12:24 pm
May 28, 2017

The Most Important IRA Chart You’ll Ever See

The Most Important IRA Chart You’ll Ever See

You may be surprised at what an IRA could do for your retirement.

There are plenty of IRA facts I could share with you that could help make the case why you should be using one. However, the most compelling reason to invest in an IRA is for the power of tax-deferred compound returns. Here’s a discussion about why you should use an IRA to save for your retirement, and a chart that really shows the true potential of compound returns.

Why invest in an IRA?

An individual retirement account, or IRA, can be a great way to save for retirement, and could even save you money on your taxes this year.

IRAs come in two main varieties — traditional and Roth, and the main difference is the tax advantages. Traditional IRA contributions may be tax-deductible in the year they’re made, but eventual withdrawals in retirement will be taxable income. On the other hand, Roth IRA contributions aren’t deductible, but any qualified withdrawals will be 100% tax-free. Of course, there’s a little more to know about IRAs than I can explain in a paragraph, so here’s an in-depth look to help you choose.

As of the 2016 tax year, you can contribute up to $5,500 to an IRA, and an additional $1,000 if you’re over 50. If you have more than one IRA (such as a traditional and a Roth), your combined contributions cannot exceed these limits.

Even if you participate in a 401(k) or similar retirement plan at work, there are still some pretty compelling reasons to use an IRA. First of all, your 401(k) might not be enough, especially if you just contribute enough to get your employer’s match. You may be surprised how much you’ll need to save for a truly comfortable retirement — even your 401(k) combined with Social Security might not provide sufficient income.

Next, there are some different rules about using IRA contributions before retirement age. For example, you can withdraw up to $10,000 penalty-free at any time to help pay for your first home, or any amount to help cover college expenses. Neither of these early withdrawals are permitted in a 401(k).

Finally, and perhaps most important, an IRA gives you more control over your retirement assets — you can choose to invest in any stocks, bonds, or funds that you want. If you prefer to take a passive approach to investing, you can shop around for funds with lower fees than those in your 401(k). Or, if you want to pursue your own diversified stock portfolio, you’re free to do that as well.

The most important IRA chart you’ll ever see

Now, I’m a big advocate of buying individual stocks, as long as you have the time and desire to do it right. Having said that, to illustrate the amazing power of an IRA, let’s look at a simpler example.

Warren Buffett has said many times that the best investment for most people is a low-cost S&P 500 index fund, and the Vanguard 500 Index Fund ETF (NYSEMKT:VOO) is a good one with a rock-bottom 0.05% expense ratio. Using this fund, which simply matches the market’s performance, you may be surprised at how your investments can build over time.

Over the past 25 years, the S&P 500 has produced an annualized total return of about 9.4%. Assuming you contribute the maximum of $5,500 each year and your investment continues to grow at this rate, take a look at how your money could grow over time:

Important Ira Chart


After 20 years, your contributions could produce an account value of more than $294,000. In 30 years, the power of compound returns could make your account swell to over $800,000, and in 35 years, you could be sitting on a $1.3 million nest egg. If you allowed your account to grow for even longer, well… you get the idea.

In other words, you could potentially start contributing to an IRA at age 30 and retire at 65 with $1.3 million. Using the conservative 4% rule of retirement, this translates to annual income of $52,000. This is in addition to your Social Security benefits and any income from a 401(k) or pension.

Of course, this is a simplification. In reality, this wouldn’t be a smooth curve — rather, there will almost certainly be ups and downs along the way. And, the maximum contribution of $5,500 will increase over time with inflation. However, the idea still applies.

The bottom line on IRAs

The point here is that an IRA is an amazing wealth-generating machine. The fact that by simply using the market’s actual historic returns and contributions of $5,500 per year (about $460 per month) could allow you to retire as a millionaire just goes to show the importance of investing, and of starting as early as possible.

The $15,834 Social Security bonus most retirees completely overlook
If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $15,834 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after.  Simply click here to discover how to learn more about these strategies.

Matthew Frankel has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Forget Netflix! We Think These 3 Companies Are Ready to Take Off

Let’s face it… cable television is on its way out and the “death of TV” means the $2.2 trillion entertainment industry is ripe for the picking. Right now, there’s a golden opportunity to hijack cable’s profits as Americans continue ditching cable. Because we think three stocks are poised to surge now that cable TV’s days are numbered. And you’d be surprised… Netflix and Amazon.com aren’t even on the list! Click here to learn more.


  • I’ve been surfing on-line more than three hours today,
    but I by no means discovered any attention-grabbing article like yours.
    It is pretty value enough for me. Personally, if all website owners and
    bloggers made good content as you did, the web shall be much more useful than ever before.

