What to do when you lose faith in your workplace retirement plan

Q: I am 53 years old. I make about $53,000 a year. I work for a private agency that does not offer a pension (unless you count $200/month as a pension), but does allow us to contribute to a 403(b) account. Over the past seven-plus years, I have contributed about $55,000. At last report it was worth about $40,000. How can I assure myself a comfortable retirement income without contributing more to this "fund," which doesn't even hold its value, let alone grow. I am not in good health and fear I will have to retire by age 60 or 62.
-T.R., via e-mail

A: Don't give up the 403(b) ship just yet, advises certified financial planner Theresa Rosen, of Sudbury, Mass.

Name a workplace retirement plan, 403(b), 457, 401(k), and it probably got stomped on during the 2000-2002 rout of the stock market. But they've rebounded lately, and for most Americans, the plans remain a great way to invest because the money you're putting aside grows tax-deferred.

Ms. Rosen suggests that, at your age, you save the maximum amount you can. It's $16,000 yearly in 2004. At that rate, she says, hopefully by the time you retire you'll have accumulated about $300,000. Between Social Security (which Ms. Rosen guesses to be about $1,200 per month) and the $12,000 to $15,000 taken per year from the 403(b), you'll have about half of your current income.

Q: Years ago I borrowed from my annuity and never repaid. Now it seems that my biweekly contribution is going mostly toward the ever-growing interest on the loan. Should I stop contributing to this annuity? Will the money presently there just be eaten away by the interest? Am I wasting money by contributing? I cannot repay the loans.
D.M., via e-mail

A: From your description, certified financial planner Fred Forbes of Palmetto, Fla., believes you may have borrowed from a 401(k) or 403(b) plan instead of an annuity. If that's true, the loan would count as income, taxes would be due on any amounts in excess of the original contributions and, if you're younger than 59-1/2, you'll owe 10 percent penalty for taking an early withdrawal of money that isn't repaid.

Whether you continue to contribute is a moot point, since you're still obligated to repay the loan.

You can make direct repayments, or continue to make them through the deduction taken from your paycheck.