Rules of the Game: Strategizing Your Retirement Fund

About a year ago, I posted something on my Facebook page asking for suggestions about groups who may want a speaker on the topic of financial planning.

I got some excellent ideas, but one guy posted, "How do you plan for total collapse?"

That comment popped into my mind this morning when I was meeting with some clients, and we were talking about the market downturn and the Ebola scare. Like me, they have a measured approach to these events. We discussed the idea that it's better to assume that markets won't crash to zero, and that we'll survive the current health panic.

This is the first serious equity-market correction we've seen since the summer of 2011, although there was a bond-market correction last summer.

As you might have guessed by now, I'm not a fan of the big stampede into cash that some traders advocate. I'm not even going to suggest tactical allocations.

Instead, I want to encourage you to take a strategic look at not only your portfolio, but your financial plan as well.

Many of you are already in retirement, but for those who are still working, keep in mind that you have until April 15 to stash away money for your 2014 Individual Retirement Account. If you already put away your 2014 contribution, you can start saving for 2015 in January.

Even if you have maxed out your 401(k), consider contributing to an IRA -- in the traditional or Roth version. With equity markets down, it's a great time to start investing while stock prices are lower than where they were just a few months ago.

Don't forget to rebalance, either. That's harder to do if you have a random collection of stocks, ETFs and mutual funds, with no strategic direction. But we've seen strong run-ups in asset classes that include stocks, real estate investment trusts (REITs) and oil-and-gas master limited partnerships.

Rebalancing just means getting your assets back in line with your original goals. If your plan indicated that a risk exposure of 60% stocks and 40% bonds is in your best interest, and if a stock-market rally has sent that to a 65%-35% ratio, sell some stocks and buy some bonds in order to get things back in line.

Don't simply base your allocations on tired, moldy old pie charts determined by age. That model has largely been thrown out the window, because your actual recommended allocation depends on your situation, retirement income needs, total portfolio and ability to draw from sources other than your retirement accounts.

For example, I know a couple in their early 70s whose living expenses are covered entirely through pensions. They can invest more aggressively in their retirement accounts because they don't have to protect those assets in the same way as do many who are no longer working.

This doesn't mean you should sell a stock simply because it's showing gains. If a stock is still holding up technically, and if the fundamental case remains strong, you can follow the "let your winners run" philosophy. But assess your portfolio holdings by asset class, not by individual stocks. This will give you more perspective on how to manage your portfolio strategically, rather than reactively.