What Is an Average Roth IRA Return Rate?

How your investment choices affect your Roth IRA returns

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A Roth IRA offers investors a number of benefits like flexibility for withdrawals and tax-free growth on your assets. 

You may wonder what the average return rate is for a Roth IRA. However this retirement account can earn money in a number of ways depending on your investment choices, so there is no "average Roth IRA return." Your return with your own IRA could be significant or minimal, or you could even suffer losses. 

Let’s learn more about how your investment choices can affect the rate of return in your retirement investing account.

Key Takeaways

  • Roth IRAs have widely varying rates of return depending on the assets in the account.
  • You can use your Roth IRA to invest in a range of assets, including stocks and bonds. 
  • Riskier investments like 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, although they may not provide as competitive of returns as other investment choices. 

What Determines Roth IRA Return Rates?

Roth IRAs have varying rates of return. A Roth IRA is like an empty basket and you choose what investments to put in it. Your rate of return will depend on which investments you choose.


A Roth IRA differs from other types of brokerage accounts because it has a special advantage. You deposit taxed income into a Roth, and you can withdraw money your investment earnings tax-free in your retirement years.

So, your Roth IRA return rate depends on what you're invested in, just like with any other brokerage account. That means 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 may also result in losses. 

Average Return Rates for Common Roth IRA Investments

You can include a number of investment types in your Roth IRA, even farmland and racehorses. More commonly, investors hold stocks and bonds. One way to invest in these assets is to invest in a fund that follows an index. For example, 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.

S&P 500 

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


You can invest in S&P 500 funds that contain all of the companies in the S&P 500 index in their respective ratios to try to mirror the returns. Since the index was founded in 1957, its average annual return has been 11.12% as of April 13, 2022. In the past 10 years, it’s averaged a return of about 14.6%.

Dow Jones Industrial Average

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

Since the index was founded in 1896, it's generated average annual returns of 11.44%, as of April 13, 2022. In the past 10 years, the Dow’s average rate of return has been about 12.8%.

Nasdaq Composite

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

This index had an average annual return rate since it began of around 12.82% as of April 13, 2022. Its 10-year average annual return rate was 17.8%. Note that while this index provides a bit higher returns than the S&P 500, it is also more volatile.

Bond Funds

Bonds are a form of debt sold by companies and governments. Just like 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. 

For example, the Bloomberg U.S. Treasury 1-5 Year Index, holds bonds with maturities of between 1 and 5 years. As of April 13, 2022, It has gained an annual average of 2.31% per year since it began. Fidelity Short-Term Treasury Bond Index Fund aims to track those returns, with at least 80% of its holdings invested in securities included in the Bloomberg index.

Average Roth IRA Interest Rates

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

However there are downsides to these accounts, including the rate of return on them. Savings accounts generally return significantly less than you could make with other investment choices like stocks and bonds. The rate of returns is not likely to keep up with inflation rates, meaning you could lose money.


As of March 2022, the national average interest rate offered on savings accounts was 0.06%. By contrast, the average inflation rate in the U.S. was 8.5% from the 12 months ending March 2022. So your money would become less valuable every year that you kept it in the IRA savings account, not more.

How To Increase Your Roth IRA Rate of Return

No matter what investments you choose, you can aim to increase your return with different strategies. Here are some of the common strategies to improve investing profits:

  • Hire an investment professional: If you're not confident about how to manage your money yourself, hiring an investment advisor can potentially help you earn more and help you avoid costly errors.
  • DIY your retirement investments: On the other hand, if you are an experienced investor, you can make your investing decisions alone and save on the costs of hiring an advisor.
  • 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, and 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, since that's often considered the benchmark for stock investments. The S&P 500, in turn, has averaged a return of about 11% per year since it began in 1957. If you can find an investment that meets or exceeds that amount, it's generally considered a good rate of return for your Roth IRA.

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 time that you're going to earn it. For example, if you'll earn $500 in interest from a 5-year, $5,000 IRA CD, your expected return will be 10% at $100 per year.

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