Here's What Might Happen if You Max Out an IRA for 40 Years

It can be hard to motivate yourself to save for retirement at a young age when you have other financial priorities and goals. You may, for example, be eager to buy a home or spend some of your money on travel before you're married with kids.

But the reality is that the sooner you start saving for retirement, the more wealth you stand to accumulate. And if you're able to max out your IRA over many years, you might end up amazed at the amount of money you're able to amass.

It pays to push yourself to max out

Maxing out a 401(k) plan is a really tough thing to do. That's because 401(k)s currently max out at $22,500 a year for savers under the age of 50, and $30,000 a year for savers 50 and over.

IRAs, by contrast, come with lower contribution limits, so maxing out may be more attainable, even on an average income. This year, IRAs max out at $6,500 a year for savers under 50 and $7,500 for those aged 50 and over.

Now if money is tight and you can't afford to max out your IRA, then your best bet is to save as much as you can. And to be clear, it's okay if you can't yet max out your IRA, or if you can't manage to do so every year. But if you are able to hit that max, it really pays to do so.

Let's assume that this year's IRA contribution limits hold steady for the next four decades, even though annual limits are very likely to rise during that time. Let's also assume that you're able to max out your IRA contributions each year between the ages of 25 and 65. That means you'd be putting in $6,500 a year for 25 years, and then $7,500 a year for 15 years.

Finally, let's assume your IRA is heavily invested in stocks. The stock market has, over the past 50 years, delivered an average annual return of 10% before inflation, as measured by the performance of the S&P 500 index. So we'll apply that 10% rate of return to your IRA as well.

When we crunch all of the numbers, the amount of money you're looking at retiring with by maxing out an IRA for 40 years is an astounding $2.9 million. Now that's a sum of money that could make your senior years quite enjoyable.

You can reap a really big reward

Maxing out an IRA year after year will likely require some sacrifice. You may have to spend less money on other things you enjoy -- for example, taking lower-cost vacations instead of luxury ones. You may also have to commit to driving a less expensive car or buying a home that's on the smaller side.

But if you're willing to commit to maxing out your IRA throughout your career, you stand to be rewarded big time once retirement rolls around. And that's reason enough to try to push yourself to save as much as you can, as soon as you can.