The Nerdwallet Roth IRA calculator has as its initial, default value a 6% rate of return. It also, as far as I can tell, doesn't provide a way to include fees in the calculation.

I am wondering if the 6% rate of return for a Roth IRA is realistic? How about the assumption of no fees? I assume every Roth IRA has fees (please let me know if I'm wrong!) and depending on the fee structure it may not be accurate to account for fees simply by decreasing the rate of return.

Also, do any of the answers to my questions above change for traditional IRA's? For instance, do Roth and traditional IRA's have different expected rates of return (other than the difference in pay out from the differing tax structures)?


A Roth IRA is just an account wrapper. Inside a Roth IRA you can have a plain 0.1% savings account, or a brokerage account, or an annuity or whatever. There's no rate of return for a Roth IRA.

That particular calculator seems to assume you'll be wrapping a brokerage account in a Roth IRA and investing in the stock market. Over a long period 6% is probably a reasonable rate of return considering the S&P 500 has returned about 7% over the last decade.

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    "A Roth IRA is just an account wrapper." This explained so much for me. Jun 16 '17 at 19:20
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    You should still account for fees, though. Index funds typically offer very low fees (< 1%) for market-tracking performance, while managed funds and brokerage accounts can charge more substantial fees (I've seen some that charge over 2%). Check your individual brokerage account and funds for details.
    – asgallant
    Jun 16 '17 at 21:33
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    "6% is probably a reasonable rate of return considering the S&P 500 has returned about 7% over the last decade." I'll bite. How would you have answered this question if it were 2010, or for that matter, 1999? Jun 17 '17 at 11:11
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    The 6-7% may be a good forecast but not because it happened to be the 10 year trailing return. I admit, I was being a bit snarky. My concern is that 1980-99 was an insane 2 decades and set up some expectations for returns well over 10%. Jun 17 '17 at 14:12
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    @JoeTaxpayer, believe me I'm the first to wince when people cite stock optimistic market averages as reasonably expected returns. I glossed over the return because 6% is about as reasonable an expectation as I've seen in a while and I felt that the thrust of the question lies in the fact that an IRA doesn't have a rate of return. I addressed it without much detail because it's not unreasonable. If that calculator came to a 10% projection I would have spent some time tempering that idea.
    – quid
    Jun 18 '17 at 18:37

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