The First Thing You Should Do in 2009

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Now that 2008 is behind us, you should focus on how to improve your investing results for 2009 and beyond. In order to get off on the right foot, you've got to make sure you have as much in the game as possible.

One way to jump-start your investing is to avoid the procrastination to which many investors fall victim. Especially with long-term goals like retirement, it's tempting to let saving slide when times are tough. But if you make an effort to catch up on your retirement saving now, the dividends it'll pay over time will be enormous.

Don't wait for deadlines
Waiting until the last possible moment to contribute to a retirement account is obviously better than never contributing at all. So if you haven't had a chance to make a contribution for 2008 yet, knowing that you have until mid-April to find money that'll qualify for the previous year and open an IRA or make a deposit to an existing account can make you feel more confident that you'll get it done.

But ideally, you should think instead about your first opportunity to make a contribution. Today, for instance, is the first day you can make contributions for 2009. By getting your money in quickly, you can enjoy the benefits of tax-deferred growth that much sooner.

What a difference a year makes
Of course, in the past year, procrastinators have gotten rewarded with falling stock prices. But typically, the longer you wait to invest, the more gains you give up. As an example, consider the table below:


Value if Contributing Early

Value if Contributing Late

Celgene (Nasdaq: CELG  )



CH Robinson (Nasdaq: CHRW  )



Gilead Sciences (Nasdaq: GILD  )



General Mills (NYSE: GIS  )



McDonald's (NYSE: MCD  )



Rohm & Haas (NYSE: ROH  )



Southwestern Energy (NYSE: SWN  )



Source: Yahoo! Finance.

In the example, two investors made IRA contributions each year from 2003 to 2008. One investor always waited until the last possible moment to contribute to an IRA for the previous year. The other investor rushed to get money into the IRA as soon as possible after Jan. 1 for the current year.

In essence, the first investor lost more than 15 months' worth of appreciation on purchases through lack of contributions in the January-April time frame -- and as the example shows, that can cost you plenty over time.

Other benefits
In addition to the obvious benefit of making more money, there are other reasons why making your IRA contribution early makes sense:

  • No scurrying. Many IRA providers don't handle contributions made close to the deadline well. By getting your money to them well in advance of any deadlines, you give yourself extra time to handle any mistakes or other problems that may arise.
  • Budgeting. It's hard to come up with $5,000 all at once. By spacing out contributions throughout the year, however, you can save in more manageable chunks -- making it more likely that you'll get as much money into your retirement accounts as you can.
  • Better investments. When you leave your IRA contribution to the last minute, you don't leave yourself much time to figure out which investments might work best for you. Early contributions give you the leisure to pick the best investments for your retirement portfolio.

Given how easy it is to open an IRA, there's no excuse for waiting even one more minute. Get your 2009 off to a great start by boosting your retirement savings today -- your future self will thank you.

For more good ideas for 2009, read about:

For more on how to manage your IRA, take a look at The Motley Fool's Rule Your Retirement newsletter service. Each month, you'll get useful advice on how to make the most of your tax-deferred retirement accounts. A free 30-day trial is yours for the asking.

Fool contributor Dan Caplinger is already getting ready to make his 2009 IRA contributions. He doesn't own shares of the companies mentioned in this article. Try any of our Foolish newsletters today, free for 30 days. The Fool's disclosure policy always keeps you ahead of the game.

Read/Post Comments (2) | Recommend This Article (65)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 14, 2009, at 11:09 AM, davidkubica1 wrote:

    Most IRAs can also be better diversified by putting your money into more asset classes. Investing 10% - 20% of your funds into managed futures accounts is a great example of this and is highly recommended by investment advisors. Most people when you ask them about investments will simply focus on the big 3: stocks, bonds, and cash. It is because this is all they know. I would recommend looking into researching managed futures if you would like to better diversify.

    If you are interested in managed futures, you can try They usually have some pretty good programs that they offer. This one: had a return in 2008 of over 128% and has averaged a monthly return of over 8% since its inception 5 years ago. The nice thing about these performance sheets is that you know they are authentic. Managed futures returns are regulated vigorously by the CFTC and are all stated NET OF EXPENSES.

  • Report this Comment On February 27, 2009, at 12:17 PM, biglittleone wrote:

    But have you approched the returns of

    Berkshire-Hathaway for example?

    I have been investing since the early fifties. Some of the reasoning of early buys was not the best, but served as training ground for post college investing when we had significant surplus cash available. Several of these are still in our vault and doing rather well in spite of current conditions caused in large part by the huge debt of the prior president.

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