403b investing close to retirement

[llc]

At 64 I am close to possible retirement at 66. I chose to maximize my contributions over the last year. Lost about 24% for 2008. Should I continue to contribute maximum or reduce contribution to only what will be matched.

My plan cannot be moved to a Roth IRA. My only options is to reduce or stop contributions.

If the advice is to reduce or stop contributions, what other investment vehicles are suggested.

[sweeps]

You should be investing the maximum you can possibly afford in your retirement.

The bigger question is what are you invested in. At 64 I would hope you're not 100% invested in stocks (although you should probably be 25%-50% in stocks.)

If you don't like your 403b, you can invest in a Roth IRA if you meet the qualifications.

[disneysteve]

I agree with sweeps. The problem, it seems, is your allocation. Being 64 and 2 years from retirement, the fact that you lost 24% last year tells me you probably had way too much in aggressive investments. Keep contributing, but dial back the risk level.

[jIM_Ohio]

You don't give nearly enough information to get an answer...

You lost 24% and I lost 40-50%. You could have done MUCH worse.

You gave yourself an education in risk. You need a better education in risk. Asset allocation, volatility, maybe a retirement calculator or two and similar.

What are your monthly expenses? I will call this "X".
Before the market went down, did you have 25*X in your 403b? If not, what was the multiplier- 20X, 12X or lower?

The lower the percentage, the more likely your retirement plan will succeed...

30X=3%
25X=4%
20X=5%

The percentages refer to the percent of your portfolio you will withdraw each year in retirement... this is where the "do I invest more, the same, or less" discussions should start.

If you are at 12X or below of expenses and plan for a 4% (25X) withdraw rate, I would invest more- you have 2-3 years for money to grow (recover) and follow a solid plan.

If your plan was 20X (5% withdraw rate) and dropped to 15X or similar in 2008, I would say you want to only decrease contributions a little and more than likely hoard cash (so you have 2 years to save around 3-4 years of expenses). That would give portfolio 6 years of working to recover to a safe level to start drawing it down.

If your plan was 30X (3% withdraw) and dropped down to 25X range in 2008, I would say just do what you did in 2008 and verify your current dividend yield is enough to live on in retirement.

You need to tell us the risks you are willing to take or not take, the amount you have, the amount you plan on withdrawing each year and similar to get a good answer as to what the next 2 years of investing will need to accomplish.

**edit**
Make sure you understand volatility. If you planned to get a 9% return with an 80-20 allocation (80% stocks and 20% bonds), know that the standard deviation of an 80-20 portfolio is probably around 12-14. That means you are as likely to see a 1 year return of 21% (9+12) as you are -3% (9-12).

I am guessing the 24% loss was close to a 60-40 portfolio. A 60-40 portfolio probably has a return profile of 8% with a volatility of almost 10. That means +18% (8+10) is as likely a return as -2% (8-10).

70% of the time you will see yearly returns between -2% and +18%. 2008 was part of the other 30%.

You need a retirement plan which reduces SOME of the volatility. That will lower returns (40-60 is the first portfolio where the deviation is less than the expect return).