Do you lump sum full amount into IRA at beginning of the year?
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Do you lump sum full amount into IRA at beginning of the year?
Obviously you'd need to have the means to do so but for those that do, do you lump sum the full amount at the beginning of the year into your IRA?
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Re: Do you lump sum full amount into IRA at beginning of the year?
Yes, only because it lets me just cross it off my list and not have to think about it.
Earned 43 (and counting) credit hours of financial planning related education from a regionally accredited university, but I am not your advisor.
Re: Do you lump sum full amount into IRA at beginning of the year?
Lump sum. Already submitted on TDA.
Time in market. Like you said, if one has the means and cash flow to.
Time in market. Like you said, if one has the means and cash flow to.
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Re: Do you lump sum full amount into IRA at beginning of the year?
Lump summed both Roth IRAs and pair of 529s (to state deductible max) first thing this morning. My transfer of $20k from Ally to pay for it all hadn't come yet, despite being scheduled a week ago to arrive today. I've had this issue before (Ally transfers not showing up when scheduled); I will be just a tad bit angry if funds aren't there tomorrow.
Re: Do you lump sum full amount into IRA at beginning of the year?
This has already been discussed in a recent thread:
viewtopic.php?p=5663291
Personally I contributed my full $6k today. If you have the money set aside already, why not? The sooner you're invested the better (regardless of market up or down).
viewtopic.php?p=5663291
Personally I contributed my full $6k today. If you have the money set aside already, why not? The sooner you're invested the better (regardless of market up or down).
"Learn from the past, live in the present, plan for the future"
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Re: Do you lump sum full amount into IRA at beginning of the year?
Yes, first time ever doing lump sum on Jan 1st.
I don't know why but I was really nervous doing it. I am a good 15-20k under the MAGI income limit but I needed to double/triple check
I don't know why but I was really nervous doing it. I am a good 15-20k under the MAGI income limit but I needed to double/triple check
Re: Do you lump sum full amount into IRA at beginning of the year?
Yes; put $7K x 2 (half of our cash savings) into empty tIRAs as the fireworks exploded last night.
Vanguard's website worked perfectly. Hopefully Roth conversions after settlement go as well.
Vanguard's website worked perfectly. Hopefully Roth conversions after settlement go as well.
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Re: Do you lump sum full amount into IRA at beginning of the year?
No. At our level of savings this would require not investing in taxable during Nov/Dec.
Re: Do you lump sum full amount into IRA at beginning of the year?
what would life be like without a good ol' fashioned "lump sum" Roth IRA thread on New Years Day.
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Re: Do you lump sum full amount into IRA at beginning of the year?
frustrating. Have had this happen w/ VG before where I transfer $$ in and then wait over a week to actually invest it (it needs to settle). IRT annual Roth contribution, I now move the funds to VG during early December so they 'settle' and it avoids this hassle.stoptothink wrote: ↑Fri Jan 01, 2021 10:42 am Lump summed both Roth IRAs and pair of 529s (to state deductible max) first thing this morning. My transfer of $20k from Ally to pay for it all hadn't come yet, despite being scheduled a week ago to arrive today. I've had this issue before (Ally transfers not showing up when scheduled); I will be just a tad bit angry if funds aren't there tomorrow.
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Re: Do you lump sum full amount into IRA at beginning of the year?
If you have cash today, it's better to contribute right away. Not much interest on cash these days, but wouldn't you rather have the interest your cash earns in 2021 accumulate tax deferred or tax free?
Reasons not to lump sum in first week of January:
- You are uncertain you will earn enough income to contribute the full amount. Furlough, layoff, wage cut on the horizon?
- You want to contribute to a Roth IRA, believe you might earn too much to contribute to a Roth IRA, and prefer to wait until you know your annual income to contribute. https://www.irs.gov/retirement-plans/am ... e-for-2021
In the last decade of work, I never knew my income because we were paid a bonus in Q2, and got our raise (if any) in Q2 also. Of course, I never knew my investment income until the last minute. You might call your IRA custodian and ask if it possible to 'undo' the contribution if you accidentally contribute too much.
