Lost your workplace retirement plan? Or maybe you have one, but its high fees and lackluster investment options make it about as appealing as reading the federal tax code? I have good news: You don’t need a workplace plan to become a retirement millionaire. You can get there with just an IRA. But it isn’t quite as easy as you’d hope. Let’s take a look at what you have to do to become an IRA millionaire and what other accounts are open to you if the IRA isn’t enough.
How to become a millionaire with an IRA
The biggest challenge to becoming a millionaire with an IRA is its low contribution limits compared to 401(k)s. You can only contribute up to $6,000 to an IRA in 2021, or $7,000 if you’re 50 or older, compared to $19,500 and $26,000, respectively, with 401(k)s. Reaching millionaire status with these constraints is possible, but you have to start early if you want it to happen.
If you contributed this year’s IRA maximum of $6,000 every year and earned a 7% average annual rate of return, it would take over 37 years to hit the $1 million mark. That’s problematic if you got a late start on retirement savings and don’t plan on being in the workforce for another 37 years.
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It may not take quite this long if you were to see a higher average annual rate of…