Should I Front-Load My 401(k) or Contribute Throughout the Year?

Summary

Ramsey Everyday Millionaires

Episode: Should I Front-Load My 401(k) or Contribute Throughout the Year?
Date: March 9, 2026
Host: Dave Ramsey (with Rachel Cruze)
Caller: Rick from Las Vegas

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Episode Overview

This episode centers around a common question for high-income investors: Is it smarter to front-load your 401(k) contributions at the beginning of the year, or to spread them out evenly over the year? Dave Ramsey and Rachel Cruze dive deep on the math, the psychology, and important tax details, weaving in practical wisdom for anyone looking to maximize long-term wealth through retirement accounts.

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Key Discussion Points & Insights

1. Rick’s Dilemma: When to Contribute to the 401(k)

• [00:20] Rick explains his situation: he maxes out both personal and employer 401(k) contributions (nearly $70,000 total). He gets a big profit-sharing check and considers maxing out his 401(k) in February. He asks if front-loading is smarter than even contributions throughout the year.

2. Dave Ramsey’s Take: The Case for Lump-Sum Investing

• [00:58] Dave addresses the common advice of dollar cost averaging, but shares he personally front-loads his 401(k) every year for these reasons:
  • “Mathematically, even if the market goes down right after you put it in, by the end of the year, it will have gone up more than it went down 90% of the time.” (Dave, [01:27])
  • Lump-summing gives all your money more time in the market—potentially yielding bigger gains than money "dripping in" over 12 months.
  • The main reason not to lump sum? Emotional volatility: "You can’t do that if you can't emotionally handle two months later Trump burps and the market goes down...” (Dave, [02:52])

3. Mindset and Age as Key Factors

• [03:19] Rachel Cruze emphasizes the importance of a long-term mindset:
  • “Depending on age, for sure, your mindset should always be long term.” (Rachel, [03:19])
• Dave and Rachel clarify: Market downturns shouldn’t deter investors focused on multi-year horizons (especially those decades from retirement). If you’re retiring soon, your approach or psychology may differ.

4. Investing Horizon: Five-Year Blocks

• [03:50] Dave: “If you’re not thinking in five-year blocks of time or longer, you shouldn’t be putting in a 401(k).”
  • Even at his age, Dave thinks generationally—planning for his children and grandchildren.

5. The Power of Roth Accounts and Tax Implications

• [04:13] Dave teaches on the difference between traditional and Roth accounts:
  • He’s moved his own 401(k) and IRAs completely to Roth, paying taxes now for future tax-free growth and inheritance.
  • Traditional 401(k)s have Required Minimum Distributions (RMDs) starting at age 72½; Roths have none.
  • “Not only is all that growing tax free for me, but then also, I don’t have RMDs… getting that stuff moved into Roth as you get old, if you can pay the taxes, if you can figure out a way to pay the taxes, it voids all that stuff.” (Dave, [05:09])
• [05:43] With new legislation (Biden’s Secure Act), inherited traditional IRAs must be cashed out within 10 years (and taxes paid). Roths pass on tax-free.

6. Practical Takeaway: Emotional Readiness and Discipline

• Lump-summing works best for investors who won’t panic during short-term market drops.
• The math favors lump-sum investing, but only if you’re disciplined enough to ignore short-term volatility.

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Notable Quotes & Memorable Moments

• Dave Ramsey [01:27]:
  “Mathematically, even if the market goes down right after you put it in, by the end of the year, it will have gone up more than it went down 90% of the time.”

• Dave Ramsey [02:52]:
  “You can't do that if you can't emotionally handle two months later Trump burps and the market goes down... So you don't know what's going to happen out there on the short term. And so you can't be freaking out all the time if you're doing that.”

• Rachel Cruze [03:19]:
  “Depending on age, for sure, your mindset should always be long term.”

• Dave Ramsey [03:50]:
  “If you're not thinking in five year blocks of time or longer, you shouldn't be putting in a 401(k).”

• Dave Ramsey [05:09]:
  “Not only is all that growing tax free for me, but then also, I don't have RMDs... getting that stuff moved into Roth as you get old, if you can pay the taxes, if you can figure out a way to pay the taxes, it voids all that stuff.”

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Timestamps of Important Segments

• [00:20] Caller Rick describes his question about front-loading vs. spreading out 401(k) investments.
• [00:58]-[02:52] Dave explains why he prefers lump-sum investing and the emotional factors involved.
• [03:19] Rachel Cruze: Age and the importance of a long-term mindset.
• [03:50] Dave Ramsey: The five-year investment horizon requirement for retirement accounts.
• [04:13]-[05:43] Dave deep-dives on Roth IRAs, RMDs, and the importance of moving to Roth before retirement.

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Key Takeaways

• Lump-sum investing (front-loading contributions early in the year) is mathematically advantageous thanks to more time in the market, but only for those not prone to emotional reactions to market swings.
• Long-term thinking is essential; 401(k) investing shouldn’t be considered unless you can leave the money alone for at least five years.
• Roth accounts offer major advantages for retirees—especially avoiding forced withdrawals and taxes on inheritance.
• Legislation (like the SECURE Act) is making inheriting traditional IRAs less attractive compared to Roth IRAs.
• Financial discipline and emotional stability are crucial for successful long-term investing.

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Summary Tone: Candid, practical, and conversational—delivering tough-love financial guidance with stories, analogies, and real-life examples.

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This episode serves as a crash course in the psychological and mathematical realities of retirement saving, with high-level tax wisdom for those nearing wealth-building milestones.

Transcript

[Dave Ramsey]

Foreign. This episode is brought to you by SmartVestor. Connect with an investing pro near you at RamseySolutions.com SmartVestor Rick's in Las Vegas. Hey Rick, how are you?

