Retirement: it is a scary new world out there.

• Author: Hajdari, Zaim
• Position: Business & Finance

IN THE IMMEDIATE postwar years, funding the American Dream seemed a lot simpler. More citizens could rely on the traditional pension plan from their employers--as well as on Social Security--without having to listen to dire predictions of its bankruptcy. People went to work, bought a house, and put their children through school. After the kids moved out, parents finished paying off their mortgages and eventually became grandparents. Then they retired, collected their guaranteed income, and enjoyed their golden years.

This was the American Dream my own parents pursued when immigrating to the states. Their understanding was that, through hard work, disciplined saving, modest investing, and living within your own means, you can live a good life, raise and provide for your family, and retire comfortably--regardless of whether you were an entrepreneur, corporate executive, or union worker.

Today, the financial world is more complex. People are feeling panicked and, with worries about their financial future, they are pulling back. That, however, is not what the market needs--or what each individual investor should do. A more measured response is called for.

Fewer companies are offering pension plans, and many that do have them are in the process of dissolving them. Even if you believe in the long-term sustainability of Social Security, that is missing the point. The main issue is that the move to a 401(k)-based retirement system means that the future of retirement is in your hands--not your employer's and not the government's. You have to educate yourself, and take responsibility for getting the help you need.

Saving and investing have become an even greater challenge because of the extraordinary time that we are in and the unconventional market environment. Saving alone is not enough. We now lace a bigger question: where do we put our money so it can grow and keep pace with inflation? If you answered "under the mattress," you are not alone.

On a recent visit to the bank, I nearly ran into a sign proudly displaying an advertisement for a seven-year CD at a mere two percent--and if that CD is purchased outside a retirement plan, a 1099 will be issued taxing you on that interest. It gets worse. Assuming you are giving back 30% in taxes, that only is approximately a 1.4% net. With inflation at approximately three percent, the return is a negative 1.6%.

Finally, if you did not plan properly and need to liquidate the CD prematurely, the penalty not only can wipe out your interest but invade your original principal. At this point, you probably are thinking that it is best just to leave it in...