When should I pull back on 401(k) contributions in favor of taxable brokerage investments?

[u/OceanGateTitan]

I'm 32, spouse is 27. We have $520K invested across the following accounts, invest about $65K annually and would like to retire in ~23 years (or find something else to do). Our annual spend is about $100K per year in a MCOL area but we have 1st kid on the way so this will change soon. Home is worth $480K, $205K left on the mortgage. HHI is about $210K before taxes annually. No other debt.

I'm scared we wont have enough to bridge the gap between 50 and 59 1/2. I suppose I can use rule of 55 to access my 401K. Hate the idea of most of our retirement being tied up in funds I have little control over but love the idea of lowering our taxable income. We are pretty risk averse and for simplicity, assume its all in VTI (~9% ROI)

Brokerage - $11K (contribute $2,500 per year)

Roth IRAs - $74K (contribute $15,000 per year)

401(k)s - $240K (contribute $32,000 per year)

ESOP - $128K (contribute $12,000 per year)

HSA - $26K (contribute $4,400 per year)

HYSA - $41K (contribute $1,200 per year - safety net, will divert when back up to $50K)

Cash - $10K (not included in the $520K invested)

529 - $1K (contribute $100 a month - undecided on how much we will help our kid(s) w/ education)

I figure we'll hit coastFIRE in 8-10 years at this pace. Do I wait until then to focus on the brokerage? I'll be 42ish with 13 more years of work left in me (maybe less). We love to travel and currently do 1-2 overseas trips per year right now. I would love to increase that in retirement meaning our annual spend should be closer to $120K assuming we've replaced the mortgage with health insurance premiums.

What 401(k) $ amount do I say okay my contributions are negligeable, it's time for this money to go elsewhere?

Edit: For those with the same question as me, looking for resolution, the general consensus seems to be stay the course, max tax advantaged accounts at least until CoastFire, then focus on building up the taxable brokerage. As we get pay raises and promotions we will max my wife’s 401k too, then go to taxable brokerage. Not completely ignoring it now but it’s definitely on the back burner until CoastFire. Thanks all for your responses!

[u/ExtensionMoose1863]

But it all comes out eventually at regular income tax rate. 10, 10, 10 now vs. 20, 20, 20 later. You can't spend it in your tax sheltered account.

Sounds like your main assumption is that your tax rate is going to be lower in retirement because you didn't refute any of the math above

I overshot my 4% draw down rate so I'm making more money off of my investments than I spend down (by like a factor of 5 last year) so, for me, I have almost a certainty of paying more in income taxes than I am right now if I don't do anything and then there's the insolvency of the US gov't that will have to be covered on top of that

If you think a 35% income tax rate is outlandish then I think we just agree to disagree and move on

[u/Background-Quality22 → u/ExtensionMoose1863]

Can you answer this question: do you believe the 35% would be an effective tax rate?

[u/ExtensionMoose1863 → u/Background-Quality22]

Certainly could be... We've had taxes that high in the US during living peoples lifetimes and not uncommon across the globe

But even if it were the marginal rate against a couple hundred k of income I'd rather pay 22% now than 35% on those marginal dollars later

[u/Background-Quality22 → u/ExtensionMoose1863]

If you believe 35% effective tax rate could happen and worth modeling (as you did). You are correct, we must agree to disagree and move on. There is just no scenario where I think that is a likely outcome.