The only caution for having too much money in a 401k is, if you want to retire early, you need enough money in accounts that are tax friendly. I do not have 5 years expenses in taxable accounts or Roth contributions, so I need a more complex withdrawal method.
I am doing some what ifs in preparation for FIRE. It is very useful to have accounts in 3 categories: taxable, traditional 401k or IRA, Roth 401k or IRA. I am trying to keep my income in the 15% tax bracket so capital gains are taxed at 0%. I also want to qualify for ACA premium subsidies. That limits my AGI to $50k. I will get both the premium and cost sharing premiums for my family of 3. Sweet! If I go over, I still get the premium help, which is 80% of the potential, so still nice. I plan to spend more than 50k, and that is where tax flexibility comes in.
Traditional 401k can be tapped at 55, so yay! me for joining the FIRE party late. The 1st 25k is tax exempt, due to standard deduction of 12.7k and 12.2k for 3 exemptions. So I want to have at least 25k of AGI, probably more. The next 18k is taxed at 10%, and I would rather pay that than 15% later, so I will fill that up most of the way.
Taxable money has a low tax rate. Only the gains are taxable, not what you invested, and long term gains will be at 15% or 0%. Currently, my taxable money averages 25% taxable and most of that is long term. So every 1000 I spend from there adds only 250 to my AGI. I plan to spend the rest of my annual withdrawal using this money, but keep my total AGI to 45k.
I will have some gains from mutual funds I cannot control, and I want to leave some buffer on the 50k limit.
Roth IRA can be spent as needed, since it does not add to AGI. I have about 2.5 years total expenses in 5+ year contributions. I will use this for contingencies, kid's college, and maybe paying off the house. Ideally, I can leave this alone until age 60, then spend it while I fill the Roth pipeline from IRAs. Assuming tax changes do not abolish the Roth pipeline.
Example: 35k traditional + 40k taxable yields 45k AGI and 1k tax.
40k trad. + 20k taxable + 10k Roth => 45k AGI, 1.5k tax.