That said, Roth IRAs have historically generated between 7% and 10% average annual returns. Let's say you open a Roth IRA and contribute the maximum amount each year. Two employees from the same company could participate in the same 401 (k) plan, but they experience different rates of return, depending on the type of investments they select. If you can find an investment that reaches or exceeds that amount, it's generally considered a good rate of return for your Roth IRA.
You can invest in S%26P 500 funds that contain all companies in the S%26P 500 index in their respective ratios to try to reflect returns. Let's learn more about how your investment options can affect the rate of return on your retirement investment account. If you don't like surprises and want to know exactly how much interest the investment will generate, a fixed-rate IRA CD gives you that certainty. Therefore, the rate of return on your Roth IRA depends on what you invest, just like with any other brokerage account.
Let's take a look at some average rates of return on common stock and bond indices to get a general idea of the returns you can expect from your investments in Roth IRAs. Some banks may offer more competitive rates for five-year IRA CDs, for example, but not for six-month IRA CDs. However, this retirement account can make money in a variety of ways depending on your investment options, so there is no average return on a Roth IRA. The current interest rate on an IRA will depend on the investment you want and the platform you buy it through.
Many people compare the rate of return on any investment to the S%26P 500, as it is often considered the benchmark for stock investments. Specifically, you can compare the investments in your account with other mutual investments or ETFs that invest in similar assets (corporate bonds, small-cap stocks, etc.).