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Getting back on the retirement horse

The Simkins family put its retirement savings on pause after the market's dive last year.

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By Yuval Rosenberg, Money Magazine contributing write

Jason and Patty Simkins, Camas, Wash.
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(Money Magazine) -- Jason and Patty Simkins, both 40, have saved next to nothing for retirement in the past year. They were rattled by the rocky market, which caused the value of their portfolio to tumble 40% at its low point.

So when Jason switched jobs last fall -- he's now a manager at a semiconductor plant, making $118,000 a year -- he neglected his new 401(k). "I didn't want to throw money into it if it was just going to be lost," he says.

The Simkins, who rely primarily on Jason's income, are happy to report that they used the cash they'd been investing to pay off their nonmortgage debt. But they're disappointed to have missed out on additional gains from the market's rebound.

Realizing they need to catch up on retirement (and, with two kids, save for college), they're ready to put a toe back in the water.

The solution

1. Feed the 401(k). Ultimately, Jason should be contributing the max annually, splitting funds between the Roth and regular 401(k)s his employer offers, says planner David Morganstern of Portland, Ore. But since he and Patty are worried about college, they could redirect some money to a 529 plan.

2. Build in some protection. The Simkins' retirement funds are 96% in stocks, too aggressive for their age. By upping their bond stake to 35%, they can reduce volatility without giving up growth, says Morganstern.

3. Eliminate redundancies. Jason may want to roll over his old 401(k) into his new one. But he shouldn't follow his old strategy -- the four funds he owned had overlapping holdings. To further reduce risk, he should reallocate into a more diverse mix.

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