No matter what happens today, this week, or further into the future, one thing is certain: We've had a stock market crash. The Dow losing 2,000 points in two and a half weeks may seem like a slow-motion crash to some, but it's had just the same impact as a one-day event would have: Investors have lost confidence and are struggling to figure out what to do next.

During the Fool's live chat on the stock market and the S&P downgrade of the U.S. credit rating yesterday, plenty of readers shared a similar story: Close to retirement, they thought they were in good shape, with their stock portfolios having performed fairly well in recent years. Yet now, with the markets falling like a stone, they wonder: Should they stay the course or get out before it's too late?

1 size doesn't fit all
I'd love to give you a single answer that would take care of not only your situation but everyone else's as well. But planning for retirement isn't that simple. A lot depends on a bunch of different variables, including the following:

  • Your exact time horizon, including whether you're already retired or still a few years out.
  • How much money you have compared with how much you'll need to meet your goals for a comfortable retirement.
  • How you have your investments divided across different asset classes, such as U.S. and foreign stocks, bonds, commodities, and cash.
  • Your tolerance for risk and how disciplined you can be in the face of a lengthy decline in the financial markets.

Unfortunately, the best time to protect your portfolio from a market decline is when times are good and no one's thinking about market declines. Under better conditions, trading out overweight positions in strong performers for new prospects with better potential for continuing price rises makes plenty of sense.

After the crash has happened, though, you need a different strategy. If you're approaching or in retirement, here's what you need to do now.

1. Make sure you have cash.
You don't want to make any hasty investing decisions. But if you don't have a healthy cash cushion, you could panic while waiting for a rebound. With bear markets potentially lasting for a long time, having enough cash to cover several years of expenses will let you leave the rest of your investment portfolio alone for the time it needs to recover.

2. Get rid of things that are too hard to understand.
Over time, you may find that you've added stocks that are difficult to analyze in tough times. Mortgage REITs Annaly Capital (NYSE: NLY) and Chimera Investment (NYSE: CIM), for instance, benefit from interest rate spreads, but under conditions in which they face a threat to their ability to get short-term financing, they can suffer quick declines like the ones we've seen recently. Similarly, refiners like HollyFrontier (NYSE: HFC), Western Refining (NYSE: WNR), and Tesoro (NYSE: TSO) had seen nice advances lately as gas prices pushed toward record levels despite crude oil input costs being fairly inexpensive. Yet as oil prices have dropped recently and fears of a global slowdown get louder, their stocks have plummeted even more than the overall market.

In good times, companies like those may have served you well even without your really understanding exactly why they worked. But now, with just about every stock down significantly, you can have your pick of the litter -- and you may well be much more comfortable with a big-name stock with an easy-to-understand business model that will help you sleep at night.

For instance, instead of trying to focus on high-yield mortgage REITs, consider a broader-based REIT ETF like Vanguard REIT Index (NYSE: VNQ). If you want an energy stock with a broader set of businesses, then ExxonMobil (NYSE: XOM) has held up relatively better than most of its peers, with integrated operations that include not only refining but also exploration and production as well as retail sales. It even still has that AAA rating that the U.S. government just lost.

3. Think about risk.
You have a big advantage that you didn't have in the past: You've already been through a terrible bear market. By looking at how you reacted in 2008 and 2009, you should be able to tell what your natural response will be this time around -- and whether you'll be able to do what you should even if it's different from what your gut is telling you to do.

Stay smart
 As scary as downturns are, they don't have to make or break your finances. Take some prudent steps now to figure out a game plan for handling your investments not just today and tomorrow but over the coming months and years. A plan will help you make the crucial decisions that could mean the difference between preserving your wealth and losing it.

Make sure you have the protection you need in a crazy market. This free video from The Motley Fool not only has useful tips but also includes one stock with the staying power to survive a bear market.