It’s only February, but Charly Stoever has already made a significant portion of this year’s investments.
Stover, founder of Traveler Charlie Money Coaching, makes maximum contributions to his Roth Individual Retirement Account at the beginning of each year, which means he has reached the 2026 limit of $7,500 as of January.
“Many people think it’s better to stretch out their retirement investments throughout the year and do what’s called dollar-cost averaging,” Stover says of the strategy, which involves investing a set amount of money at regular intervals. “But for me, it’s more effective to front-load and max out my personal retirement accounts in the first week of January to get the full year’s worth of gains.”
Stover’s business has never made more than about $60,000 a year, and after taxes and expenses, the financial coach pays himself even less. Stoever said this means their Roth investments are worth about 25% of their annual income.
“But if I don’t, I won’t retire, so I’m willing to bite the bullet and front-load my investments,” they say.
There are benefits to investing ahead of time
A Roth IRA is a tax-advantaged retirement account that is funded with funds that have already paid taxes. Your money grows tax-free in your account, and when you reach age 59 and a half, you can withdraw all your funds, including any profits, without having to owe Uncle Sam a penny, as long as you’ve held your account for at least five years. In 2026, single filers can make the maximum contribution if their taxable income is less than $153,000. The benefit is completely phased out for people with incomes above $168,000.
When it comes to funding long-term accounts, many savers and financial professionals are fans of dollar-cost averaging. Part of the idea behind this strategy is practical. Not everyone has thousands of dollars on hand to invest. What’s more, many investors already do it without thinking, by contributing to their 401(k) through regular payroll deductions.
Another reason for dollar-cost averaging has to do with investor psychology. Juan G. Hernandez Aliano, a certified financial planner and principal at WealthCreate in Houston, Texas, says this robotic way of investing takes the emotion out of managing money. It doesn’t matter if the market is going up, down, or flat. Just invest as you normally would.
“(Dollar-cost averaging) is not about maximizing profits,” he says. “It’s about maximizing the probability that someone actually stays invested and continues to invest.”
So far, Stoever has had no trouble staying consistent with his lump sum strategy. And over the long term, Hernandez-Agliano points out, it’s a mathematically sound strategy. “If someone is comfortable contributing a lump sum, that’s much better,” he says.
Consider two investors. One person invests $7,500 at the beginning of the year, and the other invests it in biweekly installments of $288. If the market rises during that 12-month period, lump sum investors will have an advantage.
Relaxed investors will take a proactive approach when the market is trending down, protecting their year-long cash holdings from declines.
Because the U.S. stock market has historically trended upward, lump sum strategies tend to produce higher returns over time. Analysts at Morgan Stanley Wealth Management analyzed 1,000 overlapping seven-year historical periods and found that in more than 56% of cases, a lump sum investment approach produced higher returns than a periodic investment strategy.
Overall, says Hernandez-Agliano, it doesn’t really matter how you save, it’s more about establishing a habit of consistently saving a portion of your income for a long-term goal like retirement. It may also be helpful to consult a trusted financial professional about which strategy is right for you.
Stover recalls receiving that message from a financial mentor when he was 26 years old.
“She pretty much convinced me that I needed to max out my Roth IRA. At the time, its limit was about $5,500 a year…and it was a significant portion of my overall income,” they say. “But I considered it non-negotiable for me, because otherwise I would have to work forever. And I’m not interested in that kind of life.”
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