For early retirement, should I max out my retirement accounts or taxable accounts?

I am 22, but I want to retire early. Something like 35 or 40 would be ideal. Right now, I'm maxing out my contributions to my Roth IRA and a Roth 401k, with money going into various stock mutual funds. However, I'm wondering if this is the way to go, as I understand that I can't even access my 401k account until turning 59 1/2 anyway. For my early retirement goal, should I continue to max out my retirement accounts, or scale some of it to taxable accounts? I recognize the tax advantages of the retirement accounts, but I'd also like to have money to draw on pre-59.5 yrs old. Thanks!

Public Comments

1. If you are putting some money into other accounts, you can live off that money until you turn 59.5 years old. Also there is a way to start removing money from your retirement accounts before 59.5 years without paying the 10% penalty, by setting up a schedule of regular withdrawals. However, once you start, you are obliged to keep making regular withdrawals, so I would use up your other accounts first. See the links for how to withdraw money from your IRA when retiring before 59.5 I would keep maxing out your IRA's and 401k's now. If at some point you feel you have enough in them, you can stop then and start putting the rest into non-retirement funds. For most people who pile up enough money to retire early, the problem is they can't put as much as they want into the tax-free accounts, not the other way around. qzz
2. Well, yea if you really want to retire that early you would need to do something in addition that would give you liquid cash at the younger age of 35-40. You must be making very good money to even contemplate this, or you are too young to realize how difficult this would be. You would need to accumulate, in the next 13 years, roughly 750k to 1 million dollars to have cash to live on until your 401's were ok to use. The problem is, right at the point when you say you want to retire is exactly the point where you can grow your geezer money the best. Now, if you can do it and really want that, go for it.
3. The younger one is...the harder it is to contemplate working "your entire life". We've all been there. Work gets easier with age. (to a point) You're off to a great start for the years after 591/2. You need to focus on money to carry you from age 40 to 59. Probably a Roth (after tax) would be best for that. Don't forget to save liquid funds (such as money market) to buy a home, cars, and other of lifes expenses. A roth is liquid to an extent but you probably should leave it as long term and have a separate liquid fund. Working part time after 40 might be a great investment. Enough money to buy health insurance etc. There are some decent "voluntary simplicity" web sites out there. Some tend to be a bit green politically, but others focus on frugal living so you can work less of your life. Good luck