Author Topic: Do you front-load your 401K?  (Read 7987 times)

zurich78

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Do you front-load your 401K?
« on: April 01, 2015, 09:28:54 AM »
Just curious what other people do in here.  Do you front-load your 401K?  Or, do you set your contribution level so that you are consistently contributing the same amount each period?

Just curious if I would be better off front loading and hitting the max contribution early, or, if it doesn't make much of a difference at all and so flexibility wise, it's just easier to set a level that you can forget about.

What do you guys do and why?

(Assume that regardless of which method I choose, I'm already participating in other investments such as a Roth and a taxable investment account).  If I don't frontload my 401K, then I'll just put a little extra in my taxable account over time.  If I do, then I'll put less and then put a lot more later once I'm capped out on 401K. 

Is there any great reason to do one vs the other or is it essentially a coin flip?

wtjbatman

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Re: Do you front-load your 401K?
« Reply #1 on: April 01, 2015, 09:33:40 AM »
I think more people would front-load their 401k if they knew they wouldn't be shorted their employer 401k contributions. Unfortunately for a lot of people here, the majority of 401k plans don't seem to make up employer contributions if you max your 401k early.

Mine does, it's spelled out clearly in the plan documents. Unfortunately I don't max out my 401k anyway, so it doesn't matter to me. Not yet anyway.

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Re: Do you front-load your 401K?
« Reply #2 on: April 01, 2015, 09:39:29 AM »
Just curious what other people do in here.  Do you front-load your 401K?  Or, do you set your contribution level so that you are consistently contributing the same amount each period?

Just curious if I would be better off front loading and hitting the max contribution early, or, if it doesn't make much of a difference at all and so flexibility wise, it's just easier to set a level that you can forget about.

What do you guys do and why?

(Assume that regardless of which method I choose, I'm already participating in other investments such as a Roth and a taxable investment account).  If I don't frontload my 401K, then I'll just put a little extra in my taxable account over time.  If I do, then I'll put less and then put a lot more later once I'm capped out on 401K. 

Is there any great reason to do one vs the other or is it essentially a coin flip?
Back when I had a 401(k) I had contributions taken out of my monthly paycheck.  I did this because it was the simplest method for me, and it made managing my cash flow simple.

Mathematically, it's marginally better to front-load your 401(k) if it doesn't negatively effect your other spending or savings (e.g. if you can do it without delaying IRA and HSA contributions). This is simply because your money will have a slightly longer time to compound.  If you have the ability, max out your 401(k), IRA etc. on January 1st of each year.  Few people are able to do this though, and in the end it makes a fairly small difference.
You also need to make sure that your employer will still match your contributions - many won't if it's all in one lump sum at the beginning of the year (e.g. they may have a limit of $1k match per pay period, even if they are doing a 6%/3% match)

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Re: Do you front-load your 401K?
« Reply #3 on: April 01, 2015, 09:40:48 AM »
I frontload because my plan allows it & I'll still receive the match.  DW contributes evenly throughout the year because her employer matches per pay period.

General consensus is that frontloading is more advantageous as long as you aren't losing out on employer match.  The basic idea is that the market rises more often than not, so getting dollars to work as early as possible generates a better outcome over time.

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Re: Do you front-load your 401K?
« Reply #4 on: April 01, 2015, 09:49:28 AM »
It's also particularly beneficial to front-load if it is your last year of working.  You can hit your max, and then hit the gate.

The Fientist talks about this here:
http://madfientist.com/front-loading/

dantownehall

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Re: Do you front-load your 401K?
« Reply #5 on: April 01, 2015, 09:52:34 AM »
I s[pread mine throughout the year a) to get the match all year and b) to dollar-cost average.
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Re: Do you front-load your 401K?
« Reply #6 on: April 01, 2015, 09:58:50 AM »
Our match continues if we max out, so I have always front loaded to some degree, usually maxing out sometime in Oct or Nov.  Also leaves a bigger paycheck for the holidays.  This did bite me though, I got a large bonus followed by a large salary increase last year.  I was making ROTH contributions because I thought I would be in the 15% bracket, but the increased income threw me solidly in the 25% bracket.  I changed my contributions to traditional ASAP, but due to the front loading, and the timing of the change, my 401(k) was already over 50% funded.  I also lost the ability to deduct IRA contributions so I couldn't even make it up there. First world problems, right?

makstache

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Re: Do you front-load your 401K?
« Reply #7 on: April 01, 2015, 10:07:16 AM »
My match is 6%, so I partially frontload. I contribute 10-12k in the first few months of the year and then lower contributions for the remainder. I end up maxing out my contributions on the last paycheck of the year and getting the 6% match.

Imustacheyouaquestion

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Re: Do you front-load your 401K?
« Reply #8 on: April 01, 2015, 10:40:07 AM »
My match is 6%, so I partially frontload.

This is what I plan to do in future years. I am not currently front-loading because my emergency savings is basically the $1000 per month I'm socking away into cash savings. (In an emergency, I'd just put less into savings that month). So I'm not comfortable setting my 401k contribution to maximize the difference between my monthly expenses and net take-home pay without building up a bit more of a savings cushion first.

