The average IRA balance is: How do your products compare?

It’s really important to do what you can to save for retirement. Seniors who retire on Social Security alone often struggle financially due to the limited replacement income these benefits provide.

Many people now have access to some type of retirement plan through their employer, such as a 401(k) or 403(b). If not, you always have the option of opening an IRA with a brokerage firm. Anyone with earned income can open one of these accounts and start saving for retirement.

The average IRA balance as of the fourth quarter of 2023 was $116,600, according to recent data from Fidelity. If your balance is higher than that, you might feel pretty good right now. But don’t worry if you have a low balance. If so, and you’re not on the verge of retirement, you’re definitely not out of luck.

Why averages can be misleading

Your curiosity may be satisfied by the fact that the average IRA balance is $116,600. However, there is no need to panic if your balance is low.

One piece of data that Fidelity does not provide with its average IRA balance is the average age of IRA savers. If that age is 45 and you are 35, that means the typical IRA holder will have 10 more years to contribute and accumulate than you. So don’t assume that just because your IRA balance is low, you won’t be in good shape when you retire. many lower.

For example, let’s say you’re 35 and your current IRA is $58,300 (half the average balance). Even if you let your $58,300 grow without adding a single dollar more to your IRA, you could end up with about $151,000 in 10 years, assuming a 10% average annual return on your IRA investments. This 10% is consistent with the average return of the stock market over the past 50 years.

Make sure you’re investing your IRA aggressively enough.

There’s no need to stress if your IRA balance isn’t as high as average, but one thing you want to make sure is that your IRA has sufficient stock exposure. The 10% return we just discussed may not be feasible if you play your IRA too safe by investing too much in bonds. So unless you’re close to retirement, it’s often helpful to have a lot of exposure to stocks.

The great thing about IRAs is that these accounts allow you to invest in stocks individually. In contrast, 401(k)s are typically limited to a variety of funds, such as index and mutual funds, where you cannot directly select stocks.

If you don’t feel comfortable selecting individual stocks for your IRA, you can always choose a broad market ETF or exchange-traded fund. That way, you can get instant diversification without having to do a lot of stock-related research.

The current average $116,600 IRA balance is likely the result of contributions. plus Investment profit. And it’s best to set yourself up with a lot of the latter.

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