Retirement Savings Meltdown: 5 Things to Do NOW (Before Things Get Even Worse)

It’s a New Year, but few people are feeling optimistic in the wake of the global financial crisis. Americans have recently lost over $2 trillion in their retirement portfolios and $2 trillion in the value of their homes.

Baby Boomers are particularly affected by the economic meltdown. Since millions of Boomers are approaching retirement age, they have less time to resuscitate their dwindling bank accounts and achieve financial security.

Here are five things you can do right now to start rebuilding your investments and weather these economic storms:

1. Revisit all the options offered in your 401(k) plan.

Re-balance your investment allocations so no one industry, sector, geography, company size, or type of investment amounts to more than 20% of your portfolio. (For example, you can divide up your money between a money market fund, bond fund, global large cap fund, commodities fund, and an emerging markets fund.) Compare fund management fees carefully, and choose exchange-traded funds (ETF’s) or mutual funds with low fees where available -- some charge only one-third what others do for the same service. Remember, these fees come off your annual return (or make losses in the market hurt even more!).

Also, think three times about staying invested in your company's own stock if it is offered in their 401(k) plan -- remember, in no case keep more than 20% tied up in any one company’s stock. Finally, make sure you put in enough money in 2009 to get 100% of the matching funds offered by your employer (if any). If you are over 50, you should be eligible to make additional catch-up payments -- take advantage of it.

2. Take extra precautions to safeguard your health.

Make time to improve your fitness and stress management or try yoga or meditation. Raise your awareness of what to do in the event of a stroke or heart attack (a fast response, including taking aspirin at the first sign of a possible stroke, can reduce any long-term harmful effects).

3. Get started on an accelerated debt reduction plan that also gives you a 10-year or less roadmap to financial security.

Whether you do it yourself, using widely available budgeting or money management software, or invest in an automated debt repayment acceleration system such as the UFirst Financial Money Merge Account, make putting the power of compound interest to work for you a top priority this year. This system should be easy to update (at least monthly) and should give you a little flexibility, while showing the exact long-term cost in compound interest of your spending decisions.

4. Investigate and get a quote for long-term care insurance before you are closed out for health reasons.

Make an informed decision now about whether long-term care insurance makes sense in your situation. Then purchase it as soon as it makes financial sense to do so, rather than waiting for monthly premiums to increase.

5. Open a Roth IRA to hedge your bets against future higher taxes.

This form of IRA uses after-tax money to build it and gives you more options in how you take money from your retirement savings after your retirement. With both a regular IRA and a Roth IRA, you can choose whether to withdraw either taxable or non-taxable income in a given year, or a mix of both, depending on the income and the tax rates you will face that year.

Finally, it’s important to have a stream of financial advice and resources you can trust from a source that acts as your advocate, with informed, unbiased perspectives and second opinions. While not always easy to find, the right sources can help you gain confidence in the future, evaluate your investment options, assure continuing income, and take the needed steps to prepare for your future, without fear.

The Baby Boomers Retirement Club (BBRC) offers advice and resources that Baby Boomers need to stay afloat in the current economic crisis and in the challenging years ahead.

The Club provides a free, easy-to-use 10-step process everyone can use to clarify their priorities, develop confidence and create a sound action plan, regardless of the declining economy. The tools and calculators at www.mybbrc.com can help you develop an intelligent and workable roadmap and financial plan for your retirement years.