As long as you still have a job, investment losses don't necessarily have a big impact on your everyday life. But when you no longer have any outside income coming in -- save perhaps your monthly pittance from Social Security -- what are you supposed to do when your retirement nest egg tumbles in value?

Retirees have gotten the biggest shock of all from the bear market. Investors in their 30s and 40s didn't take nearly the same damage from falling stocks that older investors did. And even those who are close to retiring and had substantial stock holdings still have time to make up their losses by saving more.

Boosting your savings isn't an option many retirees still have. But that doesn't mean your situation is hopeless. To survive and thrive in this environment, you have to take a hard look at your current portfolio and make sure it does what you need it to do for you.

Buckling down
Unlike younger investors, retirees have already received most, if not all, of the earned income they'll ever get. If you're a typical retiree, you probably share a number of these common traits:

  • Your nest egg is already about as big as it's going to get, absent capital gains and income from your investment portfolio.
  • Unless you had all of your money outside the stock market, you saw an alarming drop in the value of the stocks you own in the past year and a half. And although owning more conservative investments like bonds and bank CDs probably softened the blow, you were counting on having that money for your living expenses.
  • Most likely, going back to work either isn't an option or won't make a huge difference in your finances. Even if you're getting a company pension on top of your Social Security payments, you may worry that your former employer might not make good on everything you're owed.

Although retirees don't have the same options that working investors do, they can still take action now to shore up their finances. Here are some tips to consider.

One of the biggest risks that retirees face is outliving their money. As life expectancies have gotten longer, those who retire at 65 have had to account for the possibility that they might live 30 years or more -- and plan their finances accordingly. Obviously, it takes a lot more money to stretch over three decades than over one.

Buying an immediate annuity can help protect you from the risk of running out of money. An annuity lets you exchange a lump sum for a monthly income payment that will last the rest of your life. The amount is based on actuarial calculations, but in simple terms, if you live longer, you benefit more from the annuity, while if you die young, the insurance company profits.

Build your own
It's that "dying young" part that many retirees hate about annuities -- especially those who want to leave their assets to their children and grandchildren. Many retirees choose instead to follow the 4% rule, by withdrawing 4% of their total investment portfolio every year.

If you want to earn that 4% without having to sell shares, you can find plenty of high-quality dividend stocks paying 4% or more. Here's a sample:


1-Year Return

Dividend Yield

Eaton (NYSE:ETN)



Exelon (NYSE:EXC)



Kraft Foods (NYSE:KFT)



Kimberly-Clark (NYSE:KMB)



Eli Lilly (NYSE:LLY)



NYSE Euronext (NYSE:NYX)



Sysco (NYSE:SYY)



Source: Yahoo! Finance.

Of course, dividend stocks have two risks: The shares may drop, or the company may reduce or eliminate its dividend. Either situation can cause big problems.

But having some of your money in stocks is worth the risk, especially now. Sure, further losses are possible -- but you also have the possibility of future gains. Historically, stocks have usually recovered strongly from large drops. And even though you can't afford to take big risks, longer life expectancies mean that you may have time to ride out hard times and profit.

Retirees have fewer options than many other investors do. But when giving up is not an option, locking in income while seeking modest growth is the best recipe to try to repair your portfolio.

Read more about a healthy retirement:

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Fool contributor Dan Caplinger will do his best never to go broke, no matter how long he lives. He doesn't own shares of the companies mentioned in this article. NYSE Euronext is a Motley Fool Rule Breakers pick. Sysco is a Motley Fool Inside Value selection. Kimberly-Clark and Sysco are current Motley Fool Income Investor picks, while Kraft is a former one. Try any of our Foolish newsletter services free for 30 days. The Fool's disclosure policy keeps on chuggin' along.