Frugality and 401k
The Simple Dollar answers the question Does Ultra-Frugality Mean That You Don’t Need A 401(k) Or A Roth IRA? for a couple that lives on half their income and saves the rest.
I think there are a couple of points to think about:
Do you get a company match in the 401k: if so, fund enough to get the match.
Retirement income level vs current income level: the 401k shelters income, but you pay taxes on it at the income rate, not the (cheaper) long term capital gains rate. If your income in retirement is similar or higher than now, a Roth or other post-tax savings are better options. If your retirement income is lower than now (and it probably will be if you’re managing to save half now) a 401k can shift those taxes to your lower-earning years.
The 401k can be a great savings idea for people who aren’t good at saving. For your average person, the money coming out of their paycheck before they see it really can help them save. For someone disciplined enough to save half their income, that’s not necessary. It is not easy to get the money out of the 401k before 59.5 either, so retiring in your mid-forties requires some other sort of savings. A Roth IRA allows you to take the contributions out tax-free at any time, so it would be a much better choice for someone retiring early. Leave the growth money in until 59.5 and you’ve saved yourself a bunch of taxes vs saving the money outside a retirement account.