Frontloading retirement accounts?

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kitkatnyc
Posts: 48
Joined: Wed Sep 30, 2015 1:39 pm

Frontloading retirement accounts?

Post by kitkatnyc » Sat Jan 13, 2018 12:45 pm

Hey all,

Just found out that I'm allowed to contribute 100% (minus taxes and health insurance, etc) of my paycheck to my 403b. DH and I would be fine living off his salary, and I get an automatic contribution from my employer (i.e. no match). It seems like a no-brainer to me. The only thing I'm considering is whether I think it's smarter in this market to dollar cost average by contributing every month (since a correction IS coming, at some point) or if I'm bullish and want to get it all in ASAP. Is there anything else I need to consider? And what makes more sense to you in this situation? I'm leaning heavily towards front loading, but wanted to get your expert thoughts. Thanks in advance.

sailaway
Posts: 156
Joined: Fri May 12, 2017 1:11 pm

Re: Frontloading retirement accounts?

Post by sailaway » Sat Jan 13, 2018 12:48 pm

Have you seen the threads about getting your 2018 IRA topped of on Jan. 2?

In general, time in market is the most important factor. What if the the correction doesn't come until 2020?

runner540
Posts: 501
Joined: Sun Feb 26, 2017 5:43 pm

Re: Frontloading retirement accounts?

Post by runner540 » Sat Jan 13, 2018 12:49 pm

Vanguard found that the earlier you contribute in the year, the better: https://investornews.vanguard/delaying- ... -cost-you/

Frontloading the 401k in 2009 was a great move. In 2008, not so much... so like dollar cost averaging over months, you have to accept that some years you will buy higher and others lower.

Smorgasbord
Posts: 191
Joined: Fri Jun 10, 2016 8:12 pm

Re: Frontloading retirement accounts?

Post by Smorgasbord » Sat Jan 13, 2018 12:55 pm

There are lots of threads about lump sum investing. Based on the math, investing everything all at once yields the best results more often than not, however dollar cost averaging tends to reduce buyer's remorse.

Grt2bOutdoors
Posts: 17488
Joined: Thu Apr 05, 2007 8:20 pm
Location: New York

Re: Frontloading retirement accounts?

Post by Grt2bOutdoors » Sat Jan 13, 2018 12:59 pm

Front load if you can. Most participants in employer provided plans simply do not have the liquidity to front load contributions. As noted, when markets are rising front loading can reap the benefits, when markets are declining, front loading will feel the effects. However, retirement accounts are long term vehicles, as such over time you should have little to no negative impact from doing what you are contemplating.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

kitkatnyc
Posts: 48
Joined: Wed Sep 30, 2015 1:39 pm

Re: Frontloading retirement accounts?

Post by kitkatnyc » Sat Jan 13, 2018 1:09 pm

sailaway wrote:
Sat Jan 13, 2018 12:48 pm
Have you seen the threads about getting your 2018 IRA topped of on Jan. 2?

In general, time in market is the most important factor. What if the the correction doesn't come until 2020?
Thanks! I tried searching but I guess I should have just looked at the front page of the forum (or used better search terms, clearly). Since I got my portfolio set up the Boglehead way, I haven't been a frequent visitor!
Last edited by kitkatnyc on Sat Jan 13, 2018 1:11 pm, edited 1 time in total.

kitkatnyc
Posts: 48
Joined: Wed Sep 30, 2015 1:39 pm

Re: Frontloading retirement accounts?

Post by kitkatnyc » Sat Jan 13, 2018 1:10 pm

runner540 wrote:
Sat Jan 13, 2018 12:49 pm
Vanguard found that the earlier you contribute in the year, the better: https://investornews.vanguard/delaying- ... -cost-you/

Frontloading the 401k in 2009 was a great move. In 2008, not so much... so like dollar cost averaging over months, you have to accept that some years you will buy higher and others lower.
I saw this, thanks! Maybe it's better to just consider it dollar cost averaging... over years :)

kitkatnyc
Posts: 48
Joined: Wed Sep 30, 2015 1:39 pm

Re: Frontloading retirement accounts?

Post by kitkatnyc » Sat Jan 13, 2018 1:12 pm

Grt2bOutdoors wrote:
Sat Jan 13, 2018 12:59 pm
Front load if you can. Most participants in employer provided plans simply do not have the liquidity to front load contributions. As noted, when markets are rising front loading can reap the benefits, when markets are declining, front loading will feel the effects. However, retirement accounts are long term vehicles, as such over time you should have little to no negative impact from doing what you are contemplating.
Very good point about the long term vehicle. Thanks!

MathIsMyWayr
Posts: 24
Joined: Mon Mar 27, 2017 10:47 pm
Location: CA

Re: Frontloading retirement accounts?

Post by MathIsMyWayr » Sat Jan 13, 2018 9:08 pm

Besides the question of lump sum investing vs. DCA, OP also has to consider the employer matching. It is not clear whether OP gets employer matching. If no matching or a true-up matching, then it is not an issue. However, if the matching is per pay period, then OP will lose matching after maxing out. If there is any possibility of a job change, OP will lose a new employer's matching if there is not enough room to contribute to get their maximum match. A middle ground is to front load, but leave about 6-8% of the current or expected salary for the rest of the year, just in case. My front loading ends well before the middle of the year.

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