Front load 401k?

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wabash_sphinx
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Front load 401k?

Post by wabash_sphinx » Sat Aug 04, 2018 10:19 pm

I've read about front loading employer sponsored 401ks or other similar investment accounts, and am considering doing this in 2019.

Do you do this or plan to? Why or why not?

(To clarify I'm referring to putting 100% of my paycheck into investment accounts at the start of 2019 until maxed out, so to get maximum time in the market)

TIAX
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Re: Front load 401k?

Post by TIAX » Sat Aug 04, 2018 10:32 pm

wabash_sphinx wrote:
Sat Aug 04, 2018 10:19 pm
I've read about front loading employer sponsored 401ks or other similar investment accounts, and am considering doing this in 2019.

Do you do this or plan to? Why or why not?

(To clarify I'm referring to putting 100% of my paycheck into investment accounts at the start of 2019 until maxed out, so to get maximum time in the market)
This is a good idea as long as you receive all of your employer match.

drk
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Re: Front load 401k?

Post by drk » Sat Aug 04, 2018 10:49 pm

I do because my employer does a true-up match at the end of the year. If it didn't, I would still front-load, but I would leave enough contributions for the rest of the year to maximize the match.

mortfree
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Re: Front load 401k?

Post by mortfree » Sat Aug 04, 2018 10:50 pm

I cannot front load for two reasons:

1. My max contribution allowed per paycheck is 25%

2. I need to contribute at least 6% for the 26 paychecks to receive the full employer match for the year.

billthecat
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Re: Front load 401k?

Post by billthecat » Sat Aug 04, 2018 11:07 pm

mortfree wrote:
Sat Aug 04, 2018 10:50 pm
I cannot front load for two reasons:

1. My max contribution allowed per paycheck is 25%

2. I need to contribute at least 6% for the 26 paychecks to receive the full employer match for the year.
But you could front load the excess beyond the 6% (plus save a bit for later to account for an estimated pay increase).

rankl
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Re: Front load 401k?

Post by rankl » Sat Aug 04, 2018 11:47 pm

I have been front loading 401k with first pay check in Jan for last 3 years, as we get paid bonus in Jan.

Also employer match is offered once a year, so I don’t need to worry about missing match.

Front loading can be a hit or miss, i:e last year front loading worked in my favor as stock market went up through the year, I got shares at a lower price, this year it was the other way in Jan it was high, then went down, I could have bought at little bit discount if I had spread my contribution throughout the year. But in the long run front loading should come ahead.

shipwreck
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Re: Front load 401k?

Post by shipwreck » Sun Aug 05, 2018 5:27 am

No true-up for me. I have a spreadsheet to calculate % to get as close to $18500 without going under. Employer will stop at $18500. Maximizing my cash flow. In fact, I get to lower my percentage another 1% at the end of this month.

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JoMoney
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Re: Front load 401k?

Post by JoMoney » Sun Aug 05, 2018 5:51 am

My employer match is per paycheck, so to get the most I have to be able to contribute at least that amount each paycheck without going over the max. I "front load" as much as I can, and then back off when it starts getting closer to the end of the year and need to divide up the amounts over the remaining paychecks. I use a spreadsheet to keep track of my contributions and employer match because I contribute after-tax as well, and try to reach the 415(c)(1)(A) max.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

mortfree
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Re: Front load 401k?

Post by mortfree » Sun Aug 05, 2018 12:35 pm

billthecat wrote:
Sat Aug 04, 2018 11:07 pm
mortfree wrote:
Sat Aug 04, 2018 10:50 pm
I cannot front load for two reasons:

1. My max contribution allowed per paycheck is 25%

2. I need to contribute at least 6% for the 26 paychecks to receive the full employer match for the year.
But you could front load the excess beyond the 6% (plus save a bit for later to account for an estimated pay increase).
Yes. I was answering specifically to the OP asking about doing 100% early on.

I played with my contributions and am at the point where I can ride out the rest of the year at a certain percent and won’t go over the 18,500. I have done different things before where the last few pays were strictly 6% contributions.

But this was a great reminder thanks!

nolesrule
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Re: Front load 401k?

Post by nolesrule » Sun Aug 05, 2018 12:43 pm

I don't bother. We get quarterly bonuses which are eligible for 401k deferral, and there's no true-up on match, and to make it even more complex, any annual increases I receive are in September or October, so there's less time to react. So as it is I have to be careful with the amount deferred in order to hit the max on the last paycheck and get the full match for the year. Depending on the amount of the bonuses, and the amount of the pay increase, I usually have to drop the deferral percentage once or twice during the second half of the year.

crit
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Re: Front load 401k?

Post by crit » Sun Aug 05, 2018 12:52 pm

We do, because a) the job is in a volatile market, so we want to make sure the contribution is there regardless of what else happens that year, and b) no match. We front-load as much as is allowed, so it happens within 2-3 months.

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Earl Lemongrab
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Re: Front load 401k?

Post by Earl Lemongrab » Sun Aug 05, 2018 2:50 pm

My situation when it mattered was similar to Mort's. We had a percentage cap (30% the past few years) and needed to contribute 8% each pay period to get full match. However, Megacorp also allowed after-tax contributions (Mega Backdoor Roth) so I just put it on the max and let it ride. When the deferral limit was reached, the contributions automatically switched to AT. I'd roll them out the next year.
This week's fortune cookie: "Your financial life will be secure and beneficial." So I got that going for me, which is nice.

