For most people, you should not do anything. Sit tight, don’t look if it hurts too bad, and keep sending your contributions in from your paychecks. If you have a ways to go before you need the money, you do not have to really worry about anything – the market will rebound eventually and you will be getting even more for each dollar you contribute in the meantime. Buy low, sell high. That is what you are doing, but on an exaggerated level right now.
If you are closer to retirement, you probably want to shift your allocation to something a little more conservative. This does not mean you should head over to your broker and pull all your money out, which would cost you early withdrawal fees and taxes. Leave the money in there! However, it does mean that you might want to ask them about moving your portfolio to a more conservative stance to protect some of your money in this time. Granted, if you are so close to retirement that you are worrying about losing your retirement money, you should already have a pretty conservative setup. But if you aren’t, now is the time to maybe ask your broker about moving some things around.
I have not moved any of our money out of any situation we are in. Believe me, it’s tough to look at our accounts and see how much money we “lost” – but for me, it’s all on paper. Investments are for the future; for retirement, kids’ college funds, etc – they are not for short term needs. The money we are saving for our house is in a money market savings account right now, as we did not want to lose any of it if the market tanked – which it has. But everything else is in retirement vehicles of different sorts, and the money will be staying in them. Sure, I might lose a lot of it in the next couple months/years, but I have 30 years before retirement and I am guessing that the markets will probably go through another cycle like this one by then.