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If you contribute $7,500 a year to an IRA starting at age 27, see how much money you could have at age 67.
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If you contributed the 2026 Individual Retirement Account (IRA) limit of $7,500 per year from age 27 to 67 and fully invested in an S&P 500 index fund, you could end up with about $1.38 million, assuming past annual inflation-adjusted returns match future returns.
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A more conservative portfolio of 60/40 U.S. stocks and bonds has a much smaller nest egg – just over $882,000 – and an average annual return of 4.89%.
According to the IRS, you can contribute up to $7,500 to an IRA through 2026. (If you’re 50 or older, you can contribute an extra $1,100 as catch-up contributions.) So we want to know: If you contribute just $625 a month to an IRA, will you have enough money to retire in the future?
Okay, let’s run the numbers. Let’s say you start saving for retirement at age 27 and plan to retire at age 67. While IRA contribution limits typically increase each year to keep pace with inflation, let’s assume you stick to the $7,500 annual contribution limit in 2026. (This also means no catch-up contributions.)
We can analyze two different scenarios: What if you put all your money into an S&P 500 index fund? Or what about a 60/40 portfolio split between stocks and fixed income assets?
Some notes: These numbers don’t include expenses like expense ratios, and we’ll be using past annualized returns, which are not necessarily predictive of future returns. Additionally, these numbers assume you choose a Roth IRA, which allows you to pay taxes on your contributions upfront and make withdrawals tax-free and penalty-free as long as you’ve owned the account for five years and are at least 59 ½ years old.
You’ll likely get the greatest returns when you invest all of your money in an S&P 500 index fund, which consists of the 500 largest companies in the United States by market capitalization. Starting at age 27, if you put $7,500 per year into an S&P 500 index fund, you would have approximately $1.38 million by age 67, assuming an inflation-adjusted annual return of 6.69% from 1957 to 2025 to match future returns.
Investing your portfolio in an S&P 500 index fund can give you higher returns than a 60/40 portfolio (which includes conservative assets like bonds). However, a portfolio invested entirely in stocks also has greater volatility, meaning the value of your portfolio may fluctuate more.
In contrast, if you choose a 60/40 portfolio, you’ll end up with a much smaller nest egg. From 1901 to 2022, the portfolio’s average inflation-adjusted return was just 4.89%, according to CFA Institute. If you chose this more conservative portfolio, you would have just over $882,000 at age 67.
Ultimately, whether $882,000 or $1.38 million is enough for retirement depends on a variety of factors, such as your ideal retirement lifestyle and whether you have other sources of retirement income, such as Social Security or a pension.
Sometimes experts recommend using rules of thumb, such as the 4% rule, to help people calculate how much money they can safely withdraw each year in retirement without running out of money.
The 4% rule, developed by financial planner Bill Bengen in the 1990s, states that retirees can withdraw 4% of their portfolio in the first year of retirement and then adjust that rate annually for inflation. That way, assuming a retiree has a portfolio of stocks and bonds, they have enough money to live on for 30 years.
So, if someone has $882,000 in an IRA, the 4% rule assumes they can only withdraw $35,280 in their first year of retirement. However, if this person also receives the average Social Security benefit, which is about $2,000 per month, their total annual retirement income will be more than $59,000 (not accounting for taxes). That’s less than $1,000 per year on average for seniors 65 or older.
If someone chooses a more aggressive portfolio and ends up with $1.38 million, they can withdraw more money each year. In the first year, under the 4% rule, they can withdraw $55,200. Based on average Social Security benefits, that person’s annual retirement income would be more than $79,000.
However, because the Bengen rule assumes a portfolio of stocks and bonds, following the 4% rule is especially risky for a portfolio that is 100% invested in stocks. If the market plummets early in retirement, retirees may end up withdrawing a larger portion of their portfolios to maintain their desired spending and ultimately save less later on.
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