ARoth IRA is a retirement savings account that allows you to contribute after-tax dollars which grow tax-free and that allows you to make withdrawals which are tax-free, as long as you meet certain requirements.
Still, the amount your Roth IRA will grow in 20 years depends on a number of factors.
Among these factors are the amount you contribute each year, the rate of return on your investments and your age when you start withdrawing money.
How much will a Roth IRA grow?
On average, the annual rate of return for the S&P 500 index, a common benchmark for the stock market in the USA, is around 10 percent.
If you contribute 5,000 dollars per year to a Roth IRA and earn an average annual return of 10 percent, your account balance will be worth a figure in the region of 250,000 dollars after 20 years.
Is growth guaranteed with a Roth IRA?
The actual rate of return on your investments will vary from year to year. If the stock market experiences a downturn, your account balance may grow more slowly.
However, over the long term, the stock market has historically trended upwards, so you can expect your Roth IRA to grow significantly over time.
It is important to choose investments that are appropriate for your age and risk tolerance and to rebalance your portfolio regularly, which could involve moving away from higher-risk assets as you get closer to retirement.
If you're saving for retirement, a Roth IRA offers tax-free growth and withdrawals, and the potential for significant growth over time, making it a low-risk option.
When can you withdraw from a Roth IRA?
It's important to note that you cannot withdraw money from your Roth IRA without penalty until you reach 59 years and six months of age.
There are a few exceptions to this rule, such as if you use the money to pay for qualified education expenses or a first-time home purchase.
It is also advised that you start saving early, as the earlier you start saving the more time your money has to grow.
To build your Roth IRA before then, you should also contribute as much as is possible for you, taking into account that the maximum contribution for 2023 is 6,000 dollars for individuals and 7,000 dollars for couples who file taxes jointly.
