8 ways to start rebuilding your retirement savings

Your emotions might be telling you something different, but the money you have already invested in the markets should probably stay invested. You have plenty of years ahead of you before you retire, not to mention as many as 30 years in retirement. That's a long time to recoup your losses and rebuild your savings. Here are some practical steps to consider as you work with a professional financial advisor:

1. Make sure you have an emergency fund.
You need a solid financial cushion that you can rely on in case of a job loss or other emergency. Conventional wisdom is to set aside three to six months of living expenses, but in today's economy you might want to save even more.

2. Don't give up on your 401(k).
If you're already investing in a 401(k) plan, keep contributing. If you're not investing, you should start, because the risks of being out of the market are high. Why? Because stock prices are low and missing just a few of the best days in the market can have a significant impact on your returns. And you don't want to miss out on any matching contributions from your employer. That's free money that can add up quickly.

3. Keep investing in your Roth IRA.
Your Roth IRA not only offers the potential for tax-free growth and retirement income, but it allows you to withdraw your contributions (but not your earnings) without penalty at any time. Having this type of flexibility in today's economy is a smart move.

4. Revisit your diversification and your risk tolerance.
Even well-diversified portfolios felt the effects of the market downturn. That was because nearly all types of assets faced similar levels of declines. However, portfolio diversification remains an important long-term strategy. Meet with an advisor at least twice a year to talk about how you're feeling about risk and to allocate your assets accordingly.

5. Consider refinancing and invest the monthly savings.
Interest rates are at historical lows, so now may be a good time to secure a low, fixed-rate loan to reduce your mortgage. Refinancing could leave you with more money to invest or add to your cash reserve.

6. Prioritize retirement over college savings.
You may be feeling conflicted between your need to save for retirement and your desire to invest for your child's college education. But it's important for both you and your child that you prioritize your own long-term financial security.

7. Don't give up on real estate; you can still build wealth in a home.
It's still a good strategy to build equity in your home as a complement to your retirement savings. With depressed home prices and low interest rates, this could be a good time to buy, especially if you plan on staying there for at least five years. If you're a first-time homebuyer, you may be eligible for a tax credit of up to $8,000 for homes purchased on or after January 1, 2009 and before December 1, 2009, under the recent economic stimulus plan. To qualify, neither you nor your spouse may have owned a primary residence in the three years prior to your purchase.

8. Don't leave old 401(k) plans unattended.
Keep a watchful eye on all of your retirement accounts, including any 401(k) plans you may have left with a former employer. Move those assets into a Rollover IRA, where you and a financial advisor can attend to them properly.

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