It was too good to be true.

After five years of strong recovery from the 2002 lows, many investors forgot that stocks could go down. As so often happens, complacency set in, and now you've probably lost much of your recent gains.

But even if your retirement portfolio has dropped significantly, that's no excuse to give up. It may be that you don't deserve to retire rich -- but you still can, as long as you stick to your guns and keep yourself on track.

It's not as bad as you think
Everyone's talking about the 20% drops in most major indexes making this an official bear market. But depending on where you are on the path to retirement, the ultimate impact of the bear may not be as big as you fear.

If you're just getting started with retirement investing, the bear market is actually good news -- if you have the guts to put money into stocks. Shares of many attractive companies -- the same companies you might well have bought in the past -- are getting beaten down along with the rest of the market. For instance, a simple screen for companies with strong future growth estimates brought up these beaten-down stocks:


5-Year EPS Growth Estimate

1-Year Return

Goodyear Tire (NYSE:GT)



Intercontinental Exchange (NYSE:ICE)



MEMC Electronic Materials (NYSE:WFR)



Source: Yahoo! Finance.

If you still believe in the long-term prospects of these companies, then they're available now at bargain-sale prices.

Get it over with
More importantly, at least one bear-market drop like this was bound to come at some point during your lifetime. Ideally, you'd like to get them out of the way as early as possible in your investing life so that they eat away the smallest amount of your capital and give you time to recover. Here's an example: Say you invest $250 every month for 40 years, starting at age 25, and earn a 10% return except for a one-time drop of 20%. If you suffer that 20% loss when you're 35 instead of when you're 55, you'll end up with more than $100,000 more in your nest egg.

On the other hand, being fully invested in stocks when you're close to retirement leaves you fully exposed to potential market drops. That's why our Motley Fool Rule Your Retirement newsletter urges near-retirees to add bonds -- especially inflation-protected bonds -- to their portfolios. With TIPS up 16% in the past year, that advice has helped cushion the bear market's blow for our subscribers.

It's not too late
Even if it's late in the game for you, there are still things you can do to defend your assets from the bear's attack. If you want to retire early, supplementing your savings a bit or working a year or two longer than you otherwise would have can help offset your portfolio losses.

In addition, if the bear took you by surprise, you may have been taking too much risk with your investments. While small, high-growth stocks like Blackboard (NASDAQ:BBBB) and Take-Two Interactive (NASDAQ:TTWO) can play a role in even the most conservative portfolio, it's smart to temper those picks with larger, more stable companies like Wal-Mart (NYSE:WMT) and Chevron (NYSE:CVX).

Whatever you do, though, don't give up. Even after a major drop, the worst thing you can do is decide you've had enough and dump all your investments. Although getting out of stocks entirely might make you feel better in the short term, you'll cripple your chances of retiring successfully. By riding the waves, you stand a much better chance of ending up on top.

To learn more about retiring rich:

Want more bear protection tips? Read our Rule Your Retirement newsletter and you'll find plenty of ideas you can use to defend your portfolio. Our full issue archive, along with other valuable resources, are all available with a 30-day free trial.

Fool contributor Dan Caplinger has tooth-marks on his arm, but so far he's fended off the full bear attack. He doesn't own shares of the companies mentioned in this article. Blackboard is a Motley Fool Hidden Gems selection. Wal-Mart is a Motley Fool Inside Value pick. Take-Two Interactive is a Motley Fool Rule Breakers recommendation. The Fool's disclosure policy is like a can of pepper spray.