If your retirement plan has taken a beating, don’t give up on it now, advises Knight Kiplinger.

I can understand why, in this dismal stock market, you might be disgusted with your retirement savings account — your 401(k), your 403(b) or your IRA. Perhaps you’re one of those who has scoffed that My 401(k) is now a 201(k). And I can understand why you might be tempted to dump your stocks and mutual funds at a loss and load up on Treasury bonds or just park everything in cash.

I can understand, too, why you might consider suspending or trimming your periodic 401(k) contributions. Maybe your household budget is pinched and you need the money right now. Or maybe you’re thinking about more-drastic action: tapping your retirement account for current expenses, even though you’ll have to pay income taxes on early withdrawals plus a 10% penalty.

Yes, I can understand your temptation to do all these things. But doing so would be foolish, and I hope you won’t.

The 401(k) edge

Quite simply, tax-deferred retirement plans are the best gift that Washington ever gave to American workers. Yes, I know they’re not as sweet a deal as were the defined-benefit pension plans once common in the U.S. Employers funded those plans and bore all the investment risk, and there was no way that employees could raid their retirement funds early. But those pension plans aren’t coming back, so there’s no point in waxing nostalgic.

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When I probe why people are disgusted with 401(k)s in general, I find that the real issue is not the concept. After all, what’s not to like about getting an employer match to your own savings, and not having to pay taxes on the earnings inside the plan until retirement?

Instead, the issue for most people is the investments they chose for their 401(k). They are remorseful that their asset mix lacked diversity. Maybe they had too much in their employer’s stock, which shouldn’t represent more than 10% of the mix. Or, with retirement just a few years away, maybe they were too heavily invested in stock mutual funds.

John Bogle, the wise curmudgeon who founded Vanguard, thinks the percentage of interest-bearing investments in your retirement accounts should equal your age — at age 55, for example, you would have 55% of your assets in bonds or cash and only 45% in stocks. That’s a pretty conservative mix, but it would have prevented a massive erosion of your 401(k)’s value during this bear market.

If you’re 30 years old, a 70% allocation to equities — U.S. and foreign stocks, blue chips and small-company stocks, with some real estate investment trusts mixed in — will likely outperform bonds and cash over the many years until your retirement. The 30% allocation to bonds and cash, which will rise as you age, will dampen your short-term risk in stocks.

Okay, so the damage has been done to your 401(k). Now what? First of all, get some advice. Talk to a financial planner about the right asset allocation for your age, income, wealth, goals and tolerance for risk.

See whether the administrator of your firm’s 401(k) plan has some online advice or will send a planner to your office to help educate you and your fellow employees. Read up on your own. There’s sound advice at Web sites such as ours, Kiplinger.com, and many others.

Don’t sell low

What about the paper losses you’ve already incurred in your 401(k) or IRA? Don’t dump high-quality stocks and well-managed mutual funds that have been hammered (see Should You Dump Your Fund? ). From today’s depressed levels, stocks and REITs offer stronger appreciation potential over the next few years than bonds and cash.

Most important, don’t stop funding your retirement accounts. Keep making as big a monthly contribution as you can afford, to get the maximum employer match. Put the new money into an appropriate mix of assets. Then keep a cool head and be patient.

Columnist Knight Kiplinger is editor in chief of Kiplinger’s Personal Finance magazine and of The Kiplinger Letter and Kiplinger.com.