Roth IRAs typically have average annual returns of 7-10%. There are several factors that will affect the growth of your money in a Roth IRA, including how diversified your portfolio is, what your retirement term is, and how much risk you are willing to take. That said, Roth IRAs have historically generated between 7% and 10% average annual returns. The current interest rate on an IRA will depend on the investment you want and the platform you buy it through.
Therefore, the rate of return on your Roth IRA depends on what you invest, just like with any other brokerage account. Let's learn more about how your investment options can affect the rate of return on your retirement investment account. Some banks may offer more competitive rates for five-year IRA CDs, for example, but not for six-month IRA CDs. But given the number of fixed income investors using CDs in an IRA, many bankers and investment advisors simply consolidate wording to IRA interest rates.
Many people compare the rate of return on any investment to the S%26P 500, as it is often considered the benchmark for stock investments. IRA rates vary depending on the underlying investments, which in the case of an IRA CD is a certificate of deposit. If you can find an investment that reaches or exceeds that amount, it's generally considered a good rate of return for your Roth IRA. Let's take a look at some average rates of return on common stock and bond indices to get a general idea of the returns you can expect from your investments in Roth IRAs.
If you don't like surprises and want to know exactly how much interest the investment will generate, a fixed-rate IRA CD gives you that certainty.