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Re: Make Roth Contribution all at once or monthly
Old 01-05-2007, 02:43 PM   #21
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Re: Make Roth Contribution all at once or monthly

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Originally Posted by Nords
IIRC that needs to be done to make sure that you obtain the full employer's match throughout each of the year's pay periods.

Otherwise the stock market would see one heck of a January effect as everyone attempted to fully fund their 401(k)s and IRAs...
Sure wish I got an employer match
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Re: Make Roth Contribution all at once or monthly
Old 01-05-2007, 05:35 PM   #22
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Re: Make Roth Contribution all at once or monthly

I asked that question in another forum a long time ago, and someone suggested that putting a lump sum in an IRA on January 2 each and every year is dollar cost averaging. Think about it. We think of DCA as a monthly thing, but it could be weekly, bi-weekly, monthly, every 6 months, or once a year. Whatever, just so it's a regular investment. We did the IRA lump sum on January 2 thing for many, many years until 2002, when the lump sum went down-down-down. I chickened out after that, doing the monthly DCA thing for a couple years. Last year I went back to lumping.

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Re: Make Roth Contribution all at once or monthly
Old 01-05-2007, 06:25 PM   #23
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Re: Make Roth Contribution all at once or monthly

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I asked that question in another forum a long time ago, and someone suggested that putting a lump sum in an IRA on January 2 each and every year is dollar cost averaging. Think about it. We think of DCA as a monthly thing, but it could be weekly, bi-weekly, monthly, every 6 months, or once a year. Whatever, just so it's a regular investment. CJ
It's true that annual contributions are a form of DCA, but, that assumes that you have the OPTION of investing all of your lifetime Roth contributions at one time. If you could invest the next ten years of your Roth contributions (say $50,000) right now, then yes, you can say that electing annual contributions instead of a lump sum would be a form of DCA for your Roth contributions. But, the IRS will not allow you to invest all of your lifetime Roth contributions at one time, you can ONLY invest your annual Roth contributions during a limited time period (about 15 months) and then you lose the ability to make the contribution for that tax year.

So while it's true as a general proposition that annual contributions are a form of long term DCA, the IRS restricts your ability to make lump sum Roth contributions beyond $4000 in any given year for most people (or $8,000 if you overlap two years into one contribution), so you simply don't have the option of making a long term lump sum investment for Roths.
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Re: Make Roth Contribution all at once or monthly
Old 01-05-2007, 06:34 PM   #24
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Re: Make Roth Contribution all at once or monthly

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Originally Posted by Nords
IIRC that needs to be done to make sure that you obtain the full employer's match throughout each of the year's pay periods.
Depends on the employer... at my old employer I would get the full 401k match even if I maxed out my contribution so it stopped in the middle of the year. This strategy of maxing contributions worked well when I left the company early in the year.
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Re: Make Roth Contribution all at once or monthly
Old 01-05-2007, 07:04 PM   #25
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Re: Make Roth Contribution all at once or monthly

I like the yearly lump-sum strategy (I also think of it as annual DCA).
If you fall into the "phase-out" income range for ROTH contributions, it might
be easier to wait until after your taxes are done for that year, so as not to
have to re-characterize any contributions.

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Re: Make Roth Contribution all at once or monthly
Old 01-05-2007, 11:56 PM   #26
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Re: Make Roth Contribution all at once or monthly

Not into a Roth as I can't.....

But I just put the full amount for 2006 and 2007 in a IRA... so LUMP for me...

I will move to a ROTH in 2010.... if it is still there They did just past pay as you go....
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Re: Make Roth Contribution all at once or monthly
Old 01-06-2007, 01:16 AM   #27
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Re: Make Roth Contribution all at once or monthly

DW does lump; I do DCA (all bases covered ).

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