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Drazen_ \/ Getty Images<\/p>\n
See how much you could have when you’re 67 if you contributed $7,500 to your IRA every year starting when you’re 27. <\/p>\n
If you contribute the 2026 individual retirement account (IRA) limit of $7,500<\/a> every year from age 27 to 67, investing fully in an S&P 500 index<\/a> fund, you could end up with roughly $1.38 million, assuming that past annual inflation-adjusted returns<\/a> match future ones.<\/p>\n A more conservative 60\/40 portfolio of U.S. stocks and bonds, respectively, would yield a much smaller nest egg\u2014just over $882,000\u2014with an average annual return of 4.89%.<\/p>\n In 2026, you can contribute up to $7,500 to your IRA, according to the Internal Revenue Service (IRS)<\/a>. (If you’re 50 or older, you can contribute $1,100 more as a catch-up contribution<\/a>.) So we wondered: If you contributed $625 per month just to your IRA, would you have enough money to retire in the future?<\/p>\n Well, let’s run the numbers. Let’s assume you start saving for retirement at age 27 and you plan to retire at age 67<\/a>. While IRA contribution limits typically increase every year to keep pace with inflation, let’s assume that you stick to the 2026 contribution limit of $7,500 per year. (This means no catch-up contributions<\/a>, too.)<\/p>\n We can analyze two different scenarios: What if you put all of your money in an S&P 500 index fund<\/a>? Or what about a 60\/40 portfolio<\/a> comprised of equities and fixed-income assets, respectively?<\/p>\n A few notes: These numbers will exclude fees like expense ratios<\/a>, and we’ll use past annualized returns<\/a>, which are not necessarily predictive of future returns. Additionally, these numbers assume you opt for a Roth IRA<\/a>, where you pay taxes on your contributions upfront and withdrawals are tax- and penalty-free, as long as you’ve had the account for five years and are over age 59 \u00bd.<\/p>\n You may yield the greatest returns when investing your money entirely in an S&P 500 index fund, which is an index made up of the 500 largest companies in the U.S. based on market capitalization. Starting at age 27, if you put $7,500 in an S&P 500 fund every year, you would have roughly $1.38 million by age 67, assuming that the inflation<\/a>-adjusted annual return of 6.69% from 1957 to 2025 matches future returns.<\/p>\n Investing your portfolio in an S&P 500 index fund gives you the potential to achieve higher returns compared to a 60\/40 portfolio, which includes conservative assets, like bonds. However, a portfolio invested entirely in equities also has greater volatility, meaning the value of your portfolio can fluctuate more widely.<\/p>\n In contrast, if you opted for the 60\/40 portfolio, you would end up with a much smaller nest egg. The average inflation-adjusted return for this portfolio from 1901 to 2022 was just 4.89%, according to data from the CFA Institute. If you opt for this more conservative portfolio, you would have just over $882,000 at age 67.<\/p>\n Ultimately, whether or not $882,000 or $1.38 million is enough to live off of in retirement depends on a variety of factors, such as your desired lifestyle in retirement<\/a> and if you have other sources of retirement income, like Social Security or pensions.<\/p>\n Sometimes, experts suggest using rules-of-thumb, like the 4% rule<\/a>, to help people calculate how much they can safely withdraw every year in retirement without running out of money.<\/p>\n Developed in the 1990s by financial planner Bill Bengen, the 4% rule states that a retiree can withdraw 4% of their portfolio the first year of retirement and then adjust that rate for inflation every year after that. In doing so, a retiree would have enough money to last them 30 years, assuming they have a portfolio comprised of both stocks and bonds.<\/p>\n Therefore, if someone had $882,000 in an IRA, the 4% rule assumes they could withdraw just $35,280 the first year of retirement. However, if that person also received the average Social Security benefit, roughly $2,000 a month, their total annual retirement income would exceed $59,000, not accounting for taxes. That’s less than $1,000 short of the average amount people age 65 or older spend annually<\/a>.<\/p>\n And if someone opted for the more aggressive portfolio<\/a>, ending up with $1.38 million, they could withdraw even more annually. In the first year, they would be able to withdraw $55,200 under the 4% rule. With the average Social Security benefit, that person would have an annual retirement income of more than $79,000.<\/p>\n However, since Bengen’s rule assumes a stock and bond portfolio, adhering to the 4% rule would be especially risky with a portfolio invested 100% in stocks. If markets plunge early in retirement, retirees could end up withdrawing a greater portion of their portfolio to maintain their desired spending and end up with a smaller nest egg later on<\/a>.<\/p>\n <\/p>\n