anybody else out there thinking of minimizing 401K contributions so they can beat the street?

If I'm unhappy with an employer's 401k plan, I contribute just enough to get the employer match (hey, that's a guaranteed 50% return!) and then fully fund an IRA. The IRA allows me to select funds that perform well. I don't have to manage extra individual stocks, I'm still diversified, and I still get the advantage of a tax-deferred account.

That's because you have a fundamental misunderstanding about what 401k's are and what they are for. 401(k)'s are simply a method of saving money pre-tax. It's designed to support the investment habits of the majority of individuals. For larger companies, the only way to do this is to offer only mutual funds. Mutual funds, by design, are OVER-DIVERSIFIED in comparison to investing in individuals stocks. This is huge as the majority of 401k investors do not have enough money invested to properly diversify their accounts in order to reduce the risk. Of course that certainly reduces the return as well. Can't have one without the other. Additionally, in a normal investment envirement, due to the nature of the contributions coming in on a bi-weekly schedule the money would be sitting in a money market earning 4% for months and months before accumulating enough to buy enough shares of a stock to justify the sales expense. This dampens the returns for the supermajority of individuals...and doesn't occur in a typical 401k.

Another critical factor that you fail to consider is asset protection...the 401k is federally protected from creditors. The IRA currently is not. So, while you may not currently need that protection, it's a nice thing to have and would be awful if you lived in a state that offered no such protections and found yourself in such a predicament. And there are far more people out there that could use that protection than those who actually can and do beat "the street". Study after study has shown that individually directed accounts perform at a level that is 2-3% lower (over time) that those in managed accounts. You may be one of the fortunate ones but most people would be better served investing 100% of their money in an S&P and be done with it. Especially those who claim high returns but fail to account for trading costs and count contributions as earnings. IE my account was at 80k and now it's at 90k so I must have earned 12.5%...failing to consider the 4,500 that was put into the account which brought the returns down to 6.875% and trading costs maybe even lower.

That being said...Yes, there are people who performed at 20% level inside a 401k and with mutual funds. Most Large Cap International Funds performed at or near that level as a YTD. Anyone who was in those at 100% (younger riskier investors) would have met your level.

bottom line is that the 401k works for 99.99% of Americans and in ways that they don't even know or think about.

All 401(k) plans are different; some have excellent investment options and some don't. Ask your employer to provide a self-directed brokerage account option within the 401(k) plan.

My company offers a 401(k) but i use a Roth because of the options i have when i control my money.