Opening a new ROTH IRA

[martyb]

OK, I'm ready to open a ROTH IRA with Vanguard. I have the money to fully fund for 2007, but with the current down trend in the stock market, I'm not sure if I should proceed or hold on just a bit to see if things get better. I don't have to act until the IRS tax deadline, which of course is April 15th. I was planning to invest my IRA in a Target Retirement fund, most likely the 2015 which will have at least a good slice of stocks along with the safer stuff. I figure not to touch the ROTH for 10 yrs, and I will be 50 tomorrow. So...should I hold on a little while, but do it before the tax deadline, or should I go ahead & do it now? This will be my first IRA, and since I max my TSP/401 I can only do a ROTH.

[Coach]

martyb, can you go ahead and open it now, put it into MM and transfer it when you're ready?

Personally I'd go for the target retirement fund anyway -- 10 years is a long time.

Coach

[Goonie]

If it were me, I'd go ahead and do it now while the prices are low. If you wait until "things get better" (assuming that by that, you mean the market starts picking up again) you'll be purchasing less shares with the same amount of money. So I'd buy now while there's a 'Blue Light Special' sale going on.

I just made my last contribution to my Roth IRA, a Target 2020 at TRP, about a week or so ago. I sort of wish I would have waited, since share prices are lower now than they were then. But I'm not a market timer, and I just wanted to finish getting it maxed out for 2007. Now I'll just kick back and let it cook for at least the next 10 years or more.

It's something about 'buy low, sell high'.......at least that's how I see it.

YMMV

[FinanceDude]

There's an old saying:

"The best time to invest in the markets, is when you have the MONEY to do so"..................

[Animorph]

I'll second the money market option. Then you can buy into the fund in smaller steps throughout the year.

If you don't want to spend that much time on it, buy the fund now and don't worry about it. You'll still be buying at a lower price than most of last year and Morningstar has been claiming the market was about fairly priced last year.

Try not to wait for the perfect time to invest. You'll only know that after it is gone.

Dan

[aaronc879]

I would fully fund it as soon as your able to do so. If your that worried about the markets ups and downs you could DCA.

[BigBob]

Why not put your mind at ease and spread your contributions over 4 months and forget about it? DCA to the rescue.

[martyb]

Quote:

Originally Posted by BigBob Why not put your mind at ease and spread your contributions over 4 months and forget about it? DCA to the rescue.

Minimum to open an IRA with Vanguard is $3K so not much way to DCA into a new account. I'll probably just go ahead and start with the whole amount. I just turned 50 today, so I guess I can't invest $5K since I wasn't 50 in 2007. I'm going to try to scrape up enough to open one for the DW too before April 15th. And then, hopefully we can also fund for each of us for 08 and from now on. Thanks for the replies!

[73ss454]

Happy Birthday Marty, welcome to the other side of the mountain.

[Goonie]

Quote:

Originally Posted by martyb Minimum to open an IRA with Vanguard is $3K so not much way to DCA into a new account.

At T. Rowe-Price the minimum to open an IRA (Roth or regular) is $1K plus monthly systematic ACH deposits.

Fidelity also lets you open an IRA with their SimpleStart. It requires $200 to open, and $200 per month or per quarter by ACH.

[RetireeRobert]

With a brand new account and with Vanguard minimums per account and per investment in particular funds, averaging in may not be practical.

But since this is a brand new account, and it is $4000 or less amount, and market is already off substantially from the high, I'd say forget about timing and just get the money in. Now.

Seems like "now" in the long run usually ends up being as opportune a time as any. And a Roth IRA is a "for the longrun" type investment.

[W2R]

Quote:

Originally Posted by martyb Minimum to open an IRA with Vanguard is $3K so not much way to DCA into a new account. I'll probably just go ahead and start with the whole amount. I just turned 50 today, so I guess I can't invest $5K since I wasn't 50 in 2007. I'm going to try to scrape up enough to open one for the DW too before April 15th. And then, hopefully we can also fund for each of us for 08 and from now on. Thanks for the replies!

Marty, I am a little hazy on this but I think the over-50 catchup first applies for the year that you turn 50. If so, you could only contribute $4K for 2007 but you could contribute $6K for 2008.

So, if you wanted to, you could contribute $3K now, $1K a month later, and then $1K of your '08 contribution each month for six more months. Don't know if that is what you had in mind.

Personally I have been contributing the whole amount each year in a lump sum, like you were tentatively planning, and picking a different mutual fund each time. I will probably do that again this year, too, though with my luck, I expect the market probably will go down after I send it in. It's really a small amount - - you're right.

And Happy Birthday!

[free4now]

Do it now!

[BigBob]

Quote:

Originally Posted by martyb Minimum to open an IRA with Vanguard is $3K so not much way to DCA into a new account.

VG has a fund that I was turned onto called Star fund with $1k minimum and a .32 expense ration. (I had thought all with VG were 3K as well, until I did a rollover of about $1k - they set me straight)
https://personal.vanguard.com/us/fun...FundIntExt=INT
So you still have some options with Vanguard, if that is your preference.

[StJohnsWood]

I would put it in the MM and spread it over the next 3 months. Good Luck with your choice.

[jIMOh]

You might be retiring in 10 years, but the money will be in there for 40 years. 40 years from now won't matter if you put money in today, tommorrow, next week or next month. So put money in while you have it. If nervous, put 50% into stocks and 50% into money markets.

Generally speaking, do not look at current market performance to decide when to invest. Have an asset allocation with a core fund. You should have confidence an investment in that core fund at any time, in any market period, is a good investment. If you don't have that confidence, you should not be investing, or you need to change your asset allocation and core fund within that allocation.

My core fund is PRFDX and I add to it 12 months per year, regardless of market performance.

[martyb]

Quote:

Originally Posted by jIMOh You might be retiring in 10 years, but the money will be in there for 40 years. 40 years from now won't matter if you put money in today, tommorrow, next week or next month. So put money in while you have it. If nervous, put 50% into stocks and 50% into money markets. My core fund is PRFDX and I add to it 12 months per year, regardless of market performance.

Actually, I'm retiring in 4 yrs, 11 months,26 days, but who's counting?
You're right, though about the money staying in the account for a much longer period. We're planning for the ROTH money to be our emergency stash later on down the line. I have one COLA pension starting when I retire, and a 2nd one that begins 5 yrs later (age 60). Our combined TSP/401's will add some extra security, plus the DW will keep working for 3 years after I retire, so we'll continue to fund the ROTH's thru that period, a total of 9 yrs of ROTH's counting 2007. We won't be the Rockefellers but we should be able to avoid dog food. Thanks for all the great advice!

p.s. I won't get much SS because as an old-system Fed I don't pay into it. I earned my basic 40 quarters back in the 70's so I might see $300 a month. DW will get more, but she never made a big salary so we don't expect a huge amount there either. Maybe $10K per year or so. Her 401k is her only retirement.