We’re still early enough in the year that financial resolutions may still be fresh in your mind. One common resolution for those ramping up toward retirement is to max out their 401(k).

If you have the financial flexibility, you may be able to front-load your 401(k) contributions. That is, rather than spacing out your annual contributions throughout the year, you can instead max out your 401(k) contributions within the first few months of the year.

The question is, is this a good idea?

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Benefits of Front-Loading Your 401(k)

While nothing is guaranteed, investment markets have historically gone up over time. Since 1957, the S&P 500 has generated average annual returns of over 10%. If you are someone who believes that growth is on the horizon, it makes sense to front-load your 401(k) contributions. That way, you have more money in the markets right away to take advantage of that growth.

For example, let’s look at two employees at the same company (Employee A and Employee B) who are both contributing the maximum amount into their 401(k). In 2025, the maximum contribution is $23,500—unless you’re over age 50, in which case you can contribute an extra $7,500 in catch-up contributions. For our sake, both employees are age 45, so the most they can contribute for the entire year will be $23,500.

Let’s say Employee A decides to front-load his contributions, while Employee B spaces them out evenly throughout the year. Due to front-loading, Employee A contributes all $23,500 by the end of March, while Employee B only contributes $5,875 over that same period.

Now, let’s say there’s a huge spike in the markets at the beginning of April. Because Employee A had more in his account at that time, he stands to realize a much greater capital gain than Employee B. If the markets continue to grow throughout the year, by December, both employees will have contributed the same amount, but Employee A’s account will be much larger.

However, due to the unknowable nature of investment markets, growth is never a given, and there are some drawbacks to front-loading your 401(k). Generally, there are two key factors you should consider before you pursue a front-loading strategy: dollar-cost averaging and matching contribution rules.

Dollar-Cost Averaging

Investment markets can be volatile and unpredictable. Something might be climbing through the roof one day and then fall off a cliff the next. During periods of volatility, you can better prepare yourself from market risk by employing dollar-cost averaging (DCA). This is an investment strategy where you invest the same set dollar amount at regular intervals over a set period of time. Essentially, this is the strategy used by Employee B in the example above.

The understandable concern with front-loading your 401(k) is that the markets might tank early in the year. Or they could go up and down like a roller coaster throughout the year. In order to prepare yourself from sudden market drops or periods of wild volatility, you can use a DCA strategy to soften the blow.

Nobody can predict what will happen in the short term in the markets. While front-loading your 401(k) may seem like the more profitable strategy in theory, in practice, it might not work out that way. It’s still okay to contribute throughout the year if the fear of a market downturn will expose your portfolio to more risk than you’re comfortable with.

Matching Contribution Rules

Outside of market volatility, the other key factor to keep in mind before front-loading your 401(k) is how the employer matching contribution within your plan works. Some plans will only match contributions during each pay period that an employee contributes. In other words, if you front-load your 401(k) early in the year, you may receive a reduced matching contribution.

Going back to our example, Employees A and B each have an annual salary of $100,000 and their employer matches 401(k) contributions up to 5% of their salary. Employee A front-loads his 401(k) and maxes out his annual contribution by the end of March. Since he’s only contributing to his 401(k) during the first quarter of the year, he would only receive the 5% match on a quarter of his income. In this instance, he’d only receive $1,250 in matching dollars, thereby leaving $3,750 on the table.

Meanwhile, Employee B spreads out contributions throughout the year, ensuring to make a contribution during each pay period. Since he’s making contributions throughout the year, Employee B receives the 5% match on his entire annual income, or $5,000.

What’s the Right Strategy for Me?

Each retirement plan works a little bit differently, so it’s critical you speak to your plan administrator and learn how the matching contribution on your plan works before ultimately deciding whether or not you’d like to front-load your 401(k). You may decide that a DCA strategy is actually more beneficial for your situation. You may also wish to consult a wealth planner for additional advice.

If you have any other questions about how your retirement plan contributions will affect your comprehensive financial plan, contact one of the specialists at Wealth Enhancement. They can help ensure you’re making the right choices to work towards your unique goals.

This information is not intended as a recommendation. The opinions are subject to change at any time and no forecasts can be guaranteed. Investment decisions should always be made based on an investor's specific circumstances. Investing involves risk, including possible loss of principal.