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do it movin' | Is it smart to put 4k down all at once in a roth ira.. instead of doing it month to month? |
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muncie birder
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If you have it up front, by all means dump it into the the Roth IRA account. That way it can be earning tax free returns. If you do not have the 4K, then putting it into the account monthly is an excellent way of making sure it gets into the account without being spent in the mean time. |
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www.TheUseFulInfo.com
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Answers depends upon type of investment in your ROTH IRA you will be doing.
1. If you will be putting in IRA CD or Money Market or any savings account, then put lum-sum money at the earliest. This way you will start earning interest quickly and it will be tax free!
2. If you will be investing money in equities like stocks or mutual, funds or ETF, then smart thing to do is month to month that will do dollar cost averaging over the time.
And of course you have to put money before the IRS deadline.
Hope this helps.
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http://www.theusefulinfo.com/finance/roth.html |
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Quixotic
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The advantage of dollar cost averaging the money in is small, you'd be better off with the extra return from the extra money in it all year. |
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Kitty
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Up front is better due to you make interest on that full $4000. If you do the math you will see that doing it all up front vs. monthly, you make more interest BUT it is very little more but more none the less.
Over time if you had hundreds of thousands in an account like this, then this "little amount" adds up to something worth wild.
: ) |
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Rabbit
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If I were going to put my IRA money into a savings account, which is smarter: put it all into a savings account, or pull out of my wallet (or mattress or can I buried in the backyard) one-twelvth every month and put into a savings account? Sure, you might want to average down your costs in a stock or whatever that is falling in value, cost-averaging has its merits. But what if your intended investment is growing right now, waiting makes the cost higher. So the issue is first, what is your money supposed to be doing for you if you don't put it into your investment plan, and second, what does the situation for your chosen investment appear like? Nonetheless, there is a common illustration given by many brokerages and money managers: if you put money into the stock market at its highest and most expensive points each year over the last several decades, you still would have averaged more return than simply putting money into savings accounts at the bank. The question for you then, is not whether you plunk down $4k in an IRA now, or $333 a month, the question is what is that money supposed to be doing for you in the meanwhile if you don't commit it? |
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amykins89
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If you have $4,000 right now I would open a Roth for 2006. You have until the tax deadline, April 17th to open a Roth IRA for 2006. After that I would make month contributions for 2007.
If you made monthly $500 contributions starting in May and invested that money in a mutual fund your money at the beginning of every month, you would be accruing gains in the account. If the mutual funds had 3% gains every month, you would have made $638.87 off your $4000 by the end of December, plus you get the bonus of any dividends that may come with the mutual fund (they are paid out at the end of the year). So rather than waiting all year to save up the money and then invest, do in small amounts every month and you can benefit right away even if the amount is small.
Also, I really recommend opening your Roth at Scottrade. I originally opened my Roth through Ameriprise and the website was horrible and the fees for buying mutual funds and stocks were really expensive ($25 for a trade). A year ago I moved my account over to Scottrade, because there are no opening, closing or custodial fees for an IRA. Plus they do not charge you to buy mutual funds or bonds, just $7 for stock trades. I can't tell you how nice that is.
Good luck! |
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FinanceMike
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Investing your money each month will help you take advantage of compounding. |
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zaphodsclone
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Wow, you are getting some really horrible advice thus far.
If the market went up in a straight line constantly, sure doing the lump sum thing would be a super idea.
Pause
But it doesn't
http://beginnersinvest.about.com/cs/newinvestors/a/041901a.htm
run your own number in some of the screening tools available between dollar cost averaging and lump sum.
You will conclude, like most people with two functioning synapses, that DCA is by far the more reasonable approach. |
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