Do you fund your IRA/Roth in a lump sum?

[disneysteve]

Do you make your annual IRA/Roth contribution as a lump sum or do you contribute throughout the year?

Personally, I put money in every couple of weeks from my pay, usually maxing them out by June. I have, however, been thinking about pulling some money from other savings to get the accounts maxed earlier and then just replenishing the savings.

[Slug]

Thanks Steve!

As I said, mine is a lump sum for both my wife and I.

[noppenbd]

Research has shown that if you have the money, the return is generally better the earlier you can put the money in. So that would point to a lump sum in January as best for returns. I think the difference between doing that and dollar cost averaging throughout the year is not that large though, so I wouldn't go to extremes to get the money in early.

We DCA throughout the year.

[Scanner]

There was no really in between so I voted for lump sum.

Our contributions kind of went like this for 2007:

Jan. 15th, 2008: $500 to DW's Roth
Feb 28th, 2008 $1500 to DW's Roth

Jan. 1rst, 2008: $500 to my Roth
Jan. 30th,2008: $1500 to my Roth
March 25th, 2008: $1000 to my Roth

As you can see. . .we are trying to squeeze contributions for last year in.

I got $1000 left on mine and $2000 left on hers and only 2 weeks to go!

[Scanner]

BTW, I know this is related to the other thread. WHen I moved my assets over to Schwab, I asked about a monthly link from my banking part of my assets. They are trying to get that done but don't have that capability right now.

(you can do it from the brokerage side, but not the banking)

I asked the same thing you did on the other thread - don't most people do automatic withdrawals. The customer service rep said, "No, most people just do lump sum contributions."f

That's one person's take.

[Spud]

We do both. We are funding my Roth IRA monthly, and will wait until we get a bonus later this year to fund my husband's in a lump sum. But since the poll asked what 'you' do, I answered monthly, since that's what I do for my Roth.

[kork13]

Since I started my Roth in 2006, I've done 3 lump-sum contributions (for '06-'08). However, I may consider changing that to a monthly thing soon, I'm not sure... It'll depend on what my cash-flow is like in a few months, and how I'm most comfortable doing it.

The reason lump-sum works really well for me is it lets me re-align my allocation at the same time... I basically add my lump-sum payment, distributing it so that when I finish my contributions everything is back to my desired allocation, w/o having to shuffle money between funds.

[humandraydel]

Usually between 2-4 lump sums per year, mainly based on when a good buying opportunity arises.

[dardhel]

Both mine and my wife's IRAs are funded monthly...

[jc3900]

Well, it depends on what type of fees you have but basically the earlier you get your money in, the higher the return thus the lump sum loses. By getting your money in sooner, there is also less volitility.

[kork13]

Well, it depends on what type of fees you have but basically the earlier you get your money in, the higher the return thus the lump sum loses. By getting your money in sooner, there is also less volitility.

That argument swings both ways, however... Yes, if you need to save up in order max your lump-sum, then a monthly contribution would probably win out. But if you have the funds readily available for you to contribute, lump-sum is even more powerful an argument.

[meaghanchan]

I put in money as it is available- thoughout the year.

[am_vanquish]

During my time in college (past 3 years), I made lump-sum contributions every time I got my scholarship stipend in August. Mostly because it was enough to max out the IRA in one blow, but also so that it's not sitting somewhere I can get to it and quietly whispering "X-Box" every few weeks.

Once I start getting regular paychecks in July, I expect to contribute monthly and DCA. This next year I'll have to throw in some lump sums for 2008 to make up for only having a "real" paycheck for 6 months. If I've got enough time and diligence to follow the markets properly and scout buying opportunities (good idea, kork13), I might still consider using lump sums.

[MonkeyMama]

It depends.

When we were younger we lump summed our IRAs every year. We were in a high tax bracket and we would kind of decide what to put in based on how much cash we had and how much in taxes we'd save (usually a lot). OF course I had a 401k I Was DCA into, so this was gravy.

These days, we don't have 401ks, so our ROTH is our only retirement savings plan. So I contribute monthly. (& yeah a lump sum to our traditional IRA really wouldn't save us any taxes, we've dropped to such a low tax bracket, so we no longer have those strategy sessions).

Of course, if I had a lot of cash sitting around, I would lump sum it now. But overall it makes the most sense to put it in as you have it. (The sooner in, the better - agreed). So we DCA a percent of our income, as we receive it.

However at the end of every year we look at our cash and decide if we could put more in. Last year we made a bigger lump sum contribution than we had contributed with DCA. However, we tend to kind of wait and see how the year goes. If there wasn't a lot of unforeseen stuff, we often transfer more to the IRAs at year-end. IF it was a bad year, we leave it. I like the flexibility of doing it that way. So I guess I have to admit I don't always put it in right away!