Every year you get a basket that can hold 104 apples and your employer generously makes a deal with you.
For every 4 apples you put in your basket, they’ll put 2 apples in another basket that you’ll get at the end of the year.
But they’ll only match 2 at a time.
So if you save 4 apples over 26 pay periods, you’ll have the 104 apples that you saved PLUS the 52 apples that your employer matched.
But if you add 104 apples to your basket in your first pay period, you’ll only get 2 apples from your employer.
That means you missed out on 50 FREE apples.
That’s how some 401k’s work (like Amazon). You have to max out your 401k ($23,00 for 2023) evenly throughout the year.
Other 401k’s do a true-up at the end of the year.
So if you save 104 apples in January, you’ll get 2 apples in January and 50 apples at the end of the year.
But that means those 50 apples weren’t making more apples throughout the rest of the year. So you will have missed out on those investment returns.
So while I applaud your initiative to max out your 401k ASAP every year, you’re likely better off saving evenly throughout the year and putting any money you have left over each pay period into your long-term brokerage account.
