Jeffrey DeBoer understands that investors today are emotional. After a 42% market drop from Oct. 9, 2007 to July 10 of this year, even high-net-worth clients fear that they’ll never recoup losses in their lifetime. For some, it’s even enough reason to halt contributions to 401(k)s and IRAs until they feel safer.

And that’s exactly what concernsDeBoer. He sees stopping those contributions as a reaction that further harms investors’ chances for recovery from the damage caused by the market turmoil. “Some people think they’re throwing good money after bad. But they need to know they’re not,” says DeBoer, president of Granite Bay, Calif.-based DeBoer Financial Group. “They’re reacting because they see that money coming out of their paycheck right now.”

Repairing retirement portfolios is front and center for every advisor. Unfortunately, depending on an investor’s age, rebuilding back to their old balances may not be possible. Certainly those with just a few years left before retirement are unlikely to see a rebound from the equity declines they endured over the past couple of years, according to the Center for Retirement Research at Boston College.

Even for those select few whose clients’ portfolios didn’t fall that much, rebalancing is still a priority. Indeed, the consensus among many advisors is clear. Clients across the board, regardless of age, need to save more, adjust expectations, and re-weight their equities starting now.

"As the value of stocks have declined, [clients] may need to rebalance so they hit their target equity exposure," says Josh Willard, senior vice president with Coghlan Financial Group in San Diego. "Now, likely, they're underexposed."

To illustrate exactly how advisors would fix portfolios damaged by the recent fall, we crafted two hypothetical clients and asked some experts how they would rebuild.

Each portfolio is unique, of course, but most advisors will be able to find some common threads between these hypothetical clients and their own. And in the process, hopefully they'll glean a few tips that will help get their clients back on track—and quell anxiety at the same time.

Karen Greymatter: Rebalancing the Ship

Meet Ms. Greymatter, an investor any advisory firm would love to have as a client. As the 39-year-old owner of a privately held computer software company, Greymatter has built her firm into a $35 million enterprise, spinning $8 million a year in net income.

With her $450,000 annual salary, she maxes out her SEP IRA for business owners. And while she doesn't have a lot in bonds or cash, she still has a fairly substantial amount of her own capital in the firm.

The market took its toll on Greymatter. Her SEP and 401(k) each lost 30% of their value, as they were heavily weighted with stock, to the tune of 68%.

To Willard, that actually may not be aggressive enough in her equity allocation. "Her portfolio may not have been off in 2007, but now that equities are down 30%, she's likely closer to 50% [weight] in stocks as their value has declined," he says.

Sure, Greymatter's portfolio evokes a somewhat savvy and sophisticated investor. But even high-net-worth clients may push back as advisors try to ease them back to balances similar to what they had before the decline. They may feel more cautious now than before, and that may last for some time. Even with 26 years until retirement, Greymatter may have some reaction to moving too much of her portfolio back into equities. But hesitating to make that move now, at today's relatively low valuations, could cause her to lose out on future appreciation.

DeBoer said that by rebalancing now with a proper allocation, at a conservative expected 6% return, he is fairly confident Greymatter's portfolio will rebound, even allowing her to retire early with an accumulation of $2 million between her SEP IRA and 401(k).

However, he would recommend that Greymatter not buy too much technology stock, given the amount of capital she still holds in her software firm.

Others see a problem, though, in trying to convince investors to buy more equities for safety concerns. "Even securitized assets are going to be regarded with some level of suspicion," says David John, principal with The Retirement Security Project, which tries to encourage Americans to save more for their golden years. "We are seeing some movement to more conservative investments to the point of a reduction in the proportion of equities."

John notes that investors had long heard advisors suggest they remain in equities even past retirement. After all, the thinking went, with 20 to 30 years of living ahead of them, retirees needed those returns from equities in their portfolios. But for those retirees too weighted in stock when the market crashed, this logic backfired. Indeed, the products that resulted from the more-equity mindset, such as target date funds, are now coming under the scrutiny of regulators, says John.