Q. I am in my early 50s and plan to retire at age 65. I have $5,200 in a 403(b) account, of which 40 percent is in a growth fund, and 20 percent each are in the growth and income, worldwide, and general categories. I contribute $200 a month to the plan. I also have $5,866 in a tax-deferred fixed annuity earning 5.8 percent. Most important, I need to know what to do with $20,000 that's in a money market account, earning 4.9 percent. Should I contribute more to the 403(b) plan? Do I have a proper investment mix? My risk tolerance is medium. My income is $13,000 a year. What other investments might I make?

E.N., Camarillo, Calif.

A. There are limits to the amount people can contribute to 403(b) plans, so your first step should be to determine how much you more you might be able to add to your contributions. Then increase your contributions to the maximum allowed.

Presuming you will need the amount of money represented by the additional contributions for living expenses, calculate how much the additional contributions will amount to over three years. Then earmark that amount of the cash that's in the money market fund to be used to repay yourself for the higher 403(b) contributions.

Presuming that there will still be additional money available in this account, you should consider a variable annuity. This is an account that will allow the earnings on your investment to accumulate on a tax-deferred basis, just as they do in the 403(b) account.

Many fund families offer variable annuities, with the funds frequently designed to closely approximate the results of larger and better-known traditional funds. For example, the Vanguard Variable Annuity Equity Index maintains a portfolio and mission similar to that of the Vanguard Index 500 fund.

I would transfer some of the funds that are now in the money market account into a money market account within a variable annuity, giving the fund family of your choice instructions to gradually transfer some of the money into a balanced fund each month, spreading the investment out over the course of three years.

This is an investment strategy called dollar-cost averaging, and it provides investors some protection against a falling stock market. This is because in the event of a sour market, you will be buying shares at ever-lower prices, thus bringing your average cost down.

One final note: If the $20,000 now in the money markets represents your entire savings, you'll want to maintain some of this in a liquid account for emergencies. Both 403(b) and variable annuity accounts have substantial tax penalties for premature withdrawals, which are withdrawals made before age 59 1/2.