Investors planning for retirement are in uncharted territory. Baby boomers are starting to leave the workforce. Americans don't save enough. And the continuing housing slump, lingering high unemployment, a "fat-fingered" Flash Crash and a precarious public debt situation have tempered clients' appetite for risk. Despite the uncertainty, the equity markets closed out 2010 with reason for optimism: the Dow was up 11%, the S&P 500 gained 15.1% and the Nasdaq climbed 17%.

So how do financial planners advise their clients on retirement? On Jan. 5, Financial Planning convened a roundtable discussion with six industry experts to glean some of the best ideas on how to help clients maximize opportunities during their peak working years and lay sound plans for the next phase. To structure the conversation, we divided older clients into two groups based on their retirement time frame: those hoping to retire over the next three to five years, and those planning for retirement 10 or more years out.

Meet the Panelists:

Peng Chen, president of the Global Investment Management Division at Morningstar.

Jonathan Guyton, principal of Cornerstone Wealth Advisors, a fee-only financial planning and wealth management firm based in Edina, Minn.

Deena Katz, chairman and co-founder of Evensky & Katz Wealth Management in Coral Gables, Fla. Katz also leads the financial planning program at Texas Tech University.

Donna Mitchell, senior editor at Financial Planning and roundtable moderator.

Ed Slott, a CPA in Rockville Centre, N.Y, an IRA distribution expert, a professional speaker and author of several IRA books.

Thomas Streiff, executive vice president and retirement product manager at Pacific Investment Management Co. (Pimco).

Cathy Weatherford, president and chief executive officer of the Insured Retirement Institute, trade group for annuities and other insured retirement products.

RETIRING SOONER

FP: Looking at this three- to five-year group, have clients fully recovered from the market crash of 2007-2008, and is their retirement readiness where they want it to be?

ED SLOTT: Our own clients just barely recovered. I think at this point from 2008, if you were pretty broad based over the market, you probably got a lot of that back, but you are probably gun-shy going forward because it could all just happen again. So retirement, at least for my clients and myself, seems to be something that's up in the air now.

CATHY WEATHERFORD: Investors' feet are firmly planted on the ground. They're not looking for sky-high returns anymore, they're looking for safety and security, and there is pessimism, as Ed mentioned, about their future. Our research tells us they're looking for more ways to derive steady returns, even if it's at a lower rate than in the past.

PENG CHEN: Let's look at the three areas where investors have their wealth. One is their defined-contribution plans, and they probably lost quite a bit in 2008-2009. Even with the rebound in 2009-2010, they are probably not back to where they were.

The second piece is housing. If you look at the average household net worth, the biggest piece is home equity; it's not financial assets. And that hasn't recovered for the most part.

The third piece is really their jobs. Many people lost their jobs, and those who haven't lost their jobs probably are getting paid less, and a lot of them have reduced their retirement contributions.

For many people close to retirement, the downturn significantly impacted their retirement readiness. They are questioning their ability to finance how they think they can live in comfortable retirement.

DEENA KATZ: In the 1990s, what moved investors was the fear of lost opportunities. Today, it's the fear of the loss of principal. Protect me, give me an income stream I can depend on.

JONATHAN GUYTON: Right now, folks who are soon to retire are worried about one type of risk-the fluctuations that come in a balanced portfolio. I worry that by doing the things that will eliminate or mitigate that risk, they unwittingly open themselves up to some far more serious problems down the road.

FP: What sorts of problems?

SLOTT: Inflation is a big one. There are a lot of products being developed that are designed either to guarantee principal or guarantee an income stream. When you look at the volatility that is likely to come and you play those scenarios out, it doesn't bode well for clients being able either to stay flexible or to retain the ability for their incomes to appreciate with inflation.