Can You Retire a Millionaire With IRA Contributions Only?

Key Points

• IRAs have much lower annual contribution limits than 401(k) plans.

• It's possible to retire a millionaire with just an IRA if you start funding one early and invest your money wisely.

• If you don't have access to a 401(k), there may be other accounts you can save in for the future.

• The $23,760 Social Security bonus most retirees completely overlook ›

Many people dream of retiring with $1 million or more. In fact, a recent Northwestern Mutual survey found that Americans think it'll take $1.26 million to attain a comfortable retirement.

If you max out a 401(k) plan for a good number of years, it's easy to see how you might get to the $1 million mark. This year, 401(k)s max out at $23,500 for workers under 40 and $31,000 for those 50 and over. And thanks to a new rule, workers aged 60 to 63 can actually contribute up to $34,750 to a 401(k) this year.

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But to contribute to a 401(k), you need to work for a company that sponsors one. And if your workplace doesn't have a 401(k), you may be limited to saving for retirement in an IRA.

IRAs come with much smaller contribution limits than 401(k)s -- $7,000 currently for workers under 50, and $8,000 for those 50 and over. So if you're limited to an IRA, you may be wondering if it's possible to reach $1 million in retirement savings.

The answer is, absolutely. But it will depend on how long a savings window you give yourself and how you invest your money.

You can retire a millionaire with an IRA alone

It may seem impossible to wind up with $1 million or more if you're limited to $7,000 or $8,000 per year in an IRA. But the numbers do work, provided you start saving early and invest heavily in stocks, which have a long history of rewarding investors with strong returns.

Let's assume today's IRA limits never change, even though that's unlikely. Let's also say you do the following:

• Max out an IRA at $7,000 a year between ages 25 and 50.
• Max out an IRA at $8,000 a year between ages 50 and 65.
• Invest in a portfolio of stocks that gives you a yearly 8% return, which is a bit below the stock market's average.

If you do that, you could be looking at an IRA balance of over $1.8 million.

However, if you're only going to save for retirement in an IRA, you may need plenty of time and a stock-heavy portfolio to reach the $1 million mark. Otherwise, you may fall short.

There may be other accounts you can save for retirement in

If you work for an employer, or a series of employers, where there's no 401(k) access, there's not much you can do about it. But that doesn't mean an IRA will be your only option during that time.

If you can afford to save more than $7,000 or $8,000 per year for retirement, then you can put your extra money into a taxable brokerage account. You'll lose out on benefits like pre-tax contributions in a traditional IRA or tax-free gains in a Roth IRA, but you'll be able to grow your money for the future.

You may also, depending on the health insurance plan you have, be eligible to contribute to a health savings account, or HSA. HSA funds can be carried forward indefinitely, and you can use the money to cover healthcare expenses in retirement. And even if your employer doesn't offer one, you can open an HSA on your own.

You might assume that your dream of retiring a millionaire isn't doable if you're limited to saving in an IRA. But even if you don't have access to a 401(k) plan, with the right approach, you can accumulate $1 million or more even if an IRA is the primary or only retirement account you rely on.

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