WASHINGTON (AP) -- Americans' retirement plans have lost as much as $2 trillion in the past 15 months -- about 20 percent of their value -- Congress' top budget analyst estimated Tuesday as lawmakers began investigating how turmoil in the financial industry is whittling away workers' nest eggs.

The upheaval that has engulfed financial firms and sent the stock market plummeting is also devastating people's savings, forcing families to hold off on major purchases and even delay retirement, Peter Orszag, the head of the Congressional Budget Office, told the House Education and Labor Committee.

As Congress investigates the causes and effects of the meltdown, the panel pressed economists and other analysts on how the housing, credit and other financial troubles have battered pensions and other retirement funds, which are among the most common forms of savings in the United States.

"Unlike Wall Street executives, America's families don't have a golden parachute to fall back on," said Rep. George Miller, D-Calif., the panel chairman. "It's clear that their retirement security may be one of the greatest casualties of this financial crisis."

More than half the people surveyed in an Associated Press-GfK poll taken Sept. 27-30 said they worry they will have to work longer because the value of their retirement savings has declined.

Orszag indicated the fear is well-founded. Public and private pension funds and employees' private retirement savings accounts -- like 401(k)'s -- lost about 10 percent between the middle of 2007 and the

Market turmoil leaves investors wondering whether lessons about risk still apply.

A financial crisis being described as the worst since the Great Depression has left investors thinking far beyond the realm of whether it's time to buy or sell.

No matter how close they are to retirement, many are considering getting out of the stock market entirely by shifting to cash or even gold, believing the market is so shaky they're willing to take the potential tax and inflation erosion they'll suffer from a quick pullout.

Others are staying in, even after this year's 14 percent decline to date in the Dow Jones industrial average has eaten away at what they had thought were safe portfolios.

"Right now, it is just a loss on paper. If I pull out now, it becomes an actual loss," says Deborah Allen, a 51-year-old administrative assistant at a Royal Oak, Mich., school district who's trying to protect a nest egg she's relying on to take early retirement next year.

Allen has about $50,000 in a retirement account, known as a 457 plan, that she plans to use in early retirement until she can draw pension benefits at age 55. But despite a conservative investment mix, the account has shrunk this year in a falling market.

"The money that I thought was going to be there isn't there, so I'm going to have to really look closely over how I'm handling my money for at least the next year," she said.

Many others are cutting back on expenses or considering delaying retirement -- the primary aspects of

After years of hard work, you've decided to call it quits and retire. But before waving goodbye to your colleagues, you'll want to plan an exit strategy. A smooth transition requires more than just figuring out how to survive without a steady paycheck. You'll also need to figure out how to cope with the emotional impact of forgoing a routine you've followed for most of your adult life. "One of the biggest challenges in retirement is really staying engaged," says Tom Nelson, chief operating officer of AARP in Washington. Here are some steps to pave the way to retirement:

Create a health-care fund. If you don't qualify for Medicare, set aside enough money to cover the cost of health insurance, even if your employer offers health plans to retirees, advises Drew Denning, vice president of the retiree-services division at Principal Financial Group Inc. "It's not a vested benefit like a company pension plan, meaning a company can retract that at any point in time," he says. Also, get a physical before your current health-insurance plan expires, says Mr. Denning. Since some providers deny coverage to high-risk individuals, you'll want to know if you fall into this category. If you do, consider staying on the job a little longer to "mitigate the significant risk of a huge health-insurance claim," he advises.

Develop a long-term budget. Determine how much money you'll need on a monthly basis for as long as 40 years from now, says Sandy Timmermann, director of Mature Market Institute, a research division at MetLife Inc. People "are focused on how much money we can accumulate, but not a great deal of

Seeing your portfolio shrink can be tough so close to retirement, but you should still be investing for the long term.

Question: I’m 58 years old. At the beginning of June, my 401(k) was worth $482,000 and now it’s worth $430,000. How can I stop the bleeding? —John, Tyler, Texas

Answer: If your goal is simply to staunch the bleeding, the answer is simple. Just move all your money into your 401(k)’s money-market option. That will pretty much assure that your account balance will fall no further.

But I don’t think that should be your goal.

Why? Well, if you keep your money in your plan’s money-market option (or any guaranteed-return investment, for that matter), you’ll be relegating your retirement stash to a mediocre long-term return, which means that your nest egg isn’t likely to grow very much between now and the time you retire.

Of course, you could move it to a safe haven today with the idea of switching back to a portfolio of stocks and bonds at some point in the future. But you then have to figure out when the right time is to move it back. You don’t want to switch out of the money-market fund too soon and incur more losses. Yet if you wait too long, you can miss the big gains that come in the explosive early stages of a stock rebound.

So if stopping the bleeding isn’t the right goal, what should your objective be?

Tapping into your retirement savings could leave you worse off.

