Thursday, May 28, 2009

Don’t Be a Loser and Wait Too Long

No matter how careful and diligent you are with your finances, something important will eventually be forgotten. It could be a bill payment, or it could simply be overpaying for an impulse purchase. For me, it was investing for my retirement.

You heard it correctly. I failed to invest in a retirement account this year.

As you know, I quit my job several months ago. While I did transfer my 401k to an IRA and continued to manage my finances through my taxable accounts, I did not setup a retirement account now that 401k isn’t an option anymore.

At first, I thought about the different options (simple IRA, SEP IRA etc), and the complications delayed the decision. Then, it was the market downturn in February that pushed it back a few more weeks. After, the market upturn got me busy managing my much bigger taxable investment portfolio. Oh I needed to make sure I find the right stock broker, and that I pick the right type of account. I also need to make sure I put in the right amount every month, because too much money means I can’t use it as a down payment, while too little means I’m not taking advantage. Then..

Wait a minute… You know what these are? Excuses! Why does anything I said above change the fact that I needed to invest in a retirement account. Perhaps it’s beneficial to find the perfect amount to contribute every month, and it’s probably good to find the best stock broker to maximize the benefits. However, if investing immediately is better than waiting regardless of the choices that I make, isn’t it better to “just do it” already?

A Little Lesson Over Here

Regular readers know that I’m a huge believer in taking action. In fact, it’s more beneficial even if you end up making mistakes. Here’s an example. Let’s say you need to get from point A to B and the earlier you get to your destination, the better. If you start right away but end up taking one year to get to your destination, isn’t it better than spending one year to plan the route that takes one month?

Back to My Investment Procrastination

There’s really no point in beating myself about what’s already happened since the future is much more important. The good news is that even though I missed a few months of contributions, I can catch up by putting in a bigger lump sum. Sure, I already missed a good chunk of gains that my contributions would’ve had but in the big picture where I will be contributing for the next 30+ years, it’s not that bad.

What I Will Do:

  • Open an SEP IRA account (TradeKing is a good choice and may not be the absolute cheapest like others. However, I feel better with them because of the lack of bad publicity.)
  • Contribute $500 a month to the account and invest regularly
  • Monitor the Pros and Cons of using this broker and see if I need to change brokers

I may end up not liking TradeKing, or find a better stock broker for this type of retirement account. I may find that the contribution is too high (or too low) for my needs. I might even find out that SEP IRA isn’t the best choice for my circumstances. However, what I won’t (and shouldn’t) do is wait around because investing in an account is always better than waiting.

You can always wait for the boat with the perfect route, but don’t wait so long that the entire trip ends up being meaningless.


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