Roth IRA contributions 2017

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Stlhd
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Joined: Wed May 25, 2016 10:46 pm

Roth IRA contributions 2017

Post by Stlhd » Tue Nov 29, 2016 4:04 pm

Hello would love some input.

Both my wife and I are looking to invest 11K into our Roth IRA's for 2017, and we are wondering what is the wisest way to put this money into those accounts. Currently that money is sitting in a savings account earning 1% along with the rest of my EF. I considered on January 1 putting all 11K into our roth accounts, but was wondering if perhaps I should spread out the investing...say evenly throughout the year. I may be overthinking this, but would love the input of some folks on this board...thanks in advance for any help.

here is some addl info as well that may help.

we are in our mid 30's and the monies would be invested using the "3 fund portfolio mix"

livesoft
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Re: Roth IRA contributions 2017

Post by livesoft » Tue Nov 29, 2016 4:07 pm

Many folks on the forum compete with each other to see who can get their Roth contributions in the fastest.

I take a different tack. I wait until the stock market drops a little bit before I make my contribution. There has never been year where I could not find something cheaper to buy a few months into the year than in the first week of January.

Of course, you could contribute and invest in a money market fund until you needed to rebalance.

And let me ask you this question back: Why is this money not already invested in the 3-fund portfolio asset allocation? Why is it languishing in a saving accounts?
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FiveK
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Re: Roth IRA contributions 2017

Post by FiveK » Tue Nov 29, 2016 9:01 pm

Stlhd wrote:I considered on January 1 putting all 11K into our roth accounts, but was wondering if perhaps I should spread out the investing...say evenly throughout the year.
You may find Does Market Timing Work? of interest.

No way to know beforehand what approach will look better in retrospect - good luck!

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Makaveli
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Re: Roth IRA contributions 2017

Post by Makaveli » Tue Nov 29, 2016 10:43 pm

Jan 1st for me, locked n loaded.

FactualFran
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Re: Roth IRA contributions 2017

Post by FactualFran » Wed Nov 30, 2016 3:00 pm

livesoft wrote:I take a different tack. I wait until the stock market drops a little bit before I make my contribution. There has never been year where I could not find something cheaper to buy a few months into the year than in the first week of January.

Using the total return of the Vanguard 500 fund as an indication of whether the stock market has dropped, the stock market did not drop during a few years: 1979, 1983, 1989, 1995, 1997, and 2012.

mortfree
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Re: Roth IRA contributions 2017

Post by mortfree » Wed Nov 30, 2016 3:05 pm

Basic Question: did you/are you able to contribute to a 2016 Roth?

Just want to be sure that you maxed it for 2016, if you were allowed...

then figure out how you want to add money for 2017 (e.g. 1000 monthly to get 11k/11 months or lump sum)

livesoft
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Re: Roth IRA contributions 2017

Post by livesoft » Wed Nov 30, 2016 3:10 pm

FactualFran wrote:
livesoft wrote:I take a different tack. I wait until the stock market drops a little bit before I make my contribution. There has never been year where I could not find something cheaper to buy a few months into the year than in the first week of January.

Using the total return of the Vanguard 500 fund as an indication of whether the stock market has dropped, the stock market did not drop during a few years: 1979, 1983, 1989, 1995, 1997, and 2012.

Which is why I was careful to use "... where I could not find something cheaper to buy ...."

Thanks for the data. I do remember 2012 pretty well, but eventually a foreign fund went below its beginning-of-the-year level. :)
Nevertheless, from your data, in the 36 years starting in 1979, only 6 of them didn't have the S&P500 lower at some point during the year. I'm prepared to keeping banking on that kind of probability.
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akblizzard
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Re: Roth IRA contributions 2017

Post by akblizzard » Wed Nov 30, 2016 3:13 pm

I have the money and want to contribute the full amount for spouse and I in January each year. But when it comes time to do so, I can't make myself do it. Maybe because we dollar cost average into everything else. So what I do is fully fund spouse's account in January, and contribute enough into mine to fully fund it by April 1. Does it matter? No. Does it cause me stress? Nope.

livesoft
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Re: Roth IRA contributions 2017

Post by livesoft » Wed Nov 30, 2016 3:18 pm

livesoft wrote:And let me ask you this question back: Why is this money not already invested in the 3-fund portfolio asset allocation? Why is it languishing in a saving accounts?

I wanted to expound on my previous question. Forum members often admonish people to invest when they have the money, so let's consider that a family has $11,000 (or really any dollar amount) ready to put into their Roth IRAs when the new year rolls around.

Well, they have the money, so if there was no "new year" restriction to add money to Roths, would one be told to "invest now and don't wait"? I think they they would be. So with money earmarked for investments, why bother to keep it in a savings account waiting for January 1 to roll around? Instead, why not invest the money in a taxable account in pretty much what one's Roth IRA is invested in as soon as you have the money?

