This will help maximize your savings. Indexes are baskets of companies that represent certain groups, such as technology companies (Nasdaq composite) or blue-chip companies (Dow Jones Industrial Average).

Photo credit: ©iStock.com/jxfzsy, ©iStock.com/Kameleon007, ©iStock.com/skynesher. This setup allows the account holder to take tax-free withdrawals once they have had the account for five years and are over the age of 59½. Both expect the number seven to bring them wealth and riches. When deciding where to open your Roth IRA, review the fees that each institution may charge. Between 1950 and 2010, the market grew 8% after inflation. For example, a traditional bank may only offer Roth IRAs as a certificate of deposit, which typically has a lower rate of return. Between 2007 and 2012, for example, the average S&P growth after inflation was just over 2%. Then you earn interest on that interest, and so on. The S&P tracks 500 companies that account for 75% of the total value in the U.S. stock market. Another factor is how long your money will be invested. The point is, when you look at two or more decades, the stock market usually averages out to about 7% growth. For married couples filing jointly, the limit jumps to $196,000 for 2020. A portfolio of 50% equities and 50% bonds produced an average annual return of 8.2%, or 5.2% after inflation. The following numbers rely on actual stock market and bond market performance dating back to 1926. In 2018, it was down 6.2%. As you near retirement, you will gradually move to a more conservative investment style. Roth IRAs harness the advantages of compounding, which means even small contributions can grow significantly over time. Unlike traditional savings accounts, Roth IRAs don’t earn interest on the account alone.

A savings calculator makes this easy -- just rerun your numbers using 5%, 6%, and 7% to understand how the rate affects your investment balance over time.

See you at the top! Let's conquer your financial goals together...faster. With 20% stocks and 80% bonds, the returns are 6.6% and 3.6% after inflation. Make sure you meet the eligibility requirements before opening a Roth IRA. Ask our Retirement expert. These investments could include a mix of stocks, bonds, index funds and exchange-traded funds (ETFs). If you are forecasting your portfolio growth for the next five years, a 7% return is pretty optimistic. Usually, this involves changing your asset allocation to include more stable, income investments and fewer equities. Jim Barnash is a Certified Financial Planner with more than four decades of experience. If you prefer a more hands-off approach, consider opening a Roth IRA account with a robo-advisor, which uses software to manage your investments online. In 2008, the S&P tanked by 38.5%. Between 1926 and 2018, the average annual return of the S&P 500 was about 10%.

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