Too much of a good thing
The IRS sets contribution limits each year, making slight increases annually for cost-of-living adjustments. In typical "when you're old enough" fashion, the IRS increases the limits for folks over a certain age to make additional "catch-up" contributions.
There are two limits for employer-sponsored plans, like a 401(k) or 403(b). One is the maximum amount that we can contribute from our salary. The other is a limit on the combined amount by our employer and us if our employer matches contributions. The amount we can put into our IRA is much lower than what's allowed for retirement accounts through our employer. That said, they are independent of one another, so contributions to our 401(k) wouldn't count toward the limit on our IRA.
When it’s time to cash out
Outside of a few exceptions, the cash in these accounts is only accessible during our retirement years. Taking money out before retirement (before 59.5 years old) will result in paying a tax penalty of 10% in addition to any ordinary income tax we owe.
After we've turned 59.5 years old, the money in the account is available to be withdrawn without penalty. We'll have to pay income taxes when we take money out of Traditional retirement accounts since we put money in pre-tax. However, our income tax rate in retirement might be lower than it is today. Withdrawals from Roth accounts in retirement are tax-free since we paid income tax before putting the money into the account.
Nothing lasts forever
Traditional retirement accounts don't allow us to keep money in there indefinitely.
The IRS eventually forces us to withdraw money through required minimum distributions when we turn 70.5 years old.
We can easily determine our required minimum distribution by spreading the total account value amount over our life expectancy.
These limitations are in place so that people don't abuse the benefits of retirement accounts; however, these restrictions usually don't get in the way of reaching retirement goals.
The biggest problem you want to avoid is putting money into a retirement account that you'll need to take out early. Remember, this results in paying a tax penalty. Preventing this requires balancing your short-term and long-term needs. One way to do this is by contributing smaller amounts throughout the year, then maxing out with extra cash at the end of the year.