Reasons not to lump sum in first week of January:
- You are uncertain you will earn enough income to contribute the full amount. Furlough, layoff, wage cut on the horizon?
- You want to contribute to a Roth IRA, believe you might earn too much to contribute to a Roth IRA, and prefer to wait until you know your annual income to contribute. https://www.irs.gov/retirement-plans/am ... e-for-2021
In the last decade of work, I never knew my income because we were paid a bonus in Q2, and got our raise (if any) in Q2 also. Of course, I never knew my investment income until the last minute. You might call your IRA custodian and ask if it possible to 'undo' the contribution if you accidentally contribute too much.
He that loveth silver shall not be satisfied with silver; nor he that loveth abundance with increase: this is also vanity.
Re: Do you lump sum full amount into IRA at beginning of the year?
When I was employed I did.
Re: Do you lump sum full amount into IRA at beginning of the year?
Nope. We may not have enough earned income to do so even by the end of 2021.
Re: Do you lump sum full amount into IRA at beginning of the year?
yes, guessing many/most here (with earned income) do it in January at some point and be done w/ it. It is the strategy here.changingtimes wrote: ↑Fri Jan 01, 2021 11:15 amHow about getting a bit of a curve ball by asking, "Do you lump sum your full amount of expected Roth conversions at the beginning of the year?"
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Re: Do you lump sum full amount into IRA at beginning of the year?
I'm also trying to figure out what's best to do, in a situation where I might possibly be just over the limit to contribute to a Roth IRA, and won't know until later in the year due to some possible capital gains. All of my IRAs are Roth'd and I've typically dollar-cost averaged throughout the year. (In 2019 I had an unexpected capital gains that put me over the limit so I did the recharacterization/backdoor Roth thing but prefer to avoid it this time around).
For 2021, I see these as my options but would like to know what's the best recommendation:
(1) dollar cost average (or lump sum now) into the Roth and if I'm over the limit, do the recharacterization/backdoor and just deal with the annoying paperwork;
(2) dollar cost average (or lump sum now) into a nondeductible tIRA, and later on convert to a Roth (but then I'll have to pay tax on any gains);
(3) forgo the time value of contributing early and just wait until early 2022 when I have all the definite dollar numbers, and at that point contribute directly to the 2021 Roth, or if I can't contribute to a 2021 tIRA and backdoor the next day.
I've been following the boglehead principles since the 1990s but am very new to this site, and already have learned so much! Happy New Year to all!
For 2021, I see these as my options but would like to know what's the best recommendation:
(1) dollar cost average (or lump sum now) into the Roth and if I'm over the limit, do the recharacterization/backdoor and just deal with the annoying paperwork;
(2) dollar cost average (or lump sum now) into a nondeductible tIRA, and later on convert to a Roth (but then I'll have to pay tax on any gains);
(3) forgo the time value of contributing early and just wait until early 2022 when I have all the definite dollar numbers, and at that point contribute directly to the 2021 Roth, or if I can't contribute to a 2021 tIRA and backdoor the next day.
I've been following the boglehead principles since the 1990s but am very new to this site, and already have learned so much! Happy New Year to all!
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Re: Do you lump sum full amount into IRA at beginning of the year?
I did last year (2020).
This year I'll probably wait until 2022 when my 2021 income is final.
In the meantime the money is invested in a similar ETF in taxable account, so no time in the market lost.
This year I'll probably wait until 2022 when my 2021 income is final.
In the meantime the money is invested in a similar ETF in taxable account, so no time in the market lost.
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Re: Do you lump sum full amount into IRA at beginning of the year?
We aren't eligible to contribute to TIRA accounts anymore (no complaints).
Howver, we still have the Employee-contributed portion of the 403b, which allows significantly more money to be tax-deferred than in an IRA. We've got that set for an amount to be withheld each month until the max (including catch up amount due to age) is reached, so it will be completed in the first half of the year. The software automatically stops the withholding at that point each year.
Then that clock starts again automatically each January, unless we change it.
