Retirement Account Contribution Timing

I personally feel the market is a bit hot at the moment, as I'm sure many here do, and have mostly been sitting on the sidelines with exception of a few opportunistic plays the couple of months (for the stock market that is). With that said, retirement accounts have contribution deadlines that are quickly approaching

So as the title says... A bit interested to hear what you all may be doing/considering in regards to retirement account contributions for 2021. I personally use a backdoor roth but regardless, would like to hear some other opinions. My understanding is we have until March/April to make the contribution for 2021, and was curious if you are making the contribution now or considering waiting until Jan/Feb for potential market movement/corrections

Obviously timing with this sort of account and an extended time horizon is probably splitting hairs, but I can't help but dwell on it considering the year we've had, especially with the volatility these last few days/weeks

I also work in CRE and am likely less knowledgeable in this particular arena compared to many who frequent these forums, so any general insights are welcome

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Comments (10)

Dec 2, 2021 - 2:55pm

Conventional wisdom is to dollar cost average. Take the emotion out of investment decisions.

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Dec 2, 2021 - 8:28pm

Yes I know, and appreciate the comment. I dollar cost average my typical brokerage account investments for this reason, but with a retirement account contribution, I am making one lump sum contribution per year. Maybe this isn't the best way to contribute to a roth or traditional IRA? I am not sure, but considering where the market is, figured it would be worth asking. I don't believe I've heard of anyone spreading IRA contributions throughout the year, but also don't discuss this particular investment type often

This forum is full of people who are far more immersed in the markets than I am, so just looking to see whether there may be anyone with an opinion specific to timing over the next 1-4 months

I am on this site frequently, but mostly stay on the RE forum. If anyone knows some PMW or Investment professionals that they think may have insightful feedback, do me a solid and tag their usernames

Or anyone worth tagging really. Seems like other people are curious as well

Dec 2, 2021 - 9:40pm

I've read somewhere that lump sum does net a slightly higher return than DCA, but it's very marginal. I personally DCA into my IRA, but at times have lump summed too. Curious if any feel particularly strongly about it one way or another.

Quant (ˈkwänt) n: An expert, someone who knows more and more about less and less until they know everything about nothing.

Dec 2, 2021 - 10:18pm

Time in the market is more important than timing the market

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Dec 2, 2021 - 9:54pm

It sounds like you're mainly concerned about getting the funds into the account before tax deadline. Keep in mind you can do prior year contributions for Roth's and IRAs up until tax deadline in April. Regardless, what's stopping you from making the lump sum contribution to meet deadline, but keep the money in the cash/money market balance and then DCA in over this next year? If you feel uneasy about the market at current levels, this is what I would do. Get the contribution in on time and then invest/ DCA at your comfort and discretion from the cash balance.

Dec 4, 2021 - 9:53pm

Put it in bi-weekly at the same time as your paycheck (over long periods it should be indistinguishable between dollar-cost averaging the money over the full 10 days of trading periods between checks). However, the time value of money favors putting it in at the beginning of the period (when you get the money). Only put in so much money that the money in your checking will allow you to pay all of your bills till your next paycheck + a cushion for emergencies (your health insurance out of pocket maximum is a good rule of thumb) + savings for purchases you intend to make over the next 12 months forward. Watch out for checking account $ minimums charges.  If you will need the money at any point in the next 1-year period (short term gain) you should put it in SHORT TERM T-bills. 

Dec 4, 2021 - 11:06pm

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