How to Salvage Your Retirement Plan Now

If you've looked at your retirement plan statement recently, you may have noticed a bit less money in your account than you remember. The market has had a fairly substantial -- and rapid -- decline, and nearly all of us have seen our nest eggs affected. In fact, The Wall Street Journal reported in October that Americans lost $2 trillion in workplace retirement plans over the prior 15 months.

Granted, those are paper losses, but still, there's no time machine that will let us go back and rebalance our portfolios before the crash. The best any of us can do right now is to assess our current situation and the resources we have at our disposal, then pick up the pieces and start rebuilding.

Regroup and recover
There are certain universal truths about investing for your retirement that hold up no matter how the market behaves -- even amid the current market meltdown. To be successful, you need to build and execute your retirement plan around:

  • How much you currently have saved and can add to your savings each month.
  • What long-run rate of return you're aiming to receive.
  • How much money you need to live each year and how bad inflation will be.
  • When you plan to retire and how long you expect to live.

Some of these items are out of your control. The current market meltdown probably shrunk your existing nest egg. Inflation will rear its ugly head no matter what you do. And while I wish you a long, healthy, and happy life, none of us knows exactly when our time will come.

But everything else is within your control -- at least to some extent.  

You can decide that you don't need quite as big a home in retirement as you did while raising a family. You can choose to work a few more years. Alternatively, you can choose to sock a bit more away or try to reach for higher returns.

Simple, right?
Of course, there are still limits and trade-offs to all the choices you can make. The longer you work, the less time you'll have to enjoy your retirement. If you sell your family home, you risk losing the memories you've built in it. And, of course, stretching too hard to get every last bit of potential return is what got investment banks into the leveraged mess that caused the financial panic in the first place.

There are no easy answers, but you still have choices. Making the most of your current situation may very well mean the difference between salvaging a successful retirement and being tethered to a desk for the rest of your life.

Get restarted
The first step in rebuilding your retirement is to figure out where you are now. As painful as it might be, open your plan statement and take a good, hard look at the numbers you see. That's your starting line for your future.

After that, it's a question of balancing your priorities:

  • Your time.
  • Your risk tolerance.
  • The amount you can realistically invest.
  • What sort of retirement lifestyle you want.

From that point, salvaging your retirement plan becomes largely a matter of plugging your data into a retirement calculator (like the ones we have available at Motley Fool Rule Your Retirement) to help you juggle your priorities in a way that's most appropriate to your situation. If you don't like the first answer you get from that calculator, don't despair. Often, just a few modest changes to your assumptions can make a huge difference to your end result.

For instance, if the market meltdown has made you want to swear off stocks and invest more conservatively, you might be amazed at how much more you'll have to save to reach your goals.

Really? Stocks? Now?
Before completely turning away from the stock market, remember that those stocks are more than just pieces of paper. They represent ownership stakes in companies that are often very profitable. When you buy their shares, either directly or through a mutual fund, you buy a slice of their business and their future profit stream. While the stock market may gyrate in the near term, over the long haul, your shares will more or less mirror the value of the underlying business. In the case of an index fund that tracks the S&P 500, for instance, your performance will track that of the largest, most stable U.S. companies, like these:


Trailing Annual Profits

Wal-Mart (NYSE: WMT  )

$13.4 billion

Cisco Systems (Nasdaq: CSCO  )

$8.1 billion

PepsiCo (NYSE: PEP  )

$5.7 billion

Disney (NYSE: DIS  )

$4.6 billion

McDonald's (NYSE: MCD  )

$4.6 billion

General Mills (NYSE: GIS  )

$1.3 billion

FedEx (NYSE: FDX  )

$1.0 billion

Source: Yahoo! Finance.

In the short term, a market panic can take everyone's retirement savings for a roller-coaster ride. Over time, the panic will subside and the strongest companies and their stocks will once again thrive. If you take this opportunity to reassess and retool your plans based on that current reality, you very likely can still position yourself to reach a successful retirement.

To get started rebuilding your future, click here for your free 30-day guest pass to Rule Your Retirement. You'll get access to all the tools, tips, people, and other resources we've assembled to help you on your journey.

At the time of publication, Fool contributor Chuck Saletta did not own shares of any company mentioned in this article. FedEx and Disney are Motley Fool Stock Advisor recommendations. Wal-Mart is an Inside Value selection. The Fool has a disclosure policy.

Read/Post Comments (14) | Recommend This Article (115)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On February 20, 2009, at 9:46 AM, Minosul wrote:

    I've been planning my retirement for decades and was planning on retiring next year at 65. My protfolio is now down around 40%. If I sell my condo I'll take a bath on the sale. Fortunately, I'm healthy and love my work so can (must) continue working. But 5 years from now that may not be the case. Will I ever have a chance to enjoy retirement? If I get out now at lease I can get 4% in a savings account rather than wait another six months and have 10% less than I do now. What do you think?

