Are Your Retirement Savings Above or Below Average?

If you're not completely confident in your retirement savings, you're not alone. While 67% of Americans have a retirement account, only 34% believe their retirement savings is on track, according to recent Federal Reserve data gathered by The Motley Fool.

It may help to see what the typical American has put away for retirement to know where you stand. You'll find that data below -- along with the best ways to grow your retirement savings.

The average U.S. retirement savings

The median retirement savings is $87,000 as of 2022. As you'd expect, it varies quite a bit by age. Older Americans have had more time to contribute to their retirement accounts, so they naturally have more saved on average.

Here's the median retirement savings by age:

• Under 35: $18,880
• 35 to 44: $45,000
• 45 to 54: $115,000
• 55 to 64: $185,000
• 65 to 74: $200,000
• 75 or older: $130,000

So if you're 40 and have $100,000 in your retirement accounts, you're $55,000 above the average for your age range. By knowing these numbers, you can quickly and easily check how your retirement fund compares to the typical American's.

Remember that these are just national averages. They're not a measure of whether you personally are on track for retirement. That depends on both your current retirement savings and your retirement goals.

How to improve your retirement savings

If you're worried you won't have enough for retirement, or you'd like to save more so you could possibly retire early, here are the best ways to build your retirement fund.

Maximize your tax savings

There are several types of tax-advantaged accounts you can use to save for retirement. The most common are 401(k) plans and individual retirement accounts (IRAs). Health savings accounts (HSAs) are another option available to Americans with qualifying high-deductible health insurance plans.

These all have yearly contribution limits. For most people, the best approach is to contribute as much as possible to retirement accounts first. If you have a 401(k) and an IRA, contribute up to the annual limits on those before saving through a taxable brokerage account. You'll save the most on taxes this way.

Contribute to your retirement accounts after every paycheck

The most effective way to save for retirement is to make it a habit. Set aside a portion of each paycheck for your retirement savings. A good percentage to start with is 10% to 15%, depending on what you can afford.

If you have a 401(k), this is easy, as contributions are taken directly from your paycheck. While you can't do the same thing with IRAs, you can usually set up automatic contributions to your IRA on a specific day, such as a day or two after your paycheck gets deposited.

Bump up your retirement contributions every year

If you consistently save for retirement, you're already doing pretty well. To take it a step further, make it a goal to increase your contributions every year.

It doesn't need to be a huge increase. If you're currently putting 10% of your income into retirement, you could aim to add another 1% per year. You could also look for ways to increase your income. Since you're going to be saving for decades, small increases make a huge difference over time.

Put your money in high-return investments

Along with how much you contribute, the other key ingredient in building your retirement is the return you get. Let's say you invest $500 a month for 35 years. If you stick to conservative investments and average a 5% annual return, you'll end up with $541,922. But if you get a 10% annual return, which is the stock market's average, you'll have $1.63 million -- over $1 million more.

The best way to maximize your return is to invest in stocks or real estate. Stocks are easier for most Americans. As you get closer to retirement, it makes sense to shift some of your portfolio to more conservative investments, such as bonds. But in your 20s, 30s, and 40s, it's a good idea to prioritize growth.

Saving for retirement is one of the most important parts of managing money. If you make it a habit, you can make sure you have a large enough nest egg when you want to retire.