The Average American Age 65 and Older With a 401(k) Retirement Account Has $232,710 Invested in It. 4 Strategies to Help You Beat the Average Before You Retire.

How much money do you have saved up in your 401(k)? It’s largely a function of age, of course, and how much you’ve contributed to it over the years. How you’ve invested this money is also a factor.

For 65-year-olds (or older) living in the United States though, the average number is $232,710. That’s according to data compiled by mutual fund company and retirement plan administrator Vanguard in its 2023 look at all of its plans’ participants. Not bad.

The thing is, most people could probably do even better by the time they reach this retirement — or at least near-retirement — age. And it wouldn’t take a monumental feat or a massive stroke of luck do so. The key is just doing more of the little things better.

Here’s a closer look at the top four strategies that will help you beat the average by the time you’re ready to retire.

1. Start as early as possible

It’s such a simple premise that it hardly even qualifies as a strategy. It’s really more of hard truth.

Nevertheless, it needs to be said that time is an investor’s top ally. The sooner you start saving anything, the better off you’ll be. And by far more than you ever might imagine.

A little number-crunching makes for an eye-popping comparison. Assuming you’re matching the S&P 500‘s average annual return of 10%, a $10,000 investment in an S&P 500 index would be worth nearly $26,000 after 10 years. After 20 years though, that $10,000 investment would be worth more than $67,000. Letting this money fester for 30 years would leave you with over $175,000. And a 40-year run? That initial $10,000 would be worth an incredible $452,000.

Most people don’t have an extra $10,000 to tuck away when they’re first starting their working years, but that’s not the point. The point here is simply to illustrate the power of compounding your growth as time marches on. Even if you can only start small, you should. As you increase your income, you can make even more contributions toward building your nest egg.

2. Automate it

Most employers offering 401(k) plans allow you to deduct a portion of your paycheck to deposit into your retirement account. In fact, for most employers this is the only way to make contributions to your plan. It’s often just a matter of filling out a form.

Don’t neglect to do this! It’s all too easy to decide, “I’ll do it next year” or, “I’ll invest outside of a 401(k) account” only to end up never actually doing so. Your employer probably makes it much easier to handle than you’d experience on your own. 

In this same vein, don’t forget to actually invest the cash going into your retirement account either!

Lots of employers now use a default investment option — usually a simple index fund — for employees who don’t request a specific fund allocation choice for their contributions. And in most cases this fund will do just fine. The one thing you absolutely don’t want to do, however, is save up money and then let it simply sit in the account as cash, earning next to nothing.

3. At least secure your company’s matching contribution

Not that you’ll necessarily want to stop there, but at the very least you should contribute enough of your own money to earn 100% of whatever amount of your own contribution your employer is also willing to deposit into your 401(k).

This can vary from one company to another. For most plans a maximum of 6% of your total wages are even eligible for an employer match, and even then the company may only match a portion of these contributions. Vanguard reports last year’s average match was only 4.6% of the average workers’ total pay, for the record.

Still, that’s hundreds if not thousands of dollars’ worth of free money, achieving a 100% return on part of the money you’re already saving anyway.

4. Growth investing doesn’t have to mean aggressive risk

Last but certainly not least, although you’ve probably been told that achieving good growth requires you to be aggressive with your picks, that doesn’t necessarily mean you must also take oversize risks or be a highly active investor. Indeed, the principle of “less is more” actually applies quite nicely when it comes to investing for retirement. That is to say, less trading and simpler strategies often lead to more gains than you’d likely achieve with a more active or narrowly focused approach.

Data from Standard & Poor’s puts this idea in shocking perspective. Over the course of the past 10 years more than 87% of actively managed large-cap mutual funds available to U.S. investors actually underperformed the S&P 500 index. Why? Largely because the effort to beat the market leads people to make decisions that cause a fund to lag its overall performance. Even the pros aren’t very good at timing the market, or timing a particular trade!

And it’s not just the 10-year time frame. Most large-cap funds have lagged the S&P 500 for the past five years, as well as the past 15 years. Ditto for mid-cap and small-cap funds compared to their benchmarks.

That’s not to say it’s impossible to beat the market; certainly some people do it. When your 401(k) options are limited to a particular mutual fund family’s offerings though, it’s less than likely you’ll be able to do so. The highest-odds, highest-reward choice is often the simplest of index funds.