RM
Howver, we still have the Employee-contributed portion of the 403b, which allows significantly more money to be tax-deferred than in an IRA. We've got that set for an amount to be withheld each month until the max (including catch up amount due to age) is reached, so it will be completed in the first half of the year. The software automatically stops the withholding at that point each year.
Then that clock starts again automatically each January, unless we change it.
RM
This signature is a placebo. You are in the control group.
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Re: Do you lump sum full amount into IRA at beginning of the year?
I put the checks in the mail yesterday.
Re: Do you lump sum full amount into IRA at beginning of the year?
Regarding the part in bold...Is there an actual minimum you need to earn in order to contribute the full amount? I thought you just had to have "earned income" sometime during the year. I didn't realize there was a $$ threshold that needed to be met. I know there is a upper limit on income though obviouslyChurch Lady wrote: ↑Fri Jan 01, 2021 11:18 am If you have cash today, it's better to contribute right away. Not much interest on cash these days, but wouldn't you rather have the interest your cash earns in 2021 accumulate tax deferred or tax free?
Reasons not to lump sum in first week of January:
- You are uncertain you will earn enough income to contribute the full amount. Furlough, layoff, wage cut on the horizon?
- You want to contribute to a Roth IRA, believe you might earn too much to contribute to a Roth IRA, and prefer to wait until you know your annual income to contribute. https://www.irs.gov/retirement-plans/am ... e-for-2021
In the last decade of work, I never knew my income because we were paid a bonus in Q2, and got our raise (if any) in Q2 also. Of course, I never knew my investment income until the last minute. You might call your IRA custodian and ask if it possible to 'undo' the contribution if you accidentally contribute too much.
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Re: Do you lump sum full amount into IRA at beginning of the year?
The minimum income to contribute $6000 is $6000.
Note: pre-tax 401(k) contributions are counted against that number. For example, if I had $20,000 of earned income, and contributed $15,000 to pre-tax 401(k), I can contribute $5,000 to Roth IRA.
Re: Do you lump sum full amount into IRA at beginning of the year?
Or $12,000 combined for you & a spouse, just to be explicit, to contribute $6000 to each of yours.Hyperchicken wrote: ↑Fri Jan 01, 2021 12:31 pmThe minimum income to contribute $6000 is $6000.
Note: pre-tax 401(k) contributions are counted against that number. For example, if I had $20,000 of earned income, and contributed $15,000 to pre-tax 401(k), I can contribute $5,000 to Roth IRA.
Re: Do you lump sum full amount into IRA at beginning of the year?
Ah, got it. So if I go into work next week and get laid off and can't find a job the remainder of the year I may regret my lump sum. Hopefully won't be the caseHyperchicken wrote: ↑Fri Jan 01, 2021 12:31 pmThe minimum income to contribute $6000 is $6000.
Note: pre-tax 401(k) contributions are counted against that number. For example, if I had $20,000 of earned income, and contributed $15,000 to pre-tax 401(k), I can contribute $5,000 to Roth IRA.
Re: Do you lump sum full amount into IRA at beginning of the year?
I never did. Retired now, but I DCA'd all the way. I set up auto-invest for 1/12 of the limit per month into my Roth at Vanguard, shortly after my second paycheck each month.
Ran into trouble the year my income went over the limit for a full Roth contribution. I didn't discover the problem until I was doing taxes. At that point I turned off auto-invest and waited until I knew my exact income figure, usually into the new year. Good news / bad news: In the last few years of my work life I made too much to contribute to a Roth.
Ran into trouble the year my income went over the limit for a full Roth contribution. I didn't discover the problem until I was doing taxes. At that point I turned off auto-invest and waited until I knew my exact income figure, usually into the new year. Good news / bad news: In the last few years of my work life I made too much to contribute to a Roth.
Re: Do you lump sum full amount into IRA at beginning of the year?
I just finished putting in the final amount to reach the 6k for 2020. I have enough to to put another 6k for 2021. But I think I'm going to spread it out throughout the year. I know: time in the market, etc. But I want to wait just a bit to see the Biden impact on the markets. And it's weird but it is "painful" for me to see all 6k immediately drop out of my savings account. DCA for me sets my mind at ease.