Well, now I know how to get your attention. In an article entitled "Avoid these 401(k) Mistakes," I wrote that it is always a bad idea to borrow from your 401(k). Judging by the flood of e-mail I received in response, a lot of folks disagree. Most readers offered some interesting insights, but I still think borrowing from your 401(k) is something you should avoid. Why do I think so? Let's first take a look at how 401(k) loans work, their potential advantages, and why they're unwise.

The Basics

Whether you can take a loan your 401(k) depends on whether your employer has decided to give you the option. If borrowing is an option, you'll usually be allowed to borrow up to 50% of your account balance, up to $50,000. You'll have to pay interest on your loan, typically a percentage point or two above the prime rate, and generally speaking, you'll have five years to pay it back. (If you've taken a loan to buy a house, you'll probably have 10 years.) You start repaying right away, with equal payments over the term of your loan that are taken directly out of your paycheck.

The Case for Borrowing from Your 401(k)

So you've got a financial emergency on your hands, and you need some quick cash. A 401(k) loan looks like a better option than the alternatives. Sure, you've got to pay interest on your 401(k) loan, but it's

The typical American retires at age 63. Those fortunate few who have traditional pensions, retiree health insurance, and a fully loaded 401(k) will probably be fine. But if you haven't saved enough to fund 30 years of retirement--and most baby boomers aren't even close--the obvious solution is working longer. (The other possible solution is to reduce your standard of living). But how much longer will boomers need to work to finance a secure retirement?

"For those workers who can work, the way to a secure retirement is to keep working until 66," says Alicia Munnell, director of the Center for Retirement Research at Boston College and coauthor of Working Longer: The Solution to the Retirement Income Challenge. Social Security currently replaces 39 percent of preretirement income for the average earner retiring at age 65 after the Medicare Part B premium is automatically deducted. But those who retire at the same age in 2030 can expect Social Security to replace only 30 percent of earnings, according to Munnell's calculations. "Retirees in 2030 will have to work two to four years longer to maintain today's level of replacement income," she says.

It turns out that Munnell's estimate is a conservative one. Marc Freedman, founder and CEO of the think tank Civic Ventures and author of the book Encore: Finding Work That Matters in the Second Half of Life, says that boomers should try to work until at least age 70. The share of households prepared for retirement would nearly double from 31 to 60 percent if early boomers currently between the ages of 54 and 63 delayed retirement from age 65 to 70, according to a McKinsey & Co. analysis. And Tamara Erickson, author of Retire Retirement: Career Strategies for the Boomer Generation, says baby boomers

Many people dream of retiring early, but few actually make it a reality.

Taking certain proactive measures, such as investing in a 401(k) in your 20s and eliminating debt, will help set you on the path to early retirement. But even if you achieve these goals, it's nearly impossible to know whether that nest egg will be enough to get by. You'll have to consider certain factors such as the lifestyle you'd like to maintain, the number of years before you start receiving Social Security checks (full benefits kick in between age 65 and age 67, depending on the year a person was born) and the unanticipated but costly health expenses that could pop up along the way.

In short, early retirement is possible, but it requires diligent saving and planning. Here are five key things you can do to improve your chances.

Start Early

It's a simple rule of thumb: The earlier a person starts saving for retirement, the better the odds are that they can retire early.

Thanks to compounding interest, investing in a 401(k) in your 20s — even if it's a small amount — will allow your savings to grow and multiply at a rate that would be hard to make up for later on in life. Say, at age 25 you contribute $5,000 a year to a 401(k) with a 7% annual return. By age 55, you'll end up with $543,000. If you start stashing $5,000 a year away at age 40, however, you'll only end up with $148,000 by age 55.

As you change jobs, make sure to roll over any 401(k) investments to your new provider. Otherwise, if you're younger than 59 1/2, you'll get cashed out of your 401(k) — after your holdings get hit with the

Q: I transferred about $80,000 in January from a traditional IRA to a Roth with the same company. It's now worth $15,000 less. Can I undo the transfer and then redo it so I don't have to pay taxes on the $15,000 in lost value?

A: You're in luck: This is one case where the IRS permits a do-over of the conversion so you can lower your tax bill.

When you convert a traditional IRA to a Roth, you normally need to pay income taxes on the full amount of the conversion (except for any non-deductible contributions), even if the account is worth a lot less by the time your tax bill is due. But you can shrink the tax bill by undoing the conversion and starting over again.

The process is called "recharacterization." If you ask the IRA sponsor to recharacterize your conversion and put your money back into a traditional IRA, then you don't need to report the original conversion to the IRS. Then you can convert the traditional IRA to a Roth later and pay taxes on the smaller balance.

The move could save you a lot of money. If you're in the 25% income-tax bracket and you have to pay taxes on the full $80,000 conversion, you'd end up with a $20,000 tax bill -- a hard pill to swallow, considering the account has lost so much money since then. But if you recharacterize and then convert the $65,000 balance to a Roth, your tax bill would shrink to $16,250 -- resulting in a $3,750 tax savings.

You have until six months after the due date of your 2008 return to undo a 2008 Roth conversion (October 15, 2009). But you can't reconvert the account to a Roth immediately. You have to wait until the