WHEN to make an IRA contribution

[Rod]

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Does anyone make their FULLIRA contribution on Jan 2 of each year?

I hear this is the wisest thing to do instead of making a monthly contribution since you will earn more with the full contribution working for you throughout the year.

My Wife & I plan on doing this withour Roths and wondered if anyone is currently doing the same.

God Bless:^

 

[Rolo]

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I do. Jan. 2 is when the max. gets moved from my money market account ("Level 1 Cash Reserves") to my Roth and SEP IRAs. The sooner you contribute, the longer you enjoy tax-deferred/free growth.

 

[tsptalk]

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Rolo wrote:

The sooner you contribute, the longer you enjoy tax-deferred/free growth.

Assuming there is growth . Theoretically, if you are a good market timer, March or May would have been better this year, no? Of course that is easier said than done. I know I started out the year expecting a pullbackso I wouldn't have made the one time deposit in early January.Whether I would have been able to get in at a lower price though, I don't know because I didn't try. I do the monthly thing. But the Jan. 2ndtheory does sound logical.

Welcome Rod!!

Tom

 

[Rolo]

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hehehe, Now you had to make it all complicated!

That is a good point. I did jump in and buy stuff in January without much technical analysis and market study and therefore bought a little high.

However, even taking timing into consideration, having that cash inyour IRA Jan 2 will have you ready to pounce on a buy point. If you make monthly contributions, then timing is not really an option, unless you count timing 1/12 of your contribution twelve times.

Also, if you wanted to buy a new fund and the minimum to open it is $1,000, then your $250 contribution won't cut it and you will have to either wait, or sell/exchange from another fund.

To me, one deposit once per year is just simpler to manage.

 

[tsptalk]

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Rolo wrote:

However, even taking timing into consideration, having that cash inyour IRA Jan 2 will have you ready to pounce on a buy point. If you make monthly contributions, then timing is not really an option, unless you count timing 1/12 of your contribution twelve times.

Great points. I wasn't thinking about the option of depositing and keeping it on the sidelines.

 

[Rolo]

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Rolo wrote:

To me, one deposit once per year is just simpler to manage.

Plus, it is easier to have discipline once rather than twelve times.

 

[Rod]

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Thanx for the comments and the welcome.

God Bless

 

[azanon]

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To save so much you have 6K ready to plunk down every Jan 2 is very disciplined.... perhaps too disciplined?

Yes, theoretically, you would have more money if you invest it all at the beginning of the year, but I personally dont advocate this simply because investing monthly i think maximizes dollar cost averaging more than buying once a year. Yes if you did it for 30 years, you dollar cost averaged too, but buying more frequently, like monthy, in a very volatile fund really takes advantage of the peaks and dips better i think.

 

[Rolo]

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azanon wrote:

To save so much you have 6K ready to plunk down every Jan 2 is very disciplined.... perhaps too disciplined?

It depends on your cash flow (which is everything). I have good excess cash flow, so stockpiling an extra $4600 (single, 2004, Roth& SEP IRA) won't take me long.

[line]

Az, buddy, you still around?

 

[azanon]

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Yeah if you can afford it, by all means, do it.

Yeah, i'm still around!

 

[Rolo]

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azanon wrote:

Yeah if you can afford it, by all means, do it.

Must....hold....off........on......buying....PT....stuff.....guuuuuuaWl...



heh

I just have to keep remembering, investing now leads to buying evenmore stuff later!