Jim Rockford

Depending on the company, if you front load your contribution, you may have to wait till the next year for a company to “tru-up” your matching money vs spreading out the contribution over the year gets the matching money sooner.

Winston

I’ll let the professionals explain it better than I could. Lump Sum Investing is essentially what you do when maxing out the 401k. LSI and DCA are both market timing, in a sense. LSI assumes that, in general, markets will go up. DCA works if you assume the opposite. Historical data favors the first approach.

I contribute 100% and hit the max limit in my second paycheck this year. That’s essentially LSI spread over two weeks.

https://www.doughroller.net/investin...sum-investing/

https://investor.vanguard.com/invest...nvest-lump-sum

RJSAviator76

Along these lines, Roth 401k or pre-tax 401k?

I'm struggling with this one as I can see pros and cons for both. I've been able to hit the 415c limits since getting off probation, and usually I have the 401k maxed out by October. I also have 20 years left.

okawner

Delta has a really good thread regarding this. I believe it is in their mega backdoor roth thread. Slightly different in that they get cash for the company contribution after hitting the 415 limit and we get RHA. But good discussion nonetheless.

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atooraya

I’ll be the fact checker in the room and share an article from Forbes that puts numbers to the market cycles: https://www.forbes.com/sites/sergeik...-us-president/

Back to the topic, front loading allows your money more exposure to the market. Good if you’re anticipating a bull run. Bad if there is another catastrophe around the corner to put us in a bear market.

OpenClimb

In years past, I've made it a point to max out my 401k contributions as early as I could. This year, I accidentally fully funded my makeup contribution (I'm over 50) in my first paycheck. Whoops. I set it at 90% or whatever last year just to make sure it was maxed out and forgot to change it before January 1st this year.

For what it's worth, aside from the $6500 I've already contributed, I'm just going to stick with 10% until I hit the maximum. I'm concerned with what the markets might do in the short term, but I've got another 13 years before I plan on making any withdrawals, so I'm trying to not let the ups and downs bother me in the meantime. If the market crashes and I see an opportunity, I may try to go all in, but for the sake of the economy, I hope that doesn't happen.

Winston

Unprecedented low interest rates (access to cheap cash, lower debt servicing rates, poor returns on bonds), trillions of dollars of stimulus spread liberally around the world, and signs if significant pent up COVID-induced demand all point to a massive rally in the short term. There’s just no other place for investors (institutional and individual) to put money and receive any appreciable return. Take advantage of as much of that as you can.

I’m not saying asset values will defy gravity forever, and I’m not saying P/E ratios no longer matter, but this rocket had been fully fueled and the fuse has been lit. It may very well end in a spectacularly destructive explosion, but I’m guessing not in 2021.

greaser

Here's another elephant in the room: 2020

https://imgur.com/a/4hP8QHt

I'll continue to divide up into equal chunks per pay period, and re-balance to my target allocation every couple months.

Winston

https://dqydj.com/2020-sp-500-return/

If you went all in and reinvested dividends, the SP500 returned 18.4% in 2020. Are you implying that that’s an undesirable investing outcome?

Hindsight is nice, but that bias will lead you to believe you could have performed better than you actually did, if you had only known the future...

Again:

“A Vanguard study actually showed that investing a lump sum outperforms dollar-cost averaging 64% of the time over six months and 92% of the time over 36-months, assuming a 60%/40% portfolio of stocks and bonds.”

flensr

I'm going Roth everywhere I can. I think that tax rates will only go up from here, so I prefer to pay the taxes now. Company DC goes non-roth, so even if roth isn't ideal I'll still have more in non-roth from the company DC anyhow by the time I'm done.

The major threat to Roth is that congress could change the law and apply a means test to Roth distributions, and essentially double-tax those contributions for everyone with a net worth or income over whatever arbitrary number they choose. Nobody trusts career politicians anymore, and I don't know anyone who is confident to absolutely dismiss that possibility. But we DO know that non-roth distributions WILL get taxed, 100% of the time. So I'm going with the Roth, betting that the chance of a tax increase is higher than the chance that congress will start double-taxing Roth.

Some of it also depends on your personal situation. I'm not 100% sure I'll have my house mortgage paid off when I retire, and it would be nice to be able take a nice fat roth distribution one year to pay it off without that large distribution popping me to the highest tax bracket. The numbers are hard to work to *prove* that's a better choice than simply keeping the money in my pocket now or paying off the house faster now, but I *think* the math works out over the long run with maxing out the Roth and then when that's maxxed out, throw any extra at the mortgage, because mortgage interest rates are so low now. I think it gives me more options that way, even if the math shows it to be a wash.