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What is an IRA?
An IRA (individual retirement account) is a personal, tax-deferred account the IRS created to give investors an easy way to save for retirement.
Why invest in an IRA
Tax-deferral
Delaying the payment of income taxes on earnings generated in an investment account. For example, if you have a traditional IRA, you don't pay income taxes on the interest, dividends, or capital gains accumulating in the account until you begin making withdrawals.
Compounding
The snowball effect that happens when your earnings generate even more earnings, not only on your original investments, but also on any interest, dividends, and capital gains that accumulate. That means that your "money makes money" and can grow faster over time.
How your savings could add up
While the annual IRA contribution limit of $6,000 may not seem like much, you can stack up significant savings.
Here's a hypothetical example: If you contribute $6,000 yearly and realize a 6% average annual return, at the end of 20 years, you could have $233,956 in your retirement account. (Note that this figure doesn't represent the return on any particular investment and the rate of return is not guaranteed.)
Vanguard's low costs add another dimension to your savings
The average Vanguard mutual fund expense ratio is 82% lower than the industry average.* The less you pay for your funds, the more you can keep in your pocket.
Over age 50?
Once you reach age 50, you qualify for an extra $1,000 IRA catch-up contribution. This means your annual limit jumps to $7,000, potentially adding more strength to the power of compounding and greater savings for you.
How your savings can add up
Vanguard investors just like you have lots of experiences to share.
- Grow your wealth
- Low costs
- Catch-up contribution
While the annual IRA contribution limit of $6,500 may not seem like much, you can stack up significant savings.
Pay less and keep more. The average Vanguard mutual fund expense ratio is 82% lower than the industry average.*
At age 50, you quality for a $1,000 IRA catch-up contribution—jumping your annual limit to $7,500—potentially increasing the power of compounding, which could mean greater savings for you over time.
Vanguard investors just like you have lots of experiences to share.
While the annual IRA contribution limit of $6,500 may not seem like much, you can stack up significant savings.
Pay less and keep more. The average Vanguard mutual fund expense ratio is 82% lower than the industry average.*
At age 50, you quality for a $1,000 IRA catch-up contribution—jumping your annual limit to $7,500—potentially increasing the power of compounding, which could mean greater savings for you over time.
- Grow your wealth
- Low costs
- Catch-up contribution
The hypothetical bar chart shows that if you contribute $6,500 yearly with a 6% average annual return, you could have $253,453 in your retirement account at the end of 20 years.
The hypothetical example shows $253,453 on the higher end of a seesaw after you invest $6,500 yearly on a 6% average annual return over 20 years. The lower end of the seeaw shows $292,445 after you invest $7,500 yearly starting at age 50 with a 6% average annual return over 20 year.
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Ready to open an IRA?
New to Vanguard?
Already a Vanguard client? Log in and add open an IRA on your account.
For more information about Vanguard funds or ETFs, visit vanguard.com to obtain a prospectus or, if available, a summary prospectus. Investment objectives, risks, charges, expenses, and other important information about a fund are contained in the prospectus; read and consider it carefully before investing.
All investing is subject to risk, including the possible loss of the money you invest. Be aware that fluctuations in the financial markets and other factors may cause declines in the value of your account.
Vanguard's advice services are provided by Vanguard Advisers, Inc. ("VAI"), a registered investment advisor, or by Vanguard National Trust Company ("VNTC"), a federally chartered, limited-purpose trust company.
The services provided to clients will vary based upon the service selected, including management, fees, eligibility, and access to an advisor. Find VAI's Form CRS and each program's advisory brochure here for an overview.
VAI and VNTC are subsidiaries of The Vanguard Group, Inc., and affiliates of Vanguard Marketing Corporation. Neither VAI, VNTC, nor its affiliates guarantee profits or protection from losses.