About 3 in 10 savers increased their contribution rate over the last year, Fidelity found. The average 401(k) contribution rate is now 8.6 percent as of the first quarter, the highest percentage in almost 10 years and up from 8.4 percent last year — not including the employer contribution.
More employees are putting enough away to get the company match, Thompson said, particularly millennials, who know they will not be eligible for pensions or other types of guaranteed benefits many current retirees enjoy.
Average retirement savings balances are now in the six figures, according to Fidelity. The average 401(k) balance is $102,900, down slightly from the previous quarter but still up year over year, while the average IRA balance is $105,100 as of the first quarter, Fidelity found.
While the increase is due in part to the market run-up, recent volatility should not deter savers, Thompson added.
"You have to be in it for the long haul, especially if you are a millennial and you are under 40," she said. "Saving for retirement is a marathon, not a sprint."
Three tips to grow your 401(k)
1. Start saving as early as possible. "The story of the 401(k) millionaire highlights the beauty of compounding," Thompson said. "To save a million within a 401(k), it does take the better part of a career."
2. Take full advantage of a company match, when available. Roughly 1 in 5 workers still isn't contributing enough to get a full employer match, according to Fidelity. That's partly because many companies auto-enroll at a level that is lower than the match ceiling. To work your way up, Thompson suggests incremental changes. "Increase your savings 1 percent every year to a target of 15 percent."
3. Don't invest too conservatively for your age. For young investors, shying away from stocks in favor of bonds could short-change your long-term grown potential (less risk means less return), Thompson said.
Continue to contribute, Thompson advised, but if you're no longer comfortable managing the 401(k) yourself, "consider opting in to a target date fund or managed account," she said. "That can help determine the right amount of equities, bonds and cash."
As a rule of thumb, Thompson recommends saving 10 times your income by retirement age, in which case, "a million is a good savings target for someone earning $100,000," she said.