3 Reasons Your IRA Isn't Growing as Fast as You Want It To

Your goal in contributing to an IRA account is no doubt to amass some wealth for retirement. That way, ideally, you'll be able to end your career without financial worries.

But what if your IRA balance isn't much to write home about? As of the fourth quarter of 2022, the average IRA balance was $104,000, according to Fidelity. But if you're sitting on, say, one-tenth of that, you may be bummed about your IRA's lack of growth. If that's the case, these could be some of the reasons why.

1. You're just not contributing a whole lot

In 2023, you can contribute up to $6,500 to an IRA if you're under the age of 50, or up to $7,500 if you're 50 or over. You may not be able to max out your IRA, especially if you're barely managing your essential bills, like your mortgage and car payments. But if you're only contributing, say, $500 a year to your IRA, then the fact that your account isn't growing so quickly shouldn't come as too much of a shock.

Now, this isn't to say that contributing $500 a year to an IRA is useless. It's definitely better than contributing $0. But cutting back on spending so you're able to bump up your annual contributions to, say, $1,000 or $1,500 could help your balance grow a lot faster. So think about some of the expenses you can slash. And if you can't identify any, consider picking up a side hustle and using your earnings to fund your IRA.

2. You're investing too conservatively

Some people are hesitant to invest in stocks because of the risks involved. But if you're avoiding stocks in your IRA, then it's easy to see why your balance isn't growing.

If you're many years away from retirement, the reality is that you have lots of time to ride out stock market downturns. And if you branch out in your portfolio and buy stocks that span a range of market sectors, you'll minimize your risks.

An easy way to diversify your holdings is to load up on broad market ETFs, or exchange-traded funds, since you'll effectively be buying buckets of stocks with a single investment. S&P 500 ETFs, for example, track the index that consists of the 500 largest publicly traded companies. That's a great way to invest in different industries without having to do a ton of legwork.

3. You're staying invested in assets that have been underperforming

Maybe you do own stocks in your IRA. But if many of the stocks you hold have been losing money quarter after quarter, it could explain why your account balance isn't growing. And if that's the case, it may be time to cut some of those losses, regroup, and choose new investments.

When you're parting with your hard-earned money to fund an IRA, seeing your balance stagnate can be disheartening. So if that's the case, take a closer look at your investments and strategy, as well as your savings rate, and see if any major changes are in order.