Re: Do you lump sum full amount into IRA at beginning of the year?
Yes. Investing the IRA contributions is just part of a larger overall portfolio re-balancing event. HSA and taxable accounts treated the same way.
Even a stopped clock is right twice a day.
Re: Do you lump sum full amount into IRA at beginning of the year?
Yes, market historically is likely to go up not down in a given year and it's one less think to deal with during the year. Of course, I'll do it on January 3 this year, it makes no different midnight Jan 1 to 3:59pm on Jan 4 because of the weekend.
Re: Do you lump sum full amount into IRA at beginning of the year?
Yes. I save up the money at the end of the year, and lump sum it immediately after the new year. Done and done, no need to think about it until next year. I do the backdoor, so this is also much simpler, since it cannot be automated.
I already submitted the first step this morning. I expect to be able to do the second one on Tuesday or Wednesday. Then I can forget about it
I already submitted the first step this morning. I expect to be able to do the second one on Tuesday or Wednesday. Then I can forget about it
Re: Do you lump sum full amount into IRA at beginning of the year?
I max out our Roth IRAs only after I have earned income that covers the amount. I work part time as a 1099 worker (real estate sales) and one of these days I might say screw it and quit working.
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Re: Do you lump sum full amount into IRA at beginning of the year?
Absolutely! Every year. Today, I just initated $7K for myself and DW as part of our annual Backdoor ROTH process. I am firm believer that time in market is key to success.
It is not about how much you make; it is about how much you keep and how well you invest it. - Author Unknown |
Dream as if you’ll live forever. Live as if you’ll die today. - Author James Dean
Re: Do you lump sum full amount into IRA at beginning of the year?
yep, clicked the buttons when I got up first thing this morning.
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Re: Do you lump sum full amount into IRA at beginning of the year?
To piggy back on this comment:seymore92 wrote: ↑Fri Jan 01, 2021 12:33 pmOr $12,000 combined for you & a spouse, just to be explicit, to contribute $6000 to each of yours.Hyperchicken wrote: ↑Fri Jan 01, 2021 12:31 pmThe minimum income to contribute $6000 is $6000.
Note: pre-tax 401(k) contributions are counted against that number. For example, if I had $20,000 of earned income, and contributed $15,000 to pre-tax 401(k), I can contribute $5,000 to Roth IRA.
My wife will make about $15k this year and she is contributing 92% of her paycheck to her 401k so her paycheck is about $1/week.
We are above the income limit to make a Roth contribution directly.
Can I still do a back door Roth for her (neither of us have a tIRA)?
If I can’t, I’m guessing she should contribute nothing to her 401k until she reaches $7000 (we are over 50) of earned income, then do the back door, then switch to 92% contribution, correct?
Last edited by count damoney on Fri Jan 01, 2021 3:32 pm, edited 1 time in total.
Re: Do you lump sum full amount into IRA at beginning of the year?
Thanks for the reminder.
Re: Do you lump sum full amount into IRA at beginning of the year?
We have this same discussion every year. It's not really "lump sum" since presumably you intend to contribute to the IRA again in the future. So it's a matter of DCA annually or DCA monthly (or whatever). And it just doesn't matter (unless earned income is so low that you are unsure about being able to contribute the full amount, or so high as to be phased out of direct Roth IRA contributions).
Re: Do you lump sum full amount into IRA at beginning of the year?
There's no need to make it that complicated. As long as you have at least $14K of earned income (W-2 box 1) between the two of you, you can do the backdoor for both of you. And since you stated your total income is above the limit for direct Roth contributions, I'm certain you have enough income (even if you both max traditional 401k's). You can start the backdoor process today if you'd like - there's no requirement about having the earned income before making the contribution.count damoney wrote: ↑Fri Jan 01, 2021 3:25 pmTo piggy back on this comment:seymore92 wrote: ↑Fri Jan 01, 2021 12:33 pmOr $12,000 combined for you & a spouse, just to be explicit, to contribute $6000 to each of yours.Hyperchicken wrote: ↑Fri Jan 01, 2021 12:31 pmThe minimum income to contribute $6000 is $6000.
