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Is ​timing ​your ​401k ​contributions ​as ​bad ​as ​timing ​the ​market? Pilots often ask us about whether they should ​try ​to ​max ​out ​contributions ​immediately ​at ​the ​first ​of ​the ​year ​or ​should ​they ​take ​their ​profit-sharing ​check ​and ​max ​out ​contributions ​for ​their ​401k?

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In this episode, we dive into the question of timing 401k contributions and whether it’s as risky as timing the market. The discussion explores strategies for maximizing contributions, including the pros and cons of contributing early versus waiting for market conditions to improve. Key topics include the impact of market volatility, the importance of long-term investing, and why dollar-cost averaging can be a smart approach. Ultimately, the goal is to ensure you’re consistently maximizing your 401k to take full advantage of retirement savings, regardless of market fluctuations.

Here’s what we cover in this episode:

0:00 – Intro

0:32 – Investing is for the long-term

1:12 – Maxing out your 401k

Resources:

Retire Pilots – https://retirepilots.com

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Episode Transcription:

(Note, this is an automated transcription. Please forgive any errors.)

Ryan Fleming: Is timing your 401k contributions as bad as timing the market? Let’s talk about it on today’s episode. So I often get asked, what about contribution limits? And should I try to max out my contribution immediately at the first of the year, or should I take my profit sharing check and max out my contributions for my 401k? I think it’s a great question, but let’s talk about all the details of it, because, I don’t know, the market’s unpredictable. Um, now when I think about investing, I think the biggest factor is the time factor. The longer your money’s in an investment, it’s probably going to give you the most beneficial return over that longest period of time. So that would obviously say, yes, let’s get that 23,500 of what you can contribute in as quickly as possible. But. And so in most cases, that would be the way to do it. But in 2022, if you remember, the market was down, it was down bad. It would have been smarter for you to wait till October and then max out your 401k. So there’s a lot of people that take that January, get it all in there, that it didn’t work out well for them. However, what I like to think about is four out of every five years, the market’s up, you want to get your contributions in. And what I care about more, just make sure you’re maxing out your 401k. I think $ cost averaging, doing a little bit each month is always a great way to do it. And then, of course, something that happens if you do it the right way and we have the right percentage. And of course, this all depends on how much you work. But a lot of people like hitting their max around October and they have that extra money for the holidays. They get this bigger paychecks for the holidays, for Thanksgiving and Christmas, and I think that works out very well. So do I think it’s as bad as timing the market in other ways? Absolutely not. Uh, what strategy works for you? I don’t really care as long as we get it maxed out. Um, and of course, if there is a downturn in the market and the market pulls back, it’s always a great time to crank up that percentage and buy stuff while it’s down. Remember, we all know to buy while it’s low and sell while it’s high. We just don’t do it. So sometimes just being disciplined, take the emotion out of it and just get it done is what really matters.

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