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The Good News: Strong Market Returns Have Buoyed Retirement Accounts

The Dow has already made up for its bear market losses. In fact, major indexes have more than doubled in value since 2009.

Getting to a Happy Place
In the wake of the financial crisis, investors pulled hundreds of billions of dollars out of stocks. But after significant market gains earlier this year, money has poured back into stock mutual funds—the most common way to invest in a 401(k). Think about it: Even if you plan to retire soon, you'll need some of your money to last for another two decades, and stocks offer the best chance to make inflation-beating gains. With that in mind, you may find it easier to accept the short-term volatility associated with equities.

As a general rule, the percentage of stock in your portfolio should equal your age subtracted from 100 or 110 (if you're 35, that means 65 or 75 percent). Make sure to check your allocation once a year. If your portfolio falls in value, buy additional shares to stay close to your target. If your stocks end up being worth more than your ideal allocation, trim back a bit. That might sound counterintuitive, but it's fundamental to successful investing: Buy low and sell high.

The Good News: You Can Save More for Retirement and Take Advantage of Roth 401(K)s

In 2013 you're allowed to set aside up to $17,500 ($23,000 if you're at least 50 years old) in a 401(k)—a $1,000 increase from just two years ago. What's more, nearly half of employers now allow contributions to a retirement plan on an after-tax basis through Roth 401(k)s (which means future withdrawals will be tax-free), and many include conversions from traditional 401(k) accounts.

Getting to a Happy Place
You probably don't think you need to save more for retirement, and that's a mistake that could haunt you. I recommend that you withdraw only 4 percent of your total savings the year you stop working. (You could always increase that percentage over time, but starting low ensures you won't outlast your income.) If you have $500,000, for example, you could take out $1,667 a month for 25 years. You'll also have Social Security, but the average monthly payout is only about $1,150. Those of you who work in the public sector may also have a pension, but that kind of benefit has become rare. The bottom line is, you'll need a lot more money than you expect to retire with confidence.

The next time you receive a raise, immediately save two-thirds of it. If it's a 3 percent bump, increase your 401(k) or IRA contributions by 2 percent. You won't miss that money if you never see it in your paycheck.

And by all means, try to make new contributions into a Roth 401(k) if your employer offers it. That's a no-brainer if you're just starting out and not earning much money; you'd lose very little by forgoing the tax breaks that come with a traditional 401(k). Work with an accountant if you plan to roll an existing 401(k) into a Roth, though; you'll owe tax today on any amount you convert.

The Good News: Unemployment Is Falling

Yes, we still have a long way to go. But after reaching 10 percent in 2009—a 26-year high—the jobless rate has slowly inched its way back down to 7.5 percent as of May.

Getting to a Happy Place
I hope everyone has learned one big lesson from the financial crisis: how important it is to save for emergencies while you have consistent employment. In a 2012 bankrate.com survey, 28 percent of respondents said they had no money set aside, and another 21 percent said they had less than three months' worth of living expenses saved.

As you start to receive regular paychecks again, focus on building an emergency fund that could help you survive eight months without an income—that's the foundation of your financial security and, ultimately, your happiness.

Suze Orman's latest book is The Money Class: How to Stand in Your Truth and Create the Future You Deserve (Spiegel & Grau).

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