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.

Example 1: Growth of 1% IRA match

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

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

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.

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.