Save to Max Quick Next Year or Dump in Taxable?

[Stone11]

I've already maxed my HSA and Roth IRA for 2017 and I will be maxing my 401k over the course of the year. 

Does it make more sense to: (1) continue contributing to my taxable account each month throughout 2017 and then begin making monthly contributions in 2018 to my HSA and IRA with the hope of maxing them around October 2018 or (2) to stop contributing to my taxable in 2017 in order to save (i.e. not invest) enough to be able to max out my 2018 HSA and IRA contributions in January 2018? 

Or to put it another way, does tax free growth over January 2018-October 2018 from a January 2018 max outweigh the potential gains missed by not contributing to a taxable for much of 2017? 

Am I overthinking this or is there a "right" answer?

[Viking Thor]

You are overthinking in my opinion. If you max the Roth, HSA, and 401k both years and manage to save some in taxable invest you are doing great.

It's not going to matter that much what the order is, theoretically I guess it may be better to put investments to work right away versus holding them in savings until next Jan, but again you are doing good either way.

[Retire-Canada]

Am I overthinking this or is there a "right" answer?

I'd max tax advantage and then fill a taxable account. I wouldn't really give it more thought than that.

[Nothlit]

My policy is that as soon as I have money available to invest, I invest it. If there is space in a tax-deferred account, then the money goes there. If not, it goes into taxable. I let next year worry about itself.

[swashbucklinstache]

I agree with the others. Or, if you're bored and we're talking about something in the neighborhood of 10k a year, you could mess around and use that money to make travel hacking or credit card rewards earning easier...

Also hopefully this will be a one time problem! If you save enough to max the HSA and IRA in January, then you'll have 11-12 months to save up again and end up with more than enough to max the HSA and IRA the following January, if that makes sense. Then you could do both.

[Stone11]

I am leaning towards dumping it in my taxable account.  The only concern I have in doing so is falling short and being unable to max my HSA and IRA in 2018. 

I guess the best way to combat that concern is to use it as motivation for staying true to my budget.  Thanks for the thoughts everyone! 

[Heroes821]

I am leaning towards dumping it in my taxable account.  The only concern I have in doing so is falling short and being unable to max my HSA and IRA in 2018. 

I guess the best way to combat that concern is to use it as motivation for staying true to my budget.  Thanks for the thoughts everyone!

If the concern of falling short is due to income reduction in 2018, then that is a different story imo. If your income will be high enough to max those accounts, but not enough to live and max those accounts then holding some money in a savings account to ensure you can tax advantage next year that is probably a good idea, but only if you expect to make lower income next year.

[Retire-Canada]

I guess the best way to combat that concern is to use it as motivation for staying true to my budget.

Good idea. I like a challenge. It keeps me focused.

[swashbucklinstache]

With that additional information I'd add that you can always sell your taxable investments to fund your tax sheltered accounts next year, assuming your gross income is >= the limits for those accounts. You can think of it that way or as selling to fund your living expense while your salary goes to the accounts if that makes it easier to think about.

[mjb]

I am leaning towards dumping it in my taxable account.  The only concern I have in doing so is falling short and being unable to max my HSA and IRA in 2018. 

I guess the best way to combat that concern is to use it as motivation for staying true to my budget.  Thanks for the thoughts everyone!

FWIW, I'm in a similar boat. (I'm a freelancer.) I did the math and figured that, with my expenses being pretty low ($15 - $18k/yr), if I'm not making enough to max out my IRA and HSA, my tax liability is going to be close to zero anyway. (Thank you to the Saver's Credit!)

[Stone11]

I've decided to do a mix and start dumping my monthly savings into my taxable this year until October and then stopping my investing for three months to save a small amount to put in early 2018 to give me a head start for maxing all my tax advantaged accounts next year.

I'd still like to know if any of the more math inclined members of the forum are able to determine which method is mathematically correct, however it may just be too limited in time to have a large enough sample to really make a difference one way or the other. 

[Viking Thor]

You settle your bill with the IRS just once a year (before April 15 for prior year). So from a tax sheltering perspective there is no advantage to maxing 401k early in year versus late. However by saving up money (e.g putting in low interest savings account) rather than investing right away, on average over time you will lose a little bit (the market returns you are passing up).

e.g. instead of 10% annual stock return you get 1% savings account return. of course if just a moderate amount for a few months it likely will not add up to much. Of course you could get lucky and have cash sitting on sidelines when the market tanks, or unlucky and miss a big market rally. But again if its a relatively small proportion of your portfolio it won't matter that much.