Maxing out your IRA each year is one of the smartest long-term financial habits you can build. But is it enough to retire comfortably on its own? The answer is: it depends on your investment strategy, lifestyle, time horizon, and how markets perform over the decades. There are no guaranteed returns, no matter what historical averages suggest.

Here’s a simple breakdown to help you understand what maxing out an IRA could look like, and the steps you can take today to strengthen your retirement plan.

How Much Can You Build by Maxing Out Your IRA?

For many investors, the annual IRA contribution limit is now $7,500 beginning in 2026, with an additional catch-up contribution available if you’re age 50 or older. If you contribute the max every year from about age 27 to 67, that adds up to 40 years of steady saving. But the real difference comes from how the money is invested.

Scenario 1: Heavier Stock Allocation (Historically Higher Returns, Higher Risk)

A portfolio invested heavily in stocks (such as tracking the S&P 500) has historically returned around 6–7% after inflation. If those historical averages were to repeat, and again, they are not guaranteed, maxing out your IRA could grow to over $1 million by retirement.

Pros: Higher growth potential

Cons: Higher volatility, bigger swings, and potentially greater losses in down markets

Scenario 2: A 60/40 Portfolio (Balanced Portfolio)

A 60/40 mix of stocks and bonds has historically returned closer to 4–5% after inflation, which may lead to something closer to $800,000–$900,000 over 40 years.

Pros: Potentially smoother ride, typically less volatility

Cons: Lower long-term growth potential

Neither approach is “right” or “wrong." There are no perfect investments with high returns and no downside risk. Someone who says otherwise, is selling you a dream, not reality.

The best choices for you depend on your goals, time horizon, and risk tolerance.

What That Means for Retirement Income

Many planners use a very basic 4% rule as a starting point to estimate how much income retirement savings might reasonably support in the first year. In simple terms: you withdraw 4% in year one, then adjust for inflation each year.

For example, a nest egg around $900,000 could produce roughly $36,000/year. A nest egg around $1.3–$1.4 million could produce about $55,000/year.

Most retirees also receive Social Security, which may add another ~$24,000/year depending on your work history.

This combination gives many individuals a workable retirement income, but it may not meet your personal spending needs, especially if you want to travel, retire early, or spend more in the first decade of retirement.

And remember: the 4% rule is not a guarantee.

Important Reality Check: There Are No Guarantees in Investing

It’s essential to keep expectations grounded:

• Past returns are not guarantees of future performance.
• A “safer” portfolio can still lose value during downturns.
• A “riskier” stock-heavy portfolio can outperform—or underperform—for long stretches of time.
• Even well-built projections are estimates, not promises.

This is why retirement planning should include stress-testing, diversified savings buckets, and flexible withdrawal strategies.

What You Can Do Now: Smart, Simple Next Steps

1. Review Your IRA or Roth IRA Contribution Strategy: Make sure you're taking advantage of the annual contribution limits and consider setting up automated deposits so your money compounds as early as possible in the year.

2. Check That Your Investment Mix Matches Your Goals: Your current portfolio may not reflect your risk tolerance or retirement timeline. A quick risk assessment can help determine whether a stock-heavy or balanced portfolio is a better fit.

3. Request a Personalized Retirement Income Projection: See how different investment returns, inflation levels, taxes implications, and withdrawal strategies could affect your future income, including how Social Security fits into the picture.

4. Stress-Test Your Retirement Plan: A good plan should withstand market downturns, recessions, and unexpected expenses. Stress-testing helps you see how durable your savings strategy really is.

5. Explore Additional Savings Options: If IRA contributions alone won’t get you to your desired retirement lifestyle, you may want to incorporate maxing out a 401(k) or taxable brokerage to boost long-term investment savings potential.

Consider the Benefits of a Roth IRA

1. Tax-Free Growth: All earnings inside a Roth IRA grow tax-free. You pay taxes now on contributions, but never again on qualified withdrawals.

2. Tax-Free Withdrawals in Retirement: After age 59½, both contributions and earnings can be withdrawn 100% tax-free.

3. No Required Minimum Distributions (RMDs): Unlike traditional IRAs and 401(k)s, Roth IRAs do not force withdrawals. Your money can keep compounding for decades.

4. Flexible Access to Contributions: You can withdraw your contributions (not the earnings) anytime without taxes or penalties, giving Roth IRAs added liquidity.

5. Hedge Against Future Tax Increases: Because withdrawals are tax-free, Roth IRAs protect you if future tax rates rise.

6. Ideal for Young Investors: More years of compounding = dramatically higher value due to tax-free growth.

Example: Tax-Free Accumulation Over 40 Years

Annual contribution: $7,500 (current Roth IRA limit for <50)

Years: 40

Average annual return: let’s use a 7% (typical for a stock-heavy portfolio over long-term, but not guaranteed).

Contribution increase: for simplicity, we’ll assume $7,500 fixed every year (we can adjust for inflation or future IRA limit increases later).

Taxes paid upfront, so all growth is tax-free.

Future Value ≈ $1.50 million tax-free after 40 years with $7,500/year at 7% return.

That means every dollar withdrawn in retirement, principal and nearly $1 million in pure gains, comes out completely tax-free.

Bottom Line

Maxing out your IRA or Roth IRA is an excellent start, and for many people, this can form a strong foundation for retirement. But because markets are uncertain and returns are never guaranteed, relying on an individual retirement account alone may or may not be enough to meet your long-term income goals. A thoughtful mix of the right investments, diversified savings vehicles, and a flexible, tax smart, contribution and income withdrawal plan can make a WORLD of difference.

This content is developed from sources believed to be providing accurate information. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.