Investments that turn bad happen to the best of us. The only option is to switch to your backup plan. Retirement nest eggs have shrunk to the point that some can no longer rely on them at all. What to do now? You've heard it before, but cut debt, reduce spending, and save, save, save. Many close to retirement will end up having to work more years than expected.
Some may even need to downsize their homes. Your backup plan should look at every possible area of your finances and think from a fresh perspective to regain some control over your retirement nest egg. A large number of people have already cut back on eating out, entertainment, less frequent credit card use, less expensive groceries and household items.
Some have even paid off their credit cards entirely to help weather the storm and prepare for rebuilding a nest egg without large amounts of debt. Your situation will guide you as to how much you need to cut back. You may need to simply adjust your retirement goals to get within a more realistic situation. Retirement investments have been hit hard by nearly everyone. Some of have lost 20 percent or more of their retirement funds with optimism over the future continuing to shrink. A majority of those preparing for retirement claim that their financial situation is worse off than 1 year earlier.
With these dire circumstances, saving for retirement seems like an impossible situation to be in, especially if you are close to retirement. Your backup plan should be setup to prepare you for a worst-case scenario. While the current economic conditions are close to worst-case, most retirement savers have not planned for recessions of this magnitude.
During good economic times one may find planning for bad economic times as something in the future, nothing to worry about too much. But with retirement funds dwindling before investors' eyes, better preparation is always a wise move. Stocks will come back, but the length of time until recovery depends on how long and severe the recession becomes. In the meantime, you need a plan to go forward with. We have gathered some useful information to help you begin to take control of your financial situation.