If you were out of the stock market for the best 15 days of the 5 years between year-end 1995 and year-end 2000, you would have been better off investing in a plain vanilla money market fund. This was a period when the S&P 500 averaged more than 18 percent. The lesson? Do not stop contributing. If you sit out and wait for the market to improve, you might miss the best performance yet.
5. Slash Spending and Save More
This is gut check time. If you eliminate just $25 from your budget every week, you would save $1,200 a year. If you invest that same $1,200 in a stock mutual fund every year ($100 a month), assuming an average gain of 8 percent, in 10 years you would have $18,295.
6. Consider Working Longer or Working in Retirement
Assuming you can stay on at your job and continue to contribute to your firm's retirement plan, just five extra years of putting the max into your 401(k) can add an additional $100,000 to your nest egg, assuming an 8 percent return.
7. There Is Still Time
Obviously, the younger you are, the more you benefit from compounding and the more time you have to ride out the volatility of the stock market. That said, if you live past 65, your life expectancy is still another 20 years. This gives your 401(k) investments ample time to recover, and if necessary, it affords you the option of a few more years of work. In fact, more than 50 percent of the population will be working past the age of 65.
To use our calculators to do your own retirement planning calculations, click here.
Mellody Hobson, president of Ariel Capital Management in Chicago, is GoodMorning America's personal finance expert. Click here to visit her Web site, Ariel Mutual Funds.com. Ariel associate Matthew Yale and Ariel's Director of Corporate Communications Anne Roche contributed to this report.