401 (k)s: Reboot Your Retirement - Open Your Statements!

(MoneyWatch)  The stock market was pretty scary for a while, but now with S&P 500 up 45% from the lows, it's time to wake up out of your fear-based stupor, open your 401 (k) statements and take control of your retirement!

Maggie Rodriguez of the CBS Early Show and I discussed how to proactively re-boot your 401 (k) by following some rational steps.

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The core lesson to be learned from a bear market is to understand what kind of investor you were during the depths of the lows. Here are three categories to consider:

1) SLEPT LIKE A BABY

• Portfolio was less than 30% invested in risky assets, like stocks or real estate OR
• You had more than 20 years before you needed the money OR
• You were oblivious and/or in denial

2) RESTLESS SLEEPER

• Portfolio had approximately 50% in risky assets OR
• 10-15 years before you needed the money OR
• You knew you should be doing something, but didn't know what to do

3) INSOMNIAC

• Portfolio had more than 70% in risky assets OR
• Less than 10 years before you needed the money OR
• Believed that the Great Depression was coming

Once you have done this, hop on the web and take a risk assessment test. After last year, you'll most certainly know the answer to the question, "How would you feel if your portfolio fell 20% in a single year?" While you're at it, figure out how much you need to save for retirement.

With that information in hand, here are some general guidelines for reallocating your money.


RISK TOLERANT

• > 30 years: 50-70% risky assets
• > 20 years: 40-60% risky assets
• 5-15 years: 30-40% risky assets

MEDIUM RISK TAKER

• > 30 years: 40-60% risky assets
• > 20 years: 5-30% risky assets
• 5-15 years: 0-30% risky assets

HAD TOO MUCH RISK--NEED TO SLEEP!

• Reduce risk by at least half, maybe more
• Don't chase the market higher
• Save More

Finally, with all of the talk about asset allocation, there are three ways to impact your retirement savings:

1. Save more money-401(k) limit this year = $16,500 + $5,500 if > 50
2. Spend less in retirement years
3. Work longer-this has the most significant impact on retirement savings