ROTHs funded for 2012

[disneysteve]

I just sent the remainder of our 2012 ROTH contributions to Vanguard for my wife and me. I'm pretty late doing it this year. Last year I did it in January. Cash flow was off a bit because last summer we had lent my cousin 5K when he bought his house. He couldn't repay us until after he filed his 2011 taxes but we got his check last week so I could now forward that money to Vanguard and get that settled. Check that off the list.

[Slug]

Congrats! 0% so far for me. I hope to be in the position to fund earlier one day. I have all the cash right now. I just feel better with the comfort of having it all accessible.

[bjl584]

Congrats.

I DCA mine. I send in $416 a month.

[disneysteve]

I DCA mine. I send in $416 a month.

I DCA mine, too. I put the money in at the beginning of the year but park it in the money market and then invest it over time from there.

[kv968]

I DCA mine, too. I put the money in at the beginning of the year but park it in the money market and then invest it over time from there.

Good idea because it looks as if the old "Sell in May..." theory may be coming into play.

Which of course means buy in June or so

[BuckyBadger]

I don't DCA mine. I use the lump sum in January to re-balance my asset allocation. I figure our 401k and taxable stuff is DCA'ed, so it's easier to just dump it in and tweak my allocations all at once.

[breathemusic]

I just started a Roth IRA this year, so I went ahead and pulled $10k from my savings and contributed about 2 weeks ago for both 2011 and 2012!

[mrpaseo]

I'm at 0% and since I have not contributed in a few years I am trying to get back into it this year.

[feh]

We don't DCA either. We funded both of our Roths on Jan 2.

[breathemusic]

Good idea because it looks as if the old "Sell in May..." theory may be coming into play.

Which of course means buy in June or so

Excuse my ignorance, but what's the old "Sell in May" theory? I'm new to the whole Roth IRA thing so earlier this year I opened one and contributed $10k for both 2011 and 2012... but starting next year, I've been wondering if I should just contribute throughout the year or wait and do it all at once? Of course, right now I'm only invested in a Vanguard Target retirement fund, so maybe it doesn't matter?

[parafly]

I've been wondering if I should just contribute throughout the year or wait and do it all at once?

Dollar cost averaging (DCA) is the best strategy without a doubt.

Most people do $416 / per month. Personally, I contribute $100 / week for 50 weeks.

[disneysteve]

Dollar cost averaging (DCA) is the best strategy without a doubt.

Don't be so sure. Remember that a Roth is a tax-shelter. The longer you wait to make your annual contribution, the more time you spend with the money not-sheltered from taxes. By putting in 5K in January, or as soon as you can, you take maximum advantage of the tax shelter.

As I said earlier, you can still DCA. Just put the $5,000 in but deposit it into a money market account within the Roth. Then, on whatever schedule you'd like ($416/month is fine), feed it into the other investments within the Roth. That way you get the advantage of the tax shelter but also get the advantage of dollar cost averaging.

[parafly]

Don't be so sure. Remember that a Roth is a tax-shelter. The longer you wait to make your annual contribution, the more time you spend with the money not-sheltered from taxes. By putting in 5K in January, or as soon as you can, you take maximum advantage of the tax shelter.

As I said earlier, you can still DCA. Just put the $5,000 in but deposit it into a money market account within the Roth. Then, on whatever schedule you'd like ($416/month is fine), feed it into the other investments within the Roth. That way you get the advantage of the tax shelter but also get the advantage of dollar cost averaging.

Fair enough. I never thought of this strategy, but it seems like one which maximizes benefits from both sides. Thanks for the info.

In any case, you are still technically dollar cost averaging so my point stands. Without going into complex investing strategies, the benefits of direct DCA far outweigh the tax benefits of a lump sum purchase given current interest rates.

[Slug]

Congrats! 0% so far for me. I hope to be in the position to fund earlier one day. I have all the cash right now. I just feel better with the comfort of having it all accessible.

Alright, mine are set to go in tomorrow. I was thinking maybe this would the year I would get a new job and exceed the income limits, but it doesn't look like that's going to happen.

Time to start saving the $11k for next year. I'm happy that the contribution limit increased. Now, I just need to find the $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$

[BuckyBadger]

Rereading this thread made me think -- contributing $5k all at once in January actually IS dollar cost averaging. It's just once a year rather than once a week, or once a month, or any other period that people use. I'm DCA'ing and eventual $150,000+ ($5k a year for 30+ years) $5k at a time... It's still DCA, it's just got a longer period!

Anyway, I'm planning on my usual Backdoor Roth as soon as I can get around to it in January. I know I'll be beyond the limits for Roth contribution, but even if I was close I figure it's easier and cleaner (and gets the money in the market sooner) to just backdoor it all right at the beginning of the year, rather than waiting until the very end of the year and the having to futz around with figuring out exactly how much Roth contribution I could make and then back-dooring the rest anyway...