Vanguard IRA Roth Account

Since you're goal is a long-term goal, you're approach should be long-term as well. That being said, you're doing the right thing. You're with the right company and in the right fund. You're not "throwing money down the toilet". It is working and will continue to work for you through the years. There is no need for you to check your balance every month or even every year. You're in a set-it-and-forget-it fund. It automatically adjusts itself as you move closer and closer towards retirement. Yes, your balance will go up and down, but so does every single other person's balance who invests (or gambles as it applies to some) in the stock market. That's the nature of not only the stock market, but any market. Keep a long-term vision, relax, and know you're doing the right thing.

Regarding not being able to max it out every year, that's OK. Just put in as much as you can, dollar cost averaging every contribution (every two weeks or every month or however often you make contributions).

Forbes [forbes.com] just released an article discussing how dollar cost averaging into the stock market makes you a fortune over time.

You're on the right track - keep it up and you'll be richly rewarded down the road.

Setting up an Automatic Investment may help you reach your maximum contribution each year. I also have a Roth IRA with Vanguard and at the end of the first year I disappointed myself because I couldn't come up with enough money to max it out. Halfway through the next year I set up an automatic transaction to split up the remaining contribution over the rest of the year with equal amounts being deducted a few days after I receive a paycheck. I barely notice this smaller amount being deducted every two weeks. For 2013, a bi-weekly payment of $211.53 is enough to max out your contribution.

An automatic investment helps you dollar-cost-average your investment too as Brian1 recommended.

I'm also invested in the Target Retirement 2050 fund and its 1-year rate of return is around 9%. That's not bad and it should be even better in the long term.

Targeted funds like this usually work like this. They start out in high yield, higher risk investments early one when a person is young and has a lot of earnings potential in front of them. As you get older the fund automatically rebalances to be more conservative to protect the nestegg you have built. Your yield decreases but your risk also decrease since if something big did happen to the market the idea is to protect what you have earned and not loose it since you are closer to needing it.

Targeted funds a good choice for someone who wan'ts a very hands off approach and doesn't want to think about it. If you want to feel like you are doing more and have done the research, other more traditional MF might be a better option. Know that you don't have to put all your money in one fund, you can have lots of funds since they all target different areas.

It's easy to loose hope in long term investing when the market has a down period, but remember you are in this for years not months, so the chance the market will go back up someday and your in it now buying shares when things are "low" This is a super simplified way to think about it but it does work. The power of compounding interest with tax benefits is huge over time.

Thank you all for your input, will definitely keep everything going then.

dhc014 - I've had automatic investments setup since July of last year ever since I gained employment after moving. But it was a very small amount, $75 only because I was not so sure about my position, especially since it was a temp contract. I've since then turned perm and things are a bit more stable with life thankfully. I did the calculation 26 x 211.53 meets the goal. Since I get paid semi-monthly and getting my review very soon, hoping for a $5,000 raise or more :-), I'm going to jump it up from $75 to $175 on a bi-weekly basis and put the remaining from my savings which is about $550 during the end of the year.

what the minimum to open one of these targeted retirment accats from vanguard? $1000?

Quote from rkolenov : what the minimum to open one of these targeted retirment accats from vanguard? $1000?

From what I remember, 3k is the minimum to avoid most of the fees. I am not 100% sure on the fee part, but I definitely do remember $3000 being the minimum. Mine is a 2050 Retirement Fund Account.

Quote from rkolenov : what the minimum to open one of these targeted retirment accats from vanguard? $1000?

I just opened one in the past week. $1k for the Target Date funds, $3k for almost anything else. You can avoid the "Annual Maintenance" fees by signing up for electronic statement delivery.

For 2013, the max contribution increases from $5,000 to $5,500.

Quote from Visceral : For 2013, the max contribution increases from $5,000 to $5,500.

Interesting, thanks! When the Feds decide to increase the max contribution is that a sign of good or bad? Not sure if that has anything to do with each other?

Min definitely $1,000 for Vanguard target dates. Good job being invested in your future, I'm investing using the TD 2050 as well (among other things). Keep up the constant investments at regular intervals, dollar cost averaging will save you from loosing sleep over down markets!

Have you read any of Vanguard founder John Bogle's books? Also read Stocks For The Long Run by Jeremy Siegel.

2-3 years isn't enough time for volatile investments to pay off, and anything that isn't a money market fund or federally insured bank account is a volatile investment, even a short term bond fund.

Quote from reddem0n : Interesting, thanks! When the Feds decide to increase the max contribution is that a sign of good or bad? Not sure if that has anything to do with each other?

Good thing. These contribution limits have not been adjusted for inflation, etc... very well. Increasing the limit is a good thing.

Quote from larrymoencurly : 2-3 years isn't enough time for volatile investments to pay off

I agree. 2-3 hours, maybe 2-3 days is a better time estimate.