Preventing 401(k) mistakes

NEW YORK (CNNMoney.com) -- It's been a rough ride for investors this year. You may be thinking about putting the brakes on your 401(k) contributions. But there are better ways to protect your retirement.

1: Look at the Big Picture

The stock market is bound to have downturns. And while the Dow is down about 4% since the beginning of the year, there have been much steeper drops.

There was a 23% drop in October 1987 when the stock market crashed. The Dow was down about 38% in between 2000 and 2002. And the market had a one-day tumble of over 680 points the day the stock market reopened after September 11.

And considering this huge declines, the market has always come back over time.

2: Don't invest with your emotions

"People get out of stocks when the market has fallen," says Frank Boucher of Garrett Planning Network. And they get into the market when it's already made gains.

That is not the way to make money. In fact, you'll probably lose money. The annual return between 1986 and 2005 on the S&P 500 is about 12%. But the annual average investor return is 4% for the same amount of time. Clearly, those people who chase the hot stocks and sell in a panic don't reap the rewards.

If you really want to make money, you need to buy when stocks are cheap and sell when they're higher. There are some folks who stop contributing to their 401(k)s all together. If your funds are going down, continuing your contributions is a good idea.

"If the market is falling, you're buying investments that are on sale," says Boucher.

3: Develop your risk tolerance

There are a lot of tools out there that can guide you. But first, you need to figure out how much risk you want in your portfolio. Go to finance.cch.com and look for an asset allocation calculator. You can also check out cgi.money.com/tools.

If you think you have a lot of your investments in stocks, like big cap companies, and you want to change that, restructure your allocation slowly over a few months. And you want to stay on top of your asset allocation at least once a year. Make it a point to pick a certain day of the year to revisit your allocation to make sure it's still in line with your retirement goals.

4: Get advice

There is a huge reluctance out there to ask for advice. If you're not sure you're saving enough for retirement, or you want guidance on what kind of investments will work best for you, consider hiring a financial consultant. You may also think about hiring a fee-only financial planner.

To find one, check out the Garrett Planning Network at garrettplanningnetwork.com or the National Association of Personal Finance Advisors at Napfa.org.