Is it better to fill one’s IRA all at once all at once if possible or divvy it out monthly?

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  • #94706 Reply

      Hello everyone, I’m looking for advice on the best approach for funding an IRA. Should I contribute the full amount all at once if possible, or is it better to spread out contributions over the course of the year?

      I’m interested in understanding the potential advantages and disadvantages of each approach, as well as any personal experiences or insights that others may have.

      Ultimately, I want to make sure I’m maximizing the benefits of my IRA contributions while also managing my finances effectively.

      Any advice or opinions on this matter would be greatly appreciated.

      Thank you in advance for your help!

      #94707 Reply

        It’s a trivial decision over a couple decades of contributions, because you are forced to limit them by year anyway. And even more irrelevant once your accumulated assets dwarf your annual contributions.

        So just do whatever is most convenient for you, which is usually one and done if you have the funds.

        #94708 Reply

          Get the money in there as soon as you can.

          #94709 Reply

            Lump sum (all at once) is better on average, but not always. I think it does better about 2/3 of the time.

            It’s not really worth being dogmatic about, just invest what you can when you can, focusing on the best tax treatment for your plan and situation.

            Useful: Early retirement IRA contribution during income transition: pros & cons?

            #94710 Reply

              If you have the money once ASAP is best.

              If you are accumulating the money Dollar cost averaging is best.

              The worst is to hoard & dump at the end.

              #94711 Reply

                In the U.S., 80% of the years, the mkt is up.

                So 80% of the time, if you put $7k in an IRA on Jan 1, it will have the full year to grow. So a $7k deposit on Jan 1 will grow to $7700 by the end of the year, assuming a 10% mkt return for the month.

                Alternatively, let’s assume the same situation but you dribble the money in one month at a time. At the end of the year, you will have $7,399.

                So, the best path is to contribute any lump sum the day you get it in your hands. Things will work out in your favor 80% of the time.

                Suggested: Is there a platform where you can start investing in a Roth IRA without a 3K minimum like Vanguard requires?

                #94712 Reply

                  You – and most people – should just automate this and contribute each paycheck.

                  Why? Well, it’s now April and you are asking about a strategy that might have been effective in January! An imperfect strategy you reliably follow through on is better than a perfect one that never gets done.

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