The Money Mustache Community
Around the Internet => Mustachianism Around the Web => Topic started by: MoMan on February 24, 2017, 10:22:59 AM
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I really like this guy. He used to be the writer for CNNMoney's "Ask the Expert."
Anyway, I was surprised, and intrigued, by the Vanguard study he discusses in his most recent column:
http://realdealretirement.com/why-dollar-cost-averaging-is-a-lousy-retirement-investing-strategy/#more-13695 (http://realdealretirement.com/why-dollar-cost-averaging-is-a-lousy-retirement-investing-strategy/#more-13695)
He lays out some really good reasoning for investing a lump sum all at once instead of portioning it out over time. Unfortunately, I don't have a lump sum to invest, so I will continue to drip (er, I mean pour) my money monthly into my 401(k) and other taxable accounts.
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I've been confused by those who front load at the beginning of the year. It implies they have been sitting on cash at the end of the previous year. So while it sounds awesome to max out an IRA in January, it means you much have idle cash sitting around, right?
My approach is to start the year with all the tax advantaged stuff (401k, IRA, Roth, 529) lined up with automatic contributions to max out by years end. Every time my checking account exceeds about 6k I sweep the excess into the brokerage without delay.
I don't see why maximizing money in the market at all times isn't the optimum strategy?
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I've been confused by those who front load at the beginning of the year. It implies they have been sitting on cash at the end of the previous year. So while it sounds awesome to max out an IRA in January, it means you much have idle cash sitting around, right?
My approach is to start the year with all the tax advantaged stuff (401k, IRA, Roth, 529) lined up with automatic contributions to max out by years end. Every time my checking account exceeds about 6k I sweep the excess into the brokerage without delay.
I don't see why maximizing money in the market at all times isn't the optimum strategy?
Looked at in another way, your method leaves tax-advantaged space open in the IRA throughout the current tax year! I don't see how that's dramatically better than simply filling all of it when the contribution period begins. :)