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Front Load 401k in 2020?

Posted: Thu Nov 14, 2019 11:11 am
by maxutil
I understand that market timing doesn't work. We are at record highs. My plan is to contribute at a pace that will finish by mid July. I also get that front-loading could be good in the event of job change or loss, however I don't see that happening in my situation. My 401k plan doesn't match per paycheck so I don't need to worry about not capturing the full match.

I most likely will stick to the original plan, but wondering if others think spreading it out over the year is better.

Re: Front Load 401k in 2020?

Posted: Thu Nov 14, 2019 11:25 am
by bloom2708
If you have other money to pay the bills with, put it in as fast as you can. Investing early (over the long haul) works out best.

I work with some people who put 75% in pre-tax. Then switch to after-tax/with Roth conversion. Our company has a generous match and does daily Roth conversions for after-tax dollars. If you are 50 (catch up) you can save a family's average salary in one year. If you really want to pay the tax, you could do the first $19k as Roth too. That doesn't make sense for most. Having a mix of pre-tax and Roth allows you to save more. Deferring the tax to 30 years down the road or more.

This works well if one spouse makes enough to live on/pay the bills.

If you need your paycheck to be a certain level to pay the mortgage and bills, then pick a percentage that works to max in the summer or fall.

Re: Front Load 401k in 2020?

Posted: Thu Nov 14, 2019 11:29 am
by Darth Xanadu
maxutil wrote:
Thu Nov 14, 2019 11:11 am
II also get that front-loading could be good in the event of job change or loss
It might actually work against you if you max out in Q1, then go to a new employer that matches on a per-pay-period basis, and you are stuck and can't get those matching funds. But, it's very situation-specific since some employers may have a waiting period for 401k and/or matching anyway. Hard to know ahead of time, which is why I tend to front-load as well!

Re: Front Load 401k in 2020?

Posted: Thu Nov 14, 2019 2:20 pm
by ved
Darth Xanadu wrote:
Thu Nov 14, 2019 11:29 am
It might actually work against you if you max out in Q1, then go to a new employer that matches on a per-pay-period basis, and you are stuck and can't get those matching funds. But, it's very situation-specific since some employers may have a waiting period for 401k and/or matching anyway. Hard to know ahead of time, which is why I tend to front-load as well!
If that happens, can he continue to contribute in the new job to take advantage of per pay period matching, and at teh end of the year, go back to his previous employer and ask to withdraw his "excess contributions"?

Re: Front Load 401k in 2020?

Posted: Thu Nov 14, 2019 2:30 pm
by Darth Xanadu
ved wrote:
Thu Nov 14, 2019 2:20 pm
Darth Xanadu wrote:
Thu Nov 14, 2019 11:29 am
It might actually work against you if you max out in Q1, then go to a new employer that matches on a per-pay-period basis, and you are stuck and can't get those matching funds. But, it's very situation-specific since some employers may have a waiting period for 401k and/or matching anyway. Hard to know ahead of time, which is why I tend to front-load as well!
If that happens, can he continue to contribute in the new job to take advantage of per pay period matching, and at teh end of the year, go back to his previous employer and ask to withdraw his "excess contributions"?
I admit I don't know the answer to that, but it would be worth exploring with a current employer whether this is an option.

Edit to add: See this thread from some number of years ago that discusses this topic: viewtopic.php?t=168681

Re: Front Load 401k in 2020?

Posted: Thu Nov 14, 2019 2:49 pm
by maxutil
It looks like most still advocate front loading. The reason I asked is that we are at record highs, and although I can't foresee when the decline will come, it seems like if it does come next year, it would happen later in the year. This would make spreading out the contributions better. Anyway, I know this is market timing, so I'll just stick with the plan.