Should I accelerate 2009 Roth contributions?

[disneysteve]

I typically send money to our Roths every 2 weeks from each paycheck. That gets them fully funded by June. Since the market is so low, I'm thinking it could be better to speed that up and get the money in quicker before the market has a chance to recover. I can do that by shifting some money around and not impacting any other financial needs. Thoughts?

[maat55]

I feel that same itch that the market will be up by this time next year. But the first three months could be very volatile. IMO.

[creditcardfree]

Sure...why not. I would think anything you buy in the next three months will be on sale compared to a year ago when you were buying.

[GrimJack]

DW used this market to convert her IRAs to Roths, maxing her 401k this year (in a lump sum) will more than cover the tax hit.

[jIM_Ohio]

I might have a 1-2 percent impact on final retirement portfolio in 30 years. The exact timing of the deposits should not matter with a 30+ year time horizon.

I could also be wrong, but that is the whole dca premise- the exact timing of the deposits over a long period of time means little to overall performance.

[kork13]

Let's see.... 1-2% of $1.5M.... ::takes off socks/shoes to count toes:: $15k-$30k? Okay, I'm game.

Seriously, I am also probably going to accelerate my Roth contributions a bit. Not too significantly, but perhaps getting about $2k in there within the first couple months of the year. We'll see how it goes... If I have the cash available, I'll do it. If not, I just remind myself that I have plenty of time ahead of me to catch future deals....

[disneysteve]

I guess the only possible downside is if the market drops even more after I've put the money in (like it did this year). Since there is no way of knowing that, I'm kind of taking a chance either way. I'd rather be buying on the way down than on the way back up.

[jIM_Ohio]

I guess the only possible downside is if the market drops even more after I've put the money in (like it did this year). Since there is no way of knowing that, I'm kind of taking a chance either way. I'd rather be buying on the way down than on the way back up.

The 1-2% was generous in how it impacts return.

We are talking about where 5k of an eventual $750k-$1.5M portfolio will be. This is .67% of the overall portfolio value (750k) and half that (.33%) of the $1.5 M portfolio. If it impacts return more than 1% I would be impressed.

Your biggest risk is not making the investment, not when you make it.

Sure 15k makes a difference anytime... but I'd still stand by it won't make a huge difference in the end unless you see 100% type returns within a year of money being invested.

We only know those returns in hindsight, which is why DCA is advocated.

[disneysteve]

That's true, Jim. In the grand scheme of things, it probably won't matter. I guess what is on my mind is what happened in 2008. I maxed the accounts early in the year and then the bottom fell out. I'd like to do the opposite and get this year's money in before the recovery happens (whenever that will be) to regain some ground.

20 years from now, I'm sure it won't matter one way or the other. Besides, even if I don't accelerate my Roth contributions, I still have other money being invested outside of the Roths like my wife's 401k and our taxable accounts, so either way I'll benefit from the low prices and the eventual recovery.

Also, due to paying off our HEL earlier this month, I'll be funding the Roths a little quicker than last year anyway.

[jIM_Ohio]

That's true, Jim. In the grand scheme of things, it probably won't matter. I guess what is on my mind is what happened in 2008. I maxed the accounts early in the year and then the bottom fell out. I'd like to do the opposite and get this year's money in before the recovery happens (whenever that will be) to regain some ground.

20 years from now, I'm sure it won't matter one way or the other. Besides, even if I don't accelerate my Roth contributions, I still have other money being invested outside of the Roths like my wife's 401k and our taxable accounts, so either way I'll benefit from the low prices and the eventual recovery.

Also, due to paying off our HEL earlier this month, I'll be funding the Roths a little quicker than last year anyway.

You could go with (and I do go with) the logic that investing early in year gets you a few santa claus rallies... so one big drop at end of one year should not be a deciding factor on the timing of deposits.

I invest earlier in the year so there is money for xmas in nov and dec ($2000). That is more important to me than timing of the market movements relative to my deposits.

[noppenbd]

That's true, Jim. In the grand scheme of things, it probably won't matter. I guess what is on my mind is what happened in 2008. I maxed the accounts early in the year and then the bottom fell out. I'd like to do the opposite and get this year's money in before the recovery happens (whenever that will be) to regain some ground.

20 years from now, I'm sure it won't matter one way or the other. Besides, even if I don't accelerate my Roth contributions, I still have other money being invested outside of the Roths like my wife's 401k and our taxable accounts, so either way I'll benefit from the low prices and the eventual recovery.

Also, due to paying off our HEL earlier this month, I'll be funding the Roths a little quicker than last year anyway.

Personally I am sticking with DCA. There are no guarantees the market can't fall further, so how would you feel if you repeated the same mistake you made last year?

[disneysteve]

Personally I am sticking with DCA. There are no guarantees the market can't fall further, so how would you feel if you repeated the same mistake you made last year?

I don't consider what I did this year to be a mistake. It was my usual routine. I invest every 2 weeks until the accounts are maxed, which takes about 6 months, so I do DCA.

As I said, I'll end up doing the same thing in 2009 but I'll max them a little bit sooner since I'm no longer making the HEL payments and some of that money is going to the Roths.

[GREENBACK]

I'm thinking of maxing them out early but I guess in the grand scheme of things it's not enough to make that big of a difference. Maybe I'll just continue to dca.

[Snave]

I put in a huge chunk in early with my 401k last year and actually have for several years. I get a decent size bonus in February/March and I like to bump my 401 significantly at that time so as to get a bunch of money in and not have 1/2 of it going to taxes out of that check (yes, I know I get it back). Obvioulsy this hurt me last year, but I plan on doing the same this year.

[TheTicket]

Even if you just put the accelerated fresh dollars into a MM(sad situation right now)inside your ROTH and not something you think is going to be volatile shortly, you get the accrued interest from the first of the year. Then you can take that MM and DCA it manually. IMHO, it always pays to get it into the ROTH asap so you can take advantage of a full year of, at minimum, some safe accruing interest. Put the old snowball theory into action......