  • Hey there! I know this is kinda off topic nevertheless I’d figured
    I’d ask. Would you be interested in trading links or maybe guest writing a blog article or vice-versa?
    My blog goes over a lot of the same subjects as yours and I feel we could greatly benefit
    from each other. If you happen to be interested feel free to shoot me an email.
    I look forward to hearing from you! Great blog by the way!

  • Thanks for a marvelous posting! I definitely enjoyed reading
    it, you might be a great author.I will remember to bookmark your blog
    and will eventually come back in the future. I want to encourage one to continue your great
    job, have a nice holiday weekend!

  • Thanks for ones marvelous posting! I seriously enjoyed reading it, you can be a great author.
    I will always bookmark your blog and will often come back at some point.
    I want to encourage one to continue your great job, have a nice

  • Wow, wonderful blog layout! How lengthy have you been running a blog for?
    you make running a blog look easy. The entire glance
    of your web site is excellent, let alone the
    content material!

  • It is in point of fact a great and useful piece of info.
    I am satisfied that you just shared this helpful information with us.
    Please keep us informed like this. Thank you for sharing.

  • Superb post however , I was wondering if you could write
    a litte more on this subject? I’d be very grateful if you could elaborate a little bit
    further. Many thanks!

  • Please let me know if you’re looking for a writer for your weblog.
    You have some really great articles and I think I
    would be a good asset. If you ever want to take some of the
    load off, I’d really like to write some articles for
    your blog in exchange for a link back to mine. Please blast me an e-mail if interested.

  • I don’t even know how I stopped up here, but I believed this post was once great.
    I don’t understand who you’re but definitely you are going to a well-known blogger when you are not already.


  • Hello, Neat post. There’s an issue together with your site in web explorer, might test this?

    IE nonetheless is the market leader and a good part of other folks will
    leave out your fantastic writing because of this problem.

  • You are so interesting! I do not think I’ve truly read through a single
    thing like this before. So wonderful to find another person with some unique thoughts on this issue.
    Really.. thanks for starting this up. This site is something that is
    needed on the internet, someone with some originality!

  • Wow, superb weblog layout! How long have you been blogging for?
    you made blogging glance easy. The entire look of your website
    is great, let alone the content material!

  • hey there and thank you for your information – I have definitely picked
    up anything new from right here. I did however expertise several technical points
    using this site, since I experienced to reload the website lots of times previous to I could
    get it to load correctly. I had been wondering if your web
    host is OK? Not that I’m complaining, but sluggish loading instances
    times will very frequently affect your placement in google and
    could damage your high-quality score if ads and marketing with Adwords.
    Anyway I’m adding this RSS to my e-mail and can look out for a lot more of your respective
    intriguing content. Ensure that you update this again very

  • Please let me know if you’re looking for a writer for your weblog.
    You have some really great articles and I believe I would be a good asset.

    If you ever want to take some of the load off,
    I’d really like to write some articles for
    your blog in exchange for a link back to mine. Please send me an email if interested.

  • Very great post. I simply stumbled upon your blog and wished to
    say that I have really loved surfing around your weblog posts.
    After all I will be subscribing to your feed and I’m hoping
    you write once more very soon!

  • Excellent items from you, man. I’ve take note your stuff previous to and you are just too excellent.

    I actually like what you have received here, certainly like what you’re saying and the best way
    wherein you are saying it. You make it enjoyable and you
    continue to take care of to keep it wise. I can’t wait to learn far more from you.
    This is actually a great site.

  • I’m impressed, I have to admit. Seldom do I come across
    a blog that’s both educative and entertaining, and without a doubt,
    you have hit the nail on the head. The issue is something not enough folks are speaking intelligently about.

    I’m very happy I found this during my hunt for
    something regarding this.

  • Hi there, You have done a fantastic job. I will definitely digg it
    and personally recommend to my friends. I’m confident they’ll be
    benefited from this site.

  • Hello, Neat post. There is an issue along with your web site in internet
    explorer, may test this? IE still is the marketplace leader and a huge section of other
    folks will leave out your wonderful writing because of this problem.

  • Hi there I am so excited I found your website, I really
    found you by accident, while I was browsing on Bing for something else, Anyways I am here now and
    would just like to say many thanks for a fantastic post and a all round thrilling blog (I
    also love the theme/design), I don’t have time to look over it all
    at the moment but I have book-marked it and also added in your RSS feeds,
    so when I have time I will be back to read a lot more,
    Please do keep up the superb job.

