The IRS Set New IRA Contribution Limits—Would You Be Prepared for Retirement If You Saved That Much Every Year?

In 2026, you can contribute up to $7,500 to you IRAs, according to the Internal Revenue Service (IRS). (If you’re 50 or older, you can contribute $1,100 more as a catch-up contribution.) So we wondered: If you contributed $625 per month just to your IRA, would you have enough money to retire in the future?

Well, let’s run the numbers. Let’s assume you start saving for retirement at age 27 and you plan to retire at age 67. While IRA contribution limits typically increase every year to keep pace with inflation, let’s assume that you stick to the 2026 contribution limit of $7,500 per year. (This means no catch-up contributions, too.)

We can analyze two different scenarios: What if you put all of your money in an S&P 500 index fund? Or what about a 60/40 portfolio comprised of equities and fixed-income assets, respectively?

A few notes: These numbers will exclude fees like expense ratios, and we’ll use past annualized returns, which are not necessarily predictive of future returns. Additionally, these numbers assume you opt for a Roth IRA, where you pay taxes on your upfront contributions and withdrawals are tax-free.

You may yield the greatest returns when investing your money entirely in an S&P 500 index fund, which is an index made up of the 500 largest companies in the U.S. based on market capitalization. Starting at age 27, if you put $7,500 in an S&P 500 fund every year, you would have roughly $1.38 million by age 67, assuming that the inflation-adjusted annual return of 6.69% from 1957 to 2025 matches future returns.

In contrast, if you opted for the 60/40 portfolio, you would end up with a much smaller nest egg. The average inflation-adjusted return for this portfolio from 1901 to 2022 was just 4.89%, according to data from the CFA Institute. If you opt for this more conservative portfolio, you would have just over $882,000 at age 67.

So, Is That Enough to Retire?

Ultimately, whether or not $882,000 or $1.38 million is enough to live off of in retirement depends on a variety of factors, such as your desired lifestyle in retirement and if you have other sources of retirement income—like Social Security or pensions.

Sometimes, experts suggest using rules-of-thumb, like the 4% rule, to help people calculate how much they need to save for retirement and can safely withdraw every year without running out of money.

Developed in the 1990s by financial planner Bill Bengen, the 4% rule dictates that a retiree can withdraw 4% of their portfolio the first year of retirement and then adjust that rate for inflation every year after that. In doing so, a retiree would have enough money to last them 30 years, assuming they have a portfolio comprised of both stocks and bonds.

Therefore, if someone had $882,000 in an IRA, the 4% rule assumes they could withdraw just $35,280 the first year of retirement. However, if that person also received the average Social Security benefit, roughly $2,000 a month, their total annual retirement income would exceed $59,000, not accounting for taxes. That’s less than $1,000 short of the average amount people age 65 or older spend annually.

And if someone opted for the more aggressive portfolio, ending up with $1.38 million, they could withdraw even more annually. In the first year, they would be able to withdraw $55,200 under the 4% rule. With the average Social Security benefit, that person would have an annual retirement income of more than $79,000.

And since Bengen’s rule assumes a stock and bond portfolio, adhering to the 4% rule would be especially risky with a portfolio invested 100% in stocks. If markets plunge early in retirement, retirees could end up withdrawing a greater portion of their portfolio to maintain their desired spending and end up with a smaller nest egg later on.