{ "media_type": "text", "post_content": "For those who get paid annual bonuses, is it better to put a portion of that into your 401k from a tax perspective (while still maxing out for the year) vs maxing out your 401k via regular paystubs over the course of the year? What’s a better strategy?", "post_id": "60dc75227fdce20029e5ab14", "reply_count": 23, "vote_count": 2, "bowl_id": "59064a3cb12379001006592c", "bowl_name": "Personal Investment Chatter" }

For those who get paid annual bonuses, is it better to put a portion of that into your 401k from a tax perspective (while still maxing out for the year) vs maxing out your 401k via regular paystubs over the course of the year? What’s a better strategy?

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Money is money is money. I always max my 401K earlier in the year because time in market > timing market. Irrelevant per tax, your annual income is your annual income.

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It depends on what you would do with the money otherwise. For me, I would put the money in my brokerage account if not in the 401k, so it is invested either way. If you would just spend the bonus, you are missing time in the market, which may or may not hurt you.

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If you are going to put the full 19.5 in, it really doesn’t matter

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Cant wait to get to this stage where I don’t make spending plans for my bonus!

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OP, if you're at PwC, we don't do an end of the year true up. If you max out early in the year, you'll lose firm match later on. Personally, I model out salary from Jan - Jun, Jul - Dec, and bonus in September. I then determine the % needed across all of those pay periods so that I have at least 6% per paycheck going to pre-tax 401k while not maxing out until Dec.

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You should have a copy of the plan document available that will tell you. As I said elsewhere, we just got the true up a couple years ago. I assume it makes it easier for the company to manage expenses of the contributions ( and match) are spread out over the year instead of front loaded

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It matters if you have a company 401k match. If you max out your 401k in the first half of the year, you are only getting half of your company match.

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So helpful thanks guys!

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Don’t think you can contribute any of your bonus to 401k at ZS so id make sure this is even a possibility before doing too much thinking

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But I like thinking ☺️ (ps I know I can contribute my bonus)

Do you all work in hr/tax? So knowledgeable 😅🙏🏻

Nope, just in the workforce for a while. Read your HR policies and 401 (k) plan docs, there’s a ton of good info in there!

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Pre and post limit is approx $57k. I try to fill that up every year

Yeah I’m not quite there yet 😅

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