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Rightsizing your retirement

As the stock market sags, retirement savers must revisit their long-term options.

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With continued volatility in the stock market, 6.5 percent unemployment (a 14-year high), and October consumer confidence numbers at their lowest ever recorded, Americans are grimly facing what economists predict will be an extended recession.

Of immediate concern to Main Street investors is the tremendous drop in their portfolio values, depleted approximately 18 percent in the year preceding Sept. 30, 2008, according to the Urban Institute.

Applying an 18 percent loss to a $500,000 retirement portfolio would net a deficiency of $90,000. Assuming a $6,000 annual contribution invested at 4 percent, it would take nearly five years to regain the dollars lost.

Immediate retirement losses, as painful as they may be to individual investors, become magnified when a harsh light is cast on the broader issue of retirement security. According to the Employee Benefit Research Institute (EBRI), roughly a third of workers had less than $10,000 in total assets, not including the value of their primary residence; 1 out of 4 workers had saved $10,000 to $50,000; 12 percent had set aside $50,000 to $100,000; and 27 percent had over $100,000.

With low investment returns predicted several years into the future, it will be challenging for workers who have not already accumulated a sizeable nest egg to build sufficient wealth by the time of their expected retirement.

Few Americans have actually calculated the amount of dollars they'll require to live comfortably during retirement, particularly given extended longevity projections. One out of 3 American women and a little over 1 out of 5 men now age 60 are expected to live to 95, according to TIAA-CREF, a financial-services company in New York.

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