2008 Roth Contribution: Do it now, or wait?

[red92s]

I've been following the gospel of Dave Ramsey for a year now and have paid off all my CC debt, paid off my car, started an EF (currently @ 3-4 months expenses, still growing), and take advantage of my employer-matched 401(K) plan.

My current 401(K) contribution is 9%, with an additional 4% employer match. Following Dave Ramsey's guideline of 15% of gross pay to retirement savigns (neglecting employer contributions), I've been saving an additional 6% in a savings account for a Roth IRA.

I planned to open my Roth with Vanguard, per many suggestions on this forum. My Roth savings currently has just over $1k in it, which is enough to open an account at Vanguard (but only with the Vanguard Star Fund).

Given the current market volatility, does it make any sense to hold off on making a large contribution? This would probably allow me enough time to save the $3k needed for one of the Vanguard Target Date funds. I guess the counterpoint is that half the battle in saving is just getting started, and that by putting it off I'm more likely to spend the money elsewhere . . . but at this point I feel like I've more or less made saving a "lifestyle", so I'm not too worried about that.

[noppenbd]

Good job so far!

Either way is ok, since it is unlikely you will spend the money given your new attention to your finances. Studies have shown that you will end up with slightly higher returns if you invest the money as soon as it is available. This is because the market trends upward over the very long term.

So I would go ahead and put the $1K into the Star fund, and once you have accumulated $3K, exchange it over to a TD fund (transferring is quite easy with Vanguard).

As you mentioned, this will also "get the ball rolling" on your Roth and make future contributions that much more automatic.

[jIM_Ohio]

I would at minimum make the savings account for the mutal fund charactorized as a Roth and then transfer whenever to Vanguard or another custodian.

Getting the 5k into the Roth before April 15 should be a higher priority than the EF IMO.