I’ve been using IRAs to invest for retirement for well over a decade and feel that I’m well on my way to having a million-dollar IRA before I retire. And while every investing journey is different, and there’s quite a bit that you can’t fully control, like your investment returns, I use three specific strategies to grow my IRA over time. Here’s what they are, and why I’m confident they’ll help me retire as an IRA millionaire.

Use the best account type for you

IRAs come in a few different varieties, and the best option for you depends on the type of income you have, your tax situation, and your financial goals.

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Traditional and Roth IRAs are the most common and allow qualified individuals to save as much as $7,000 in 2024 ($8,000 if over 50). Traditional IRA contributions may be eligible for a tax deduction, but eventual retirement income is taxable. On the other hand, Roth IRA contributions aren’t deductible, but qualifying withdrawals are completely tax-free.

While there’s a lot to unpack in the traditional vs. Roth debate, the general idea is that traditional IRAs are often best for those in a relatively high tax bracket now, while Roth IRAs are great for those with relatively low tax rates now but who anticipate their tax bracket in retirement to be higher.

In addition, there are two specialized IRAs — the SEP-IRA and SIMPLE IRA –that are designed for self-employed investors and small businesses. I use a SEP-IRA for my retirement savings. If you qualify, these accounts have much higher contribution limits than traditional or Roth IRAs. For example, the SEP-IRA has a 2024 contribution limit of 25% of your total compensation or $69,000, whichever is lower.

Save often and make it automatic

One of the best pieces of advice I offer friends and relatives when it comes to IRA investing is to automate the contribution process. Don’t even give yourself a choice. If you want to contribute $6,000 this year, for example, set up an automatic $500 transfer from your checking account each month.

If you have to manually push a button to contribute, there are two problems. One, it’s easy to forget, and then you have contribution deadlines that sneak up on you. Two, it can be tempting to skip a contribution if you think of it as a choice. Automating the process ensures that you’ll steadily add to your account over time.

Set your investments up for long-term compounding

Last but certainly not least, I fill my IRA with (mostly) investments that are designed for slow and steady compounding. They don’t all necessarily have to be dividend-paying investments, although they probably will gravitate toward that category as I approach retirement and start thinking about income. But I can generally group my IRA investments into three baskets:

• Index funds: By using index funds, you’re putting your retirement investing on autopilot. And there’s nothing wrong with doing this. In fact, a simple S&P 500 index fund like the Vanguard S&P 500 ETF (VOO 0.69%) has historically produced annualized total returns of about 10% over long periods.
• Dividend compounders: I own shares of plenty of real estate investment trusts (REITs) and other dividend-paying stocks designed to not only produce income, but to grow that income over time and deliver steady share price gains as well.
• Compounders and rock-solid businesses: Berkshire Hathaway (BRK.A 0.35%) (BRK.B 0.35%) is the largest investment in my IRA right now and is an excellent example of a business that is designed for strong compounding over time.

My strategy isn’t for everyone, but I generally believe that high-growth tech stocks and speculative businesses can certainly have a place in your investment strategy, but not in the accounts you expect to finance your retirement with.

The bottom line

As mentioned, every saver is different. I admittedly have a significant advantage when it comes to being able to use a SEP-IRA, but there are millions of people who have self-employment income who might not even know they’re eligible. And of course, it isn’t practical, or necessary, for everyone to completely max out an IRA — for example, if you have a pension plan or a 401(k) with a generous employer match at work.

The point is that these are three strategies that I’m using. They may not be perfect for you, but they are solid ways to help ensure your IRA eventually provides you with the financial security you want in retirement.