I’m 21m I maxed out my Roth IRA for the first time this year. For next year’s contributions, should I put the $7,500 in one lump sum payment into it? Or should I invest monthly? Doing one lump sum payment would not hurt me financially.
Next year’s Roth IRA contributions
byu/Nsundo10 inpersonalfinance
Posted by Nsundo10
7 Comments
Time in the market beats timing the market. If you can invest it all at once in the beginning of the year then absolutely do that.
The Money Guys (popular finance channel that is run by a wealth management firm) did an episode on this topic. Here is the link:
[https://moneyguy.com/article/dollar-cost-averaging-vs-lump-sum-how-to-take-away-the-guess-work/](https://moneyguy.com/article/dollar-cost-averaging-vs-lump-sum-how-to-take-away-the-guess-work/)
In general, the market goes up over time. So in general, the earlier you invest the better.
It’s not going to really make much a difference either way, but if you have the money available now, I would just lump sum it in right away.
I do my taxes as early as possible. my tax guy always tells me to dump a few grand into traditional Roth before the final filing date. He writes it into my taxes, resulting in me getting more $ back from my taxes. Almost like free money.
I’d say invest $625 a month over the 12 months. You should max it out every year until you retire so dividing it up and making contributions monthly is the best way to dollar cost average.
Congratulations, that’s great you are and can max. out your Roth IRA. I do it once a year but my daughter pays monthly. Someone already mentioned that you can’t time the market so you do whatever you can afford even if you don’t max out. Best of luck.
Contribute a lump sum as soon as you can comfortably afford.
Whether to invest the money all at once or DCA is a different question. But even if you decide to DCA, at least the cash is earning interest inside the account instead of outside.