If you have extra cash lying around, you might think about tossing that money into your IRA to help you cover your future retirement costs. The downside: this money is usually out of reach until you're 59 1/2. Most IRA withdrawals before this age trigger a 10% early withdrawal penalty.
As long as you avoid that, the upside looks pretty good. Here's a rough idea of how maxing out your IRA this year could help you.
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In 2026, you can contribute up to $7,500 to an IRA if you're under 50, or $8,600 if you're 50 or older by the end of the year. How much it grows to by retirement depends on your age and the returns you see on your investments over the long term.
The following table shows how much a $7,500 or $8,600 IRA contribution could be worth over time, assuming a 10% average annual return.
|
Time Until Retirement |
$7,500 Contribution |
$8,600 Contribution |
|---|---|---|
|
5 years |
$12,079 |
$13,850 |
|
10 years |
$19,453 |
$22,306 |
|
15 years |
$31,329 |
$35,924 |
|
20 years |
$50,456 |
$57,857 |
|
25 years |
$81,260 |
$93,178 |
|
30 years |
$130,871 |
$150,065 |
|
35 years |
$210,768 |
$241,681 |
|
40 years |
$339,444 |
$389,230 |
Data source: Author's calculations. All numbers rounded to the nearest dollar.
So the $7,500 or $8,600 contribution today is really just the tip of the iceberg. Your contributions today could cover years of retirement expenses in the future.
If you can afford to max out your IRA this year, it's worth doing. If not, just save as much as you can. You don't need to save large sums each year to retire comfortably. Consistent contributions can go a long way, even if they're smaller.
