Just a short time ago pensions were of the defined benefit variety whereby the employee was guaranteed a certain monthly amount for life, and the employer took all the risk in the investment of funds to provide that pension. Then thanks to Reaganomics and the "Ownership Society" almost everyone (with their acquiescence) was converted to 401ks for which the individual employee has the great pleasure of assuming all the risk of his or her pension themselves.
Now we all get to succeed or fail with our pensions as the stock market crests or tanks. Individual anxiety has replaced peace of mind. But a secure retirement as a reward for working 30 years is not based on free market principles. Instead of corporations taking the risk for its retirees, it's a far better solution (for the corporations) for individual employees to take all the risks. And we've all fallen for the ploy that the stock market is our friend and will net us a far heftier retirement than we would have had with a stodgy old defined benefit plan. Now we have a defined contribution plan that guarantees us absolutely nothing in retirement if it's invested in the stock market.
If we are all to take responsibility for our own retirements, then we shouldn't be invested in high risk environments. Anyone invested in the stock market these days who is not a "player," should realize that the extreme volatility makes it unlikely that the plodding investor will ever get anything out of it. The player makes money off the volatility. He makes money when the market goes up; he makes money when the market goes down. And if you're a 401k investor, he's playing with your money.
The first thing to realize is that we've been sold a bill of goods by going along with the conversion from defined benefit pension plans to 401ks. (By the way our good Congress persons and most people in the military-industrial complex still have defined benefit plans.) The second thing to realize is that we've been sold a bill of goods that we should invest our retirement savings in the stock market. It has just been a bonanza for financial product purveyors and those with seats on the trading floor because now they have your money to play with.
Instead, put your money in CDs and rent producing real estate. I hear there are some great bargains out there (foreclosures? immediate postive cash flows from Day 1 anyone?). Although real estate can fluctuate up and down, if you have a positive cash flow from rent, fluctuation of the underlying asset doesn't really matter. Rents have remained remarkably stable throughout the latest financial crisis. If anything, they are only going up as more former homeowners become renters. And as a final note renters did just fine during the runup in house prices during the late housing bubble. Rents did not rise commensurately with housing prices. You could rent the same house for far less than the monthly mortgage payment you would have had if you bought it. So why were people willing to pay far more in monthly payments to own rather than to rent? Because the value of the house, the equity, was going up so rapidly. Unfortunately, after the runup came the crash and an actual loss of equity. It is not hard to understand why, then, it made far more sense to become a renter rather than an owner, especially if you put nothing down, and to walk away from your mortgage.