1. Control your emotions - take a deep breath.During this volatile period and every volatile period there isalways a cycle of greed and fear. Greed and fear are the two thingsthat move the market. We have periods where the markets get aheadof themselves and investors become too optimistic - and otherperiods where investors begin to panic, throw the baby out with thebath water, and become overly pessimistic. We are obviously in thethroes of, or very close to, the latter scenario. This volatileperiod will pass like all the others have.
  2. Consider increasing your annual savings and retirementcontributions. This is one area you have direct controlover. It may require that you reduce your current spending orearmark your raise for savings, but putting more away now willallow you to buy more shares at cheaper prices (since the market islower). The younger you are and the earlier you start saving, themore years your money can grow tax deferred inside your 401(k) orIRA. This tax deferred compounding can mean thousands or tens ofthousands of extra dollars for you to spend come retirement time.Also, every dollar you invest in your 401(k) or 403(b) plan todayis one less dollar included in your income this year so you canlower your tax bite. Employee's elective contributions are limitedto $16,500 per year in 2009 ($22,500 for those people age 50 andover). How much are you saving? Can you save more?
  3. Consider reallocating your 401(k)/403(b) to higheryielding investments. I realize that this may becounterintuitive to what you're feeling given the recent marketslide but perhaps you should invest more aggressively. Over time,stocks have historically outpaced bonds and inflation. Certainly,the greater the potential return on your money, the more riskyou'll be taking. However, if you have 10 years or more until yourretirement date (and have at least 20 years or more of life ahead),you may well be rewarded for taking this additional risk.Certainly, past performance is no guarantee of future results andI'm not saying you should get more aggressive; but you should takea few minutes and review your asset allocation. Most people have noidea what they're invested in, what they can expect to earn, andhow much risk they're taking with their portfolio. This can all bequantified. What percentage do you hold in stocks versus bonds? Ifyou're not sure, talk with a professional or trusted advisor andgets his or her guidance. Recognize that every extra 1 percent youcan earn on your money over time will go a long way to helping youenjoy the retirement you envision sooner.
  4. Consider retiring later. Don't retire whenwhat you really need is a break. All too often I see people intheir 50s and 60s who retire or take an early incentive offerbecause they think they're ready to stop working. After a fewmonths or a few years the find themselves bored and restless andwanting to go back to work. Before you decide to fully retire,discuss a phased retirement or flexible work schedule with youremployer. Explore all of your options before retiring. Gaining anextra day or two a week of free time may be just what the doctorordered. Realize that every year you earn an income is another yearyou defer money into your 401(k) or 403(b), lower your tax bill andallow your savings to grow tax deferred. The longer you work, theless you would need to accumulate to afford your desired lifestyle.If you love what you do, why would you ever completely retire? Ifyou don't love what you're doing, why are you still doing it?What's holding you back (time, money, confidence, knowledge,connections)? Research indicates that there is a direct correlationbetween our happiness, our health, and our financial wellness. Whenwas the last time you examined your situation?
  5. Consider lowering your investment costs. Doyou have any idea what you're paying in dollars and cents for yourinvestments or investment management? If you're like most people Isee, you don't have a clue. Recognize that each investment has itsown internal cost structure. Usually this information is containedin small print in the back of the prospectus, which most peoplenever take the time to read. Additionally, these fees usually getskimmed off the top and you don't even realize it. You get mypoint! Take some time and review your investments. Quantify whatyou're paying. Determine if you're getting good value for whatyou're paying. Understand that every dollar you lower yourinvestment costs by is another dollar in your pocket. Can you sayca-ching?
  6. Consider reducing your retirement incomeneeds. At the end of the day (or work week), you can onlycontrol what you can control. If you can make astute lifestylechoices, control your spending, eliminate your debts and live onless, you may feel more in control of your future. FYI - myhappiest private clients are those that have downsized, organizedand simplified their lives.

Complete your profile to continue reading and get FREE access to BenefitsPRO, part of your ALM digital membership.

  • Critical BenefitsPRO information including cutting edge post-reform success strategies, access to educational webcasts and videos, resources from industry leaders, and informative Newsletters.
  • Exclusive discounts on ALM, BenefitsPRO magazine and BenefitsPRO.com events
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.