Author Topic: Max 401k with January bonus?  (Read 3340 times)

NorCal

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Max 401k with January bonus?
« on: December 28, 2015, 10:56:49 PM »
My wife is expecting a large bonus in January.  Based on past experience, it will be large enough to cover a full year's worth of 401k contributions, and the company allows this.  Plenty of additional savings will go to taxable investments throughout the year as well.

Would you contribute to the 401k all up front, or would you dollar-cost average through the year?  Why or why not?

seattlecyclone

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Re: Max 401k with January bonus?
« Reply #1 on: December 28, 2015, 11:00:08 PM »
The market goes up throughout the year more often than it goes down, so more often than not you'll be better off maxing out the account as early as possible. Just be sure that her company doesn't require her to contribute a little bit each paycheck to get the maximum employer match.

Taran Wanderer

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Re: Max 401k with January bonus?
« Reply #2 on: December 28, 2015, 11:15:13 PM »
Just be sure that her company doesn't require her to contribute a little bit each paycheck to get the maximum employer match.

This.  My company requires us to "spread it like peanut butter" to get the full 3% match.  I screwed up and missed $150 of match money this year because I didn't know there would be 27 paychecks and I maxed out on the 26th. 

seattlecyclone

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Re: Max 401k with January bonus?
« Reply #3 on: December 28, 2015, 11:21:04 PM »
Note that in the common case where they'll match up to a fixed percentage of each paycheck, you can likely still mostly front-load your contributions. Just make sure you leave 3% of your salary (or whatever) to contribute throughout the rest of the year.

Jack

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Re: Max 401k with January bonus?
« Reply #4 on: December 29, 2015, 09:59:02 AM »
Yep. Contribute $18000 - ([annual salary] * [percentage needed to capture match] * [safety factor to account for raises and such]).

terran

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Re: Max 401k with January bonus?
« Reply #5 on: December 29, 2015, 10:03:21 AM »
Regardless of the employer match situation (but certainly if the match requires regular monthly contributions) I would probably just stick with $1500/month for consistency. Easier to set up set-it-and-forget-it processes that way. I would lump sum invest the bonus into IRA's and/or your taxable account as soon as you get it though.

TheNick

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Re: Max 401k with January bonus?
« Reply #6 on: December 29, 2015, 10:49:29 AM »
Just be sure that her company doesn't require her to contribute a little bit each paycheck to get the maximum employer match.

This.  My company requires us to "spread it like peanut butter" to get the full 3% match.  I screwed up and missed $150 of match money this year because I didn't know there would be 27 paychecks and I maxed out on the 26th.

Yup this is how mine works too.  If I max mine in six months it would just mean I effectively gave up 1/2 of my match for the year lol.

Vilgan

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Re: Max 401k with January bonus?
« Reply #7 on: December 29, 2015, 02:23:12 PM »
The thing to ask about for the match is if her employer offers "true up". If so, it won't matter that she maxed early as they'll catch her up on missed matching payments at the end of the year. A risk though is if she changes employers and the new employer doesn't offer a true up.

That being said, I maxed mine in March this year and didn't regret it (other than some pointless regret about not timing the Sept dip).

NorCal

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Re: Max 401k with January bonus?
« Reply #8 on: December 30, 2015, 07:50:20 AM »
There's no match involved here.  My wife's work is really good on the headline salary and bonus, but stingy on the benefits.

Otherwise, all good thoughts.

JLee

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Re: Max 401k with January bonus?
« Reply #9 on: December 30, 2015, 09:40:20 AM »
There's no match involved here.  My wife's work is really good on the headline salary and bonus, but stingy on the benefits.

Otherwise, all good thoughts.

Given that, I'd max it right away.

Tjat

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Re: Max 401k with January bonus?
« Reply #10 on: December 30, 2015, 10:42:13 AM »