Planning now can help rescue 401(k) plan

The most frequently cited rule — the percentage of your portfolio in bonds should equal your age — is problematic for the young and the old. People with more than 20 years to retirement should be 90% or more in stocks; people age 80 can probably keep 30% in stocks.

Nevertheless, it's a starting point. Pension funds typically consider 60% stocks and 40% bonds to be a reasonable mix. But your allocation will also depend on your risk tolerance. If 80% in stocks keeps you awake at night, dial back to 70% and see if you feel better.

Want more help? Several fund companies, including T. Rowe Price, Fidelity and Vanguard, offer very good online retirement planning tools.

•Rebalance. Once you've set your allocation, check it every few months to see if your portfolio is still close to your targets. If it's not, move your money from your winning investments into those that have lagged, bringing your portfolio back to its original allocation. For example, suppose you had resolved to be 60% in stocks and 40% in bonds. Because of the bear market, however, you're now 50% in stocks and 50% in bonds. You'll have to sell enough of your bond funds to get back to 60% stocks and 40% bonds.

Because stocks and bonds often move in opposite directions, you won't have to rebalance often. Rebalance only when your portfolio is 5 percentage points off from its target.

•Save more. You can't control what the stock market will give you, but the single biggest factor in the size of your nest egg is the amount you save. Odds are good that you'll barely notice it if you contribute 1 percentage point more of your salary to your 401(k) plan.

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