Every evening you turn on the news and watch Brian Williams or Katie Couric report on another dive in the stock market.  And every time you hear that the stock market slides, you know that your retirement is sliding in value as well.  What can you do in this situation? 

If you’re like many, you may have thoughts of swiping all of your 401(k) funds and placing them someplace safer than the stock market – like under your mattress.  That would be the biggest mistake you could make.  However, there are strategies you can take to bail out your retirement.

Check Your Investment Mix

The first thing you should do is evaluate your current allocation of retirement funds.  Whether your retirement savings are in a 401(k) or an IRA, your funds are usually invested in a combination of stocks, bonds, and mutual funds.  Each one has a higher or lower level of risk and return.  You should keep your retirement savings in a mix that optimizes the investment return while preventing large losses during economic setbacks. 

Though stocks are more likely to give higher returns, they are also likely to lose larger values, such as we’ve seen in the current economic downturn.  If you are decades away from retirement, you should have nothing to worry about.   However, the closer you get to retirement age, the less you should have in stocks.  A good recommendation is to keep up to 70% in stocks until age 55, or 10 years before your retirement.  Then change the stock mix to about 50% to 60% of your portfolio until retirement.  Check with a qualified financial advisor at www.kenhimmler.com or asset management group such as www.iamllc.biz to get the best advice for your situation.

Keep On Working

As you reach retirement age, you could opt to work longer.  Working longer means you have a few more years to grow your retirement savings through paycheck withholdings and additional interest income.

The longer you work and wait to start collecting Social Security, the more you’ll receive per year.  Consider if you wait a few years and retire at age 65 instead of 62; you can obtain about 25% more per month in Social Security benefits.  Each year you postpone retirement, you can add another 8% to your Social Security payments. 

Tap into Your Home Equity

If you followed the normal paradigm of homeownership, you would have bought a house with a 30-yr mortgage sometime in your 20s or 30s and have it paid free and clear by the time you retire.  Having 100% equity in your home gives you tremendous financial leverage in your retirement, especially with the rise of home prices over the last 20 years.

You could sell your home and buy a smaller place to live like a condominium, and then put the rest into an annuity.  Or perhaps you could even get a reverse mortgage where the bank pays you money each month.  You get value and a regular income for your largest asset.

Re-adjust Your Retirement Budget

The other strategy you could implement as you approach retirement age is to re-assess your retirement income needs.  Do you plan to live in a big Victorian home and travel somewhere every month?  Perhaps you could re-adjust that plan to live in a nice one or two bedroom cottage close to your family and not have the need to travel every month.  Whatever your initial plans, there are options and strategies you can change to live cheaper and within your means come retirement age.

Authored by Kenneth Himmler, Sr.