Consider these 3 possibilities if one does invest as soon as they have the money:

1. The investments go nowhere, so when January comes along, sell and put the proceeds into the Roth IRAs.

2. The investments lose money, so when January comes along, sell for the tax-loss harvesting and put the proceeds into the Roth IRA. You save on taxes! :)

3. The investments make money, so when January comes along, sell and be happy you made more money than a measly 1% in a saving account and put the proceeds into the Roth IRA.

Thus, there are no bad outcomes for investing the money right away in a taxable account instead of parking it in a savings account while waiting for January to come around.
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FillorKill
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Re: Roth IRA contributions 2017

Post by FillorKill » Wed Nov 30, 2016 4:44 pm

livesoft wrote:Thus, there are no bad outcomes for investing the money right away in a taxable account instead of parking it in a savings account while waiting for January to come around.

Why wait until January? I've laid this out a couple of times before so I'll just paste-in a previous explanation from a couple of years ago:

"Be advised: I’m presenting this strategy (again) for that small population of posters & lurkers who will find this potentially actionable. If you’re big on the ‘time in market’ concept then here are, potentially, a couple of extra days for you to enjoy. This is minutia in the extreme. You have been warned. Commit further time to reading this post at your own discretion.

In January I mentioned in an IRA thread that I made my 2014 IRA ETF purchase on 30 December, 2013. When I later explained how, I believe one of the comments was along the lines of ‘now you tell us’. Maybe I’m just imagining that. Either way I’m going to lay-out how I will do this in advance (I know at the onset I will be eligible to make a 2015 contribution). I use VBS when doing this so I can only relay that experience. If you’re considering attempting this then you’ll want to determine the feasibility with your broker, assuming not VBS, in advance.

As I use equity ETFs in my IRAs and they settle T+3 then any given year I determine my purchase date by simply assuming the second trading day of the year is the settlement day and subtracting two trading days and project my trade the day prior. So, for the 2014 contribution the second trading day of the year was to be Friday, 3 January, 2014. Back-out two trading days between your projected purchase date and the settlement date and you arrive at Monday, 30 December, 2013 which is when I input my trade.

My initial trade attempt was rejected by VBS (I believe that happened in prior years as well but I’m not 100% sure) and I received a call almost immediately from VBS asking what I thought I was doing. I explained to them that with Vanguard the IRA contribution is the transfer of funds into the IRA settlement account, not the trade itself (which is why this works in the first place). From EOY distributions I had cleared funds sitting in my taxable settlement account. I told him I was simply going to transfer the funds from my taxable settlement account into the applicable IRA settlement account on the first trading day of the year which would settle the trade on the second trading day of the year, at which point he was satisfied and offered to execute my trade for me to save me the hassle of reentering. Nice guy.

For this year, the second trading day will be Monday, 5 January. I treat that as settlement and back-out two trading days in between and Tuesday 30 December, 2014 will be the day that I execute my 2015 IRA ETF purchase with VBS".

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Toons
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Re: Roth IRA contributions 2017

Post by Toons » Wed Nov 30, 2016 5:20 pm

When we were working I would go all in the first trading day of the New Year.
2017 is Mon Jan.2.
All In.
Don't give it a second thought.
Time Not Timing.
Put the compounding machine to work.
:happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

TropikThunder
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Re: Roth IRA contributions 2017

Post by TropikThunder » Wed Nov 30, 2016 7:43 pm

livesoft wrote:And let me ask you this question back: Why is this money not already invested in the 3-fund portfolio asset allocation? Why is it languishing in a saving accounts?


+1. I asked basically the same question a few weeks ago, and the consensus answer was: if the money is earmarked for your Roth IRA, then invest it now in taxable with the same asset allocation as your Roth. Then, move it to the Roth next year. You won't need to aggravate over choosing DCA vs Lump Sum since it will already be invested at the correct AA.
viewtopic.php?f=1&t=202021&p=3096573#p3095350

In my case, my IRA is 56% VTI Total US Stock, 24% VXUS Total Int'l Stock, and 20% BND Total US Bond. So, my taxable account (which will hold my Roth IRA contributions for 2017 and 2018) is 56% VTSMX Total US stock, 24% VGTSX Total Int'l stock, and 20% VWAHX High-Yield Tax Exempt. In hindsight, I probably just should have used VBMFX Total Bond in taxable too rather then the muni fund since my marginal rate is 15% and the amount will be low ($2,800) but I was seduced by the higher historical yield. That higher historical yield has turned into a ~4% loss for now. :(

Still, I think it was the right thing to do and if I'm going to get emotional over a 4% drop in a bond fund (20% of portfolio), I don't want to see how I would handle a 20% stock drop (80% of portfolio).

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