So what should you do in 2009 to make your portfolio and overall financial picture better? Here are some general ideas to employ as markets and economies hopefully stabilize in the New Year:

Start with a plan (or review an old one): If you’ve worked with a financial planner in the past, now is a good time to review your plan to make sure you are still on track to meet your goals. If you haven’t worked with a financial planner before, or if you haven’t prepared a financial plan before, it might be time to meet with a Certified Financial Planner™ to create a plan. Much of the riskiest investing, overbuying and panic selling during the late 1990s and early 2000s could have been avoided if individual investors had sought advice for achieving long-term specific goals such as retirement or a college education.

Check all your assets in banks: As a result of federal economic bailout legislation, the Federal Deposit Insurance Corporation (FDIC) temporarily raised the per-deposit account, per bank coverage level from $100,000 to $250,000 through Dec. 31, 2009. Certain retirement-related accounts carry $250,000 of FDIC coverage, but again, check in with your bank to make sure you’re covered, and if not, get the right advice for moving funds so you don’t incur an unexpected tax liability or fees.

Review your risk tolerance: Having a plan doesn’t mean make the plan and leave it to sit for years. You and your planner should decide when it’s time for a review of your investment goals and your feelings about them. An annual conversation makes sense if nothing’s going on, but when unusual circumstances in life or the markets take place, a phone call might be a good idea.

Prepare to stay invested: Stock downturns are always filled with panic selling – and buying. If your financial plan is sound, be prepared to stay the course, but work with your advisor to make sure you have your priorities covered. While times are tough, it’s wise to examine all your investment choices, but if they make sense, definitely put what you can afford in. You’ll reap rewards when the market returns.

Check your credit: No one knows how long it might take to unravel the nation’s current credit situation. That’s why creditworthy individuals might want to delay looking for new lines of credit until things loosen, and it’s definitely a good time to schedule review of each of your latest credit reports at staggered intervals throughout the next year. Why? Because in tough economies and times of tight credit, identity theft might be on the rise, and you’ll need to make sure the information on your credit data is truly your own.

Pay attention to your cash: You should have an emergency fund of three to six months’ worth of living expenses in case your job situation goes south, but the market turbulence we’ve experienced also highlights the need to be somewhat liquid in your investment positions so you can take advantage of certain opportunities. Not every investment that’s lost value is necessarily a bad investment, and with careful study, you should be able to have cash on reserve so you can capitalize on legitimate opportunities.

Re-budget: It’s a good time to make a budget or re-assess the one you have. Though the federal government would love for consumers to start spending again to lift the economy, that doesn’t mean you have to jump in with both feet. Keep your spending smart, your debt low so it’s easier to set savings and investment priorities that will do you the most good when the economy and the market come back.

Check your retirement: How will the activity in the market affect your retirement timetable? You might want to continue working full-time or plan a phased-in approach as you continue to build assets. There is a great danger now that people may become either too risk-adverse or assume too much risk in planning for their retirement, and that’s why it’s wise to get advice.

December 2008 — This column is produced by the Financial Planning Association, the membership organization for the financial planning community, and is provided (and edited) by Kristine McKinley, a local member of FPA.

Here’s what Walter Updegrave with Money Magazine has to say about this:

But as understandable as the urge may be to transfer all your money into the investments that seem safest – stable value funds, capital preservation funds, money market funds and the like – that would be a mistake.

Yes, you have the option of switching back into stock and bond funds later on. But getting the timing right is difficult, if not impossible. You could easily end up missing the early stages of a market rebound, which would make it even harder for your 401(k) to regain lost ground.”

Updegrave goes on to say that now may be a great opportunity to take a more comprehensive review of your retirement planning strategy.  While you should review your retirement plan on a regular basis anyway, it’s even more important after a bad year like 2008 to make sure you’re still on track to retire on time.

Updegrave has three retirement resolutions for investors for the new year:

Resolution #1: Kick up your savings a notch

For example, if someone 35 years old who makes $40,000 a year and gets 3% annual raises contributes 10% of salary to a 401(k) that earns 7% a year, that person would have $535,000 by age 65. But if the markets whack that 401(k) for a 25% loss on the eve of retirement, its value would fall to just over $400,000, requiring this would-be retiree to significantly scale back his retirement lifestyle or postpone retiring altogether.

But if this person had socked away just two percentage points more a year, or 12% of salary, he’d have a 401(k) worth about $642,000. That same 25% hit would drop his account’s value to roughly 482,000. While still a big loss, he might be able to retire on schedule by scaling back his spending a bit rather than postponing retirement altogether. Or he might not need to put off retiring for as long.

The point is that by saving more during your career, you’ll end up with a larger nest egg than you otherwise would, which gives you more maneuvering room if the markets turn against you or, for that matter, if you find you’re forced out of the workforce sooner than you would like.

Resolution #2: Create an actual retirement plan

Clearly, there are lots of moving parts here, so you can’t nail down all these variables with decimal-point precision. But you can make reasonable estimates. You can then fine tune your planning as your circumstances change and as you near retirement (and even once you begin living it).

Resolution #3: Resist the impulse to overreact when the markets go haywire

This is probably the hardest resolution to keep. The point of having a comprehensive plan is to set you on a course that can lead to a secure retirement even though the economy and financial markets will go through major upheavals along the way.

You can’t predict these ups and downs in advance or insulate yourself from them entirely. But a plan based on reasonable savings and realistic investing should allow you to roll with the economic punches and improve your chances of reaching retirement with the resources you’ll need.

The problem is sticking with the plan. When the markets take a dive as they have over the past year, there’s a natural tendency to feel you must take quick action to protect your nest egg. The same impulse to act arises when the markets soar to absurd heights as they did in the late 90s. Unfortunately, following these urges usually leads to trouble. It makes us more apt to invest too conservatively after a market setback and more likely to take on too much risk when the market is approaching unsustainable highs.

So once you’ve gone to the trouble to create a plan, don’t be so quick to dump it. Review it? Sure. Maybe you were overconfident when you originally set your stocks-bond mix, in which case you might want to re-think your asset allocation and re-assess how much you should be saving.

But if you abandon your plan whenever the economy slumps (or soars) or the stock market crashes (or takes off), then you don’t really have a plan at all. You’re winging it, which is the same as entrusting your retirement security to luck.”

You can read the complete article here: http://money.cnn.com/2009/01/05/pf/expert/retirement_resolutions.moneymag/index.htm?postversion=2009010609