There is no single “average IRA return rate” because an IRA is just an account, not an investment. Your return depends entirely on what you hold inside it. An IRA invested 100% in stocks has historically averaged about 10% per year before inflation, while one parked in a money market fund might earn 3% to 4% right now. The account itself doesn’t generate returns; your investment choices do.
Why There’s No Universal IRA Return
An IRA (whether traditional or Roth) is a tax-advantaged container. You can fill it with stocks, bonds, mutual funds, ETFs, target-date funds, certificates of deposit, or plain cash. Two people can each have an IRA at the same brokerage and earn wildly different returns depending on what they bought inside it.
When people quote an “average IRA return,” they’re usually talking about the long-run performance of the most common investment mix held in retirement accounts. That’s helpful as a benchmark, but your personal return will differ based on your allocation, the fees you pay, and when you started investing.
Historical Returns by Investment Mix
The most useful way to think about IRA returns is by asset allocation. Using data from December 1925 through December 2022, with stocks represented by the S&P 500 and bonds by long-term Treasuries and the U.S. Aggregate Bond Index:
- 100% stocks: 10.0% average annual return
- 60% stocks / 40% bonds: 8.5% average annual return
These are nominal figures, meaning they don’t account for inflation. After adjusting for inflation, the S&P 500 has delivered roughly 7.0% annualized going back to 1926, according to Dimensional Fund Research. That’s the number that reflects your actual purchasing power growth.
A younger investor with decades until retirement often leans toward 80% to 100% stocks, while someone closer to retirement typically shifts toward a 60/40 or even more conservative mix. Target-date funds automate this shift, starting aggressive and gradually adding more bonds as the target year approaches.
What Fees Do to Your Returns
The returns above don’t include investment fees, which quietly reduce what you actually keep. Mutual fund expense ratios typically range from 0.25% to 1% of your total investment per year. That gap matters enormously over time.
Consider the difference on a $100,000 portfolio earning 8.5% annually over 25 years. At a 0.25% expense ratio, you’d pay roughly $25,000 in cumulative fees. At 1%, that figure balloons to over $90,000. The investments might perform identically, but the higher-fee version leaves you with tens of thousands less.
Passively managed index funds, which simply track a benchmark like the S&P 500, charge far less than actively managed funds that try to beat the market. Many popular S&P 500 index funds charge 0.03% to 0.10% per year. If you use a robo-advisor, expect an additional management fee on top of the fund expenses, typically around 0.25% to 0.50%.
Cash and Money Market Returns Inside an IRA
Not all IRA money is invested in stocks or bonds. Some people keep a portion (or all) of their IRA in cash equivalents like money market funds. These are far safer but earn far less over time.
As of early 2026, competitive money market accounts pay between roughly 3% and 3.9% APY, though the national average sits much lower at about 0.43%. Those competitive rates are likely to drift down following the Federal Reserve’s late-2025 rate cuts, with the federal funds rate currently at 3.50% to 3.75%.
Keeping your entire IRA in cash or money market funds means your money barely keeps pace with inflation (core inflation is running around 3% right now). Over decades, the gap between a 3.5% cash return and a 10% stock return is staggering. A $10,000 investment growing at 3.5% for 30 years becomes about $28,000. At 10%, it becomes roughly $174,000.
Nominal Returns vs. Real Returns
When planning for retirement, the number that actually matters is your real return: what’s left after inflation erodes your purchasing power. If your portfolio earns 8.5% in a year when inflation runs 3%, your real return is closer to 5.3%.
Over very long periods, stocks have delivered about 7% annually after inflation. A 60/40 portfolio has delivered roughly 5% to 6% in real terms. Those are the numbers to use when estimating how much your retirement savings will actually buy you in the future.
What Drives Your Personal IRA Return
Four factors determine what your specific IRA earns:
- Asset allocation: The split between stocks, bonds, and cash is the single biggest driver of long-term returns. More stocks means higher expected returns with more volatility along the way.
- Investment fees: Even small differences in expense ratios compound into large dollar amounts over a 20 or 30 year horizon. Low-cost index funds consistently leave more money in your account.
- Time in the market: Staying invested through downturns matters more than timing your entry. The S&P 500 has recovered from every historical crash, but only for investors who stayed in.
- Contribution consistency: Regularly adding money means you buy more shares when prices are low and fewer when prices are high, a process called dollar-cost averaging. This smooths out the impact of short-term market swings.
Your IRA’s tax advantages (tax-deferred growth in a traditional IRA, tax-free growth in a Roth) amplify all of these factors by letting your full balance compound without annual tax drag. That’s the real power of the account, separate from whatever investments you choose to put inside it.
Realistic Expectations for Planning
For long-term retirement planning, most financial planning tools use a 6% to 7% average annual return assumption for a balanced portfolio. That’s roughly in line with a 60/40 or 70/30 stock-bond mix after accounting for fees and inflation. It’s conservative enough to avoid nasty surprises, but realistic enough to produce meaningful projections.
If you’re decades from retirement and heavily invested in equities, using 7% (inflation-adjusted) is reasonable. If you’re closer to retirement with a more conservative mix, 4% to 5% after inflation is a better planning number. Either way, the actual return in any single year will swing wildly. Stocks lost 37% in 2008 and gained 26% in 2023. The averages only emerge over long stretches of time, which is why retirement investing rewards patience above almost everything else.