10 ways to get your retirement plan back on track

Getting back on track

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Job loss. Tumbling stocks. Unexpected medical bills. In the past five years, the struggling economy has taken its toll on many investors' retirement plans. If your golden years seem threatened because of recent financial setbacks, don't panic. You likely still have time to pull off a retirement that works. Here are 10 tips from retirement experts on your next steps.

—By Paul O'Donnell for CNBC.
Posted 30 Aug. 2013.

Start fresh

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Recalculate how much retirement income your depleted account balances will yield (using an online calculator like this one from Bankrate.com). Then structure your new savings plan based on your current situation.

"The fact is, where you are now is Point A," said Chris Cook, a wealth manager and founder of zerocommissionportfolios.com. Pay back loans from your 401(k) or other investments that may be subject to penalties, but don't restore your old portfolio just for the sake of seeing it back at par.

Bump up your tax-deferred contributions

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If your contributions to your 401(k) or IRA are not already maxed out, boost them to the maximum allowed—$17,500 in 2013, plus an additional "catch up" contribution of $5,500 if you are 50 or older.

This may mean revising an already reduced budget—cutting back on clothing, say, or having fewer meals out—but "giving up a few inconsequential expenses now will compound over time," said Kathy Roeser, executive director and wealth advisor at Morgan Stanley in Chicago.

Pay off your high-interest debt

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If you've dipped into your retirement accounts, you've also likely hit up your credit cards. Erase that drain on your income before you reboot your savings plan. Let longer-term, lower-rate debt like your mortgage ride.

Adjust your expectations

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"You may have to rethink what retirement will look like," said Sharon Miller of Bank of America's Preferred Business unit. Postponing your retirement date may be one answer, but don't count on it. Sixty percent of retirees surveyed in a recent Merrill Edge study stopped working earlier than they had planned, largely for health reasons. Instead, examine your priorities. With your curtailed savings, you may have to give up the dream apartment in Paris in favor of putting the children through college.

Don't try to make it all back at once

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After financial setbacks, "people often swing for the fences," said Jack Vanderhei, research director of the Employee Retirement Benefits Institute in Washington. "They end up being far too aggressive in their asset allocation."

The market can return to volatility at any time, so the same rules about risk apply to your new status. Stay away from investments whose returns are too sweet to be sustained and bump up bonds' share of your portfolio as you age.

Call Social Security

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You may have more remunerative options than you think when it comes to claiming your Social Security benefits. Most people have at least five choices about when they begin the payments and how much they'll get. Make sure you are calculating your benefit properly by making an appointment with a local Social Security Administration counselor.

Rethink your real estate

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You may be tempted to refinance your mortgage to lower your monthly payment, but be sure not to add to your overall debt by absorbing new fees and restarting the clock with another 30-year mortgage.

If you're 50 or older, it may make more sense to transition to a 15-year loan. Not only will you save money in the longer run, but by the time you're 65 or 70, "you'll be debt free," said Roeser. Going to a shorter term can be a good idea even if it means downsizing to a smaller, more affordable home.

Fight the fees

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Always a good move, avoiding hidden or exorbitant fees on your mutual funds is particularly important when trying to recover from a setback. "Anything more than 2 percent we regard as too much," said Sean P. Lee of SPL Financial in the Salt Lake City area. To avoid getting tagged with an unstated fee by the person who's supposed to be on your side, Lee recommends using a fee-only or fee-based advisor.

Get help

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A financial planner or budget counselor will likely recoup more than they charge you, according to Vanderhei. Your bank or mutual fund company may even offer free retirement planning; as a last resort, consult the Internet.

"There are so many opportunities for people to get advice these days," said Miller, whose employer, Bank of America, has partnered with the web-based Khan Academy.

Have a plan for next time

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Before you do anything, set aside a few months worth of expenses in a stable, liquid account, like a money market fund, and develop a strategy for future collapses.

"Set up some rules for when equities start to fall again," said Cook, like a stop-loss plan that says you'll jump into U.S. Treasurys when the market drop hits 10 percent. "Making decisions when you are stressed will lead to bad decisions."