Workers who don't have access to an employer-sponsored 401(k) have another strong savings option to utilize: the IRA. Anyone with earned income can contribute to an IRA, and opening one is an important step on the road to a secure retirement. Here are three smart moves that'll help you make the most of your IRA -- both now and in the future.

1. Max out year after year

Currently, the annual contribution limits for an IRA are set at $5,500 for workers under 50, and $6,500 for those 50 and over. You may notice that these figures are well below today's 401(k) savings thresholds -- those with employer-sponsored accounts can contribute $18,500 and $24,500 at those respective ages. And while that might read like a disadvantage, the benefit of working with an IRA is that maxing out becomes much more attainable on an annual basis.

Red, white, and blue IRA road sign with arrow pointing toward the right


Here's what your total savings balance might look like if you manage to max out an IRA over various time frames:

If You Start Maxing Out an IRA at Age:

Here's What You'll Have by Age 70 (Assumes a 7% Average Annual Return):


$1.6 million


$1.1 million












As you can see, if you give yourself a lengthy savings window to max out, you stand to retire with well over $1 million, assuming your investments generate an average yearly 7% return, which is more than doable with a stock-focused portfolio. Another thing to remember is that the above figures are based on the current annual contribution limits. Since these thresholds are likely to rise over time, there's a good chance you'll have the opportunity to accumulate even more.

2. Pay attention to required minimum distributions

If you're keeping your savings in a traditional IRA, as opposed to a Roth, you'll need to worry about required minimum distributions, or RMDs, when you're older. RMDs kick in once you turn 70 1/2 -- specifically, you must take your first one by April 1 after the year in which you turn 70 1/2. All subsequent RMDs are then due by the close of each calendar year. If you fail to take your RMDs in full, you'll be assessed a 50% penalty on whatever amount you fail to withdraw -- and that's not a risk worth taking, so mark your calendar, and make sure to keep up with your RMDs on schedule.

3. House at least some of your savings in a Roth account

Because Roth IRA contributions don't result in an immediate tax break, many savers prefer to go the traditional IRA route. Additionally, since higher earners aren't allowed to fund Roth accounts, they'll often gravitate toward traditional IRAs because they think it's their only choice.

The fact of the matter is, the traditional IRA is a terrific savings tool. But there are certain benefits that come only with a Roth, and passing them up could hurt you later on. For example, whereas traditional IRA withdrawals are taxed in retirement, Roth IRA distributions do not get taxed. Saving in a Roth, therefore, can lead to a higher income stream once you're no longer working. Additionally, Roth IRAs don't impose RMDs, which means your money is free to sit and grow indefinitely. You don't need to worry about penalties and withdrawal deadlines, and you have the option to leave some of your savings to your heirs if that's the route you wish to take.

Furthermore, while you can't contribute to a Roth IRA directly as a higher earner, you do have the option to fund a traditional IRA and then convert some or all of that account to a Roth. The downside, of course, is that you'll be liable for taxes on whatever sum you move over up front, but if you want to buy yourself more flexibility with your savings, it pays to keep at least a portion in a Roth account.

Opening an IRA is a smart move that you'll come to appreciate when you're older. Just be sure to sock away as much as you can, pay attention to RMDs, and consider the merits of a Roth to truly make the most of your savings.