You're throwing money away without a 401(k). Here's how to start saving for retirement.

Mutual fund giant Vanguard has officially crunched the numbers. As of last year, the average balance for people aged 65 and older participating in one of its employer-sponsored 401(k) retirement plans stood at $279,997. Not bad.

Most people would likely prefer more, and plenty of people certainly have less. Either way, an average nest egg of this size isn't too shabby given that most of these individuals will also be collecting at least some Social Security retirement benefits.

You can do better than the average, though, particularly if you're closer to the beginning of your career than the end of it. Here are the four most important actions to take right now – if you haven't taken them yet – if you'd like to give yourself a chance at beating the average by age 65.

1. Start as soon as possible, even if you're not really ready

The reasons for not participating in a company-sponsored 401(k) plan are reasonable enough. Chief among them is the reality that once all the bills are paid, there's just not enough left over from your paycheck. This is especially true for young adults who may be starting out their careers with below-average paychecks and above-average expenses, including student loans. It's not easy.

This is the time for young people to make a point of proverbially digging deep. That is to say, this is an important time to do anything you can feasibly do to sock away even small amounts of savings toward retirement – even if it means reducing some of your discretionary – "fun" – expenses.

Because the younger you are, the more time you have until retirement, and time is your biggest ally when it comes to building a retirement fund. For perspective, $1,000 invested in an S&P 500 index fund will be worth about $2,600 a decade from now, assuming it achieves average annual returns of 10%. Twenty years from now, however, that $1,000 will grow to something in the ballpark of $6,700. The 30-year end result will be around $17,500. And how much will a $1,000 investment in the S&P 500 be worth 40 years from now? Around $45,000.

There comes a point when the gains made on your previous gains are far greater than the benefit of adding more funds to the account in the meantime. You just need to start somewhere, even if that start seems too small to make a difference.

2. Qualify for 100% of your employer's matching contributions

Most employers will also help you accelerate your 401(k) account's growth even if you're only setting aside small amounts.

They do so with matching contributions. As the name suggests, employers will match savings you put in your 401(k) with a contribution of their own. This benefit will vary from one company to the next, but employers will commonly match contributions on a one-to-one basis or at $0.50 on the dollar. And the maximum they're willing to chip in often ranges from 3% to 6% of your annual salary.

It may be challenging to forego as much as 6% of your wages to save for retirement, but this is essentially free money, so every effort should be made to claim 100% of this benefit.

3. Explore all of your retirement account options

Just because your employer will only match up to 3% or 6% of your salary in a 401(k) doesn't necessarily mean you have to stop there. You can contribute up to $23,000 of your wages to a 401(k) account in 2024, all of which is tax deductible.

If you've got more to work with or don't love the investment options in your company's retirement plan, no problem. You may also be eligible to contribute to a traditional IRA or a Roth IRA.

The tax-deductibility of contributions to a traditional IRA depends on a combination of your income and whether or not you're able to participate in an employer-sponsored plan. And although Roth contributions are never tax deductible (because withdrawals come out tax-free), higher earners may not be eligible to contribute to such an account at all. Still, it makes sense to explore all of your tax-advantaged savings options within and outside of your company-sponsored plan.

4. If you've got 10 or more years to go, prioritize growth

Last but not least, don't forget to actually invest the money you've put into a 401(k) account. Too many people go through the trouble of enduring the budgetary sacrifice of making contributions but then let these savings sit idle.

How you choose to invest this money is up to you, but most work-sponsored 401(k) plans offer a wide array of mutual fund options ranging from growth-seeking funds to value funds to dividend-oriented funds and more. While all of these choices have their appeal to certain sorts of investors, people with 10 or more years until retirement should prioritize growth. Although growth stocks tend to be more volatile than other options, they're usually worth it in the long run due to their bigger returns. With 10 or more years to work with, you've got time to ride out the additional volatility.

That being said, do embrace the fact you're likely better served by using index funds than actively managed funds whether your goal is growth, safety, or income.

Most actively managed mutual funds meant to outperform the overall stock market don't actually do so. Standard & Poor's reports that over the course of the past year only 40% of large-cap mutual funds available to investors in the U.S. did better than the S&P 500. Over the past five years, nearly 80% of these funds trailed the benchmark index. In the past decade, 87% of these large-cap mutual funds lagged the S&P 500's overall returns.

Given how difficult it is for these professional money managers to beat the market, accepting a market-matching result with simple index funds is still a smart-money move for your 401(k) account.

James Brumley has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The Motley Fool is a USA TODAY content partner offering financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.

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