Facing Your 401K Fears

(CBS)  With the recent rebound in the stock market and stocks up 45 percent since March, it may be time to awaken from your fearful recession stupor and open those 401K statements -- and take control of your retirement.

But what should you do?

CBS MoneyWatch.com editor at large Jill Schlesinger came on "The Early Show" Thursday with a few ways you can maximize your 401K and move on.

Schlesinger said you have to look back at how you felt when the market was at its worst during the recession and decide what state you were in:

Low Risk

-Portfolio was less than 30 percent invested in risky assets, like stocks or real estate
-More than 20 years before you needed the money
-You were oblivious and/or in denial

Medium Risk
-Portfolio had approximately 50 percent in risky assets, like stocks or real estate
-10 to 15 years before you needed the money
-You knew you should be doing something, but didn't know what to do

High Risk
-Portfolio had more than 70 percent in risky assets, like stocks or real estate
-Less than 10 years before you needed the money
-Believed that the Great Depression was coming

Schlesinger recommended taking a risk assessment test Online: You'll finally know the answer to the question, "How would you feel if your portfolio fell 20 percent in a single year?"

She added you also need to figure out how much you need to save. According to the Society of Actuaries, 45 percent of retirees aged 55 to 75 surveyed in April 2009 haven't calculated how long their assets will last. So what can you do now to ensure you'll have enough later?

Schlesinger recommends these 401K guidelines for each type:

Low Risk (Do not like much risk)

-Allocate 0-70 percent in risky assets, depending on your time horizon and risk
-More than 30 years and risk tolerant: 50-70 percent
-More than 20 years: 40-60 percent
-5-15 years: 30-40 percent
-Less than 5 years, 0-15 percent

Medium Risk
-Allocate 20-60 percent in risky assets, depending on your time horizon
-More than 20 years: 40-60 percent
-5 years: 15 percent
-less than five years: 0-15 percent

High Risk (had far too much risk before and needs to make big changes)
-Reduce portfolio risk by at least half from where you were
-Do not get lured into chasing the market higher
-Since you can't assume too much risk, SAVE MORE!

However, no matter what type you are, Schlesinger suggested three tips for each type of 401K holder: save more money, spend less in your retirement years and work longer because it has a significant effect on your retirement savings.

Schlesinger said, referring to working longer, "A couple of years can change (your 401K) dramatically."