Any Reason to Wait?

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Newtothis111
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Any Reason to Wait?

Post by Newtothis111 » Thu Feb 13, 2020 2:11 pm

I’m 23 and just started a new job. I have my 401K set up at 10% + 3% employer match. I have a good deal of savings that I should have started investing a few years ago.

I’m planning on opening a Roth IRA and investing in index funds. I think I already know the answer to the question, but is there any reason I shouldn’t contribute the max to my IRA when I have the savings to stand it?

My only concern comes from investing the max when the market is near an all-time high rather than waiting a bit and buying at better value.

bloom2708
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Re: Any Reason to Wait?

Post by bloom2708 » Thu Feb 13, 2020 2:30 pm

If you have a bunch of cash, put $6k in your Roth IRA for 2020. 2019 is still open if you haven't filed your 2019 taxes yet.

Put some of the cash in your checking account and max out your pre-tax 401k. $19,500. Any match does not count toward the max.

Be sure to set aside an Emergency Fund.

You are 23. Think of where the stock market indexes will be in 40 years? Buy, buy, buy. Invest when you have the money. Every paycheck.

I think you can be 100% stocks until you get to 30. Then see how your risk tolerance is.

Every raise bump up your savings rate.
"People want confirmation, not advice" Unknown | "We are here to provoke thoughtfulness, not agree with you" Unknown | Four words: Whole food, plant based

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fredflinstone
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Re: Any Reason to Wait?

Post by fredflinstone » Thu Feb 13, 2020 2:36 pm

Newtothis111 wrote:
Thu Feb 13, 2020 2:11 pm
I’m 23 and just started a new job. I have my 401K set up at 10% + 3% employer match. I have a good deal of savings that I should have started investing a few years ago.

I’m planning on opening a Roth IRA and investing in index funds. I think I already know the answer to the question, but is there any reason I shouldn’t contribute the max to my IRA when I have the savings to stand it?

My only concern comes from investing the max when the market is near an all-time high rather than waiting a bit and buying at better value.
how would you feel if you put all the money in the stock market and then the market fell 50 percent? If you think you'd be OK with that, then no need to wait. If you think you might be stressed out and/or tempted to sell, you should consider investing some of your 401K money in other assets (e.g. bonds, gold, cash).

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greg24
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Re: Any Reason to Wait?

Post by greg24 » Thu Feb 13, 2020 2:38 pm

If you have enough 2019 income, contributing the 2019 Roth contribution by April 15th is an excellent idea.

ChiKid24
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Re: Any Reason to Wait?

Post by ChiKid24 » Thu Feb 13, 2020 3:04 pm

An IRA by definition is meant to be used in retirement. At age 23, you are 30+ years away from retirement. So for me, it's about comparing the long-term rate of the market (7-10% depending on your investment) to the long-term rate of cash/savings (0-2.5% depending on where you hold it). If you don't need the money in the near future, and it's truly meant for retirement, then maximize the roth every year if you can.

Also remember in a growing market, there are going to be lots of "all-time highs". The S&P 500 had 33 of them in 2019 alone, 18 in 2018, 62 in 2017, 18 in 2016, 10 in 2015, 53 in 2014 and 45 in 2013. So essentially back in 2013 we kept hitting all time highs, which at the time were in the 1,500-1,800. If you had the same concerns then you would have missed out on doubling your money. Even as recently as last year we were hitting all-time highs of 2,600 and 2,700 would have cost you 30% in one year!

123
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Re: Any Reason to Wait?

Post by 123 » Thu Feb 13, 2020 4:10 pm

As much as bogleheads want to emphasize retirement savings if you are in your early 20's you could have significant life "start-up" expenses that are also important. Things like car purchase, furniture, education, maybe travel, house downpayment, maybe even wedding expenses. The correct answer is some kind of balance. That said Roth contributions are really precious, but once the time period closes on a contribution tax year it's gone forever.
The closest helping hand is at the end of your own arm.

alex_686
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Re: Any Reason to Wait?

Post by alex_686 » Thu Feb 13, 2020 4:12 pm

Newtothis111 wrote:
Thu Feb 13, 2020 2:11 pm
My only concern comes from investing the max when the market is near an all-time high rather than waiting a bit and buying at better value.
We can talk about market timing if you wish. However the correct answer is to invest in lower risk assets like bonds, and not delay contributions.

nix4me
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Re: Any Reason to Wait?

Post by nix4me » Thu Feb 13, 2020 4:16 pm

You are 23. Max both Roth and 401k. 100% stocks.

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1789
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Re: Any Reason to Wait?

Post by 1789 » Thu Feb 13, 2020 4:16 pm

Newtothis111 wrote:
Thu Feb 13, 2020 2:11 pm
I’m 23 and just started a new job. I have my 401K set up at 10% + 3% employer match. I have a good deal of savings that I should have started investing a few years ago.

I’m planning on opening a Roth IRA and investing in index funds. I think I already know the answer to the question, but is there any reason I shouldn’t contribute the max to my IRA when I have the savings to stand it?

