[USER]

I never understood why someone thinks a product (401k) designed to keep people working into their 60s can allow you to retire early.

Many people suggest that contributing to a 401(k) can help you retire early, but since it’s designed for individuals working into their 60s, how does it really support early retirement?

What strategies or approaches have you used with a 401(k) to retire earlier than expected, and how effective have they been?”

[Stephany]

A 401k is one component of a multi faceted investment portfolio. Other assets are engaged while the retirement accounts grow so they can take over later in life.

[Dafne]

Employer match. You want to contribute at least the match % so you don’t leave money on the table

[Ran]

You can access your money in your 401K when you turn 59 1/2. Plus there are multiple options when it comes to IRS rules to access them earlier like the Rule of 55(you can access your current 401K in January of the year you turn 55 if you retire/quit your job).

There is also rule 72t which the IRS allows you to withdraw money early from either an IRA or 401K and you have the flexibility to apply it to one or all retirement accounts you have at your disposal.

[Thai]

It’s designed as a tax shelter for highly compensated individuals who would’ve otherwise paid a higher amount in marginal tax.

Usually for these individuals, a fully contributed 401K would only represent low single digit percentile of their gross income, so it’s more of a tax savings tool than an early retirement tool.

[Stephanie]

No specific account allows you to retire early. Tax-advantaged accounts are just tools to leverage to hit your FI number faster.

There are ways to access 401k funds prior to age 59.5 without penalty so many in the FIRE choose to prioritize it over other types of accounts.

[Hin]

You just need to have assets outside the 401k to tide you over until 60.

[Author]

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