4 of 5
Age: 50s
Age: 50s
Your conundrum:
A badly battered nest egg. The market will probably rebound before you retire, but how do you make sure you're protected against another downturn?

Shocking fact:
Seemingly seasoned investors still make rookie mistakes. Given the option, 40% of 401(k) participants in their 50s keep more than 20% of their savings in unrestricted company stock. That's a dangerous snare for anyone, but even more so for people nearing retirement.

Catch-up plan:
Once you hit 50, you're allowed to make catchup contributions. Starting in 2009, you can put away an extra $5,500 into your 401(k) every year (raising the ceiling to a total of $22,000 per year). Fewer than 20% of eligible participants take advantage of that option, according to Vanguard, even though it can be a big boost to savings in the home stretch.

Getting caught in a bear market. Create a cash cushion within your 401(k) so you aren't forced to sell stocks if you retire into a downturn. Charles Schwab's Dean Kohmann recommends shifting 5% to 10% of your balance into short-term bonds or cash vehicles two years before you plan to retire.

Bottom line:
Most 401(k) investors tend to leave their portfolios on autopilot. But in the decade before retirement, it's more important than ever to make sure you're controlling for risk and positioning your portfolio to ride out any rough patches.

NEXT: Age: 60s
Last updated December 12 2008: 12:03 PM ET
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