Dicey

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Re: Do you front-load your 401K?
« Reply #9 on: April 01, 2015, 10:54:39 AM »
When I was working, employer matched every pay period with no make-ups, so not an option.

I used to be vigilant about tax withholding. Every year, when I'd had as much withheld as I owed the year before, I shut off the tap (changed status to Exempt). I then banked the difference and put it into non-retirement accounts. HR never understood why I was doing this (i.e. creating more "work" for them, but I'm pretty confident that they're all still working.)

I rarely managed to front-load my Roth either, because I'm a lazy ass. I know, I know, I could have so much more money by now if I did (blah x 3), but somehow I stumbled across the finish line with enough, despite my slovenliness. It matters most that you invest on a consistent basis, not that you front load.
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FrozenBits

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Re: Do you front-load your 401K?
« Reply #10 on: April 01, 2015, 11:35:40 AM »
2014 was the first year that my wife and I were able to max out both of our 401k's.  I have already checked with both of our employers and they do a "true up" on matches for the previous year every January.  So from now on we will raise our contribution amounts every time we get a raise and start to slowly work on front loading.  I am hoping that within 3 years we are able to max both of our 401k's in the first half of the year.

Another advantage of front loading is if your looking at switching jobs. In this case front loading gives you a better chance on not missing the chance to max out your 401k the year of the switch.  Many employers require you work for them for 1 year or so before you are eligible to participate in their 401k.  So, if you max out your 401k in the first six months at employer A and then move to employer B mid year (who requires 1 year of service for 401k eligibility) you're not missing out on the 9k of pre-tax income.

BarkyardBQ

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Re: Do you front-load your 401K?
« Reply #11 on: April 01, 2015, 11:52:07 AM »
Our situation is a little different, so I thought I'd share our strategy. My wife and I both have 457/403 accounts. This is our first year maxing out our 457's and halving our 403's. She gets paid monthly and I'm bi-weekly (26 checks), this year we have it simply divided by the number of checks. Next year, we will increase our contributions so that I contribute in 24, and basically match her in contribution rate. The following year we plan to increase it so all are maxed at the beginning of November, then a year later by October. This helps us getting contributions in faster, forcing lower available disposable income, and leaving extra post tax dollars at the end of the year for maxing our IRAs on January 1. Right now we have enough cash to fund the IRAs at the beginning and regenerate the savings account throughout the year... but we'd eventually like to have less cash on hand and handle taxable investments at the end of the year. Additionally, we have a 5 year plan to leave the state, so we'd like to get those accounts maxed out that final year, so some mix of contribution compression and cash is necessary.
« Last Edit: April 01, 2015, 11:54:48 AM by zdravé »

dunhamjr

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Re: Do you front-load your 401K?
« Reply #12 on: April 01, 2015, 12:31:51 PM »
I think more people would front-load their 401k if they knew they wouldn't be shorted their employer 401k contributions. Unfortunately for a lot of people here, the majority of 401k plans don't seem to make up employer contributions if you max your 401k early.

Mine does, it's spelled out clearly in the plan documents. Unfortunately I don't max out my 401k anyway, so it doesn't matter to me. Not yet anyway.

i guess i am one of the lucky ones.  we get our employer match included each month until they hit their $2k contribution limit.
so front loading doesnt have any impact for me.

edit:
i just looked, i hit the max emp match on the mid-March pay period.
« Last Edit: April 01, 2015, 12:35:38 PM by dunhamjr »

Krnten

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Re: Do you front-load your 401K?
« Reply #13 on: April 01, 2015, 06:36:08 PM »
Fh front loads and is maxing out earlier each year with raises. I think the only reason he does it is because it's fun for him to get a take home income boost when he's done.  I would front load too but my job only lets you max out evenly. 

samburger

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Re: Do you front-load your 401K?
« Reply #14 on: April 01, 2015, 06:55:31 PM »
Nope. My employer won't allow me to contribute over a certain percentage of my paycheck. They will give the full match for the year regardless of when you contribute, though.

aschmidt2930

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Re: Do you front-load your 401K?
« Reply #15 on: April 01, 2015, 06:59:36 PM »
I do to a degree. I'll be done with my contributions in August this year, hoping to push that date forward a little each year.

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Re: Do you front-load your 401K?
« Reply #16 on: April 01, 2015, 07:27:46 PM »
Yes - will max out by July (unless DH quits his job). We only get the ER match once per year on 3/31.
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Re: Do you front-load your 401K?
« Reply #17 on: April 01, 2015, 08:48:51 PM »
I front load, mostly because it makes the end of winter/beginning of the year more bearable, ugh. I will get a crappy "profit share" in October if I stay at my job.
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Knaak

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Re: Do you front-load your 401K?
« Reply #18 on: April 01, 2015, 09:38:57 PM »
I'm frontloading my 457b and 401k.  Should have the employee portions for both maxed out by the end of May.
« Last Edit: April 02, 2015, 10:40:42 AM by Knaak »

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Re: Do you front-load your 401K?
« Reply #19 on: April 02, 2015, 05:45:33 AM »
I front load my plan, but I have a sophisticated employer and a "spillover" deferred comp plan that is matched to my 401k contributions.
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Re: Do you front-load your 401K?
« Reply #20 on: April 02, 2015, 06:40:16 AM »
I frontload - sort of. Last year I maxed out my 401k at the end of September, but that's only because I was leaving for another job. When I started with my new employer, I just made post-tax contributions of 6% so I didn't miss out on their match.

