aggressively. As retirement nears, your holdings will be shifted into more stable assets.

But target date funds often err on the side of investing conservatively. So if your 401(k) didn't grow a ton last year despite a strong market, consider moving your money into an index fund or mutual fund instead. Just be aware that of the two, you'll generally be looking at much lower investment fees with an index fund.

If your 401(k) balance is lower than the average, don't panic. It may be that you're younger than the average participant and have therefore had less time to actually save. But it does pay to employ these tips to see your balance take off.