IRA growth potential | Robinhood

IRA growth potential

To help you visualize the effects of compound interest on your potential IRA returns over time, we used a hypothetical annualized rate of return of 8% for your invested IRA balance.

Keep in mind, your actual returns will vary and may be less than what’s shown in the following examples of potential growth of your IRA over the next 35-45 years. It’s important to remember that your returns are not guaranteed and these illustrations are hypothetical. Review Disclosures for more details about your risks.

Examples

Example 1: Growth of 1% IRA match

IRA Match Growth potential image

Example calculation:

Initial investment ($0) + 1% Monthly IRA match amount ($5.41) * Length of time (45 years) * Interest rate (8%) with an Interest rate variance of 0 and Annual compound frequency = Potential total retirement savings just for the 1% match

Hypothetical and other assumptions:

  • You contribute $6,500 to your IRA each year. In the formula example, you’d divide it by 12 months for the $541 per month or a $5.41 match.
  • You earn a 1% IRA match every year, which would be 1% multiplied by $6,500 equals $65 each year or in the example, $5.41 a month.
  • You invest your full IRA match amount and earn an average of 8% each year over 45 years.
  • This calculation assumes $6,500 is the maximum IRA contribution limit and doesn’t account for potential changes to contribution limits in the future. It also doesn’t account for catch-up contributions where the annual limit is more.
  • For the purposes of illustrating the hypothetical growth of the 1% IRA match, the initial investment is $0 in the example. In actuality, you must contribute to earn a 1% match.

Example 2: Growth of 3% IRA match

Put your match to work example 2

Example calculation:

Initial investment ($0) + 3% Monthly IRA match amount ($16.25) * Length of time (40 years) * Interest rate (8%) with an Interest rate variance of 0 and Annual compound frequency = Potential total retirement savings just for the 3% match

Hypothetical and other assumptions:

  • You contribute $6,500 to your IRA each year. In the formula example, you’d divide it by 12 months for the $541 per month or a $16.25 match.
  • You earn a 3% IRA match every year, which would be 3% multiplied by $6,500 equals $195 each year or in the example, $16.25 a month.
  • You invest your full IRA match amount and earn an average of 8% each year for over 40 years.
  • This calculation assumes $6,500 is the maximum IRA contribution limit and doesn’t account for potential changes to contribution limits in the future. It also doesn’t account for catch-up contributions where the annual limit is more.
  • For the purposes of illustrating the hypothetical growth of the 3% IRA match, the initial investment is $0 in the example. In actuality, you must contribute to earn a 3% match.

Example 3: Growth of $6,500 per year

IRA growth model

Example calculation:

Initial investment ($0) + Monthly contribution ($517.08) * Length of time (35 years) * Interest rate (8%) (with an Interest rate variance of 0 and Annual compound frequency) = Potential total account balance

Hypothetical and other assumptions:

  • You contribute $6,205 to your IRA each year. In the formula example, you’d divide it by 12 months for the $517.08 per month.
  • You invest your full IRA balance and earn an average of 8% each year over 35 years
  • This calculation assumes $6,500 is the maximum IRA contribution limit and doesn’t account for potential changes to contribution limits in the future. It also doesn’t account for catch-up contributions where the annual limit is more.

Disclosures

The hypothetical illustrations of mathematical principles that are described in this article and in the app do not predict or project the performance of any investment or strategy, nor do they represent any guarantee of returns. Individual investor results will vary.

The impact of the Early IRA Match Removal Fee (when applicable) and any investment fees have not been included in the examples, nor has the impact of inflation, withdrawals, or any potential dividends been taken into account.

Ordinary income and, in some cases, penalty taxes may apply to distributions from retirement accounts, effectively reducing gross returns.

All investments involve risk. Investors should consider their investment time horizon and income tax bracket when making investment decisions. Past performance does not guarantee future results. Robinhood does not provide tax advice.

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All investing involves risk.

Brokerage services are offered through Robinhood Financial LLC, (“RHF”) a registered broker-dealer (member SIPC) and clearing services through Robinhood Securities, LLC, (“RHS”) a registered broker dealer (member SIPC). Cryptocurrency services are offered through Robinhood Crypto, LLC (“RHC”) (NMLS ID: 1702840). Review a list of RHC licenses for more information.The Robinhood Money spending account is offered through Robinhood Money, LLC (“RHY”) (NMLS ID: 1990968), a licensed money transmitter. Review a list of our licenses for more information. Credit card products are offered by Robinhood Credit, Inc. ("RCT") (NMLS ID: 1781911 and issued by Coastal Community Bank, Member FDIC, pursuant to a license from Visa U.S.A. Inc.

The Robinhood Cash Card is a prepaid card issued by Sutton Bank, Member FDIC, pursuant to a license from Mastercard® International Incorporated. Mastercard and the circles design are registered trademarks of Mastercard International Incorporated.

RHF, RHY, RHC, RCT, and RHS are affiliated entities and wholly owned subsidiaries of Robinhood Markets, Inc. RHF, RHY, RHC, RCT, and RHS are not banks. Products offered by RHF are not FDIC insured and involve risk, including possible loss of principal. RHC isn’t a member of FINRA and accounts are not FDIC insured or protected by SIPC.

RHY is not a member of FINRA, and products are not subject to SIPC protection, but funds held in the Robinhood spending account and Robinhood Cash Card account may be eligible for FDIC pass-through insurance (review the Robinhood Cash Card Agreement and the Robinhood Spending Account Agreement).

Options trading entails significant risk and is not appropriate for all customers. Customers must read and understand the Characteristics and Risks of Standardized Options before engaging in any options trading strategies. Options transactions are often complex and may involve the potential of losing the entire investment in a relatively short period of time. Certain complex options strategies carry additional risk, including the potential for losses that may exceed the original investment amount.

Commission-free trading of stocks, ETFs and options refers to $0 commissions for Robinhood Financial self-directed individual cash or margin brokerage accounts that trade U.S. listed securities and certain OTC securities electronically. Keep in mind, other fees such as trading (non-commission) fees, Gold subscription fees, wire transfer fees, and paper statement fees may apply to your brokerage account. Please see Robinhood Financial's Fee Schedule to learn more.

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