Despite the fact that IRAs are available to anyone with an income, only 33% of Americans actually have one. If you're part of that group, you're already making a smart investment in your future. But to really make the most of your account, here are three important moves to make as well.

1. Max out your annual contributions

Most people with 401(k)s struggle to contribute the maximum since they're dealing with a pretty high annual threshold -- $18,500 for workers under 50 and $24,500 for those 50 and over. But maxing out an IRA is a far more attainable goal, since the annual contribution limits are just $5,500 for workers under 50 and $6,500 for those 50 and older.

IRA road sign


Now you probably don't need to be convinced that the more you put into your IRA, the more money you'll have available in retirement -- because that's just plain common sense. But what you may not realize is the extent to which your money has the potential to grow over time. In fact, check out the following table, which shows how much wealth you stand to retire with if you begin maxing out your IRA at various ages:

If You Start Contributing $5,500 a Year to Your IRA at Age:

Here's What You'll Have by Age 65 (Assumes a 7% Average Annual Return):


$1.098 million












As you can see, maxing out your IRA for 40 years could help you retire a millionaire, assuming your investments generate at least an average yearly 7% return. And if you go heavy on stocks, that's more than doable. Another thing to keep in mind about the above calculations is that they assume a yearly $5,500 contribution throughout your career. But if you take advantage of the $1,000 catch-up available to workers 50 and older, you could retire with even more.

2. Go for a Roth 

Many folks who fund an IRA opt for the traditional version, since contributions are tax-deductible along the way. Roth IRA contributions, by contrast, aren't immediately deductible, and so you may be inclined to forgo this option because it doesn't offer the same sort of instant gratification. Don't. Roth IRAs come with a world of benefits that traditional IRAs can't match.

For one thing, Roth IRA withdrawals are taken tax-free in retirement, which means that when you're on a fixed income, you won't need to worry about losing a portion of it to the IRS. Additionally, Roth IRAs don't impose required minimum distributions, which are another tax nightmare of sorts.

Roth IRAs also offer more flexibility during your working years. If need be, you can access your principal contributions at any time (though it's generally not a good idea to tap a retirement plan early, since the more funds you remove, the less money you'll have available later on). Finally, Roth IRAs allow you to continue contributing for as long as you manage to earn an income. This means you can keep funding your account during retirement if you so please. And because required minimum distributions don't apply to Roth accounts, you have the option to leave a portion of your savings (or your entire savings, for that matter) to your heirs.

While it's true that higher earners aren't eligible to contribute to Roth accounts directly, there are ways around this -- namely, by funding a traditional IRA and converting to a Roth later on. Though you'll be liable for taxes when you make that conversion, you'll get to reap all of the benefits we just discussed.

3. Choose low-cost investments

Earlier, we talked about aiming for a 7% yearly return or higher on your IRA investments. And while you have several options for generating that sort of return, you should know that index funds are probably the cheapest way to go. Remember, the investments you choose for your IRA come at a cost, but index funds typically offer the lowest fees of the lot without compromising on performance. And it's crucial to keep those fees down, because as your account grows, you could lose much more if you choose pricier investments. If you're not sure how to invest your savings, check out my colleagues' roundup of top IRA index funds.

While opening an IRA is a wise move by itself, you have the power to benefit even more from your account by maxing out annually, choosing a Roth, and finding cost-effective investments. Play your cards right, and you'll be thankful for it once you're retired and ready to put that account to use.