What Is an Average Roth IRA Return Rate?

How your investment choices affect your Roth IRA returns

A child kisses the cheek of a senior woman while someone takes their picture

 Halfpoint Images / Getty Images

Roth IRAs offer investors a number of benefits, such as flexibility for withdrawals and tax-free growth on your assets. You might wonder what the average return rate is for a Roth IRA, but there's no average return because this retirement account can earn money in a number of ways. It depends on your investment choices. Your return with your own IRA could be significant or minimal, or you might even suffer losses.

Key Takeaways

  • Roth IRAs have widely varying rates of return depending on the assets held in the account.
  • You can use your Roth IRA to invest in a range of assets, including stocks and bonds. 
  • Riskier investments such as high-growth stocks have a higher return potential, but they also have the potential for greater losses.
  • More conservative investments like bonds offer lower risk in terms of principal protection, but they might not provide returns that are as competitive as other investment choices. 

What Determines Roth IRA Return Rates?

A Roth IRA is like an empty basket. You choose what investments to put into it. Your rate of return will depend on which investments you choose.

Your Roth IRA return rate will depend on what you're invested in, just as with any other brokerage account, so your returns could vary widely. You could use your Roth IRA to hold short-term bonds with modest returns or aggressive stocks that can yield larger gains but that could also result in losses. 


A Roth IRA differs from other types of brokerage accounts because it has a special advantage. You deposit taxed income into a Roth, so you can then withdraw your contributions and your investment earnings tax free in your retirement years, subject to some rules.

Average Return Rates for Common Roth IRA Investments

You can include a number of investment types in your Roth IRA, even farmland and racehorses. But investors more commonly hold stocks and bonds. One way to invest in these assets is to choose a fund that follows an index. You could invest in a fund that mirrors the S&P 500 to try to achieve the same returns. 

Let’s look at some average rates of return on common stock and bond indices for a general sense of what returns you can expect with your Roth IRA investments.

The S&P 500 

The S&P 500 is a weighted average of the stock prices for 500 large U.S. companies. It's commonly used as a benchmark for the broader market.


S&P 500 funds contain all the companies in the S&P 500 index in their respective ratios to try to mirror the returns. It was founded in 1957. The index's lifetime average annual return is 10.45% as of March 10, 2023. It's averaged a return of about 12.24% over the last ten years.

The Dow Jones Industrial Average

The Dow Jones Industrial Average, or "The Dow,” is a stock market index of U.S. blue chip stocks representing nine sectors of the economy from consumer goods to technology.

The index was founded in 1896. It's generated a lifetime average annual return of 9.23% as of March 10, 2023. The Dow’s average rate of return has been about 5.79% over the last five years.

The Nasdaq Composite

The Nasdaq Composite was founded in 1971. It represents a weighted average of the more than 3,000 companies that are listed on the Nasdaq stock market.

This index had a lifetime average annual return rate of around 10.99% as of March 10, 2023. Its 10-year average annual return rate was 14.94% as of that date. This index provides slightly higher returns than the S&P 500, but it's also more volatile.

Bond Funds

Bonds are a form of debt that's sold by companies and governments. Just as with stocks, you can get exposure to several bonds at once by buying into a bond fund that tracks a bond index. 


Bonds are generally a lower-risk investment than stocks, but they tend to offer more modest returns. 

The Bloomberg U.S. Treasury 1-5 Year Index holds bonds with maturities of between one and five years. As of March 10, 2023, it's gained a lifetime annual average of 2.05% per year since it began. The Fidelity Short-Term Treasury Bond Index Fund aims to track those returns, with at least 80% of its holdings invested in securities that are included in the Bloomberg index.

Average Roth IRA Interest Rates

Many banks and credit unions offer a Roth IRA savings account. This is essentially a Roth IRA that holds a savings account rather than investments. Your funds will earn the savings account interest rates and you'd be covered against losses of up to $250,000 with FDIC insurance. 

But there are downsides to these accounts. Savings accounts generally return significantly less than you could make with other investment choices like stocks and bonds. The rate of return isn't likely to keep up with inflation rates, so you could lose money.


The national average interest rate offered on savings accounts was 0.35% as of Feb. 21, 2023. The average inflation rate in the U.S. was 6.4% from the 12 months ending January 2023. Your money would become less valuable each year that you keep it in an IRA savings account, not more.

How To Increase Your Roth IRA Rate of Return

You can aim to increase your return with different strategies no matter what investments you choose.

  • Hire an investment professional: Hiring an investment advisor can potentially help you earn more and avoid costly errors if you're not confident about how to manage your money yourself.
  • DIY retirement investments: You can make your investment decisions alone and save on the costs of hiring an advisor if you're an experienced investor.
  • Invest in index funds: Rather than picking and choosing each stock, you can invest in an index fund that holds multiple stocks. Index funds can improve your diversity and you can choose one based on your risk tolerance level.
  • Shift your investment allocation as you age: Most financial advisors recommend investing more aggressively while you're young, then changing your allocation so that you're invested more conservatively when you're older.

Frequently Asked Questions (FAQs)

What is a good rate of return for a Roth IRA?

Many people compare the rate of return for any given investment to the S&P 500 because that's often considered the benchmark for stock investments. The S&P 500 has averaged a return of more than 12% a year in the 10-year period ending in March 2023. It's generally considered a good rate of return for your Roth IRA if you can find an investment that meets or exceeds that amount.

How do you calculate your expected rate of return for a Roth IRA?

You can calculate your expected rate of return by dividing the amount of money you'll earn by the period of time over which you're going to earn it. Your expected return would be 10% at $100 per year if you earn $500 in interest from a 5-year, $5,000 IRA CD.

Want to read more content like this? Sign up for The Balance’s newsletter for daily insights, analysis, and financial tips, all delivered straight to your inbox every morning!

Was this page helpful?
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. IRS. “Roth IRAs.”

  2. S&P Global. “S&P 500.”

  3. Fidelity Investments. “FXAIX - Fidelity 500 Index Fund.”

  4. Federal Reserve Bank of St. Louis. “Dow Jones Industrial Average (DJIA).”

  5. Fidelity Investments. “Rydex Dow Jones Industrial Average Fund Class A.”

  6. Nasdaq. "Who's in the Nasdaq Composite?"

  7. Fidelity Investments. “FNCMX - Fidelity Nasdaq Composite Index Fund.”

  8. Fidelity Investments. “Fidelity Short-Term Treasury Bond Index Fund.”

  9. FDIC. “FDIC: National Rates and Rate Caps.”

  10. U.S. Bureau of Labor Statistics. “Consumer Price Index Summary - 2022 M03 Results.”

  11. U.S. Securities and Exchange Commission. “Beginners' Guide to Asset Allocation, Diversification, and Rebalancing.”

Related Articles