Fellow Mustachians, I apologize in advance for yet another "where do I invest my money thread," but I seek advice.
I am 35 and would like to retire in 10 years time when I'm 45(ish). My wife is a stay at home mom. We have two children, one who just entered Kindergarten and one who will follow in 3-4 years. My wife wants to start a business to bring in some cash and is having trouble deciding what to do but that's a topic for another time.
My current take-home pay (after taxes) is approximately $66,000. Between the two of us, we maybe get $1k or $2k extra per year for various odd jobs. I contribute 10% of my base pay to a 401k account (my employer matches something like 6%), which currently has a balance of $83,000. (Index funds ftw!)
We bought a house almost three years ago for around $150,000 and unfortunately had no down payment. (This was shortly before discovering mustachianism.) This means we're paying PMI each month. We will get this taken off one way or another in the coming months, probably through a refi. On the bright side, we have been paying down the mortgage aggressively and have it down to $124,000.
Other than that, we basically have no debt. We're working to bring expenses down but they are not outrageous. Problem is, aside from the 401k, we don't have much in the way of investments or savings.
I want to start seriously building our stash.
So I started doing some math. Using various compound interest calculators around the web yielded some surprising results about my 401k. Assuming my contributions stay the same and also assuming an average interest rate of 7%, I'll have roughly $360,000 in the account in 10 years (age 45, target retirement age). Hmm, not bad. Now, if at that point I stop contributing (because I'm retired), the balance will grow over the next 15 years to $993,000. Holy Toledo! That's way more than we'll need at that point, which tells me I'm putting too much into my 401k.
So, to put it bluntly, where should I be putting my money so that I can actually use it when I'm 45 without penalty? I researched IRAs and they don't look any different than a 401k to me. The IRA Escape Hatch Loophole strategy in MMM's article "How much is too much in your 401k" sounds interesting, and I get the part about converting a traditional 401k/IRA into a Roth IRA to avoid the taxes, but I thought you couldn't withdraw from a Roth IRA early without penalties? How does that part work?
Should I just open a standard non-tax-deductible Vanguard account and start throwing an extra post-tax $1-2k per month in there? Are there any minimums or gotchas that I should be aware of? Other ideas?
Thanks,
Charles