Snowball method + 401K

[jaine]

Those of you who love the snowball method - do you snowball your 401K contributions too? Compressing your 401K contribution into part of the year? So that you can have more "oopmh" snowballing your other goals in the other part of the year? Or do you leave the 401K contribution alone, same amount every paycheck?

[jIM_Ohio]

401k would work best with continual contributions if there is a match involved...

meaning if you put in $0 from Jan -June which is matched 6%-3%, you only get the 3% for positive contributions (3% of 0 is 0). You get the match for July-December, but you left half your match on the table.

In general with investing, putting more money in earlier wins just about every time if the same amount is compared... meaning if you invest $1000 per month vs $12,000 lump sum in December, the $1000 per month will win out because it was compounding for 11 months before the 12k was deposited, but if the 12k was deposited in January and compared to $1000/mo from Jan-Dec, the lump sum would win out (because it was invested earlier and compounded more).

The opposite is also true

for IRAs many people either put all money in january of the same year (so 2010 IRA contribution is done in Jan of 2010) or all money in at end of tax year (so 2009 contribution is Jan of 2010) for reasons which usually have tax implications and yearly limit implications.

Over 30 years, in 2040 it won't matter much if the 2010 contribution was done in Jan of 2010 or Jan of 2011 ($5000 of a $1 M portfolio, even with compounding might be $6000, is not that much).

So capture the full match for sure (all year long) and if you have the cash flow to manage a lump sum payment at beginning or end of year, its worth considering if you have investing or tax reasons to do so.

[disneysteve]

I do "front load" our Roths. Our 2010 contributions were maxed in April this year. I'd rather get the money in as soon as I can for the reasons Jim mentioned.

My wife has a 401k but she already contributes the maximum allowed each paycheck - 50% - so it isn't possible for her to put in any more or fund it any faster.

[feh]

401K contributions are monthly - taken right out of my paycheck. IRA contributions are done in one lump sum, usually toward the start of the year.