Reducing 401k contributions

[Elisabeth]

I am 30 and have about $200k in a 401k and IRAs (Roth and traditional). I have maxed everything for about 5 years now. Can I reduce my contributions to at least the 401k? Should I continue doing 5% to my full match? I would like to start putting more into VTSAX. Right now I do about $1k a month, but could pretty much double it if I dropped to the 5% vs $18500/year.

[DrF]

Look over on the investment section of MMM. Depending on your tax situation it is probably better to keep maxing the 401k.

Read this: http://www.madfientist.com/retire-even-earlier/


Then read this: http://www.madfientist.com/guinea-pig-year-1/

Enjoy!

[MDM]

Depending on your tax situation it is probably better to keep maxing the 401k.

+1

Why do you want to avoid the tax advantaged of either the traditional or Roth accounts, and go fully taxable instead?  There may be a good reason, but...?

[mtn]

I'm doing it right now, but I'm saving specifically for a downpayment on a house, an emergency fund, and a (please, facepunch me) wedding. I've also already saved $11,000 this year in IRA's (2014 and 2015 contributions happened in 2015, I couldn't afford it last year but got a big pay jump and bonus in January), and will probably be able to save $5,500 additional in my Fiance's IRA after we're married.

Unless you are saving for something short term and you won't be able to afford it in time, there really isn't a good reason to stop maxing them out if you're able to do that and still live comfortably. And even then, if you put it in a Roth IRA you can take out the principal penalty free.

[Elisabeth]

Thanks everyone.

I'd like to free up extra cash to pay down the mortgage. My commute to work is now 1 mile (yay!) but the mortgage is $2950 which is about $1000 more than I'd have paid for a 15 mile commute.

Between daycare (1061) , the reg mortgage payment (2950), the other mortgage (house on the market - 2700/mo), food, etc there isn't a lot of extra to pay the mortgage off faster.

I was looking for ways to make extra payments, but you're right - it might be more advantageous to keep the 401k maxed if I can afford it. Maybe once (if) the other house sells I can re-evaluate everything then.

[SuperSecretName]

paying off the mortgage is often not the best financial use of your money.  it may have an emotional gain for you, but it comes at a very real cost.

[RexualChocolate]

You phrased the question like you wanted to invest in taxable VTSAX over your 401k plan, which is obviously very suboptimal even with very poor plans.

However, what you really want to do is save less and consume more now.

I'm not sure why you're asking permission to do this from us. It's your money. If your current consumption > gains in net worth, go ahead. It's a poor financial decision, but so is floating two 3k mortgages.

[Elisabeth]

Not asking permission lol. Trying to figure out if I can scale back contributions to the retirement accounts to invest in something I can use prior to my 50s/60s (ie early retirement investments) and pay off the mortgage sooner so I don't have that expense.

Sounds like cutting back the 401k/IRA contributions is not optimal because of the tax consequences. Not sure how that was translated as "consum[ing] more now" since the goal is to be in the position to retire before my 50s/60s. I see it as a redirecting the money toward things I can use to retire early once I have "enough" in the old lady accounts.

Thanks for the advice.

[dandarc]

Your 401K/IRA money doesn't have to be an "old-lady" account.

https://seattlecyclone.com/accessing-your-retirement-accounts-early-yes-you-can/

[RexualChocolate]

Not asking permission lol. Trying to figure out if I can scale back contributions to the retirement accounts to invest in something I can use prior to my 50s/60s (ie early retirement investments) and pay off the mortgage sooner so I don't have that expense.

Sounds like cutting back the 401k/IRA contributions is not optimal because of the tax consequences. Not sure how that was translated as "consum[ing] more now" since the goal is to be in the position to retire before my 50s/60s. I see it as a redirecting the money toward things I can use to retire early once I have "enough" in the old lady accounts.

Thanks for the advice.

You said in the previous post you were trying to pay down the mortgage faster. So you want to reduce your 401k to 1) invest more in VTSAX and 2) pay down your mortgage faster.

Both are dumb ideas.