The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: Megatron on September 30, 2013, 03:16:29 PM
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I get true up match with my company's 401k and I was thinking if I should just max out my 401k for next year the first 3 months of the year ($17,500). that way it has a longer time for compounding interest. I have an efund and a fiancee that I can kind of live off for a bit. Has anyone done this?
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Not quite the same, but I invest in my roth (and my spouses Roth) in one lump sum in the beginning of each year, to take advantage of longer investment time/tax free gains.
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I always front load my 401k in the first half of the year, but can't max it out because the company doesn't true up. They also only allow whole percent contribution amounts, and any adjustments take an unpredictable amount number of pay periods to take effect.
The result is that it is always a math problem to try to get the full match AND max the 401k each year. Basically I have to time it so the last pay period of the year completes the max, but is also above 6% - with the contribution constraints mentioned above.
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Megatron - I know a few people that max out in the first half of the year.
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Yes, the only disadvantage deals with the matching - if your employer does make up for the match, then great - if you stay there.
If you get a better offer from another employer and their match is different, you risk losing that. Depend on your job security and satisfaction, this may or may not be a real concern.
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that's a pretty amazing deal. I think i'd take full advantage of that as early as possible.
within reason of course. 3-6 months sounds doable.
You're amazingly blessed to work for such a company.
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I am in awe that you make so much that you could hit the max contribution in 3 months... sounds pretty nifty if you can manage that!
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I get true up match with my company's 401k and I was thinking if I should just max out my 401k for next year the first 3 months of the year ($17,500). that way it has a longer time for compounding interest. I have an efund and a fiancee that I can kind of live off for a bit. Has anyone done this?
Yes, I max it out as quickly as possible every year by contributing 60% of my paycheck (the maximum I'm allowed to elect in my plan). My employer contributes a flat 3% of my salary as it's paid, regardless of my contributions, so when I choose to contribute doesn't matter for that. When I first started doing that I was somewhat uncomfortable with the concentration of the investment into such a short period of time (that is, the "What if this is the peak of the market?" fear), but I got over that as any one year's 401(k) contribution became a much smaller portion of my total portfolio and have subsequently seen data that suggests it's historically been generally advantageous to invest earlier, rather than evenly, for annual cycles.
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It may depend on how your company match (if any) works. My company only matches when I make a contribution, so I plan on spreading mine out over the course of the year.
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I do this, but it's easier cause I don't get a match. I'd just ask your 401k administrator what the easiest way to get the full match is.
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The result is that it is always a math problem to try to get the full match AND max the 401k each year. Basically I have to time it so the last pay period of the year completes the max, but is also above 6% - with the contribution constraints mentioned above.
This is exactly my issue right now. My projections for the year went slightly off track when a bonus came in a little lower than I had expected. I made an adjustment and I think I'm on track for nailing the 17.5k contribution limit on my December 15th paycheck.
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The result is that it is always a math problem to try to get the full match AND max the 401k each year. Basically I have to time it so the last pay period of the year completes the max, but is also above 6% - with the contribution constraints mentioned above.
This is exactly my issue right now. My projections for the year went slightly off track when a bonus came in a little lower than I had expected. I made an adjustment and I think I'm on track for nailing the 17.5k contribution limit on my December 15th paycheck.
Will you miss out on the company match on your Dec. 31st paycheck then?
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The result is that it is always a math problem to try to get the full match AND max the 401k each year. Basically I have to time it so the last pay period of the year completes the max, but is also above 6% - with the contribution constraints mentioned above.
This is exactly my issue right now. My projections for the year went slightly off track when a bonus came in a little lower than I had expected. I made an adjustment and I think I'm on track for nailing the 17.5k contribution limit on my December 15th paycheck.
Will you miss out on the company match on your Dec. 31st paycheck then?
We get paid on the 1st and 15th of the month.
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That sentence means you can front load and get your maximum match...However ask your HR just to be sure. And do it via email so you have it in writing.
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http://www.madfientist.com/front-loading/