Hello All, I'm currently on track to be FI in 2020 at age 50. I'm currently maxing out my 401k ($18k for this year) and am considering stopping my contributions to use the extra cash to increase my FI stash that will be accessible when I'm FI. There are 2 significant reasons why my 401k isn't as advantageous as it should be and 2 reasons that it works well....
cons: 1) there is no company match... 2) with the way our 401k is set up in our small business, if the 401k plan does not pass a financial test at the end of the year (dependent on the amount of contribution by the majority of the employees and some other factors I'm not clear on), the people who max out there account get a partial refund (with taxes withheld) to balance things out. Due to the lack of employee participation in the 401k, I have received refunds for the past two years of roughly $7k each (yes, a nearly 40% refund).
pros: 1) the funds in the 401k are primarily Vanguard and the expense ratios (even with plan administration fees) are very low... 2) the funds offered in the 401k complement my after-tax Vanguard account to allow for a nice balance between the two.
Would it be unwise to stop contributions to the 401k to increase the FI stash or is there some reasoning (despite no match and an almost certain refund at the end of the year) to continue contributing to it that I'm missing?
My adjusted income with the net $10k contribution to the 401k doesn't affect my tax bracket nor does it really move the needle much at this point in my 401k since the market returns considerably exceed any contributions that I make.
Any advice would be greatly appreciated!