401k vs other investing while hoping for early retirement

[Unkempt Stash]

I am new to this community. Please forgive any faux pas.

Background:

I am in my early 30s and live in the US. I have a job with an available 401k and I have not set up any other means to invest.
I have somewhat recently gotten divorced which has (and will continue to) damage my saving rate.
In addition to the reduction in future cash flow, all savings except for ~50k in a 401k was either used to pay down debt, spent, or lost in the split.

As I dealt with the divorce and reestablishing life I took the easy savings route and nearly maxed my 401k.
I decided that the hit I was about to take to it and my relative youth meant that I should quickly refill it to let compounding get to work.

The question is relatively independent of my income and savings rate; this isn't a case study on me.

Question:

Excepting the obvious of meeting the company match, is there an optimal amount to put in the 401k?

For example, if I intended to retire at 45, I would have 15 years from retirement until I could access the 401k without penalty.
If I wanted an income of $40k at retirement and I assume I will live forever, I need $1M in the 401k at that point.

I would need less than $600k to make it from 45 to 60 since there will be growth (hopefully) during that period of time.

Would it make sense to max the 401k until it can reach $1M using a conservative growth estimate and then reduce to meeting the match but basically switch to local investing?
This would made me feel confident in my eventual retirement, even if the early retirement falls through for some reason.

Would it make more sense to split my current savings between a 401k and another investment (advice on which would be very welcome) to reduce my income for tax purposes while investing outside of the 401k since money can be used past 60 age if my investments and savings is sufficient?

Would it make more sense to reduce the 401k contribution to the match, and put savings towards another investment, with the idea that the 401k will be a cherry on top because I can get a full retirement income without being tied to my age?

Thanks in advance,

-- Unkempt

[Jellyfish]

My personal view is to reduce 401(k) savings rate only long enough to accumulate an emergency fund equal to 3-6 months living expenses. Once you have that, I'd max out your 401(k) contributions to the extent you are able.  With our without the company matching I still view the 401(k)s tax advantages as the single best way to save for FIRE over the long term.

[MooseOutFront]

I like the way you're thinking.  Maxing the 401k initially is a no-brainer, but there indeed could come a time when you view it as enough and focus on other things.  That said, there are several ways to get that 401k money out early and penalty free. Also to retire very early, you'll likely eventually be saving much more than the 401k max contribution annually, so you probably wont want to give up the tax benefits.

Roth contributions for example can be withdrawn penalty free.  So if you max that now along with the 401k then you have the 1st couple years at least of retirement funded with just Roth contributions without getting fancy with rollovers and such.

[foobar]

I like the way you're thinking.  Maxing the 401k initially is a no-brainer, but there indeed could come a time when you view it as enough and focus on other things.  That said, there are several ways to get that 401k money out early and penalty free. Also to retire very early, you'll likely eventually be saving much more than the 401k max contribution annually, so you probably wont want to give up the tax benefits.

Roth contributions for example can be withdrawn penalty free.  So if you max that now along with the 401k then you have the 1st couple years at least of retirement funded with just Roth contributions without getting fancy with rollovers and such.

It is pretty much impossible to save enough money in the 401(k) for this to be an issue. And even if by some means you could save enough money, the math probably works out that you are better off paying the 10% penalty since you were probably deducting a good chunk of the money in the 25% bracket. Through in things like SEP and the ROTH rollovers to get access to the money early and there is pretty much zero reason not to max out a 401(k).

Real world math is that if you looking to turn 50k into 1 million (real) in 15 years, you will need to save over 30k/yr (7% real is a pretty optimistic number). Figure 22k in the 401(k), 5k in the roth and another 3k in taxable gives you 75k of roth money, 80k of taxable that you can spend at anytime Thats pretty much enough to get the ROTH pipeline going.  If you are within 2-3 years of retirement, you could verify you have enough cash in taxable and redirect your 401(k) then but I wouldn't waste any time on this issue until then.

[Frankies Girl]

For example, if I intended to retire at 45, I would have 15 years from retirement until I could access the 401k without penalty.
If I wanted an income of $40k at retirement and I assume I will live forever, I need $1M in the 401k at that point.

I would need less than $600k to make it from 45 to 60 since there will be growth (hopefully) during that period of time.

You're  wrong about being not being able to access 401K/retirement accounts before 59.5 without penality.

Do some research (here, and especially on at the Mad FIentist's site) about the Roth Pipeline method. There's also the SEPP/72t drawdown method. Both of these require some initial planning a few years out, but they mean a steady flow of non-penalized, low (or no) tax money (depending on your tax bracket in ER) from your retirement accounts.

http://www.madfientist.com/traditional-ira-vs-roth-ira/

[BaldingStoic]

Because of the tax savings, always max-out the 401K and your IRA.  Since you're limited in how much you can invest each year you will never over-accumulate.  Once you contribute the max, then start investing in taxable low-cost index funds and ETFs.  All investments that yield regular interest payments and dividends (Bonds, dividend-stocks, REITs and TIPs) should go into your retirement accounts to defer taxes.  Your taxable accounts should be buy-n-hold, but you can actively trade (rebalance) in your tax-sheltered accounts to maintain you're optimal asset allocation.

Happy investing.