Hello all,
Common advice on MMM, and other sources, is to max out tax-advantaged accounts before putting money elsewhere, such as brokerage accounts. This means $17,500 in 401K plus $5,500 in a Roth IRA for a total of $23,000 in savings. This doesn't even include adding to an HSA as I've been reading about as another investment vehicle. Since the Roth IRA is non-deductible tax-wise, you are actually adding more than $5,500 (since its not gross pay that is being added and so taxes are paid on those contributions). For the sake of simplicity, lets say that someone is earning $50,000 a year. By contributing the maximum to both the 401K and Roth IRA, this person is effectively saving 50% of their income.
So to my question: How is one supposed to retire early, when their savings is locked up in accounts that that aren't accessible until the account owner is 59.5 (without incurring penalties)? I've read a couple of threads on the 'backdoor IRA,' but the amount of money coming out of this doesn't seem as though it is enough to live. What am I missing here?