The financial and economic crisis of 2008 helped derail many retirement plan participants from their goals and objectives. The market decline turned stock returns for the last decade negative with the Standard and Poor’s 500 – a broad measure of U.S. stocks -- down 1% annualized over the past 10 years. At the end of the decade, many investors had come to believe that investment returns of 10% or greater would lead them to a prosperous retirement. Today, for many the reality of a lost decade has retirement plan participants feeling that retirement is no longer a goal but a dream. However, there are several steps people can take to get themselves back on track to achieving their goals.

All retirement plan participants should develop an asset allocation strategy they feel is comfortable. The proper mix of investments will lead to portfolio volatility that allows investors to weather a market downturn versus having their emotions get the best of them. A 2005 study conducted by Dalbar, Inc. found that the Standard and Poor’s 500 gained 11.9% from 1986 – 2005 but, the average investor in U.S. stock funds received a 3.9% return. Investors’ emotions of fear and greed often cloud judgment leading to poor investment results. Be certain to adopt a strategy and stick with the strategy versus adjusting the game plan based on every recent news event.

Once you have adopted an asset allocation strategy be certain to periodically rebalance your portfolio back to its target for various asset classes. For example, if you are targeting a strategy of 50% stocks and 50% bonds, and stocks do well and now comprise 60% of your portfolio; be sure to rebalance back to your 50% target for stocks. All too often investors allow the market to rebalance for them. Rebalancing your portfolio creates a disciplined process for selling what is doing well to buy what is out of favor.

Retirement plan participants also need to set an appropriate deferral rate as soon as possible. When it comes to retirement time is money. Assuming a rate of return of 7%, a 25-year-old would need to save $380 per month to reach $1 million by age 65; delaying dramatically increases the costs to $820 for a 35-year-old, $1,920 for a 45-year-old, and over $5,700 per month for a 55-year-old. Retirement is on sale today and the costs for waiting can make achieving your goals prohibitive.

Taking the simple steps of adopting an asset allocation strategy, rebalancing your portfolio to the strategy periodically, and setting an appropriate salary deferral rate to achieve goals and objectives can get you back on track towards your long-term goals and objectives.