Qualified Plans
5 year growth capability: ARTICLE

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How Much Can You Increase Your IRA over the Next 5 or 10 years – Just from Contributions Alone?
Shane Flait (2013)


As boomers approach the end of their working years, many are considering delaying retirement to beef-up their IRAs and other savings. But what’s a reasonable guess at how much more they can accumulate?  Here are some estimates for your IRA…


You can contribute to your IRA as long as you have working income from which to contribute and you haven’t started mandatory withdrawals at age 70½.  So, those aged 60 to 65 have 5 to 10 more years to contribute to their IRA if they work until they’re 70.


As of 2013, annual contribution limits to both traditional and Roth IRAs are $5,500 plus an additional $1,000 catch-up for those 50 or older. That allows boomers to contribute $6,500 each year – based on 2013 limits – to their IRA.


But just how might your IRA will grow if you contribute just $6,000 of that $6,500 each year for the next 5 or 10 years?  

The table shows the increase in an IRA for such contributions for both 5 years and 10 years if the contributions compound at annual return rates of 5, 7, and 10%.  



IRA Increase for

Contributing $6000 per year

for 5 and 10 years

at 5, 7,and 10% growth rates

Compounding Rate

5 years

10 years


$ 34,812

$ 79,242


$ 36,918

$ 88,704


$ 40,296

$ 105,186












Note that the table shows only the increase due to these contributions – not the increase of money you already had in it!  


So, according to the table, at a 7% compounded annual return, you’d accumulate almost $37,000 in 5 years or almost $90,000 in 10 years – just from those contributions and their earnings alone. Comparing the 5 to the 10 year accumulations, you can see that delaying longer helps accumulations a lot.


Also, at a 7% compounding rate, whatever you had in you IRA will double in 10 years; at a 10%, doubling takes only 7 years and at a 5% rate, doubling takes place in about 14 years.


The beauty of these tax-deferred plans, like the IRA, is that they compound at their investment return rate. Taxable accounts, on the other hand, lose a portion their yearly returns to taxation, so for equal investment returns, they have a smaller compounding rate than the tax-deferred plans. And that significantly cuts into potential growth for longer holding times for taxable accounts.














Shane Flait is a writer and educator. See more at www.EasyRetirementKnowHow.com