401(k) Savings Rates Just Hit a Record High. How Do You Compare?

The latest data on Americans' 401(k) savings rate is in -- and workers should pat themselves on the back. Fidelity Investments says the average 401(k) savings rate reached a record high of 14.2% recently. 

Considering inflation's rise over the past two years, this is an impressive feat. Here's how close workers' savings are to the recommended savings rate and how to boost your balance if it's not where you want it to be. 

A 14% savings rate is impressive 

Workers achieved their 14.2% savings rate thanks to some help from their employers. Americans contributed an average of 9.4% of their earnings, while employers contributed the remaining 4.8%. 

Most retirement experts recommend saving 10% to 15% of your pre-tax income. 

Of course, this is a general rule that needs to be adjusted depending on when you start saving for retirement. For example, if you start saving at age 25, Charles Schwab says your savings rate could be as low as 13% to 18%. 

However, if you don't begin putting money into a retirement account until age 40, your savings range should increase to 21% to 28%. 

Why do these percentages change? The general goal is for you to have 25-times your planned annual spending saved by the time you retire. The earlier you get started, the more time your investments have to grow. 

How to maximize your retirement savings 

If your savings rate is lower than you want it to be, or you're nearing retirement and find yourself far behind your goals, here are a few steps to improve it.

1. Save windfalls

Cash windfalls can take many different forms, including gifts, inheritances, or even raises. They don't even have to be a lot of money. Putting hundreds of additional dollars toward your retirement can add up over time. 

For example, maybe you receive $200 every year from family members via birthday cards, Christmas presents, or other gifts. If you have $10,000 in your retirement account right now, add $200 annually, and earn the historical annual rate of return of about 10%, you'll end up with nearly $80,000 in 20 years. Not bad for just $200 in annual contributions and a modest starting amount.

2. Automate savings 

Automating your contributions is one of the best ways to reach your retirement savings goals. We all have the best intentions of setting money aside for retirement, but setting up automatic withdrawals puts those intentions into action.

If you have a brokerage account for your retirement savings, you can automate a certain amount to invest each month. For example, you could set up a $50 investment to buy a low-cost index fund each month.

3. Sign up for employer matching 

This is one of the most critical -- and easiest -- ways for many workers to reach their retirement goals. Remember the 14.2% workers are saving? Just over one-third of that percentage came from employers matching their employees' contributions.

Many employers offering 401(k)s have matching programs, with many of them giving you $0.50 for every $1 you contribute, up to 6% of your income. For example, if you earn $65,000 and contribute $3,000 to your 401(k) over the year, your employer would contribute an additional $1,500, giving you a total of $4,500. 

That's basically free money you didn't have to put into your retirement account. Just remember that some employers may require you to stay at the company for a few years before receiving the employer contributions.

Saving for retirement can seem overwhelming. But taking a few simple steps to automate your savings, depositing windfalls into your account, and signing up for any available matching programs will help put you on the right track.