  • Attractive part of content. I just stumbled upon your blog and in accession capital to say that I get actually loved account your
    weblog posts. Any way I will be subscribing for your augment
    and even I achievement you get right of entry to constantly fast.

  • Hey there, I think your website might be having browser compatibility issues.
    When I look at your website in Chrome, it looks fine
    but when opening in Internet Explorer, it has some overlapping.
    I just wanted to give you a quick heads up! Other then that, awesome blog!

  • Right now it seems like Expression Engine is the top blogging platform available right now.
    (from what I’ve read) Is that what you’re using on your blog?

  • Hey! Someone in my Myspace group shared this website with us so I came to look it over.
    I’m definitely loving the information. I’m book-marking and will be tweeting this to my followers!
    Excellent blog and outstanding design and style.

  • Thank you for some other wonderful post. Where else may just anyone get that type
    of information in such a perfect method of writing?
    I’ve a presentation subsequent week, and I am on the look for such info.

  • Hmm is anyone else experiencing problems with the images on this blog loading?

    I’m trying to figure out if its a problem on my end or if it’s the blog.

    Any responses would be greatly appreciated.

  • Hello everyone, it’s my first visit at this web site,
    and article is actually fruitful designed for me, keep up
    posting such articles or reviews.

  • I think that is among the such a lot vital info for me.

    And i am satisfied studying your article. But should
    observation on few general things, The web site taste is perfect,
    the articles is actually excellent : D. Just right task, cheers

  • When I initially commented I appear to have clicked on the -Notify me when new comments are added- checkbox and now each time a comment is added I get 4
    emails with the same comment. There has to be a way you are able
    to remove me from that service? Thanks!

  • Hi there would you mind letting me know which webhost you’re utilizing?

    I’ve loaded your blog in 3 different browsers and I must say this blog
    loads a lot quicker then most. Can you recommend a
    good web hosting provider at a honest price? Thank you, I appreciate

  • Good day very nice web site!! Guy .. Excellent .. Wonderful ..
    I will bookmark your website and take the feeds also?

    I am satisfied to find numerous useful information right here in the post, we want work out more
    techniques on this regard, thanks for sharing.
    . . . . .

  • When I initially commented I clicked the “Notify me when new comments are added” checkbox
    and now each time a comment is added I get three e-mails with
    the same comment. Is there any way you can remove me from that
    service? Thank you!

  • You really make it seem so easy with your presentation but I find this matter to be really something which I think I
    would never understand. It seems too complicated and
    extremely broad for me. I am looking forward for your next post, I will try to get the hang
    of it!

  • Just wish to say your article is as astounding. The clearness in your post is just great and
    i can assume you’re an expert on this subject.
    Well with your permission allow me to grab your feed to keep updated with forthcoming post.
    Thanks a million and please keep up the enjoyable work.

  • Its like you learn my mind! You seem to understand a lot approximately
    this, such as you wrote the ebook in it or something.

    I feel that you could do with some percent to force the message house a bit, but other than that, this is wonderful blog.
    A fantastic read. I will certainly be back.

  • Very great post. I just stumbled upon your blog and wished to mention that I’ve really enjoyed surfing around your blog posts.

    After all I will be subscribing to your feed and I hope you write once more very soon!

  • Hi there fantastic blog! Does running a blog like this take a large amount of work?
    I have very little understanding of computer programming however I had
    been hoping to start my own blog soon. Anyway, if you have any ideas
    or techniques for new blog owners please share. I understand this is off subject
    nevertheless I simply wanted to ask. Thanks a lot!

  • Hi! Quick question that’s totally off topic. Do you know how to
    make your site mobile friendly? My site looks
    weird when browsing from my apple iphone. I’m trying to
    find a theme or plugin that might be able to correct this issue.
    If you have any suggestions, please share. Cheers!

  • Hello! This post couldn’t be written any better!
    Reading through this post reminds me of my old room mate!
    He always kept talking about this. I will forward this article to him.

    Pretty sure he will have a good read. Thank you for sharing!

  • Just wish to say your article is as astonishing.
    The clearness in your post is simply excellent and i could assume
    you’re an expert on this subject. Fine with your permission allow
    me to grab your RSS feed to keep up to date with forthcoming post.
    Thanks a million and please keep up the enjoyable work.

  • This design is incredible! You most certainly know how
    to keep a reader entertained. Between your wit and your videos, I was almost moved
    to start my own blog (well, almost…HaHa!) Wonderful
    job. I really loved what you had to say, and more than that, how you presented it.

    Too cool!


Leave a Reply

Your email address will not be published. Required fields are marked *