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Ask Money

Too much going into retirement accounts?

Chris Farrell Apr 19, 2012

Question: Outside of my 403(b) Base Program, which my employer matches 10% to my 5%, how much should I sock away in a 403(b) Supplemental? Currently, I contribute 5% to a 403(b) Supplemental, for a total of 20% of 110% of my paycheck. I fully fund a ROTH IRA every year, so I am wondering if I should be saving more of my paycheck to a more liquid asset. Michael, Haslett, MI 

Answer:  I’m always glad to hear from people savings well for their retirement. That’s a terrific match in your 403(b).  I’m a fan of putting a chunk of a paycheck into taxable savings once the retirement savings accounts are well-funded. The issue isn’t saving. It’s where you put the money. 

Saving for retirement is critical for managing the transition to the last third of life. Retirement is only one transition, although it’s a big one. Many of us l face several voluntary and involuntary transitions during our lifetimes. We might lose a job, desire additional education, start our own business, change careers, downshif into less strenuous work, and so on. Savings helps pay for the transitions. 

Your retirement savings is pretty much locked up or at least it should be left alone. You can borrow some of the retirement money, but it isn’t a good idea. You can’t cash it in while younger than 59 1/2 without paying a penalty and income taxes on the withdrawal. 

However, the savings you put into taxable accounts is available at any time without penalty although, depending on the investment, you’ll pay taxes on interest and perhaps capital gains. The savings is there for when you need it. The savings boosts your financial flexibility. If you don’t tap it the money will also be there during the traditional retirement years.


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