401(k) accounts hit record high: is yours enough?

(MoneyWatch) According to Fidelity Investments, the average 401(k) balance among 12 million participants in plans they manage was $77,300 at the end of 2012. This average balance for workers 401(k) accounts is the highest level on record ever.

Higher 401(k) Contribution Limit in 2013 

401(k) Advice for Gen X-ers 

Why You Should Not Cash Out Your 401(k)

Looking further into the data in the Fidelity report, the average balance for workers who are 55 and are nearing retirement is $143,300. It's not nearly enough money with which to retire.

The report also shows that for workers age 55, who have contributed to the same plan without interruption for ten years, the average balance is $243,800. The average contribution for participants age 55 to 59 is 10 percent.

But if you are in your 50's, where should you be in terms of your financial position for retirement?

According to retirement savings tools provided by Fidelity, you'll need to have saved at least 5 times your salary by age 55. Benefits consulting firm Aon Hewitt says you'll need to have saved at least 11 times your salary by retirement age. Both say that older workers need to save and contribute at least 15 percent of their pay into their employer's retirement plans.

But if you're not as prepared for retirement as you should be, don't panic. For many folks, the 50's marks a time in their life when some expenses can begin to go away. For example, you may no longer be making college tuition payments, or maybe you have paid off a home equity loan. Also, at this age many workers are typically entering their peak earning years. Hopefully you have an increase in cash flow, which can be used to increase your retirement savings. Here are a few things older workers should focus on to boost their retirement savings.

Catch-Up Contributions

If you've been saving since your 20's, you could have accumulated a significant amount by the time you are 50 and that balance has grown to be a sizable chunk of change. But don't think about slowing down on your savings. Now is the time to kick your savings rate into high gear. Make the maximum contributions you can afford to your 401(k) plan and even consider additional contributions that are available to workers age 50 and over. In 2013 the maximum pre-tax contributions allowed to a 401(k) type plan if you are age 50 by the end of the year, is $23,000.

Run Your Retirement Numbers

The time to find out you have not saved enough is not after you retire. Now is the time to do some serious number crunching. Calculating how much income your current retirement account and annual savings will provide at retirement is a critical step to ensure you are on track to achieving your retirement income goals. If your retirement plan offers access to on-line tools to do this, use them.

Use Account Monitoring and Re-balancing

With a higher account balance, market downturns can result in larger losses. Now is the time to pay more attention to your investment funds in your account and monitor the performance of your account and funds. Also, don't forget to re-balance your account at least once per year.

Invest for Moderate Growth

With a larger balance, a loss of account value can be even harder to recover from and with fewer years ahead of you to make additional contributions to make up for a loss, diversification becomes more important. But it's also important to recognize that you will not be making sizable withdrawals from your retirement savings for some time, and therefore it is suitable to have over half of your account invested in stock funds.

  • Ray Martin

    View all articles by Ray Martin on CBS MoneyWatch»
    Ray Martin has been a practicing financial advisor since 1986, providing financial guidance and advice to individuals. He has appeared regularly as a contributor on the CBS Early Show, CBS NewsPath, as a columnist on CBS Moneywatch.com and on NBC-TV's morning newscast TODAY. He has also appeared on the Oprah Winfrey Show and is the author of two books.

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