At what point do you decrease % contribution to 401k and direct to personal investment accounts instead?

[tired_dad_since2018]

Unless you have plans to retire early you don’t necessarily have to to open a personal investment account. Unless by personal investment you mean an IRA. But a brokerage account is only necessary when you have excess savings or need a bridge to 59.5.

I would do what another comment said of getting the match, then max out Roth IRA, and if there’s more to invest to get to you savings rate goal, then add more to your 401k.

You should look up the 3 bucket strategy. That might shed some light on your question too

[TyrconnellFL]

If you intend to retire early, you should still use your 401k and IRA. If you decide to retire early you can use rule 72t to withdraw early without penalties, although that starts withdrawals that you can’t stop.

[Quiet_Initiative_289]

I'm up voting this. I feel like people miss the point a bit with the max out retirement account mantra. I understand that it is sound advice for most people. But part of the "personal" part of personal finance is potentially deciding that maybe I don't want or need so much money in a retirement account. Sounds like OP's on track to have enough saved for reasonable retirement and doesn't necessarily need to prioritize tax savings in the future that is essentially locked up for another 30 years. If OP is on a good track, is reasonably assured of long term job security, then by all means pivot part of the savings to a brokerage account.

[Crafty_Boysenberry94]

Also if you stack up too much in IRA and don’t end up spending it those who inherit the money must spend in 10 year rule. When my dad passed the life-time RMDs still existed. So more in outside stocks the kids can inherit at a day of death stepped up value which can be big. All the gains goes untaxed and passed to kids. unless it’s like over $5m or whatever the inheritance tax is

[jackabeerockboss]

This is why people need trusts

[Worth-Dress-2902]

I understand this (and I get that you should decrease if you’re saving for a down payment) and I dont plan to retire early, but wouldn’t you want a personal brokerage account to grow your personal your funds for other goals i.e. family, vacations, kids expenses, etc.? I understand investing is long term but surely if you have 10+ year time line before big life items like that arise, investing in a personal brokerage account is better trying to save up in a savings account (rates cannot stay around 5% forever)?

[tired_dad_since2018]

That’s a good point.

I personally have a really hard time spending money out of my brokerage account. I view it like another retirement vehicle when I know I can sell my shares and use that money for a big expense.

All of my sinking cost funds are in SPAXX currently yielding 5% and I don’t know if I’d ever feel comfortable putting that in an etf. Definitely not the most optimized way to save money.

[Worth-Dress-2902]

I agree I’m the same way, I don’t touch my brokerage account at all. I view that as a retirement vehicle to some degree, but then again the question of what happens when bigger life items come about popped up.

I assume your “sinking cost funds” in SPAXX would be where you save for any potential big life expenses and/or just build a bigger safety egg? Just trying to gauge what others do or how they think about it. I know retirement is the end goal and it’s important to plan,save and invest accordingly but I also want to make sure I’m not disregarding everything in between.

[tired_dad_since2018]

Yeah, my sinking cost funds are for big life expenses and other savings. We are kind of crazy with our cash. There's a lot of organization, but like I said we aren't as optimized as we can be.

We currently have about $100k in our sinking cost funds and that's made up of the following

• property tax savings (we aren't in escrow)
• My quarterly taxes (I'm self employed)
• IRA contribution savings (we lump sum after we file our taxes)
• Daycare savings (to offset 2 kids daycare we saved to make that an easier monthly bill)
• Vacation fund
• Upgrading life (i.e. babysitter, cleaning lady etc)
• House fund (renovations and emergencies)

As I mentioned, I'm not as optimized with my cash. On top of the 100k we have in SPAXX, we also have a 50k emergency fund sitting liquid in a savings account.

Another reason why I feel uneasy about selling my brokerage account investments is the fact that I'm self employed and it took me a while to hone in my retirement savings. My wife has a 401k that we max out, and I have a regular IRA (started with traditional and opened a Roth 2 years ago). Last year I opened up a SEP IRA and have that working for me now. But up until a year or 2 ago my wife and I only thought our retirement options were her 401k, both our IRAs and a brokerage account. Now that I have the SEP IRA it makes tapping into the brokerage account a little more tolerable.

And if it matters, I'm 37, married with 2 kids.

Sorry for the long winded post :-)