Good idea to max out 401k in the first few months of year?
I know that if you want to invest 19k in the market it's better to do dollar cost averaging and invest some monthly. Is this the case for 401k or Roth as well, or the brokerage handles the investment strategy? My brokerage is Fidelity, employer Microsoft. Assuming I don't need cash immidiately.
Yes. Good. Good. Good.
Good in that it gives you more time for growth, bad in that it doesn’t spread your investment over an even period of time. But as long as you’re making other investments and keeping them evenly spread out you should be fine
Dollar cost averaging
Lump sum investing tends to perform slightly better (citation needed) because markets tend to go up more than down. Dollar averaging would be better if you're about to fall off a cliff. You can't predict the future. Dont over think it.
Lump sum tends to be better, except when it isn't (right before a cliff). Depends on your risk appetite.
Don’t worry about it too much. Theoretically lump sum is expected to perform better because your employer match + your money sits in the market longer. I still chose to DCA it because the markets make me nervous right now.
If you are changing jobs that year, check if your old or new employer matches more
Do you know comoanies matching more than 50% of what you pay, max $9500?
$9,800 is the max match you can get at Netflix.
What I usually do is to max out the 19k pre-tax with the bonus in January, getting the 50% match, and then spreading out the 27k after-tax over the year.
I was thinking of the same, if I felt better about the markets
Hard to predict the outcome ... it could be a Bad idea cause you are trying to time the market (assuming right now stock are cheapest). Spreading it evenly across the year provides better returns if the market corrects/crashes further and I think there is a likelihood of that happening this year.
In fact contributing max as soon as you can is not timing the market. It's based on the philosophy that time in the market better than timing the market, (which I don't fully agree with). Spread over the year is more of timing the market.
Depends on how the event unfold ... let’s assume Q1 is the highest point for the year 2019 followed by a shallow crash in H2 2019 then you will lose more then the person who has evenly spread. FYI ... this happened to me this year when I made a 50% contribution in my bonus paycheck that covered all my 401k and unfortunately September 15 was the peak for this year and when I look at my returns it’s -10% compared to my colleagues at -6% for the same fund(bitc life)
If you're getting a huge bonus/check in January then pump as much as you can in 401k, less taxable dollars and more money in your paycheck throughout the year
No. Bad. Bad. Bad.
Why? The reason that i said in the post?
Payroll is run to deduct your company match on a proportional basis to your paycheck. If you front load your 401k in say 4 months, you will be foregoing the free money that is a company match for the final 8 months of the year.