My only concern comes from investing the max when the market is near an all-time high rather than waiting a bit and buying at better value.
You are going to miss out next 5 years bull run if you don't invest now.
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)

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Stinky
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Re: Any Reason to Wait?

Post by Stinky » Thu Feb 13, 2020 4:24 pm

Invest now in Roth IRA. $6k for 2019 tax year, and $6k for 2020 tax year.

Continue every year until your retirement. You’ll be glad that you did.
It's a GREAT day to be alive - Travis Tritt

PhillyPhan
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Re: Any Reason to Wait?

Post by PhillyPhan » Thu Feb 13, 2020 6:25 pm

bloom2708 wrote:
Thu Feb 13, 2020 2:30 pm
If you have a bunch of cash, put $6k in your Roth IRA for 2020. 2019 is still open if you haven't filed your 2019 taxes yet.

Put some of the cash in your checking account and max out your pre-tax 401k. $19,500. Any match does not count toward the max.

Be sure to set aside an Emergency Fund.

You are 23. Think of where the stock market indexes will be in 40 years? Buy, buy, buy. Invest when you have the money. Every paycheck.

I think you can be 100% stocks until you get to 30. Then see how your risk tolerance is.

Every raise bump up your savings rate.
Is 2019 not open if you have filed your 2019 taxes? I did not think that Roth contributions were a reported item?

22twain
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Re: Any Reason to Wait?

Post by 22twain » Thu Feb 13, 2020 6:36 pm

ChiKid24 wrote:
Thu Feb 13, 2020 3:04 pm
At age 23, you are 30+ years away from retirement.
Unless of course he/she is aiming for FIRE in mid 30s. :wink:
My investing princiPLEs do not include absolutely preserving princiPAL.

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Phineas J. Whoopee
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Re: Any Reason to Wait?

Post by Phineas J. Whoopee » Thu Feb 13, 2020 7:11 pm

At your asset and savings level future changes of the value of your retirement portfolio will be much more strongly affected by new savings than by investment returns, quite possibly for decades. Get the money in there, and don't worry so much about recent market highs, is my thought. It isn't as if stock market highs are zero-sum, where for you to gain somebody else must lose.
PJW

go140point6
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Re: Any Reason to Wait?

Post by go140point6 » Thu Feb 13, 2020 7:59 pm

I started working mid-1999 about your age and immediately began plowing the max into a Roth IRA and started my 401k (no match) at $150/month raising it when I could. Almost immediately the dot-com bubble burst and we entered into the US "lost-decade". The only thing I stopped doing was looking at my balances, I just kept on maxing my Roth and increased my 401k when I could... by the end of that decade, I was maxing my 401k, still maxing my Roth IRA, had started contributing to my 457 and saving a little in taxable. One more decade later, I'm pretty happy I did it, obviously. Once you pass the deadline for contributing to that tax year's Roth IRA, you lose it forever. Don't do that. Start investing now.

bloom2708
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Re: Any Reason to Wait?

Post by bloom2708 » Thu Feb 13, 2020 10:23 pm

PhillyPhan wrote:
Thu Feb 13, 2020 6:25 pm
bloom2708 wrote:
Thu Feb 13, 2020 2:30 pm
If you have a bunch of cash, put $6k in your Roth IRA for 2020. 2019 is still open if you haven't filed your 2019 taxes yet.

Put some of the cash in your checking account and max out your pre-tax 401k. $19,500. Any match does not count toward the max.

Be sure to set aside an Emergency Fund.

You are 23. Think of where the stock market indexes will be in 40 years? Buy, buy, buy. Invest when you have the money. Every paycheck.

I think you can be 100% stocks until you get to 30. Then see how your risk tolerance is.

Every raise bump up your savings rate.
Is 2019 not open if you have filed your 2019 taxes? I did not think that Roth contributions were a reported item?
My tax software asks if we contributed to an IRA and then what kind. When you say Roth that kind of ends the questions.

I guess I contribute before filing.
"People want confirmation, not advice" Unknown | "We are here to provoke thoughtfulness, not agree with you" Unknown | Four words: Whole food, plant based

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TechGuy365
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Re: Any Reason to Wait?

Post by TechGuy365 » Thu Feb 13, 2020 10:25 pm

go140point6 wrote:
Thu Feb 13, 2020 7:59 pm
Almost immediately the dot-com bubble burst and we entered into the US "lost-decade". The only thing I stopped doing was looking at my balances, I just kept on maxing my Roth and increased my 401k when I could...
This is the winning formula right here. The “lost decade” totally worked to your advantage during accumulation stage because of dollar cost averaging and your dollar went so much further. :sharebeer

Topic Author
Newtothis111
Posts: 2
Joined: Thu Feb 13, 2020 2:03 pm

Re: Any Reason to Wait?

Post by Newtothis111 » Sun Feb 16, 2020 12:36 pm

Thanks for all of your insight. I appreciate your responses!

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