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Subject:  Re: Roth IRA deposits Date:  11/13/2003  8:56 PM
Author:  Mark0Young Number:  37816 of 88778

My question: is there any benefits to waiting to amass more money before making a deposit? (Say making a bigger deposit of $300 every three months?)

That depends.

Generally, if you are investing in the stock market, the long-term trend is upward, so if one is predominantly a long-term buy & hold investor, the rule of thumb would be to get invested as much as possible as soon as possible. So, in this case, if $100/mo is what you can reasonably invest without having to go into debt, investing $100/mo is better than $300/quarterly. So, considering this, $100/mo is better.

However, if there are transaction costs, you generally don't want transaction costs to exceed 2% of the amount being invested. If there is no transaction costs to get your $100/mo into your Roth IRA, do so! But if there are transaction costs to get that $100/mo in the Roth IRA invested, you might want to allow the balance in the Roth IRA to build up to where you can make a purchase where the amount being invested is 50 times the transaction costs.

Generally, purchasing individual stocks or exchange-traded funds through a discount broker have commissions. But generally if purchasing mutual funds with the fund family as the custodian won't have transaction costs, but, depending on the fund, there may be loads, and there will be an "expense ratio" to cover the administration of the mutual fund--loads (sales charges, contingent deferred sales charges, and 12b-1 fees) and high expense ratios will eat into the returns, so consider the costs of the investments as well as what those investments are. If you are using an investment advisor, the loads help pay the investment advisor's wages.

Take the Roth IRA seriously--the fact that it is a Roth IRA means it has certain tax advantages. However, it is the investments inside the Roth IRA that have the impact (or lack thereof) of the growth of assets inside the Roth IRA.

For 2003, you can contribute a total of $3,000 aggregate ($3,500 if you are or will be 50 years old or older by December 31) to Roth IRA and Traditional IRA, e.g., you can contribute up to $3,000 to one or the other, or split it between Roth and Traditional, just as long as the Tax Year 2003 contributions don't exceed $3,000 (or $3,500 if 50 or older). The latest you can make your Tax Year 2003 Roth IRA contribution is April 15, 2004, so it is strongly recommended that you clearly label which year the contribution is for if you are sending your Roth IRA a contribution between January 1 and April 15. (Even though you can make your Tax Year 2003 Roth IRA contribution as late as April 15, 2004, you still must qualify based on Calendar Year 2003 income.)

If you haven't done so already, you may want to read "All About IRAs" <>
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