Rebuild your nest egg

17 moves to secure your future now

Golden egg put together with building blocks
Illustration by Christoph Niemann

When bad investments happen to good people, there's only one thing to do short of weeping: Turn to Plan B. That's where most of us are now. We're viewing the shards of our broken retirement nest eggs and making choices we'd hoped to avoid. We might have to work harder to slash debt, cut spending, and save more.

We also might need to continue working longer than we had expected and to change our living situation. Plan B means seizing the reins in every area of our finances over which we have control.

Most investors can take some of those steps, and many already have, according to a survey of our online subscribers, ages 55 to 75, by the Consumer Reports National Research Center. Half of survey respondents close to retirement said they're eating out less, and almost half said they have cut back on entertainment. About a third have used their credit cards less and cut spending on groceries and household goods. About 20 percent have paid off most or all of their credit-card debt.

And no wonder. Fifty-one percent of retired readers and 55 percent of those just short of retirement reported investment losses of 20 percent or more between November 2007 and November 2008. Most of those losses occurred last fall. Two-thirds of respondents were pessimistic about the prospects of recovery in the next 12 months. Two-thirds said they were worse off financially than they had been a year before.

Brittney Saks, a personal financial specialist and partner with PricewaterhouseCoopers Private Company Services practice in Chicago, says she tries to give her clients advice on dealing with worst-case scenarios. "Ninety-five percent of the time, you'll be fine," she says. "But right now we are in that 5 percent."

No doubt stocks will come back. People who held on to their investments after Black Monday in 1929 and through the Great Depression did recover their money, but it took about 25 years. No one can accurately predict whether the current financial funk will be as dire or last as long.

So in this report, we outline 17 actions you can take now, whether you're already retired or are close to retirement, or you have decades to go. And we pinpoint the best places to stash a cash cushion against more bumps in the road.

Posted: January 2009 — Consumer Reports Magazine issue: February 2009