My grandpa was a colorful guy. And despite the crudity of his characteristic idioms, the truth still rings through. The right time to invest is as soon as you can. And it doesn't get any sooner than now.
In that spirit, I have finally made the move to fund my 2014 IRA. I know what you are thinking, and yes, I know that it is no longer 2014. However, IRAs have a handy feature that allows you to fund one up until the income tax filing deadline (April 15) the following year. This little time cushion is very handy for serial procrastinators like myself.
Ideally, I would have been contributing $458 every month to the IRA over the last year. Over the course of 12 months, the $458 monthly payments would result in the IRA reaching the federal limit of $5500 by the end of the year. However, I had made increasing my cash emergency fund a higher saving priority than funding the IRA, so it sort of fell by the wayside.
But then during my 2014 year in review it became abundantly clear that I had failed completely on my goal to max out the IRA. An itchy sense of guilt came over me. I know better than this. I know that key to compound interest is to start early. And by letting the whole year go by without making any contributions, I had effectively cheated myself out of a year's worth of interest to the tune of a couple hundred dollars.
But it's not too late to start. My emergency fund has grown to a comfortable enough size (6 months of living expenses plus some) that I feel okay pulling out a lump to finally max out the IRA for 2014.
Be that as it may, investing now is easier said that done in some cases. For me, it's an issue of security associated with liquidity. IRAs and other retirement accounts have some great benefits with tax sheltering and security in old age; however, they don't offer a lot in the now. Taking money out of an IRA is not easy and can even result in financial penalties. Yikes. It's a little scary knowing that once my money goes in that I won't be able to take it out for nearly thirty-five years.
This has been my main issue with funding my IRA. Over the last two years, there have been a lot of large variable expenses. So, I have felt like I needed to have more cash on hand in savings accounts, especially while I worked to grow the emergency fund to a comfortable amount. This is not unreasonable since having the cash savings reduced my financial stress level, but it did mean that my IRA missed out on some sweet interest income.
Going forward, I plan on being more proactive with funding the 2015 IRA instead of waiting until the last minute for the third year in a row. I'll probably still do small lump contributions rather than make the tidy monthly contributions. I'll guess we'll have to see how it plays out.