Note: pre-tax 401(k) contributions are counted against that number. For example, if I had $20,000 of earned income, and contributed $15,000 to pre-tax 401(k), I can contribute $5,000 to Roth IRA.
My wife will make about $15k this year and she is contributing 92% of her paycheck to her 401k so her paycheck is about $1/week.
We are above the income limit to make a Roth contribution directly.
Can I still do a back door Roth for her (neither of us have a tIRA)?
If I can’t, I’m guessing she should contribute nothing to her 401k until she reaches $7000 (we are over 50) of earned income, then do the back door, then switch to 92% contribution, correct?
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Re: Do you lump sum full amount into IRA at beginning of the year?
Thanks. Time to move some money to Vanguard and Fidelity02nz wrote: ↑Fri Jan 01, 2021 4:01 pmThere's no need to make it that complicated. As long as you have at least $14K of earned income (W-2 box 1) between the two of you, you can do the backdoor for both of you. And since you stated your total income is above the limit for direct Roth contributions, I'm certain you have enough income (even if you both max traditional 401k's). You can start the backdoor process today if you'd like - there's no requirement about having the earned income before making the contribution.count damoney wrote: ↑Fri Jan 01, 2021 3:25 pmTo piggy back on this comment:seymore92 wrote: ↑Fri Jan 01, 2021 12:33 pmOr $12,000 combined for you & a spouse, just to be explicit, to contribute $6000 to each of yours.Hyperchicken wrote: ↑Fri Jan 01, 2021 12:31 pmThe minimum income to contribute $6000 is $6000.
Note: pre-tax 401(k) contributions are counted against that number. For example, if I had $20,000 of earned income, and contributed $15,000 to pre-tax 401(k), I can contribute $5,000 to Roth IRA.
My wife will make about $15k this year and she is contributing 92% of her paycheck to her 401k so her paycheck is about $1/week.
We are above the income limit to make a Roth contribution directly.
Can I still do a back door Roth for her (neither of us have a tIRA)?
If I can’t, I’m guessing she should contribute nothing to her 401k until she reaches $7000 (we are over 50) of earned income, then do the back door, then switch to 92% contribution, correct?
Re: Do you lump sum full amount into IRA at beginning of the year?
Interestingly, I'm doing the opposite! I'm still tax gain harvesting at this point in my life so I have $6,000 waiting in taxable to be transferred to Roth no sooner than April 1st, earmarked for the 2020 tax year. I plan to wait til around December 30th for 2021, but assuming all goes well with my next big career move, I'll be contributing directly to Roth as the paychecks come in at the start of the year in 2022.
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Re: Do you lump sum full amount into IRA at beginning of the year?
I usually fund my BIL's Roth early in the year from his taxable account. $7000 for him..
Every bit helps. I need to do that Monday. I set an Alexa reminder.
Broken Man 1999
Every bit helps. I need to do that Monday. I set an Alexa reminder.
Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go." - Mark Twain
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Re: Do you lump sum full amount into IRA at beginning of the year?
2 $7k Roth (well IRA for backdoor) contributions and 2 $10k I-Bond contributions this morning. I know that I could have done the I-Bonds closer to the end of the month but the money wasn't earning anything anyway.
Last edited by ImUrHuckleberry on Fri Jan 01, 2021 4:14 pm, edited 1 time in total.
Re: Do you lump sum full amount into IRA at beginning of the year?
I transferred the $7k this morning. It's nice of Vanguard to instantly add the amount to my account total although with a little "pending" underneath. My company has been purchased by megacorp and it finalizes the first of the year so lets hope I don't get laid off before the end of the month.
The fool, with all his other faults, has this also - he is always getting ready to live. - Seneca Epistles < c. 65AD
Re: Do you lump sum full amount into IRA at beginning of the year?
yes, in the years i am sure that i qualify to contribute and i am sure about if it should be in roth or traditional
no, in all other years
no, in all other years
60-20-20 us-intl-bond
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Re: Do you lump sum full amount into IRA at beginning of the year?
I'm going to have to disagree with you here, otherwise, EVERYTHING would just be DCA with your definition.
