7 Ways to Save for Retirement During a Recession

While Americans cut back, experts warn against tapping into long-term savings.

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The recession appears to be forcing many consumers to sacrifice their retirement savings.

While financial experts frown on halting 401(k) contributions—or even worse, taking money out of tax-protected retirement accounts—retirement savings can be a tempting, quick source of cash when monthly bills are looming. According to the recently released Bank of America 2008 Retirement Savings Survey, about 4 in 10 Americans say they will stay in the workforce longer than they expected to because of the economic downturn. Meanwhile, almost 1 in 5 has withdrawn retirement assets prematurely, often to pay off credit card debt and make mortgage payments.

"A significant number of Americans don't know how much they need to save to maintain their standard of living [in retirement]," says Craig Averill, personal retirement solutions executive for Bank of America. Some 62 percent of survey respondents said they were either behind schedule in terms of their retirement planning or had not yet started.

Here's a summary of the survey's top findings—and what you should do with your retirement savings in response to the crisis:

Scale back on the Gucci purchases. Six in 10 respondents said they're spending less than they were three months ago, with 3 in 10 calling their spending "sharply lower." Affluent consumers—defined as those with $100,000 to $3 million in investable assets—were just as likely to report cutbacks. Those ages 30 through 49 appear to have it worst, with 7 in 10 reporting cutbacks.

Put the money in your piggy bank instead . Even though respondents said they were spending less, they reported saving less, too, which underscores how difficult it is to put money away during tough economic times. About half of survey respondents said they were saving less than they had been three months ago, with 2 in 10 saying they were saving "much less." Averill says he thinks consumers are putting their cash toward reducing debt and paying for items that have gone up in price, such as food and, until recently, gas. Also, he says, many people are supporting adult children who have recently graduated from college and can't find jobs.

Don't expect to hang up your hat at 65. Some 43 percent of survey respondents said the current financial conditions caused them to delay their expected retirement age. Three out of 10 consumers over 50 said they now expect to retire much later than they did a year ago. Others came up with creative solutions for the money crunch: Three in 10 said they have considered working part time after they retire, and 27 percent said they have thought about moving to an area with a lower cost of living.

Don't let market swings upset your investing strategy. Two thirds of consumers say they haven't changed the way they save and invest in response to the economic climate, and Averill calls that a good thing. It suggests, he says, that they understand dollar-cost averaging, the concept that if you invest regularly in the market, you'll fare better than if you try to time its ups and downs. As for whether you should put money into safer investments in light of the volatile stock market, Averill says the answer depends on people's individual risk tolerance and how many years they have until retirement.

Don't be tempted by the cash in your retirement account. About 1 in 5 consumers has pulled money out of retirement accounts early, according to the survey. The most common reasons were to pay off credit card debt and to pay down a mortgage. Doing so not only generates penalties, but it also means missing out on any upswing in the market while the money is not invested. While paying down high-interest debt—such as credit card balances—is a priority, Averill says money should be taken out of tax-protected retirement accounts only as a last resort.

Dust off your calculator and crunch some numbers. Most Americans say they don't know how much money they need for retirement. Some 60 percent say they either have not started planning for retirement or they're behind schedule. A Bank of America retirement survey conducted back in March found that 53 percent of consumers were behind schedule or had not started, which suggests that the financial crisis has caused even more Americans to get off track.