This year, I started off the first three months on pace to max out with my last paycheck. But I just bumped my contribution by 50%, with the intent to drop it back down to 6% to ride out the year and still finish at $18,000. I don't think my employer does a true-up, so if I max out early, my only option is to put away post-tax money, like last year. Which wouldn't be the end of the world.
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Re: Do you front-load your 401K?
« Reply #21 on: April 02, 2015, 07:09:00 AM »
I began to front-load this year for the first time.  I am tired of trying to play catchup at the end of the year.  My income tends to stronger early in the year, so far so good.
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MrsSmitty

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Re: Do you front-load your 401K?
« Reply #22 on: April 02, 2015, 08:54:26 AM »
I front loaded this year but sort of unintentionally. I set mine up last fall to max out based on the salary I was getting at the time. Then I got a bonus in March and will be getting a small raise next month. As a result, I'll have to reduce the % I contribute later in the year to avoid going over the limit. I actually like how that worked out this year and may intentionally do it again next year.

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Re: Do you front-load your 401K?
« Reply #23 on: April 02, 2015, 09:14:51 AM »
I just set it to max by the end of the year.  I might do differently in my last year of working, when it comes.  For now (and for me) it is easier just to contribute through out the year.  I feel like I have a hard time getting definitive answers from our 401K provider and HR on how the match works if I front load, and managing cash flow is a bit easier this way.

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Re: Do you front-load your 401K?
« Reply #24 on: April 02, 2015, 10:00:16 AM »
I do, but I don't have any sort of a match for this particular account.  I maxed out my contributions for 457 and 403b this year as of March 31.

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Re: Do you front-load your 401K?
« Reply #25 on: April 02, 2015, 11:27:07 AM »
Yes, I front-load. My employer gives the same overall match regardless of when you contribute so it makes sense to contribute early.
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Re: Do you front-load your 401K?
« Reply #26 on: April 02, 2015, 12:14:58 PM »
nope i dont front load.  My employer does make up contribution at the end of April from the previous year.  Therefore since i dont know how much OT i will work or what my bonus will be i put in the percentage that i think puts me just over for the year.
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Re: Do you front-load your 401K?
« Reply #27 on: April 03, 2015, 02:23:34 PM »
My employer allows it but I didn't see much benefit. My employer will only give a fixed percentage match and then true it up at the end of the year.

irishbear99

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Re: Do you front-load your 401K?
« Reply #28 on: April 03, 2015, 06:51:36 PM »
Nope, I don't do it because I would lose the employer's matching contribution.

gimp

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Re: Do you front-load your 401K?
« Reply #29 on: April 03, 2015, 07:00:08 PM »
Yes, but only to the extent that I still get employer contribution.

Example, if I could do 10% all year, I can also do 14% for half the year and 6% for the other half.

dhlogic

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Re: Do you front-load your 401K?
« Reply #30 on: April 03, 2015, 09:12:12 PM »
Yes, and I've already reached the contribution limit for the year. My employer does not match.

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Re: Do you front-load your 401K?
« Reply #31 on: April 03, 2015, 09:40:04 PM »
We don't front load. I find it easier to not have to keep track. Our monthly cash flow is vastly simplified if we keep making regular monthly contributions. Plus, if something were to happen to me, my spouse can follow the plan easily.


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Re: Do you front-load your 401K?
« Reply #32 on: April 04, 2015, 07:43:07 AM »
Nope, I don't do it because I would lose the employer's matching contribution.
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Re: Do you front-load your 401K?
« Reply #33 on: April 04, 2015, 08:47:02 AM »
I maxed out at the end of February. I don't get a match so there's no good reason not to other than cash flow.

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Re: Do you front-load your 401K?
« Reply #34 on: April 04, 2015, 11:38:11 AM »
Yes to an extent. I try to make sure there are some contributions in 4th quarter for DH's plan since he is paid his match quarterly (I have been promised that they true up but prefer not to test the theory since its not in writing). I get no match but can only do minor front loading due to the outsized effect on my paycheck. I bring home only a little more than what goes into my 401k.The front loading will increase though as I have no real intention of dropping my contribution rate.

We are front loading the Roth IRAs though since traditional require lower income than we bring home.

RunHappy

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Re: Do you front-load your 401K?
« Reply #35 on: April 04, 2015, 11:54:03 AM »
This year I am front loading my 401k.  My company does not match.  I am planning to go on maternity leave in September and will return the first of January. Next year I probably won't front load.