Do I have any business investing in non-tax advantaged accounts?

[DC10]

My partner and I both contribute to our 401K/403B (10% plus employers match) accounts and max out Roths- Do I have any business investing in non-tax advantaged Vanguard Index Funds before we are able to max out the 401K/403B at 17,500 each?

We are not particularly high earners, but we are fairly good savers in a high COL area (to be near extended family). To max out both retirement accounts and Roths we would have to contribute more than 35% of each of our salaries to 401K and still max Roth (more than 10% of each income)- not leaving much for living expenses and investment savings.

I am not looking to retire early, but I would like to earn something from investments that I can reduce my work hours over the next decade as we raise our family- Any suggestions on how to craft a strategy to make this work? Is there another approach I should be considering? Am I dreaming?

[nereo]

You may want to post this in the Investing forum for more targeted replies.

That said, there's nothing wrong with investing in non-tax advantaged accounts.  You'll just be paying more to the government then you have to for that calendar year.  What you get in return is fewer hurdles to jump through when you need to access your money*.  At what point that convenience is worth it is a personal question.  If you are talking about investing $5k/year, and your tax bracket is 25%, that's an extra $1,250 you're paying in taxes that you wouldn't have to pay this year.  In most cases when you withdraw from your 401k/403b you'll be paying far less than 25% in taxes.

[Gin1984]

Is there a reason why you want to invest outside of tax advantage accounts?  They do have decent advantages.

[DC10]

Thank you for the replies. As nereo mentioned, I think the "fewer hurdles to jump through when you need to access your money" is appealing as I am not sure when I will want to use this money - I think I want to use it to reduce supplement income and reduce my work hours for 2-3 years when kids are small.
 
To withdraw it from tax advantaged accounts before retirement seems much more complicated and beyond my comfort/current knowledge about investing/retirement accounts. I am also afraid that if I want to use this money before retirement, I will feel like I am "stealing" from my own retirement and I will chicken out in the end when in fact I just want to buy a little time and freedom during this one particular season of life.

That said, your simple math of what it would cost me in taxes for every $5000 I invest in non-tax advantaged accounts has me reconsidering... My default has been to save cash, but the one year emergency fund we have in cash is earning zero so I am reluctant to save any more there.

[dandarc]

The Roth IRAs give you the flexibility you want, I'd bet - you can withdraw contributions at any time, so if you max those you've got 11K * number of years that you can use to smooth the income when you cut back, before having to jump any significant hoops.

Also - from the stated numbers you are around 100K gross, and to max both accounts would take 46K (Roth IRAs + 35K to Traditional 401Ks) of that, leaving  55K to live on / pay taxes.  7.65% for FICA + no more than 6% of gross for federal income tax leaves around 36-40K for health insurance and to live on - can you get by on 3 grand per month?  If so, you can probably make this happen.

[Edited twice due to numbers typos]

[dandarc]

Just reread that - 'partner' not 'spouse' - I am lucky y'all appear to be in the income range where the married-jointly ranges are exactly double the single ranges - should come out close to the same if you add your incomes together as if you were married, depending on deductions / tax credits you might qualify for.