[Rick]

Hey, Dave. Hey, Rachel. Thanks for taking my call today. Appreciate it.

[Dave Ramsey]

Sure. How can we help?

[Rick]

So I have a 401k question for you. I'm just trying to plan for next year. I max out my 401k every single year, not only as an individual, but from the company contributions as well. This year it was 23,500 for individual and I think 46,000 from the company. So 70 grand total. My question is next year I'm debating on whether I want to front load it all by February. We get a huge profit sharing check every single year and I max it out in February. Is it better to do that or is it better to spread it out throughout the year?

[Dave Ramsey]

We have taught in our world dollar cost averaging for so long that people sometimes avoid the lump sum. And that's kind of what brings your question to bear. So what I do is I fully fund mine in the first month of the year. And the reason is this, the only reason you would spread it out throughout the year is if emotionally you can't handle the stock market going up and down and you're going to freak out. But that doesn't bother me a bit because I don't even look at it. I just put it in there and I'm thinking I'm probably never going to touch it. I'm probably putting it in there for Rachel's kids because I'm probably not going to use that money anyway. But the, and Denise and Daniel's kids. But anyway, it's not just Rachel's kids, but the Rachel's kids are like, woo hoo. Yeah, Papa Dave. Yeah. But anyway, so the point being that mathematically, even if the market goes down right after you put it in, by the end of the year, it will have gone up more than it went down 90% of the time. That's the history of the stock market. Okay? Okay. And so, you know, sometimes you get a bear market that lasts over 12 or 14 months, but very seldom, you know, if you go back and look at this, look at the track record of the stock market, look at the S and P charts, okay? And you know, look at how many times, you know, so what ends up happening is the entire lump sum is earning money all year, or 1/12 of the lump sum is earning money, then 212 is earning money, then 3/12 is earning money. Then 4/12 is earning money. So the point is I'm making those S and p returns for 12 months while someone that's spreading it out is not getting the same dollar result that I'm getting. That makes sense.

[Rick]

Sure. Yes, it does.

[Dave Ramsey]

So I lump sum it for that reason. But you can't do that if you can't emotionally handle two months later Trump burps and the market goes down, you know, or he throws a tariff on some bizarre country that we never heard of and the market goes down, you know, or whatever it is. Right. And so you don't know what's going to happen out there on the short term. And so you can't be freaking out all the time if you're doing that. Yeah, but you lump some years at first, don't you?

[Rachel]

Yes. And depending on age, for sure, your mindset should always be long term.

[Dave Ramsey]

Right.

[Rachel]

I mean, if you're, you know, 61

[Dave Ramsey]

and you're looking at retiring, you can't touch it.

[Rachel]

There's something there. Yeah. So I mean, like it's, it's, there's

[Dave Ramsey]

not really a point unless you're 58.

[Rachel]

That's right. 49 and a half or whatever.

[Dave Ramsey]

Yeah. In my case, I can, I could touch it if I wanted to because

[Rachel]

I'm 65, which would be, I could see that having a different psychology. But, but when you're, when you're younger than that, you know, when you're in your 40s, 50s, 30s, all of it, you know, it's long term anyway.

[Dave Ramsey]

If you're not thinking in five year blocks of time or longer, you shouldn't be putting in a 401.

[Rachel]

That's right. That's right.

[Dave Ramsey]

Even at my age, you need to be thinking long term. And so I'm thinking past my death because again, I'm probably not going to ever touch that money. I've got plenty of other stuff generating income without touching that. And so that money's probably, is all in Roth too. So it's all going to pass completely tax free. It's awesome. So, yeah, that another reason I won't be touching it. So, yeah, that's the thing. Which also kind of. We can sidebar on that for a second. Rachel. It's a good teaching point. And I didn't think about this when I was your age and teaching this stuff and I was your age and doing this stuff and building the wealth, but now that I, as I'm hitting these milestones, 65 and all that, I'm starting to understand 72 and a half you have. If you have traditional IRAs or 401ks that have not yet been taxed, you have required minimum distributions that are beginning. You have to begin to take it out because the government wants their tax money. If it's in a Roth, it is growing tax free. And there's no RMDs, no required minimum distributions. I have moved over the years, 100% of ours into Roth and paid the taxes on those lump sums as I did that. Even the matching portion at Ramsey, where I match myself, has. Has to be. It's required to be traditional. But each year I roll it to Roth, so I don't have anything that's not Roth now at my age. So this is really beautiful. Not only is all that growing tax free for me, but then also, I don't have RMDs. I wasn't. I never. I couldn't spell. Yeah, it's just a required.

[Rachel]

No, no, no. What's the dollar amount?

[Dave Ramsey]

The dollar. It's a percentage. It's a chart. It's a percentage.

[Rachel]

Percentage of more each year.

[Dave Ramsey]

Okay. Because they want to get their taxes.

[Rachel]

Yeah, yeah, they want to get their taxes.

[Dave Ramsey]

They're going to require you to begin to cash out traditionals, but if it's not traditional, you're not required to take it out. And it's continuing to grow tax free. And with the new Biden Secure act, the legislation was passed under President Biden, if you do an inherited IRA and it's a traditional, all the taxes are due within 10 years. You have to cash it out over 10 years. If it's a. There's no taxes due on a Roth, none of that applies. So when I do leave it to you, the kids, as a. As an inherited ira, as a beneficiaries, then that there's zero tax on it. None. And no required distribution. So getting that stuff moved into Roth as you get old, if you can pay the taxes, if you can figure out a way to pay the taxes, it voids all that stuff. I didn't even think about all that stuff when I was in my 30s. I was just chunking money in there like crazy. And now I look back and go, man, that Roth stuff's freaking ingenious.