Details are given below, but my question is given my situation, would it be better to put more money in a taxable brokerage account rather than maxing out my traditional 401k, or should I keep maxing out our 401k's?
My wife and I are both 35, make about $315k before bonuses, putting us solidly in the 24% MFJ tax bracket. We both currently max out our 401k's, and max out our IRA's which we do a backdoor Roth conversion on each year, and are also contributing to a taxable brokerage account. As it currently stands, I have $459k in my 401k and my wife has $265k in her 401k.
I've built out a spreadsheet to track and forecast our investing across our accounts, to see how much we would have saved at different retirement ages. Our goal is to retire before we are 50, with the earliest retirement age likely being 46. If we were to retire the year we turn 46, and we each max out our 401k each year from now until then, factoring in employer matches and using a conservative 4.25% real return, I would have $1.2M in my 401k and my wife would have 1.0M in her 401k (each of our Roth IRA's would have a balance of ~$180k at that point).
If we went that way, our taxable brokerage account would have $2.3M in it. My current plan is to live off of our brokerage account while we either do Roth conversions, or try to minimize MAGI to maximize healthcare subsidies. However, if I cut my 401k contributions to $11k a year, that $12k difference would be worth $8,640 post tax (assuming the 24% tax bracket reverts to 28% at the end of 2025), and doing that from now until we turn 46 would see our taxable brokerage account have a value of nearly $2.6M, while my 401k would still have a value just shy of $1.1M (I have the forecasted higher returns on the taxable brokerage account due to a higher exposure of equities compared to the 401k).
I know the typical investing advice is to max out tax-advantaged accounts before putting money in post-tax accounts, but that advice seems to be aimed more towards people looking to retire at an age where they'll be able to immediately start drawing funds from those tax-advantaged accounts. For those looking to retire early and live off of a brokerage account, does it make sense to divert more funds towards a brokerage account so that when we retire, we have a larger balance to float us until we can start accessing those tax-advantaged funds, or begin pulling on accessible Roth conversions?
Thanks in advance for your thoughts/input.
My wife and I are both 35, make about $315k before bonuses, putting us solidly in the 24% MFJ tax bracket. We both currently max out our 401k's, and max out our IRA's which we do a backdoor Roth conversion on each year, and are also contributing to a taxable brokerage account. As it currently stands, I have $459k in my 401k and my wife has $265k in her 401k.
I've built out a spreadsheet to track and forecast our investing across our accounts, to see how much we would have saved at different retirement ages. Our goal is to retire before we are 50, with the earliest retirement age likely being 46. If we were to retire the year we turn 46, and we each max out our 401k each year from now until then, factoring in employer matches and using a conservative 4.25% real return, I would have $1.2M in my 401k and my wife would have 1.0M in her 401k (each of our Roth IRA's would have a balance of ~$180k at that point).
If we went that way, our taxable brokerage account would have $2.3M in it. My current plan is to live off of our brokerage account while we either do Roth conversions, or try to minimize MAGI to maximize healthcare subsidies. However, if I cut my 401k contributions to $11k a year, that $12k difference would be worth $8,640 post tax (assuming the 24% tax bracket reverts to 28% at the end of 2025), and doing that from now until we turn 46 would see our taxable brokerage account have a value of nearly $2.6M, while my 401k would still have a value just shy of $1.1M (I have the forecasted higher returns on the taxable brokerage account due to a higher exposure of equities compared to the 401k).
I know the typical investing advice is to max out tax-advantaged accounts before putting money in post-tax accounts, but that advice seems to be aimed more towards people looking to retire at an age where they'll be able to immediately start drawing funds from those tax-advantaged accounts. For those looking to retire early and live off of a brokerage account, does it make sense to divert more funds towards a brokerage account so that when we retire, we have a larger balance to float us until we can start accessing those tax-advantaged funds, or begin pulling on accessible Roth conversions?
Thanks in advance for your thoughts/input.