Investing a lump sum of cash in this market – a wealth of common sense

A reader asks:

My partner and I are both 30 years old and run a small business. We made the maximum SEP IRA contribution of $70,000 in December 2025; then a maximum contribution for FY 2026 of $72,000 in January 2026. The SEP IRA has a total market value of $365,000 and now approximately $145,000 in cash. My question is; How can I invest this money psychologically? I know I can follow all of Ben’s rules: lump sum above DCA, diversify, manage risk tolerance, etc. But now I’m starting to feel the pressure since the account has such a large amount. What should we do?

The SEP IRA is one that most people are probably unfamiliar with.

The contribution limit for 2026 is $72,000. For a traditional or Roth IRA, this is only $7,500 this year. Why the huge difference?

SEP IRAs are intended for small business owners, freelancers, and self-employed individuals who do not have access to a retirement plan such as a 401k. And if you have employees, you can also donate on their behalf.¹

It’s a pretty good deal for sole proprietors who want to put a decent amount of money into a deferred retirement account. I have a SEP IRA and it almost doesn’t seem fair that my limit is so high.²

If I were America’s retirement czar, I’d get rid of all the different accounts – 401k, IRA, Roth, HSA, 529, Solo 401k, SEP IRA, etc. – and just set one big contribution limit for everyone in one account. But I digress…

To the real question here: you are sitting on a large sum of cash in the six figures that makes up 40% of your IRA. That’s a lot of money. It’s understandable why you feel the pressure about this. There is more at stake here.

I’ve discussed the math of lump sum investing versus dollar-cost averaging many times on the blog over the years.

From a probability perspective, it makes more sense to put a lump sum into the market because the stock market usually goes up.

Since 1928, the US stock market has risen in 73% of all years. Since 1950, the stock market has been positive in 80% of rolling twelve-month periods.

That’s a great winning percentage.

However, Murphy’s Law of investing applies here.

Almost every investor looking to invest a lump sum of cash assumes that everything that can go wrong will go wrong when he puts the money to work. These feelings are heightened when the stock market is doing well.

We have a lot of these conversations with our clients who come to us with cash from a company sale, concentrated equity position, RSUs, etc.

Some people are guided by mathematics. You show them the numbers, the light goes off, and they make the spreadsheet choice by putting the lump sum to work right away.

Others see the numbers, understand the numbers, but prefer to make a more psychologically driven decision to average over time.

None of these decisions are necessarily right or wrong. It really depends on which choice you will regret more: missing out on potential profits or missing out on potential losses.

Here are some ways you can implement a strategy to get your money invested:

Peel off the plaster. If you’re going to put that entire lump sum to work, just do it and don’t look back. The market goes up and down. That’s how stocks work. When you rip the band-aid off, there’s no question.

Split the difference. You can also put a lump sum to work right away and market the average together with the rest. Maybe you put that 2025 contribution to work right away and then come up with a DCA schedule for the 2026 cash.

That way all your bases are covered.

You could create some barriers. The biggest reason why you worry about making a lump sum is because the market could fall out of bed right after you pull the trigger. Some people like the idea of ​​waiting for a correction to put money to work.

I’m not one of them.

The longer you wait, the harder it becomes to invest. Cash becomes an addiction. When the market takes off, there is no entry point low enough to get you back in if the market eventually falls.

But you could make a DCA schedule with some exits. If the market drops 10%, 15%, maybe 20%, you give yourself the opportunity to speed up the process. This seems useful to me as long as you already invest periodically.

Whatever plan you come up with, just write it down.

If you’re averaging the market, write down your chosen cadence (weekly, monthly, quarterly, etc.) and then stick to it.

If you put in the full amount today, write down why you are doing it.

If you are going to split the difference or wait for a correction or other variation, write down your plan and the reasons for your plan.

Choose a plan, stick to the plan.

Sometimes you will like the outcome, sometimes you won’t, but we all deal with imperfect information about the future.

You make an informed decision based on your emotional state and the information available to you at the time, write it down to remind yourself, and then move on with your life.

The hard part is out of the way.

You have already saved a lot of of money.

I discussed this question in the latest episode of Ask the Compound:

Bill Sweet This week I was back on the show to answer questions about healthcare options in early retirement, Roth conversions in the plan, the secret sauce of retirement planning, and how the new Trump savings accounts work.

Further reading:
The psychology of cash sitting

¹If you, as an employer, contribute 10% of your salary, you must also pay a 10% contribution for your employee based on his or her salary.

²I have an LLC for A Wealth of Common Sense for advertising revenue, book sales, speaking engagements and the like. Technically, I’m not a businessman; I’m a business, man.