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The recession has been a wake-up call for a lot of folks. If you had put off starting to save for long-range goals like retirement, you suddenly realized that nobody was going to do it for you -- and that what you had already set aside might well not be enough to last your entire life once you stopped working.

What's just as important as saving, though, is making the most of the money you save. Unfortunately, many people believe that the only way they can catch up is to take huge amounts of risk -- and as successful as that strategy would have been over the past year or so, it's definitely not a direction that most people will want to take.

Jumping in over your head
Many financial planners use what's sometimes called a lifecycle theory of investing. What it says is that while young investors can afford to take risks with their money, you have to turn down your risk level as you age. That's because as you accumulate a larger nest egg, you'll find that you need to take steps to protect it -- and as you get closer to retirement, you won't have as long to weather whatever storms the investment markets throw in your path.

If the 2008 market meltdown lit a fire under past procrastinators, it may have done too good a job. According to a survey from Hewitt Associates and Financial Engines, many of those who save for retirement through 401(k) plans at work continue to take high levels of risk far later in their careers than they should -- especially those who are investing on their own without any professional help or advice.

Making up for lost time?
It's certainly possible that some of those workers merely neglect to make changes to long-held investment strategies from earlier in their careers. But there's probably another force at work: panicked workers late in their career figure that they have no choice but to put 100% of their money in high-risk investments like stocks, rolling the dice in the hope that they'll recover lost ground in time.

If that's the case, then latecomers could well be in for a shock. Stocks may have provided greater long-term growth historically, but they've also gone for long periods without providing any returns at all. Just looking at the period from 2000 to 2009 shows that if your timing is bad, you can end up losing money even over relatively long stretches of owning stocks. You simply can't afford to tie up all your money in stocks and hope that the market cooperates on your timeline.

Taking the middle road
That doesn't mean, however, that you should give up on stocks entirely. But you should be careful. Oddly enough, conservative large-cap stocks have gone out of favor during the rally, as more volatile stocks have provided better returns. But late in life, you might find that these big stalwarts give you the perfect combination of risk and reward.

PepsiCo (NYSE: PEP  ) is a great example of an attractive stock. Not only did it have below-average losses during 2008, but it also found a way to keep its 38-year streak of raising dividends alive. Combining strong growth prospects, especially abroad, with a healthy dividend, Pepsi gives investors the best of all worlds. Similarly, Procter & Gamble (NYSE: PG  ) has had just half the volatility of the broader market, but its steady profitability and 3% dividend yield are both attractive.

Moreover, you don't even have to give up entirely on higher-risk stocks. Remember: at age 55, you could easily live 30 to 40 more years, giving you more than enough time to get through a market downturn with some of your money. So keep some exposure to riskier small-caps and emerging-market international stocks, either with individual issues or through ETFs. iShares S&P 600 (NYSE: IJR  ) and Vanguard Emerging Market Stock ETF (NYSE: VWO  ) are two exchange-traded funds that can fit the bill for the piece of your portfolio that you dedicate to riskier investments.

Stocks shouldn't be all you own, though. Even though bonds have gotten a lot of attention lately, they can also provide healthy income for a portfolio, and certain types of bonds often move up when stocks go down. ETFs now make bond investing easy. Vanguard Total Bond Market (NYSE: BND  ) gives shareholders a cross-section of nearly the entire bond market. For those looking for tax-free income, iShares S&P National AMT-Free Municipal (NYSE: MUB  ) gives you a broad-based fund owning municipal bonds, or you can go with a state-specific fund that gives you income that's exempt from state taxes as well.

Mix it up
Above all, don't panic. Even if you're late to the game, you have time to make a huge difference to the quality of your retirement -- if you get the right mix of investments.

Dividend stocks can be a great tool for retirement investors. Read Adam Wiederman's analysis of which stocks will give you the best yields for the next 10 years.

Fool contributor Dan Caplinger mixes a mean batch of guacamole. He doesn't own shares of the companies mentioned in this article. PepsiCo and Procter & Gamble are Motley Fool Income Investor recommendations. Motley Fool Options has recommended a diagonal call position on PepsiCo. The Fool owns shares of Procter & Gamble, Vanguard Emerging Markets Stock ETF, and Vanguard Total Bond Market ETF. Try any of our Foolish newsletters today, free for 30 days. The Fool's disclosure policy likes its mixed drinks shaken, not stirred.

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