Bad economic news has everyone worried. But if you've already retired, all of the problems you've been reading about could have you close to panic over the prospects for your financial survival.

Retirees are experiencing challenges everywhere in their financial lives. Stocks are down, bonds are shaky, and even CD and savings rates are falling. Social Security and Medicare are in crisis. Meanwhile, a slowing economy isn't making life cheaper for retirees. Steep prices for energy, food, and medical care seem poised to move still higher.

But no matter how bad things get, panicking isn't the answer. Before you convince yourself that you'd be better off with a pile of $100 bills underneath your mattress, do these three things:

1. Know what you own
The first step toward avoiding panic is to get information. Too many retirees are pushed into risky investments that they don't really understand. If your broker sold you something that's doing badly, make sure you get a full explanation. If you don't get one, you should find yourself a new broker.

2. Look for balance
One reason the recent market woes are hitting retirees so hard is that the stocks they tend to buy are less flashy, more value-oriented companies that pay reasonable dividends. But it's exactly those companies that have taken the worst of it over the past year. And as you can see from this chart, it's not just financials that are the problem.


Year-to-Date Return

Fannie Mae (NYSE:FNM)


Citigroup (NYSE:C)


Merck (NYSE:MRK)


Bristol-Myers Squibb (NYSE:BMY)


Sprint Nextel (NYSE:S)


Verizon (NYSE:VZ)


Source: Yahoo! Finance.

If you've taken losses, check to see whether your portfolio is concentrated in value stocks. If it is, consider diversifying into other types of stocks, including growth, small-cap, and international stocks. But you don't have to do it right away -- especially if it would require selling your other stocks near their lows.

3. Plug your budget leaks
When you can't ask for a raise at work, the best way to make ends meet is to tighten your belt. Many retirees have already done plenty of cost-cutting, but if you haven't taken a hard look at your expenses yet, now's a good time. Cutting your living expenses will make it easier for you to get through an extended market downturn without doing anything drastic.

Stay calm
With all of the attention the flagging economy is getting, it's easy to become upset, especially when so much of what's going on is out of your control. But by taking these three steps, you can keep your wits about you and make rational financial decisions that will help you get through tough times unscathed.

To learn more about protecting yourself in retirement, read about: