I recently had a chance to talk to Mike Alfred. Back in 2003, he became an independent registered investment advisor. But over time, he realized there was a big void -- that is, in terms of useful information on the 401(k) market.

Could this be a big opportunity? Well, he wanted to find out. So, he helped to start a new online web service for 401(k)s: BrightScope. In fact, the company recently raised $2 million in capital from Steelpoint Capital Partners.

Academics, being a privileged and rarefied lot, almost by second nature consistently look down the field.

Hey, it's what one is supposed to do when one has lifetime job security and is freed of many of the burdens that occupy most others in the American workforce.

For the above reasons, and others, academics tend to see things others don't. Case in point: the slumping stock market, the U.S. recession, and decidedly less-cash-flush credit markets.

I've got bad news for the 30,000 participants in Dell's (NASDAQ: DELL) $1.6 billion 401(k) plan. They're going to have to work another ten years to earn up to $202,000 in lost retirement savings, compared to the participants in the top-rated plan in its peer group.

Dell's plan isn't all that bad. It's about average.

It took me ten seconds to get this information. How did I do it?

This post is part of our feature on Money Losers of 2008. See all 20.

If there could be a more cruel joke played on the downtrodden American middle class this year, I don't know what it could be. Battered by high gas prices and a punishing mortgage climate in which millions lost their homes, at the end of the year, many were laid off. Desperate in a period of high unemployment, millions are turning to their 401(k) plan for emergency funds. And that's where the true emergency is.

My 401(k) lost about 40% of its value in only a few terrible months this summer and fall. I didn't have much to lose; I'm only a drop in a trillion-dollar bucket, with losses in the NYSE alone at $8.6 trillion for the year. In January 2008, the NYSE opened at 9,647 points, a value of $19.7 trillion. By mid-December, the NYSE was hovering around 5,500 points, a value of $11.1 trillion, an enormous 43.7% decline.

Taking an early distribution from my 401(k) due to a period of depressed income (I'm now a freelance writer and not an "employee," a title so imbued with special status in our society), I had to laugh at the automatic calculator that the Fidelity Net Benefits system makes you undergo in order to request a distribution, showing me how much I would be losing from my retirement income. If only someone could have made me go through this little exercise when I was responsibly socking away cash in stock index funds -- "this is how much retirement money you can lose if you trust in the American economy!" -- perhaps I'd have saved the time to log into Fidelity and just stuck the money in savings instead. I had to laugh -- so I didn't cry.

I don't mean to pile on. I know looking at your 401(k) statement is so painful these days many employees don't bother to open it.

History tells us that markets recover over time. Your 401(k) will increase in value, but it will still be far short of what you will need to retire. Why?

Because of hidden costs that enrich 401(k) providers. These costs are totally unnecessary and could be easily eliminated if only your employer cared enough to do the right thing. Most don't.

There is no end of research indicating that index funds outperform funds that try to "beat the markets." I call these funds "hyperactively managed funds." Index funds are also far less expensive.

While "less expensive" is good for employees, it is bad for brokers and advisors to these plans because it deprives them of excessive fees. The porky pig fees in most 401(k) plans include undisclosed trading costs, the payment of excessive brokerage commissions, the practice of subsidizing record-keeping services with high fund management fees and the payment of marketing fees for selling the high-cost funds in the plan, among many others.

Welcome to Way Off Wall Street, a column dedicated to providing Main Street opinions on topics of interest to investors. Each installment highlights the views of Americans who are far removed from the canyons of Wall Street -- and who often see things more clearly as a result.

I've spent a good deal of time researching and soliciting opinions about how people are looking at their own retirement in relation to the American economic downturn. Many people are looking at retirement with the same mind-set that they've always had. In many cases, I found people believe that our economy will recover rather quickly. In others, I suspected they are intentionally blinding themselves from the truth that this could be a very long economic downturn.

Since today's retirement realities is such a big topic, I'm going to discuss it over two posts. This first one concerns the group of people who either have already retired, or expect to retire within the next five years. My next column will cover people who have more than five years until retirement, as well as those people who believe that the word "retirement" will never truly apply to them (I myself fall into the latter part of the second group).

On a day when the Dow Jones industrial average closed down 400 points, you may be asking yourself, 'What can I do to make myself feel better about this?'

Charles Schwab Corp. (NASDAQ: SCHW) has an idea for you: Invest more for your retirement.

Here's how the logic goes, and I agree with it (even though, of course, it is good marketing for Schwab to promulgate such ideas).

The discount broker has found in surveys that most people (63%) say they sleep better at night when they are saving for retirement, yet many people save very little for retirement each year. They also found that people save for vacation or household items before they max out their retirement plans. And most people are positively drowning in credit card debt, probably because they made those purchases and took those vacations before they'd actually saved the money (that's my sophisticated analysis there, not survey results).

Here is a frightening statistic: about 63% of people with retirement accounts have stopped contributing to them. That little nugget comes courtesy of a recent survey conducted for TD Ameritrade (NASDAQ: AMTD).

Half of those who stopped contributing to their retirement accounts cited "financial strain due to the economic downturn." Another 32% cited unemployment, while 25% mentioned health care costs, according to a company press release. Of those polled, 34% had less than $50,000 in investable assets.

Many of the people who've quit or curtailed contributing -- nearly one in four -- are aged 35 to 44, which should be prime earning years. I am not going to bore you with financial planning 101, but the earlier you start to save (absent a market meltdown), the better because over time the stock market is your friend. Lately, though, it has not been much of one.

