It's Not Too Late to Save Your Retirement

How's your retirement fund looking?

If you're like a lot of people of a certain age, you're probably still worried. Will you have enough?

Despite the much-ballyhooed rally we've had since the market lows in early March, lots of folks are still sitting on sizable losses in their retirement portfolios. Big-name funds like Dodge & Cox Stock (DODGX) and Fidelity Small Cap Independence (FDSCX) are still down around 18% from where they were this time last year. Many more funds are still showing negative average annual returns over a three- or even five-year period.

Clearly, retirement growth has been something of a pipe dream for many in recent times.

But no matter how old you are or how much you have in your portfolio today, there are still things you can do to improve your chances of a comfortable, secure, and fun retirement.

The one thing I won't tell you to do: "Work longer."
That would be easy "advice" for me to give, but it's not helpful. If you need to work longer than you'd planned to meet your retirement goals, you already know that and don't need to hear it from me. My goal is to help you avoid that fate. Enough said.

I have three better ideas.

1. Allocate your assets wisely
Asset allocation and diversification are two variations on a pretty simple theme: Don't put all of your eggs in one basket. Asset allocation generally refers to your allocation among different classes of assets (shocking, huh?) like stocks, bonds, cash, and real estate. Diversification is the idea that you should diversify (another shocker) your holdings in each of those asset classes among different types of investments.

Asset allocation can be simple or fiendishly complex, depending on your tolerance for risk (and complexity). As a quick rule of thumb, a good starting point is to put any money you won't need for seven years in stocks, most of the remainder in bonds, and the money you'll need in the next year (along with your emergency fund) in cash equivalents like a money market fund.

Diversification is a little more complicated and can involve dividing your stock holdings up by market cap, by growth versus value, by sector and industry, or by some combination of all of those. The best way to implement a diversification strategy is by using a template that's appropriate for your age and risk tolerance. Your 401(k) provider's website can probably generate a decent one, though they tend to be a little too conservative at times.

Alternatively, the Fool's Rule Your Retirement team has put together some excellent ones that are designed to be used with the investment options available in most retirement plans -- take a look at those if you'd like to learn more.

2. Be smart about the stocks you pick
If you want to get maximum gain for your money invested -- and if you're trying to make up ground before retirement, you should -- then holding an index fund in your IRA might not be the way to go. Invest directly in stocks -- but not high-risk, speculative stocks.

Your best bet for solid returns with relatively low downside risk right now is to buy good companies that are value-priced. Despite the rally, there are still plenty out there. Even better, find some with dividends, and reinvest those to boost your growth over time. I just did a few quick screens and turned up these examples:

Source: Motley Fool CAPS, Yahoo! Finance.

These are just ideas, not recommendations, but you see what I mean -- stocks with reasonable price-to-earnings ratios, low levels of debt, and high returns on equity often represent solid value-priced opportunities. All of these also pay a decent dividend -- if those dividend payments are sustainable through the remainder of the economic downturn, that's a great bonus. (But not all companies may sustain their dividends -- Pfizer, for instance, cut its back in January as part of its plan to acquire Wyeth (NYSE:WYE).)

3. Get help if you need it
Don't be afraid to get some advice on all of this. If I can leave you with only one takeaway from this, it's that it's important to use the assets you have to maximum advantage between now and retirement. A fee-based investment adviser can help you make sure you're getting the most bang for those investment bucks, now and while you're in retirement.

Alternatively, you can get great objective advice for a lot less money via my favorite retirement resource, the Fool's Rule Your Retirement. In addition to a great monthly newsletter, there are professionally staffed message boards where you can get answers to specific questions. Get full access right now for 30 days with no obligation.