Funding Roth

[disneysteve]

"Since the market is bullish..." This clause acknowledges that the present trend is upward.
"...you'd probably be better off to buy now."

This is called market timing and is exactly what I and others are disagreeing with. Saying he is probably better off buying now because the market seems to be rising isn't how many of us believe in investing. We invest regularly over time regardless of market conditions.

That said, there are other reasons unrelated to market timing that make lump sum funding of your Roth a better option.

[bjl584]

Technically, even if you do a lump sum investment into a Roth once a year for say 30 years, then you are still dollar cost averaging the contributions. Just not as often as if you would invest monthly or quarterly.

[disneysteve]

Technically, even if you do a lump sum investment into a Roth once a year for say 30 years, then you are still dollar cost averaging the contributions. Just not as often as if you would invest monthly or quarterly.

I was going to post the very same thing. If I put in $5,500 every January from age 25 until age 65, that is DCA.

[rutgers07]

Thanks for all the advice as usual. I'll end up doing a lump sum, just need to figure out what I'm going to buy. A lump sum benefits my spending habits since I can be a little impulsive at times so without the money to spend, no harm can be done.

[Wino]

For goodness' sake. You stated Rutgers should do a lump sum "since the market is still bullish". This is known as market timing. No inference is required.

As usual, the temper which is flaring is yours.

At the risk of further inflaming you, I must insist that my words not be misinterpreted and then the incorrect interpretations ascribed to me. My actual and only suggestion was that the OP fully fund the account, whichever method of funding he might choose. Never in the offending post did I suggest which strategy to use.

In addition, I can assure you I am not upset, nor have I lost my temper. I just refuse to let you, Kork13, or DisneySteve infer meanings that are not in my words especially when you or they then argue or disagree with the misinterpretation. My diction was precise, and I have parsed it twice to show that the meanings are exactly as I intended them.

To continue, dollar cost averaging is a legitimate non-market-timing strategy for large lump sums to mitigate risks due to short term and relatively extreme fluctuations. It is up to the investor to determine if his risk tolerance is such that he wants to put all of the money in now assuming continued growth or to stagger the investments over time to smooth out the volatility. I merely gave the conditions and reasoning for the two strategies, without excessive verbiage which I have now been forced to write to defend my statement from outrageous attributions.

I apologize for upsetting you and anyone else who finds fault with my clarifications. Once again I will bow out of this discussion to avoid further provocation. If my point has not been made and defended by this time, it will never be so.

[Petunia 100]

Wino, you aren't unintelligent, so you must be choosing to misunderstand.

Making investing decisions based on one's best guess as to what the market will do next is known as market timing. Many people here are "Bogleheads", and believe market timing should be avoided.

So when a statement such as "Since the market is still bullish, you'd probably be better off to buy now. If it were bearish, you should probably dollar-cost-average." is made, of course Bogleheads are going to disagree.

It's not a conspiracy; your statement is in direct contradiction with the philosophy of passive investing.

Bogleheads are in the minority; more people would agree with you.

[rutgers07]

Just transferred the last $3150 I needed to finish off my Roth contribution for the year! It feels great; up until now I had never explored the option of a 401k let alone a ROTH. I'm now funding my 401k @ 6% and have a fully funded ROTH for the 1st time ever.

A quick question. When people suggest saving ~15% of your paycheck, does that include your 401k and ROTH contributions? Or is that just 15% in a savings account? If it's the former, then I'm right on track, if the latter, there's almost no way to reach that goal (for me).

[MonkeyMama]

15% is the rule for "Retirement funds" or for funds "earmarked for retirement." You would probably have additional savings needs.

In addition, you'd want to consider your age. If you are in your 40s and just starting to save for retirement, you'd need to save much more. If you are in your 20s, 15% might be something to eventually work up to.

[MatthewC]

Rutgers07,

I always recommend putting in money earlier. The longer it is in, the longer it has to compound. Please realize that this doesn't have to be an either/or situation. Yes, you can fund it now or later.. but you could fund it now and then later you could put in extra money for a regular brokerage account (or something along those lines). Just because the ROTH has limits for contributions does not mean that your investing should stop there.