Author Topic: ESPP and 401k contribution timing  (Read 1143 times)

Hike

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ESPP and 401k contribution timing
« on: December 31, 2016, 12:02:35 PM »
My company has a great ESPP: buy up to $25,000 in shares a year with at least 15% discount. The shares are bought twice a year and I can sell them immediately. I typically front load my 401k purchases early in the year to max out my $18,000 contributions.

But I'm wondering which I should max out first: the ESPP or 401k. Any thoughts? Thanks

seattlecyclone

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Re: ESPP and 401k contribution timing
« Reply #1 on: December 31, 2016, 10:40:45 PM »
You have two discrete dates per year to buy shares for the ESPP. The money you put into that is sitting there earning no interest until the next purchase date, at which point you get a pretty nice instant payoff. So I'd say the optimal thing with the ESPP would be to contribute as close to the purchase date as possible, if varying your contributions from paycheck to paycheck is even an option. Work your 401(k) contributions around that schedule.

Hey It's Me

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Re: ESPP and 401k contribution timing
« Reply #2 on: December 31, 2016, 11:11:24 PM »
Cut down on 401K contributions while you're maxing out the ESPP, and then use the payoff when it comes to fund the next few months of spending while you increase your 401K contribution. ESPP is literally free money - you can invest in that and the 401K with some planning.

Hike

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Re: ESPP and 401k contribution timing
« Reply #3 on: January 01, 2017, 07:49:23 PM »
Thanks for the advice. I can change my 401k contribution as much as I want, but can't vary ESPP more than once. So I'm going to maximize the ESPP and then add the free money from there to max out 401k and get my matching.