Mulling over this survey got me thinking that whoever is elected president is going to face the gargantuan challenge of rebuilding the financial security of millions of Americans who are being forced to push back their retirement plans or who have mortgages they can no longer afford. It's going to take years for people to rebuild their nest eggs and undo the damage they have done to their credit by over-extending themselves. Many people may never be able to return to their former lifestyles.

Of course, that may not be such a bad thing. If this crisis has taught us anything, it's that people need to live within their means.

This post is a follow-up to an earlier post by retirement expert Dan Solin on what you should do with your imploding 401(k) plan.

If you are retiring in ten year or less, I can understand how worried you are about the value of your 401(k) investments. Many employees tell me they can't bear to look at their statements.

Here's what to do if you are going to depend on your 401(k) for living expenses when you retire.

In the investing world, ten years is a long time horizon.

I looked at 481 monthly rolling ten year periods over fifty years, from January, 1958 to December, 2007. If you were fully invested in a globally diversified portfolio of stocks during that time period, how many ten year periods do you think you would have had negative returns?

How about never!

The average annualized returns of this portfolio were over 13%. The lowest returns were still over 5%.

I appreciate that historical data is not predictive of future returns and it may well be that it is "different this time," but those are pretty impressive facts.

If you are persuaded by this data, the asset allocation of your 401(k) should have 70%-100% stocks with the balance in bonds.

As retirement nears, you will have to make adjustments to your asset allocation, because your tolerance for risk will diminish. Here are some good rules of thumb.

When you are seven years from retirement, reduce the stock portion of your 401(k) to 60% or less. The average annualized returns for this portfolio were in excess of 10%. The worst returns were in excess of 2%.

When you are five years from retirement, reduce the stock portion of your 401(k) to 35% or less. The average annualized returns for this portfolio were in excess of 8%. The worst returns were in excess of 3%.

If you have less than 4 years from retirement, you have a dilemma.

The only way to keep pace with inflation and taxes is to have some exposure to the stock market. Many pre-retirees and retirees are understandably concerned about market volatility. They invest in "risk-free" investments like insured CDs and Treasury Bills. These investments currently pay low interest rates, virtually guaranteeing a loss after inflation and taxes.

Many financial planners believe that pre-retirees and retirees should have at least 35% (or more) of their portfolios invested in stocks at all times.

If you follow this advice, remember that you may have to hold on during stomach-churning bear markets like the one we are currently experiencing.

Dan Solin is the author of The Smartest Investment Book You'll Ever Read (Perigee Books 2006) and The Smartest 401(k) Book You'll Ever Read (Perigee Books, June 24, 2008)

For the fifty million Americans with 401(k) plans, these are troubling times. The turbulent markets and steady stream of really bad news have caused assets in these plans to plummet.

So what should investors do to protect their retirement nest eggs?

This question, endlessly debated by financial pundits, indicates a fundamental misunderstanding of both 401(k) plans and investing.

By their very nature, 401(k) plans are long-term investments for the vast majority of those who have them. Distributions cannot be taken without penalty until you reach age 59 and a half.

The focus of plan participants should not be on what happened to the value of their plan assets on Monday. They should be concerned with the money in their plan when they will start taking distributions from it. For a 35 year old, this is more than two decades into the future.

Speculators react to short-term volatility by buying and selling. Long-term investors focus on their asset allocation and staying the course.

If you have the right asset allocation, and you are properly invested, the current unstable market conditions should not cause you to stray from your course.

This post is part of a series where personal finance expert Dan Solin looks at money moves that may seem smart in tough economic times, but are actually quite dumb. See all 12.

Rising gas and food prices, the disappearance of home equity, downsizing by large and small employers and a credit crunch are a perfect storm for cash-strapped investors. Many are tempted to tap into low-hanging fruit: their 401(k) and 403(b) plans.

Is this a good idea?

Other than as a last resort, this answer is "no."

Even in good times, the number of employees who cash out of their retirement plans is alarming. More than 45% of departing employees cash out of their 401(k) plans.

The consequences of doing so are draconian.

This post is part of a series where personal finance expert Dan Solin looks at money moves that may seem smart in tough economic times, but are actually quite dumb. See all 12.

It is a tough time for participants in 401(k) plans. They dread opening their statements and seeing their declining account balances.

Is this the right time to move your 401(k) funds into more conservative investments?

The answer is a resounding "no"!

Your 401(k) plan is intended to fund your retirement. You cannot access it without penalty before age 59 1/2. By definition, for most employees, it is a long-term investment.

By switching into a portfolio that is too conservative, you are compounding the problems inherent in a system that is already rigged against you. Most 401(k) plans charge excessive, indefensible fees and have poor, under-performing, investment options. The primary beneficiaries of these plans are employers (who offload the cost and responsibility for securing the retirement of their employees) and the mutual fund industry (which gouges the $6 trillion in assets in these plans with unconscionable fees and expenses).

This post is part of a series where retirement expert Dan Solin offers simple answers to the ten toughest retirement questions. See all 10.

Q: How should I proceed to withdraw funds I need in retirement?

A: Once you have retired and need to start tapping into your retirement savings, you have a number of options to consider.

You can take a periodic or lump sum check from your 401(k) or similar plan. Or you can rollover your plan into a traditional or a Roth IRA or into an annuity. Each of these options has tax consequences which you should discuss with your tax advisor.

The first place you should look when considering where to start taking withdrawals is the account that will trigger the least taxes.

For example, withdrawals from your Roth IRA will be tax free because you invested with after-tax dollars. While you are still in a higher tax bracket, withdrawing money from your Roth IRA or other non-taxable assets is sound financial planning.