Rescuing Retirement: Advice For All Ages

(CBS)  As the stock market continues to plummet, it's draining Americans' retirement funds.

New numbers suggest that over the past 15 months, pensions and 401(k)s have lost a total of $2 trillion. So what do workers do now? Contributor Ray Martin offers some specific advice for workers in different generations, as well as suggestions for how their portfolios should be allocated.

For Workers 60+

CASH: 10 percent

BONDS: 40 percent

STOCKS: 50 percent

Move money you'll use within 5 years out of stock:

If you're going to be relying on this money, you can't take any risks with it, says Martin. You should put it into bonds and cash. It's still OK to have some of your money in the stock market, even if you plan to retire soon. Hopefully, you're not going to use all of your 401(k) the first year you retire. If you're retired for 10 or 20 years, your money still has some time to recover and grow.

Figure out when you'll need to tap into your 401(k) savings. Just because you're retiring in a year or two doesn't necessarily mean you'll need the money from your 401(k) right away. Perhaps you also have a pension, maybe you'll be receiving social security, or maybe you plan to downsize your home and live on the sale proceeds for awhile.

Workers In Their 50s

CASH: 5 percent

BONDS: 30 percent

STOCKS: 65 percent

Workers in this age group can afford to have a bit more money in the stock market, because their accounts have more time to bounce back from the current meltdown. But if you're in this age group, time alone is not going to heal your 401(k)'s wounds. It's going to require some work from you.

Increase contributions:

If you've lost money, you need to regain ground quickly. The good news is that you're allowed to contribute more to retirement accounts once you hit age 50. Take advantage of this. Once you stop working you can't save pre-tax money, and you certainly don't have anyone agreeing to match your savings as your employer does now.

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Weathering The Downturn: In this economy, it's smart to save. CBS News shows you how.

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Workers In Their 30s and 40s

CASH: 5 percent

BONDS: 15 percent

STOCKS: 80 percent

Martin says this is the age where it's easy to stop saving for retirement, because you want to buy a home or put money toward your kids' college educations. Or, in the case of many workers now, you're just too scared to keep putting money into the market. He warns interrupting your savings is the worst mistake you can make.

Diversify your portfolio:

Since retirement is still a long time away, your retirement savings can be invested mostly in stock funds. But now that your balance is larger, diversification becomes more important.

If the stock market falls 10 percent, a $100,000 portfolio invested 100 percent in stocks will fall in value by $10,000. On the other hand, if your portfolio was invested 75 percent in stocks, it would only fall $7,500, which would be easier to recover from.

Also, make sure that you're invested in a wide variety of stocks - small companies, large companies, foreign companies, etc.

Workers in their 20s:

CASH: 5 percent

BONDS: 5 percent

STOCKS: 90 percent

Martin says this age group can afford to be invested almost solely in stocks. The market is ugly right now, but retirement is far away and your portfolio will have plenty of time to grow. You can afford to take some risks at this point in your life, and it's almost guaranteed that these risks will pay off down the road. The most important thing of all is to get started now.

Begin saving 6-10% in 401(k):

Sign up for your company's retirement plan and start by saving at least 10 percent of your salary. The sooner you get started, the more money you'll have. Even if the markets are down now, the beauty of compound interest will still win out.

Most experts say that for the average worker, if you are working and saving for retirement over 30 years - and all you will have is your 401(k) and Social Security - you will need to contribute a total of 13 to 15 percent of your pay each and every year into your 401(k) plan account to have a reasonable chance of having enough money to pay for your retirement. So, if your employer contributes three percent, and you contribute 10 percent, the total contribution would be 13 percent.

[cbsblogger]

Don''t forget that all the tax cuts for the rich were funded from the social security trust fund. It provided the offsetting funds necessary for our multiple wars and other government functions.

Many of those rich people who got the tax cuts lived off investments and have never paid a dime of payroll tax.

[hbevis]

Posted by rharrin1 at 09:52 PM : Oct 09, 2008

Very good post. We don''t have much chance of getting the Crooks in Washington to do what you as saying. But on the off chance that at some point in time we get people in office that will do as you are saying.

[hypnotoad72]

oh ya this is good advice the rest of the world is not having any problems with their finances so just convert your dollars..

Posted by LGgeek
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I thought other markets were crumbling because of our plight?

[lggeek]

"The only way you can preserve your wealth is to turn it into something other than dollars."

oh ya this is good advice the rest of the world is not having any problems with their finances so just convert your dollars..

[lggeek]

"Perhaps the best thing that you can do to save retirement benefits is to not vote for republicans this year by Strangeworld"

It''s idiots like you that have to politicize everything that cause problems not to get fixed. Republicans and Democrats are two sides of the same coin, problem is ALL of our politicians are bought and paid for. They sucker people like you into blaming the "other guys" and you fall for it.

[simplemind2]

This guy - Ray Martin suggested that STOCKS: 90 percent for Workers in their 20s to STOCKS: 50 percent for Workers 60+.
That tells me Mr. Ray Martin has a great personal interest in the Wall Street.
He could be a Stock-Broker - i.e. every time some stock trading happens, he wins.
My take is when the economy is stable, then one could put (no more than) 50 percent in stocks.
When the Economy is sooooo bad - take all your money out of stocks.
After all, for someone in their 20s and make minimum wage - how in the world would the person be able to invest 90 percent in stocks?
What a bunch of bull!
Kind of like a real estate Realtor- they would never discourage one to purchase and/or sell a home!

[strangeworld]

Perhaps the best thing that you can do to save retirement benefits is to not vote for republicans this year. Republican economic policy since 1980 heavily favored the wealthy and big-business campaign donors to the republican party over the financial well being of the American worker and Senior Citizens. If you''re a senior citizen, you''d better think twice about voting for any republican this year - McCain and his friends are not looking out for your well being.

[rational_1]

YOU''''D Damned well better BELIEVE there is something SECURE about Social Security. I''''m sitting right here and REAL American''''s like ME are NOT going to let our Old Timers Down. Now go shove your greed or whatever else it is you are selling, where the sun don''''t shine. It''''s time WE got back to WE the PEOPLE!! It''''s time to turn to OTHER leadership...
Posted by irmcvet97 at 11:14 AM : Oct 09, 2008

I''m not worried about the oldtimers - they''ll be getting their SS for a few years yet. What I am worrying about is SS for 47 year-old me. This Ponzi scheme run by the government can''t continue forever and as the average age in the population and percentage of workers drops, sooner or later the money will run out. I''m completely ignoring it in my retirement calculations and if you''re banking on it being there for you in 20-25 years I certainly hope you''re right - but I''m not as hopeful.

[rational_1]

Thousands of pictures of NAZI SS Officers and Adolf Hitler found property owned by Sarah and Todd Palin. Also an apparent Altar dedicated to the notorious Angel of death Dr. Joseph Mengele along with thousands of NAZi era coins.
Posted by ms_michelle at 01:39 PM : Oct 09, 2008

That mescaline you''re doing is really messing you up. Switch to pot before it''s too late.

[three-o-six]

I have been buying raw - udeveloped land for the last 25 years -- It''s value has not depreciated. Buying it only when I could pay cash fot it. When I retire I will sell it off on contract, collecting the interest. This way I will develop an income. I am looking good for my retirement -- there is a reason it is called REALestate.