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Our 401(k)s Show We're Not Taking Investor Confidence Seriously

NEW YORK (BankingMyWay) -- U.S. investors are bullish on the stock market, but not enough are putting the cash into their 401(k) accounts to show it -- and to gain full advantage.

That's a shame, as even a 1% hike in your monthly 401(k) savings plan can add up to $330 per month in your retiree "paycheck" down the road.

This figures come from Fidelity Investments, which is chiding Americans these days about not saving enough for retirement even though eight out of 10 investors believe the Standard & Poor's 500 Index will rise by more than 100 points by the end of the year.

There is some progress for Americans with their retirement savings. According to Fidelity, 401(k) plan balances rose 11% from the third quarter or 2012 to the third quarter of this year to a nationwide average of $80,600. And if you have been working for a company that offered 401(k) plans for the past 10 years, that average balance number leaps to $211,800 -- up 19% from a year ago.

But in the latest in a series of quarterly reports from Fidelity on U.S. workers and their 401(k) plans, company analysts say Americans are costing themselves income in retirement by being stingy on their retirement plan contributions now.

"While it's a good sign that some workers are increasing their savings for retirement, many younger workers -- especially Millennials -- aren't saving at the recommended 10% to 15% of their income," says James MacDonald, president of workplace investing at Fidelity. "It is critical young workers realize that even the smallest increase to their monthly savings today or just 1% -- whether in a 401(k) or an IRA -- could have a meaningful impact on their retirement paycheck down the road."

Here is how that translates into real dollars:

Say you're 25 and have a salary of $40,000, and you added just $33 per month to your 401(k), with an assumed average annual rate of return of 7%. Fidelity says you could add $330 (in pretax income) to your monthly paycheck in retirement by doing so. Even if you scaled back to an average annual rate of return of 5.5%, a 1% uptick in savings translates into an extra $200 every month in retirement.

If you're 35 and make $60,000 annually, and you add $50 to your monthly 401(k) contribution, an average 7% annual rate of return will yield an additional $270 every month after you turn 65, or an extra $180 at a 5.5% annual rate of return.

Those are real dollars, and they really add up during your golden years. But that only holds true if you play the game right and start contributing that extra 1% every month, Fidelity says.