TravelGeek
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Re: Front load 401k?

Post by TravelGeek » Sun Aug 05, 2018 3:40 pm

We have been front loading for years. Yes, I checked how the match works. The sooner the money is in the market the longer it can work for me. And if I were to quit or laid off, I would have maximized my contributions.

bhsince87
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Re: Front load 401k?

Post by bhsince87 » Sun Aug 05, 2018 3:51 pm

I've been doing it for the past few years. We are at FI and I don't necessarily need to work any more.

If I want to hit the eject button for whatever reason, I want to have the 401k already maxed out for that year.
Retirement: When you reach a point where you have enough. Or when you've had enough.

MathIsMyWayr
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Re: Front load 401k?

Post by MathIsMyWayr » Sun Aug 05, 2018 5:30 pm

Besides the market outlook, front loading or not depends on the emplyer match and your employment status, i.e., leaving the current emplyer before the end of the calendar. If your employer match is not true-up, then you should maintain room for maximum match to the end of the year.
1) You do not seek, e.g., retire or expect to be unsuccessful in securing a new employment. - front load.
2) The new employer offers match - leave enough room for 401k for the new match.

stoptothink
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Re: Front load 401k?

Post by stoptothink » Sun Aug 05, 2018 5:38 pm

JoMoney wrote:
Sun Aug 05, 2018 5:51 am
My employer match is per paycheck, so to get the most I have to be able to contribute at least that amount each paycheck without going over the max. I "front load" as much as I can, and then back off when it starts getting closer to the end of the year and need to divide up the amounts over the remaining paychecks.
This is how I have been doing it, while we have my wife just DCA'ing a flat $771 each paycheck throughout the year. Some added "diversification" I guess.

billfromct
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Re: Front load 401k?

Post by billfromct » Sun Aug 05, 2018 6:01 pm

I don't think you can contribute 100% of your paycheck into your 401k because money has to be withheld for SS & Medicare, income taxes, health insurance, etc.

The company I worked for had a maximum 50% for normal 401k contributions & 25% maximum for catch-up contributions.

I would think most companies have similar maximum contribution requirements.

bill

billthecat
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Re: Front load 401k?

Post by billthecat » Sun Aug 05, 2018 10:21 pm

TravelGeek wrote:
Sun Aug 05, 2018 3:40 pm
if I were to quit or laid off, I would have maximized my contributions.
Exactly - the future is uncertain, so I try to cram it in as quickly as possible.

wabash_sphinx
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Re: Front load 401k?

Post by wabash_sphinx » Thu Aug 09, 2018 9:19 pm

Thanks to all. This sounds like something I will work towards for 2019 as the future is uncertain.

sco
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Re: Front load 401k?

Post by sco » Fri Aug 10, 2018 8:54 am

billfromct wrote:
Sun Aug 05, 2018 6:01 pm
I don't think you can contribute 100% of your paycheck into your 401k because money has to be withheld for SS & Medicare, income taxes, health insurance, etc.

The company I worked for had a maximum 50% for normal 401k contributions & 25% maximum for catch-up contributions.

I would think most companies have similar maximum contribution requirements.

bill
There are certainly places that let you choose 100%. Of course there is some math involved, it is 100% after FICA and any deductions. If your net is 0 there isn't any income taxes due for that period.

Most places don't want to do the math and limit to 50-90%, but they certainly don't have to.

michaeljc70
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Re: Front load 401k?

Post by michaeljc70 » Fri Aug 10, 2018 9:13 am

Though I was dong 75% (the max) the last couple months, that was due to me probably leaving the company and wanting to get in as much as possible fast. Though I've seen some "studies" show lump sum (which is close to what front loading is, depending on salary) is better, I generally don't front load. Your circumstances probably make a difference. If you front load and that is all you are saving for the year and the market tanks, you have nothing to invest the rest of the year at lower prices. If you are going to continue to save (outside the 401k), that is a different story.

kcc
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Re: Front load 401k?

Post by kcc » Fri Aug 10, 2018 10:10 am

Putting aside (1) company match issues and (2) cash flow considerations, I would think the decision as to whether to make an early lump sum contribution to your 401(k) comes down to whether you want to take a dollar cost averaging approach, or not.

See the wiki page: https://www.bogleheads.org/wiki/Dollar_cost_averaging

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TinkerPDX
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Re: Front load 401k?

Post by TinkerPDX » Fri Aug 10, 2018 10:14 am

wabash_sphinx wrote:
Sat Aug 04, 2018 10:19 pm
I've read about front loading employer sponsored 401ks or other similar investment accounts, and am considering doing this in 2019.

Do you do this or plan to? Why or why not?

(To clarify I'm referring to putting 100% of my paycheck into investment accounts at the start of 2019 until maxed out, so to get maximum time in the market)
Yes, in years when I have the cash for it. Match isn’t an issue for me. Did it this year with the RIRAs and 529 too—while I know that it will usually be the right move, this year was a bit of bummer timing wise, though at least the 401k was DCA’d over a couple of months.

Catfish Plumber
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Re: Front load 401k?

Post by Catfish Plumber » Fri Aug 10, 2018 10:24 am

The last 2 years we’ve been fortunate enough to max 401k contributions in the first 6 months.

Company puts in 3% salary spread across the entire year for everyone (not a match, no personal contribution required). So my front loading doesn’t cost us there.

Definitely doing this to try to get tax advantaged $ in faster so it can starting earning faster.

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