The current crisis and your retirement, part 3

This is the third and, for the moment, last installment in this series. The first two offered what I hope were some useful suggestions for readers who are already retired and for those who plan to retire within a year or two. Much of that information will also apply to people whose retirement is further off. Here’s some additional advice for that group.

1. Consider yourself lucky. Much of this mess should be cleaned up by the time you retire.

2.  See what you’ve still got. Tally up your assets at their current prices (you may want to wait a week or two for the stock market to settle down a little). Check that against whatever asset allocation you’ve chosen for yourself. If you’ve never done an asset allocation (which can be as simple as a pie chart showing what percentages of your money you want in stocks, bonds, and cash), you’ll find abundant information on the topic online. For example, the Securities and Exchange Commission has a basic primer, which, in turn, links to this interactive asset allocation calculator.

3. Rebalance. As you probably know, that’s financial jargon for getting your portfolio back in sync with your asset allocation. You can do that in a couple of ways: Sell some of the stuff you have too much of and use that money to buy stuff you have too little of.  Or, when you have new money to invest, use it to buy more of whatever types of assets you need to bring your allocation back into balance. Bear in mind that selling outside of a tax-deferred account usually has tax consequences. So if you’ll be reaping a lot of capital gains, you may want to delay some selling until calendar year 2009 and defer the tax pain until April 2010. But if you have capital losses, you can use them to offset any capital gains you have and up to $3,000 of regular income (for joint filers). Any remaining losses can be carried forward to offset capital gains or income in future years.

4. Don’t forget your 401(k). As if you could. If you’re like most people, it probably represents the bulk of your retirement savings and maybe of your savings, period. Unlike traditional, defined-benefit pensions, which are backstopped by the Pension Benefit Guaranty Corp., 401(k)s are generally not insured, but they do have safeguards that protect against financial shenanigans. However, your 401(k) can lose value, depending on what it’s invested in. You’ll probably want to rebalance it, too, at the first opportunity. Also, resist the urge to take money out of your 401(k) or to stop contributing to it unless you really need the cash and have no other alternatives.

5. Think ahead. If you’ve suffered a serious financial setback as a result of recent events, you may want to revisit such questions as when you plan to retire, where you plan to retire, and what kind of life you envision for yourself after you retire. This could argue for retiring later, adjusting your expectations, or even saving and investing more aggressively—if you still have the stomach for it. —Greg Daugherty

Greg writes the “Retirement Guy” column each month in the Consumer Reports Money Adviser newsletter.