  • Report this Comment On March 26, 2009, at 10:48 PM, Chaine42 wrote:

    I am a couple of years older than Minosul, and I too, am still working, but by choice not because of the market. I have been a member of Motley Fool Pro since its inception last fall. I would recommend the Pro to anyone interested in serious investing for retirement. I am up on my investments, in some cases, significantly up. I think this is a great time to by stocks. It may not be the bottom of the market, but I believe we are close.

  • Report this Comment On March 27, 2009, at 7:12 AM, howcosuds wrote:

    I'll be 60 in July, which would have been my retirement date, but I too must now continue working. I understand the temptation Minosul is facing, but will probably stay vested in the market myself. One question that I have is that before I started learning about Foolishness, I bought all mutual funds (350K) - should I sell those and take the fee hit now while things are low so I can get into individual stocks? Further, since October, I have bought 22K in stocks but it's a simple brokerage account not IRA/Roth - how can I advantage that money?

  • Report this Comment On April 03, 2009, at 11:54 AM, rsingh6675 wrote:

    I just turned 60 & was planning on retiring soon. I made mistake of depositing Retirement money in Dodge Cox Stock fund 22 months back & now it is down 61%. Does anyone think it will come up or should I take my loss & move it into some conservative fund?

    I need every one's opinion.

    Any good funds where I can get 4-6% return?


  • Report this Comment On May 05, 2009, at 1:15 PM, BlindLuck32 wrote:

    Small caps historically lead the bull market so the FBR Focus Fund is one my favorites. (We gotta be at bottom, right)

    If you are near retirement age you should only be around 30% in stocks at most. Personally I like municipal bonds (The bonds themselves, not funds because as rates rise bond funds will lose value) right now for steady tax-free income.

  • Report this Comment On May 25, 2011, at 4:49 PM, ybckorea wrote:

    Looking back over these comments allows me to say - if you invested heavily late 2008 or early 2009, then you made about double in the last 2 years. Of course hindsight is always great.

    At 70 and 95% invested, I am in the minority of thinking about investing. That is 100% in stocks or equivalents. No bonds and no real estate at the moment outside of REIT's. When AGNC gives 18% it is hard to see actual real estate when most likely the return is around 10% in a good market, and much less if not 100% rented or a good tenant. It has been a rocky road and the future looks like more of the same.

  • Report this Comment On November 20, 2011, at 5:30 PM, samyan wrote:

    I,m in the process of retiring; almost all my money is invested in stocks, from which around 75% is Apple stocks. I am worried. Should I rethink the whole Apple thing ad sell?

  • Report this Comment On November 26, 2011, at 7:30 PM, Wistrade wrote:

    Looking for 5 stocks to buy and forget for the next 10 years.

    What is AGNC?

  • Report this Comment On December 22, 2011, at 11:43 AM, wingmanalaska wrote:

    I moved all of my mutual funds into long term treasury bonds Dec. 1 and now im up 6%. I know this will not be long term and if intrest rates start to move up I will dump it all back into stock funds.

  • Report this Comment On February 28, 2012, at 6:56 PM, Jackman2020 wrote:

    I'm in my mid-60's and own my home outright, but

    am no longer working. My savings is around $50,000 and have some stocks. Any recommendations where I should be putting my nest egg so it will grow and give me more of a retirement...while I continue to seek employment???

  • Report this Comment On August 10, 2012, at 10:12 AM, aamfcrdc wrote:

    just turned 61, have a fairly good savings of ten yrs .one yr ago i put it in a co called Curian to manage it for me.. profit,,1.9% .. just doesnt seem enough for the amt i put in .. am i worrying too much or should i look elswhere,, i hear fidelity does a decent job of managing savings or retirement funds ,, any. suggestions

  • Report this Comment On November 11, 2012, at 11:09 AM, titus103 wrote:

    I have decided to invest in utilities. I receive the utility forecaster and invest about 4000 a mos into them. I have Duk, So and otc:apa. I also have been buying 1 0z Canadian Gold Maple leaves. I kind of drifted away from utilities and lost about 3000 in 4 mos. I like utilities and I follow Roger Conrad religiously. I have two rental units and am working wery hard to payoff the mortgages. I may retire next Dec but like many ohers, I enjoy working and have done so for the Past 40yrs. I will be 72 next July. One think my wife and I have done is to build up her retirement. She is 61.

  • Report this Comment On January 04, 2013, at 12:38 PM, DMoreaux wrote:

    I'll be 65 this February, and a Fidelity client for over 10 years. When my company went from a traditional retirement program to 401(k), they opened a Fidelity account. I retired from the company in 2010 and work as a consultant, but took a portion of my then 401(k) into a Fedelity deferred annuity. It's performed well for the last 5 years considering the market. The remander of my account is self managed, using Motely Fool Advisor as a guide.

  • Report this Comment On January 20, 2013, at 1:08 PM, ProjectPat1 wrote:

    my husband and i rode the stock roller coaster for the last 20 years, we got out in 2010 when we invested in real estate, we now want to slowly get out of r.e. and put our money is something more passive, like stocks but are very afraid of the volatility, any ideas????? we recently sold a property and have 60,000 to invest in our retirement, ps. we are both now retired.

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