conversation: User (aceshades): "This might be a really, really dumb question but I've never actually done this before.  If I wanted to contribute the annual maximum to my 401k ($18,500 in 2018), how do I make sure that I hit that amount by next year?\n\nIs it as simple as just figuring out my annual take-home income, and figuring out the percentage that $18,500 is?  For example, if I make $100k pre-tax annually, then $18,500 / $100,000 = 18.5%, so I tell my employer to contribute 18.5% from each of my paychecks?\n\nWhat happens if I started contributing late in the year?  Can I contribute one-off amounts for a few paychecks to catch up?  \n\nWhat happens if I legit put down at the start of the year that I want to contribute 33% of my paychecks to my 401k and as a result, I hit the legal maximum in the middle of the year?  Is my employer supposed to automatically detect this and stop my contributions, or will I have to pay a penalty at tax time next year?"
  Self: "Note: if you can afford to, max out sooner than the whole year.  I used to max mine out about mid year.  This makes a huge difference over time.  Look at the average per month when you get it all in by mid way.\n\n(I use 12K/yr just for example)\nCompare: If you put in $1K/month for 12 months vs $2K/month for the 1st 6 months.  At the 6 month point, you have 12K in there working for you vs 1/2 that in there working for you.  In fact, for each of the 1st 6 months, you have twice as much in there working for you.  It works towards even for the 2nd half of the year, but still has the advantage.\n\nIt's the same concept as starting to save at 20 vs 30, but just on a smaller scale.\n\nYou get used to the lower/higher paycheck and once you get used to it, you might find it's not that hard to contribute more."
  scUbast2ve (scUbast2ve): "That’s not always a good idea. The stock market and associated investment vehicles will ebb and flow over time. Over-saturating at one time vs. spreading it out can have positive or negative effects. \n\nhttps://www.investopedia.com/terms/d/dollarcostaveraging.asp"
  forevercountingbeans (forevercountingbeans): "I mean, it's not over-saturating at one time at all. It's just shifting every single one of your 401k contributions half a year earlier for your entire career."
  scUbast2ve (scUbast2ve): "Hence the “not always” idea. \n\nIf you invest in something that is $20 in January vs. $15 in April -&gt; December, you are essentially losing out on gains. \n\nThus, it is NOT ALWAYS, a good idea."
  forevercountingbeans (forevercountingbeans): "Shifting your contributions to max-out by June **every year** will mean your money will have 6-months more time in the market to grow **every year**. Since the market consistently goes up over time then having 6-months more time in the market **every year** will yield better results then putting your money in 6-months later **every year**. You keep acting like dollar cost averaging is a choice but 401k contributions are literally dollar cost averaging regardless how you do it. Just like investing in a Roth IRA is always dollar-cost averaging.\n\nIf you are investing in a Roth IRA it is always better to front-load at the beginning of the year because statistically there are always more better years than worse years in the long-run, so you receive a higher benefit of having more time in the market, ergo, front-load your investment when are forced to dollar-cost average due to contribution restrictions on tax-benefit accounts."
  scUbast2ve (scUbast2ve): "6 months longer in the market means absolutely nothing in terms of long-term gains. It just means you have the POTENTIAL, not guarantee, for a larger return. Why is this so hard?"
  forevercountingbeans (forevercountingbeans): "6-months earlier, every year, for 40 years. Why do you keep acting like this person is acting like they are going to max out their 401k 6-months early for only one year?\n\nTime in the market beats timing the market. If every investment you make, every paycheck, for every year you work is invested 6-months early then each of those investment payments will have 6-months longer in the market.\n\nIf you are 30 years old and you start to front load your investments 6-months earlier than your normal investor, then you will have an ~8% higher investment than if you spread it evenly over the full 12 months of the year assuming a 7% return on average."
  scUbast2ve (scUbast2ve): "I'm not saying "time the market" at all. I'm saying you want to spread out your exposure/entry into the market."
  forevercountingbeans (forevercountingbeans): "&gt; I'm saying you want to spread out your exposure/entry into the market\n\nThe 401k system itself already forces you to do that by forcing a cap on your contributions each year. In the long-term, time in the market beats timing the market. You are suggesting "timing" your contributions every single year by spreading it out over the entire year because you don't trust that time in the market beats timing the market.\n\nThe math 100% proves that spreading out your investments over the course of one year, and consistently doing that every year, is not the ideal course of action for investments. It's much better to maximize your overall time in the market.\n\n"
  