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:

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.