In my corporate career in financial services and retirement plans I followed a lot of good advice for my own retirement planning. I was fortunate to have good 401(k) plans with generous matches. My wife had access to an even better plan. We always poured a lot into these plans, chose investments using a sound asset allocation strategy, we stayed the course during rough markets, funded IRAs when we could, and started funding Roth accounts when they became available. We will have enough saved to meet our retirement goals. Now that I am turning 60, I look back and pondered what we might have done differently.

I wish we would have saved more money outside of our retirement plans and IRAs. After spending money recently on some home renovations, almost all our money is now positioned in retirement plans with our before-tax savings (401(K) and IRAs) dwarfing our Roth dollars. So, now when we need to access our money, there are tax ramifications in doing so. I wish we had a bigger bucket of money that we had grown over time in a brokerage account.

What does my hindsight mean to your retirement journey? Consider looking at your savings in 3 buckets: traditional (before-tax, but taxable at retirement), Roth (after-tax, but tax-free at retirement), and savings outside a retirement plan (taxable as you go). Try to determine what percentage should go to each. There is no magical answer here, but I suggest most people should save for retirement in all 3 buckets to increase their flexibility as they approach retirement. As a retirement planner, I can help you determine a reasonable percentage split for your situation.

What are some of the factors to consider? First off, your current age will matter. If you are young and intend on being an aggressive saver, you should favor the Roth and brokerage buckets. If you’re a high earner and middle-age or beyond, you may like the tax deductions of traditional before-tax savings.  If you think your income will be lower in retirement, you may want to favor before-tax savings. If you believe your income will be higher in retirement, then look to put more in Roth investments.

It is not an all or nothing decision and it varies for each individual circumstance. Too often people put all their retirement savings in before-tax accounts because of the immediate tax deduction. I suggest diversifying your dollars between the 3 types of tax classifications. Because the future is uncertain, this will give you more flexibility to adapt. And don’t forget to save outside of your 401(k) or IRA.

Enjoy the journey!