4 Secrets of IRA Millionaires

Early Starters

Investors who have managed to grow their IRAs to over a million dollars have one thing in common: they started early. This is not a new concept, but it's one that bears repeating. Time does most of the heavy lifting for all investors. For perspective, assuming you earn the S&P 500's average annual return of 10% on your investment, every $1 you put to work today and then reinvest will be worth $2.59 in 10 years. In 20 years, though, it will be worth $6.73. In 30 years, that $1 will have grown to $17.45. This is why it's essential to start saving for retirement as soon as possible.

Growth-Oriented Investments

Not everyone is comfortable taking risks with their money. Unfortunately, anyone looking to grow their savings at a rate that outpaces the effect of inflation must do so, and stocks remain the most proven means for most people to achieve such growth. The good news is, you don't need to be a brilliant stock picker to be in the market. A basic index fund like the SPDR S&P 500 ETF Trust or Vanguard S&P 500 ETF should pretty much match the aforementioned S&P 500's average yearly gain of about 10%, even if its return ebbs and flows from one year to the next.

Minimizing Expenses

Although stock-trading commissions are pretty much a thing of the past, there are still plenty of ways to nickel and dime your portfolio into a subpar performance. One of those ways is relatively expensive mutual funds or exchange-traded funds (or ETFs). While the SPDR S&P 500 ETF Trust or the Vanguard S&P 500 ETF only impose an annual expense ratio of less than 0.1% of your amount invested, some funds charge as much as 1%, or more. Most third-party money managers charge in that ballpark as well. That doesn't seem like much. However, reducing your net gains by this amount for many consecutive years can take a meaningful toll on your bottom line.

Avoiding Frequent Portfolio Tinkering

Finally, perhaps the chief reason a few people have managed to become IRA millionaires is that they resisted the temptation to do a lot of tinkering, and instead simply left these portfolios alone to let time do its thing. Although it's obviously always well-intended, investors tend to make short-term decisions based on fear or greed that often end up doing more long-term harm. Less is almost always more... less activity, more net gains. This assumes your portfolio consists of predictable, quality holdings that reliably bounce back from short-term setbacks.