Just like that, it was gone. Poof.

Your dreams of retiring at 65, the lake house with the little sailboat, the globe-trotting travel plans you've been putting off until you had more time -- they're all gone. You'll be working until you're 103, and the only sailboats in your future will be in the bathtub at the nursing home.

Assuming your family can afford to put you in a nursing home.

The big disaster
The Great October Panic blew a big hole in a lot of people's retirement plans. Balances have been cut by a quarter, a third, even half or more in some cases. Mutual funds across the board were hit hard, as managers were forced to sell to meet panic-driven redemptions.

And those great stocks you had in your IRA? I'm sorry to be the bearer of even more bad news, but take a look at what happened to these companies:

Stock

12-month high

Price now

Percent drop

Intel (NASDAQ:INTC)

$27.99

$13.29

53%

Garmin (NASDAQ:GRMN)

$112.68

$17.47

85%

Volcom (NASDAQ:VLCM)

$28.88

$10.87

62%

Under Armour (NYSE:UA)

$50.55

$26.22

48%

Akamai (NASDAQ:AKAM)

$40.90

$13.03

68%

Starbucks (NASDAQ:SBUX)

$22.98

$9.12

60%

Priceline.com (NASDAQ:PCLN)

$144.34

$60.46

58%

Source: Yahoo! Finance.

And here's the worst part: These companies are far away from the epicenter of the credit and housing busts, but they've been punished right alongside companies that were central to the disaster. They aren't alone -- and many of the stocks so punished are still great stocks.

Is there any hope?

There's definitely hope
As long as you've got time -- and even people in retirement have decades left to plan for -- there's always hope. But you need a plan that involves more than rolling into a stressed-out little ball and hoping it all magically gets better. Try this one instead.

1. Figure out what went wrong.
It's possible that you did everything right. People with portfolios that were perfectly allocated among excellent stocks from all the best corners of the market got clobbered, too. According to Morningstar, every single domestic and international equity mutual fund registered in the U.S. has lost money in 2008 -- all 11,579 of them.

It's also possible that you held some stocks beyond their reasonable valuations, that your asset allocation wasn't appropriate for your risk tolerance, or that you had some just plain lousy investments. If any of that's true, spend two seconds beating yourself up over it.

OK, now move on.

2. Rethink your asset allocation.
Although everyone, even people already in retirement, needs to keep some portion of their portfolio in stocks, how much you have invested in equities is a function of two things: your time horizon until retirement and your tolerance for risk.

Even if you were comfortable with your asset allocation a year ago, you may have recently discovered that your tolerance for risk isn't quite as high as you thought -- and your time horizon is one year shorter.

Take this opportunity to rethink how you'd like your portfolio to be arrayed across asset classes.

3. Upgrade your investments.
Look at every single thing in your portfolio, and ask yourself this question: If I didn't already own it, would I buy it at today's prices?

Forget what you paid for it. Forget how much you've lost. Definitely let go of any idea of "waiting for it to come back." Just ask that question.

If the answer is "no", sell it -- now, today -- and buy something better. Don't hold on to stocks you don't believe in. Trade them in for ones you do believe in.

4. Keep at it.
The market may go lower in the near term, but the long-term trend of the market is up. We don't know when it will recover -- although I'm betting it will be sooner rather than later -- but it will recover.

Although many of the companies who've seen their share prices slashed deserved it (sub-prime mortgage-backed securities, anyone?), many companies are selling right now at a serious discount to their value.

That means the stocks you buy today will look like screaming bargains after even a 25% recovery. Keep contributing to those retirement accounts or your future self will hate you.

5. Get some help.
Every portfolio -- and every retirement -- is unique, but that doesn't mean there aren't good guidelines you can use as a starting point. If you're feeling stuck or struggling to figure out just what you should do next, consider taking a 30-day free trial to our Motley Fool Rule Your Retirement service. It offers not only a monthly newsletter chock-full of retirement insights, but model portfolios and investment education to boot. There's no obligation to subscribe -- just click here to get started.

Fool contributor John Rosevear has no position in the companies mentioned. Garmin is a Motley Fool Global Gains recommendation. Volcom and Under Armour are Hidden Gems picks. Starbucks and Intel are Inside Value selections. Under Armour and Akamai Technologies are Rule Breakers recommendations. Starbucks, Priceline.com, and Garmin are Stock Advisor recommendations. The Fool owns shares of Under Armour, Starbucks, and Intel. The Fool also owns covered calls on Intel. The Motley Fool has a disclosure policy.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.