Re: Do you lump sum full amount into IRA at beginning of the year?
No it would not. The lump sum vs DCA discussion is most applicable to one-time windfalls. Somebody who inherits say $100K and is trying to decide whether to lump sum or DCA isn't going to keep inheriting $100K year after year. By contrast, you do plan on contributing $6K next year and the year after that (or whatever the inflation-adjusted maximum is at that time).
Actually, by your definition EVERYTHING would be a lump sum, because if you DCA monthly, aren't your really choosing to "lump sum" instead of DCA weekly? And if you DCA weekly, why not daily? ... and so on.
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Re: Do you lump sum full amount into IRA at beginning of the year?
No, YOU are!02nz wrote: ↑Fri Jan 01, 2021 9:03 pmNo it would not. The lump sum vs DCA discussion is most applicable to one-time windfalls. Somebody who inherits say $100K and is trying to decide whether to lump sum or DCA isn't going to keep inheriting $100K year after year. By contrast, you do plan on contributing $6K next year and the year after that (or whatever the inflation-adjusted maximum is at that time).
Actually, by your definition EVERYTHING would be a lump sum, because if you DCA monthly, aren't your really choosing to "lump sum" instead of DCA weekly? And if you DCA weekly, why not daily? ... and so on.
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Re: Do you lump sum full amount into IRA at beginning of the year?
As others have said, you have to earn the amount you contribution in the year you contribute. I have a friend, retired, who intentionally works just enough to earn his Roth contribution.JD2775 wrote: ↑Fri Jan 01, 2021 12:26 pmRegarding the part in bold...Is there an actual minimum you need to earn in order to contribute the full amount? I thought you just had to have "earned income" sometime during the year. I didn't realize there was a $$ threshold that needed to be met. I know there is a upper limit on income though obviouslyChurch Lady wrote: ↑Fri Jan 01, 2021 11:18 am If you have cash today, it's better to contribute right away. Not much interest on cash these days, but wouldn't you rather have the interest your cash earns in 2021 accumulate tax deferred or tax free?
Reasons not to lump sum in first week of January:
- You are uncertain you will earn enough income to contribute the full amount. Furlough, layoff, wage cut on the horizon?
- You want to contribute to a Roth IRA, believe you might earn too much to contribute to a Roth IRA, and prefer to wait until you know your annual income to contribute. https://www.irs.gov/retirement-plans/am ... e-for-2021
In the last decade of work, I never knew my income because we were paid a bonus in Q2, and got our raise (if any) in Q2 also. Of course, I never knew my investment income until the last minute. You might call your IRA custodian and ask if it possible to 'undo' the contribution if you accidentally contribute too much.
Good luck!
He that loveth silver shall not be satisfied with silver; nor he that loveth abundance with increase: this is also vanity.
Re: Do you lump sum full amount into IRA at beginning of the year?
This is silly. DCA v. lump sum is about what you choose to do. The restriction on how much can annually be put into an IRA is not a choice. So doing it once a year is being as lump sum as possible. And of course there are different strategies for DCA at various frequencies, but those all fall within the DCA umbrella.02nz wrote: ↑Fri Jan 01, 2021 9:03 pmNo it would not. The lump sum vs DCA discussion is most applicable to one-time windfalls. Somebody who inherits say $100K and is trying to decide whether to lump sum or DCA isn't going to keep inheriting $100K year after year. By contrast, you do plan on contributing $6K next year and the year after that (or whatever the inflation-adjusted maximum is at that time).
Actually, by your definition EVERYTHING would be a lump sum, because if you DCA monthly, aren't your really choosing to "lump sum" instead of DCA weekly? And if you DCA weekly, why not daily? ... and so on.
FWIW I DCA my IRA monthly because it helps minimize regret and smooths out my expenses so that I don't even have to think about the investment. ~<$200 a year in opportunity cost is a small amount of pay for peace of mind and removal of active decision making (and its associated pitfalls).
Re: Do you lump sum full amount into IRA at beginning of the year?
No, I wait till tax season to decide whether to contribute the 6k to traditional or Roth.
1 fund