Taxable Brokerage Now or Max 401k Sooner Next Year

[ChadP]

Hi Jeremy!  First off thank you for your blog, you have literally changed my life. *insert continuous gushing fanboy praise*

I'm probably overthinking this but just want to make sure I'm not missing anything:

We are about to do a cash-out refi ($70k) on an investment property tomorrow.  Originally the intent was to get enough cash to be able to max out our 401k's this year but the refi took so long that we found out we were able to max them out without the money. Some of the money will immediately be going to max out remaining 2020 IRA contributions and paying off a $4k car loan at 6.25% regardless of which option we choose.  I'm a little torn on how to deploy the remainder.  Should we:

a) Keep most of it in cash so that we can max out IRA and crank up the 401k contributions to max ASAP in the new year.  This would leave us with larger take-home paychecks later in 2021 that could be invested in taxable brokerage accounts but we would miss out on potential remaining gains in 2020.

b) Put it in a taxable brokerage account right away and leave our 401k contributions where they are which would have them maxed out by July or August 2021.

c) Split the difference and do a little of both.

We are looking at at least 5 more years of accumulation stage then hopefully transitioning to part-time work for early FI.  Thanks to cost-cutting put in place this year, graduating from university, and a changing investment philosophy (from Roth to traditional) we should be making enough next year to max out all tax-advantaged retirement accounts based on our income alone.

Bonus question - any recommendations on what type of index fund (largecap, smallcap, etc.) to put in the taxable brokerage account?

[gocurrycracker]

Hi Chad

Probably 6 of one, half dozen of the other. If the market goes up after you invest, front-loading was better. If it goes down, it wasn't. In 20 years, probably doesn't matter at all.

VTI and VXUS are good to have as core asset allocation.

As an aside, I personally wouldn't do cash-out refinancing to invest - leverage multiplies gains and losses. It's nice when it works, painful when it doesn't.