Frontloading my 401(k)

I’ve often thought about front loading my 401(k), i.e. contributing the full amount at the beginning of the year in as few paychecks as possible, but never done it.

Why? My former employer, although they did a true-up match the following year, would only contribute the matching money each paycheck if you contributed at least X%. So if I front loaded my contributions, then I would possibly not get the full matching money if I was no longer employed with them when they did the true-up.

With my new employer, I can maximize the 401(k) match even if I front load my 401(k) contributions.

Why do I like the idea of front loading my 401(k) contributions? I like going through my list of savings goals for the year and checking off one at a time, only concentrating on one goal at a time.

1. Get my savings account up to $60,000. done with mid March paycheck
2. Contribute the full $18,000 to my pre-tax 401(k). will be done with end of May paycheck
3. Contribute the maximum I can to my after-tax 401(k) and then transfer it to my Roth IRA. will finish with a September paycheck
4. Contribute the maximum I can to the Employee Stock Purchase Plan. ongoing
5. Pay down the mortgage by $28,671.79. this one probably won’t get done, but I’m forecasting I’ll get 75% of the way there.

I used to not like the idea of the small paychecks, but it has grown on me since I have a nice cash buffer now. I plan to use the BrokerageLink feature of my new 401(k) to set up a three fund portfolio and I can’t set that up to automatically put money into a specific allocation like I can with the regular funds in the 401(k) plan, but by front loading my 401(k) contributions, the money will only be sitting in cash for ~2.5 months if I let it sit there until all the money is there and then invest it. If I wasn’t front loading, I would feel a need to log in more often and set up the money.

Why have I always wanted to do this? Over the last few years, I’ve often wanted to leave my job before the end of the year and it would have been nice to have already maxed out my 401(k), be on the path to get the maximum match, and not worry about that while I was contemplating quitting my job.

Front loading also means I don’t have to worry about getting the contribution % exactly right to max it out with my last paycheck of the year or worry if my last paycheck will actually come in the following year or if there are more paychecks than expected.

I had forgotten about this idea, even after thoroughly reading my new job’s 401(k) plan’s Summary Plan Description (SPD) in detail to learn as much as I could about the after-tax contributions and how the matching worked. But then I read Mad Fientist’s blog post on why you should front load your 401(k) and I was hooked!

Readers, have you ever considered front loading your 401(k)?


23 thoughts on “Frontloading my 401(k)

  1. I’m front-loading this year (sort of– I’m actually spreading it out across the semester) because the academic year and the calendar year don’t match up and next academic year I’ll be getting half-salary. So that means in 2016 I will be back-loading the 403(b).

    • That’s a sensical time to front load. Back-loading would stress me out in case you didn’t quite finish contributing!

  2. If it was possible to still get the full match then I’d love to do this. But my employer doesn’t provide that and I’m not about to turn down free money.

    • Excellent point, which is why I haven’t done this in the past. Since my former employer offered a true-up match and they didn’t match very much of our income, I know some people who front loaded anyways and then if they stayed, they would be rewarded with the true-up match eventually.

  3. I really like how your approach has you focusing on one goal at a time. Or at the very least, if you can tick goals off the list early in the year, it frees up bandwidth to focus on other goals.


    • It’s a great system! Multi-tasking definitely stresses me out. I get enough of that at work – I don’t need that outside of work too!

  4. I wouldn’t consider it front loading but my 401k should max out in November. I just left my % deferral the same as last year, even though I will earn more money this year. My employer does a once a year profit-sharing match based on total contributions during the year, so I won’t get dinged by not having a contribution every paycheck throughout the year. I also read MadFIentist’s post and 100% agree that it can be advantageous.

    • That’s a good approach too! A once a year profit-sharing match encourages people to leave after that, but it is also nice in that you can structure your contributions however you want without losing out.

  5. It’s the whole lump sum vs DCA argument. I’d absolutely lump sum if I had the capital and it didn’t decrease the potential match.

