The amount that an account can lose during market downturns is directly related to the structure of the account. Think of your portfolio as a Chili Recipe. (I know it sounds funny, but bear with me). The more pepper in the Chili, the hotter it likely will be. Some people can handle hot chili, others cannot. The key to enjoying the chili the most is having the chili hot enough to "titillate the taste buds" but not ruin the whole bowl.
Similarly, small stocks are more volatile than large stocks. They typically grow more, but they also drop more when the market turns bearish. Bonds are less volatile than both of them, and often go UP when the stock market goes DOWN, but historically do offer as much growth opportunity - especially now with interest rates at historical lows. The VALIC guaranteed interest account in your 403b is designed not to go down at all, but to hold its value when the market goes down. On the other hand, it doesn't go UP when the market goes up, either - and will not give you the high rates of return that we all enjoy.
You are pretty much stuck with the investment options within your 403b, so the key is to maximize the use of these tools (ingredients for your Chili) as best as you can. So now you have to focus on being a good INVESTOR - working on YOUR SKILLS, not worrying about what you do not have or cannot use.
The key to being a successful investor is to properly measure your risk tolerance. You need to have an honest conversation with yourself and your wife. Decide exactly how many dollars you can bear to see your account go down without losing sleep (because the markets WILL fluctuate). For example, if the market goes down 20% - and your account is 100% in stock funds - then your account, at $90,000, will likely drop $18,000. Is this too much? Can you handle it?
If the answer is that you can only bear a 10% ($9,000) drop, then, given the fact that the stock market experiences a 20% drop every 3 years - maybe you need to only have 50% of your account in stock funds (Small, medium, and large stocks) and the remaining 50% in bonds and the VALIC guaranteed account. In this manner, you will have protected your account from the stock market drops that you are worried about - but you also will not likely get the high rates of return that you will need to offset the inflation worries that you have mentioned. What about a 40% drop? This occurs historically about every 2 decades or so (we didn't have one at all in the 80's or 90's - but we had 2 in the last decade).
Ultimately, the ONLY way to combat the inflation you are worried about is to have your dollars grow faster than the rate of inflation. This is not without pain - because the best hedge against inflation has historically been stocks (no, not gold - especially over the long term). The problem is that stocks do poorly during times of economic crisis and fear, thus shaking out weaker-stomached investors and making them fodder for financial pornography (free internet advice or investing magazines) - lining the pockets of the investment media, but only confusing the average investor with conflicting and flip-flopping advice.
My advice to you at the point that you are now is to consult with a financial advisor. I've been doing this for almost 20 years - and I can tell you from dealing with thousands of people, that FEW (microscopically FEW, in fact) people do as well on their own as they would by finding a good financial advisor. There are tons of articles on this site about how to pick one, so roll up your sleeves and dive in. You'll find the one right for you.
You owe it to yourself to find a good one and start working with him or her for the long term.
Best of luck. I agree with your assessment on our country, by the way.
Jon Castle http://www.WealthGuards.com
You did the right thing by staying in the market and riding the recovery back. But, if you don't want to go through that again, I don't blame you. First, we have had two crashes in the years in a short time - 2000 to 2007 and that is extremely unusual. It would be unprecedented to see a third without going through a major depression. Second, the 2000 crash was the end of the dot.com bubble when the market went to ridiculous over-valuation. I thought that was really easy to see coming and I got my clients out. The 2007 bubble was a bubble in financial speculation and overleverage by the big banks along with bubbles in real estate and personal indebtedness. I don't see that repeating itself either. The market now sells for a reasonable value, which also makes a crash unlikely. Still, for protection you can explore stock funds that are less volatile. You can also set a mental stop-loss in which you transfer to short-term bonds when your account drops, say 15%. Of course, the problem is knowing when to get back in. Other options are to change your allocation to include some different types of assets like alternatives or floating rate bonds or low duration bonds. Unfortunately, most company retirement plans are horrible when it comes to offering sufficient bond choices and rarely offer alternatives funds so you may not have the choice. If you end up leaving the company at some point, roll your 403b over to an IRA where you can have more choices in reducing risk and start working with a professional fee-only advisor.
You didn't lose it then, nor will you lose it in the future.... IF you do not sell.
Joseph-- Congratulations for your discipline in staying the course. Unfortunately, there are no guarantees in the market. The only safe place to keep your money is hidden in a safe underground in a location where only you know. The problem with that approach is that it's a) a pain in the butt to find a safe and a location, and b) inflation will, over time, decimate the value of that money you hid in the safe. If you still have plenty of years left in your investing horizon, then continue to stay the course. I recommend periodic value cost averaging ( http://www.hullfinancialplanning.com/value-cost-averaging-or-dollar-cost-averaging/ ) and continuing to stay invested in the markets. It's not a guarantee, but it gives you a better shot at beating inflation. If you try to time the market, you're likely to shoot yourself in the foot ( http://www.hullfinancialplanning.com/play-the-market-like-a-hedge-fund-manager/ ). I know this probably isn't the answer you wanted; there is no silver bullet that tells you when to get in and when to get out of the market. If that was the case, I'd be retired, and so would a lot of other people. It's just not that simple. The most prudent course, in my opinion, is to continue to periodically invest in the market, don't watch the markets every day ( http://www.hullfinancialplanning.com/dont-watch-cnbc-before-talking-to-me-even-if-the-market-is-up/ ), and focus on the important things in your life.
Joseph, with any investment, there is risk. You need to determine what level of risk you are comfortable with. Understanding how you got hurt in 2008, look at how your money was invested then. It would probably be safe to say that you want to have less risk than you did back in 2008. There are risk analysis questionnaires online or at any financial planner or institution. As simple as it sounds, even after taking a risk analysis, you want to be able to sleep at night. Plan your investment strategy accordingly.
Joseph, as mentioned above, and, there is a lot of great information there for you to digest... There is a lot of risk whenever investing your money. As such, to some, 90,000 isn't much... to others it's a lot... Find a good, recommended CFP in your area that will work on an hourly or fee basis and have them run a risk tolerance profile, then, an asset allocation for you based on your personal situation. Investing has changed a lot over the years, and is something you need to pay close attention to, especially as you get closer to the retirement years. A reputable Certified Financial Planner is a good place to start... interview a few, and work with someone you feel comfortable with... someone who understands where you are, where you want to go, and makes sense of how and what you need to do to get there...
Rod Miller, CFP, CLU, ChFC