doubting to retire early...so should I still max out 401K even with later taxes?

[sikasika]

hello all,

per the subject line - I'm doubting I'll retire early based on only now starting to work after some years away...BUT like all of us I want to make the most of investing/planning so am reaching out for some guidance.  I follow this blog as well as others (jlcollinsnh, frugalwoods, 1500, etc) and am a bit torn on what to do with retirement planning. 

here's what I'm debating:
-max out 401K (lower my yearly taxes as well as grow investments tax free until retirement) however if I do not retire early/have the option to slowly convert and IRA to a Roth then I'll be faced with taxes on cashing out. 
OR
-contribute only to match (after one year) employer's program and then invest remainder in an index fund
OR
-not put into the 401K (still not sure what the plan options are) and instead invest in stocks/bonds at the investment level - as the IRA/Roth would have limitations. 

Thanks for any input!

[Eric]

here's what I'm debating:
-max out 401K (lower my yearly taxes as well as grow investments tax free until retirement) however if I do not retire early/have the option to slowly convert and IRA to a Roth then I'll be faced with taxes on cashing out. 

You're faced with taxes when cashing out no matter what.  Converting a traditional IRA to a Roth IRA is a taxable event.  Anytime you withdrawal from your traditional IRA, you're paying taxes on that amount.  The question is, would you rather pay taxes now, or taxes later?  If you're like most of us, you'll be in a lower tax bracket upon retirement so it's beneficial to delay paying taxes until then.  (your retirement age has no bearing on this, only your expenses)  So max that sucker out!

Edit to add -- The traditional IRA to Roth IRA conversion is done to avoid the early withdrawal penalty, but it has no bearing on taxes.

[MDM]

-max out 401K (lower my yearly taxes as well as grow investments tax free until retirement)

^That one.

Otherwise you pay more taxes and end up with less money.

Main assumption: your 401k has at least halfway decent fund options.

[soccerluvof4]

^+1. I gotta go with the 401k and if/when you get in your 50th year take advantage of the catch-up program and add the additional 5k a year. This helped us out alot.