    • That’s a great observation! Some people say that doing the $5,500 Roth IRA contribution all at once is lump sum investing. I call it DCA investing since you’re investing it once a year at the same time ;)

      • Last year, I essentially backloaded it. Since, I am a “highly compensated employee” I can only contribute 2% more than the average of regular employees. I have that average + 2% taken out of my bonus payment. Or maybe you can consider it to be frontloading for the next year? :P

  6. Great that you can do it all up front and still get full match. I have front loaded my 401K since I started – I front load a little over half, which is the max I can and still max out my match over the remaining months. If a person’s cash flow supports it, the logic is clear. I have a similar schedule to you. Backdoor Roth 1st week of the year (done). 401K max without losing match over first 2 months (done) and max out after tax 401k->Roth IRA beginning of April (I have lump sum by cashiers check contributions allowed in after tax 401k so can do it in one check).

    Why not max out 401k sooner than May? You have a sufficient cash buffer to be able to.

    I would also suggest the same approach on after tax 401k for different reasons- do it over the smallest time period possible to minimize time incurring gains in after tax 401k prior to your withdrawal. Also do it as early as possible for same logic as front loading 401k. It is perfectly okay if your spending for a portion of the year comes from your cash and not from your paycheck.

    • You’re better at this than I am – I didn’t max out my 401(k) the first year (just enough to get the match). I should have been front loading half at my last job with how much of the time I was there I spent wanting to quit. It took me until last year to figure out that I could do that pretty easily though and at that point, my 401(k) was already maxed out for the year.

      I calculated how much % I could put into the pre-tax 401(k) and still max out the ESPP and set my pre-tax contribution % to that. It is only one percentage point lower than the maximum combined pre-tax/Roth/after-tax 401(k) contribution my employer will let me make and no contributions came off my mid-March paycheck. I’m hopeful that it’ll kick in with my end of March paycheck and it should take about 2.25 months to power through the pre-tax 401(k), starting from whenever that deduction kicks in.

      I can’t do lump sum by cashier’s check though, so I’ll switch from pre-tax to after-tax once the last pre-tax contribution comes off. Assuming that that takes a month to kick in, it’ll take another 3.5 months to do that while also maxing out the ESPP. I wish I could lump sum the after-tax!

      Money is fungible. I’m totally fine with spending down cash to fund retirement accounts. There’s also the proceeds of a decent chunk of ESPP money during that time. I remember trying to suggest to an ex (with a comparable salary) that he should use his end of year bonus to smooth out cash flow so that he could max out his 401(k) near the end of the year, but he wouldn’t. He also didn’t want to max out his 401(k) because that was tying up too much money for age 60+.

    • That’s too bad! Hopefully when you find a new job, they’ll turn out to have a good 401(k) plan. At least you’ve been saving outside of your 401(k) – not everyone would do that when they don’t have access to one.

  7. I’m happy to let the monthly reductions max out my accounts. I don’t really think of it as multi-tasking since it all happens automatically. I never see the money hit my checking, so it all happens without thinking about it.

    • That’s a good way to look at it too! My problem with doing that was that pre-tax 401(k) + after-tax 401(k) + ESPP + taxes and other deductions came out to less than my monthly spending by a few hundred dollars, so I’d rather contribute to them unevenly. Somehow that explanation made more sense in my head…

  8. I have front-loaded my 401k in the past. I did this because I was looking to make a change. I ended up staying at my company so now I spread out the reductions again. It felt good to have the money all saved up by mid-year but at the same time, seeing a very small paycheck was a bit scary.

    • That’s why I’ve usually done it in the past – making the tradeoff between maxing it out vs possibly not getting all the match. I’m curious to see how I feel about the small paychecks :) I’ll probably end up with < $50 paychecks, which will be super weird!

  9. I had a child last year and timed my 401(k) contributions to finish the paycheck before he was due. I lost out on matching as my employer matches per paycheck also, but I did manage to get the full contribution in. Front loading, combined with an unpaid 3 months off (end of Sept – end of Dec) did put a dent in our income for the year. That said, we’d budgeted for it and I do not regret taking the time out to spend with him.

    • That’s a great reason to front load your 401(k) contributions! I think most employers won’t match / let you make contributions while you’re on maternity leave anyway, so you might not have missed out on any matching money.

  10. We are in our early forties and we started frontloading my husband’s 401k (I’m a SAHM) a few years ago. Our only regret? Not doing it sooner : ) Your future selves with thank us.

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