What you can do

Stay in the market

With time on their side, young workers such as the Pazes can afford to allocate stocks more heavily, ratcheting slowly downward as they age. Indeed, with stocks at their lowest levels in years, long-term investors with guts can bag some bargains now.

Their planning for retirement should include regular contributions to an employer-matched tax-deferred retirement plan at work. Workers in lower tax brackets can also consider tax-advantaged Roth 401(k) or IRA accounts. Maximize returns by investing in funds with no fees and low expenses.

Fund retirement before college

It's never too early to begin saving for your children's education, but you shouldn't put all available cash there. Experts recommend giving priority to retirement saving. You can always borrow to pay for college, but not for retirement.

Pay down the mortgage

In the past we've advised against prepaying your mortgage in favor of making regular investments in an index fund. But in this environment, paying down a home loan might offer better returns than many other investments. Because of the tax deduction, a 6 percent fixed-rate mortgage actually costs a homeowner in the 28 percent tax bracket about 4 percent. That's your return on money you put toward paying down your mortgage, and it's certainly higher than recent stock market performance and somewhat higher than current after-tax returns of a five-year CD.

Adding just $50 to the monthly payment on a $200,000, 30-year fixed-rate mortgage at 6 percent can shrink the mortgage duration by about three years and save almost $28,000 over the life of the loan (not accounting for tax deductions). Bloomberg.com has a calculator (www.bloomberg.com/invest/calculators/mortgage.html) that will help you assess prepayment savings.

Start early and diversify

Survey respondents who said they started saving in their 20s and 30s were far more satisfied with their retirement prospects than were those who started later. They also reported higher net worth, though we don't know how much of that came from retirement savings. Diversifying savings vehicles also affected satisfaction with retirement plans. Those who used six or more—401(k)s, IRAs, taxable accounts, home equity, CDs, and real estate, for instance—were more satisfied than those who used three or fewer ways to save.