Roth IRA Interest Rates: What Rate Does a Roth IRA Pay? (2026)

A Roth IRA does not have a single interest rate. The Roth IRA is a tax wrapper, not an investment, so whatever rate you "earn" depends entirely on what you hold inside it. A bank-IRA savings account in 2026 typically pays 0.5–4.5% APY. A brokerage Roth IRA holding low-cost S&P 500 index funds has averaged about 10% per year nominal over long historical periods. A money-market fund inside a brokerage Roth IRA currently pays roughly 4–5%. The Roth IRA itself is just the tax-free wrapper around whatever investment vehicle you choose.

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Quick Facts

info"What rate does a Roth IRA pay?" is the wrong question. A Roth IRA is a tax wrapper. The rate depends on the investment you hold inside it.
check_circleBank Roth IRA (savings or CD): 0.5–4.5% APY in 2026, FDIC-insured up to $250,000 per depositor per institution.
check_circleBrokerage Roth IRA (index funds): S&P 500 ~10% annualized historical nominal, total bond market ~4–5%, money-market ~4–5% in current rate environment. Market risk applies.
infoThe actual benefit isn't the rate; it's tax-free compounding. A 7% real return compounded tax-free over 30 years is roughly 25–30% larger than the same return in a taxable account paying tax along the way.
warningThe investments inside a Roth IRA can lose value. The tax wrapper doesn't protect against market losses — see Can You Lose Money in a Roth IRA?

Bank Roth IRA vs. Brokerage Roth IRA — Where the "Rate" Question Comes From

Most people asking "what's the interest rate on a Roth IRA?" are picturing a savings-account model: deposit money, earn a fixed APY, watch the balance grow predictably. That mental model fits a bank Roth IRA, but it doesn't fit a brokerage Roth IRA — and the brokerage version is what most savers actually want.

Bank Roth IRA (offered by banks and credit unions): generally limited to savings accounts, money-market accounts, and CDs. Rates are quoted as APY. FDIC-insured up to $250,000 per depositor per institution. Returns are predictable but historically modest. As of 2026, a 1-year IRA CD typically pays 3–4%, a 5-year IRA CD pays 4–5%, and a high-yield IRA savings might pay 4–4.5%.

Brokerage Roth IRA (offered by Fidelity, Schwab, Vanguard, etc.): can hold stocks, bonds, mutual funds, ETFs, REITs, and money-market funds. Returns are not "interest rates" — they're investment returns that vary year to year. SIPC-insured up to $500,000 (which protects against custodian failure, not market losses). Long-term historical averages are higher than bank IRA rates, but with real volatility and the possibility of negative years.

The choice between them comes down to time horizon and risk tolerance. A 25-year-old saving for retirement at 65 typically benefits enormously from the brokerage route's higher historical returns despite the volatility. A 64-year-old who plans to withdraw within 18 months might reasonably prefer an IRA CD locked at 5%.

2026 Roth IRA Rates by Investment Type

The table below shows typical 2026 rate ranges for the most common Roth IRA holdings. None of this is a forecast. Past performance does not guarantee future returns; the historical figures are 30+ year averages and individual years vary significantly.

Investment	2026 typical rate	Notes
Bank IRA savings account	0.5–4.5% APY	FDIC-insured. Rate set by the bank; varies widely.
IRA CD (1-year)	3–4% APY	Fixed rate, fixed term. FDIC-insured.
IRA CD (5-year)	4–5% APY	Higher rate for longer commitment. Early-withdrawal penalty applies.
Money-market fund (brokerage)	~4–5% (2026)	Tracks short-term rates. Not FDIC-insured but very low risk.
Total bond market index fund	~4–5% historical	Long-term average; year-to-year varies. Some negative years (e.g., 2022).
S&P 500 index fund	~10% historical nominal	~7% real (after inflation). 30+ year average. Volatile year-to-year; negative years occur.
Total stock market index	~10% historical nominal	Similar to S&P 500 with slightly more small-cap weight.
International stock index	~6–8% historical nominal	Lower long-term average than US, more volatile.
REITs	~8–9% historical	Income-heavy returns; the Roth wrapper is especially valuable here since REIT distributions are otherwise taxed as ordinary income.
Target-date 2065 fund	~7–9% projected	Stocks-heavy now, shifts toward bonds as 2065 approaches. One-decision portfolio.

How Much Interest Does a $7,500 Roth IRA Earn? — Worked Examples

Imagine Sarah contributes the 2026 maximum of $7,500 in January. By December, what does she have?

If she leaves it in the cash sweep at 4.5%: ~$338 in interest. End balance: $7,838.
If she buys a 1-year IRA CD at 4%: $300 in interest. End balance: $7,800.
If she buys a money-market fund yielding 4.5%: ~$338 in dividends (called "interest" colloquially). End balance: $7,838.
If she buys an S&P 500 index fund and the year matches the historical average (10%): ~$750 in growth. End balance: $8,250.
If she buys an S&P 500 index fund and the year is bad (down 10%): -$750. End balance: $6,750. Market risk is real.

Over 30 years of compounding (a single $7,500 contribution, no further additions):

4.5% money-market average: grows to ~$28,000 (3.7× the original).
5% IRA CD average: grows to ~$32,400 (4.3×).
7% bond-heavy mix: grows to ~$57,000 (7.6×).
10% S&P 500 average: grows to ~$130,800 (17.4×).

The Roth IRA tax wrapper doesn't change which return you get. It changes whether you owe tax on the growth and on the withdrawals — in a Roth, qualified withdrawals are entirely tax-free. Use the Growth Projection tool to model your own contribution + return scenarios.

Why "Roth IRA Rate" Is the Wrong Question

If a search result, ad, or sales pitch advertises "the Roth IRA rate" as a fixed number, the writer is either oversimplifying for marketing reasons or doesn't understand the product. There is no Roth IRA interest rate set by the IRS, by the government, or by any standard. The IRC sections that govern Roth IRAs (§408A, §408A(d)(4), §408A(c)) define contribution limits, eligibility, withdrawal rules, and tax treatment — they do not set or guarantee a return rate.

A more accurate way to frame the question: "What rate does my chosen investment inside the Roth IRA earn?" That depends on the asset (CD, money-market, bond fund, stock fund), the rate environment, and the issuer (bank vs. brokerage). Once chosen, the Roth wrapper makes the growth tax-free — which is usually worth far more over 30 years than any small APY difference.

For the underlying mechanics of how a Roth IRA grows (compound interest, dividends, capital gains, sweep accounts, etc.), see our companion FAQ: Does a Roth IRA Earn Interest?

How to Find the Best Rates for Your Roth IRA

If you want to optimize the rate component of your Roth IRA returns:

For cash held inside a brokerage Roth IRA — don't leave it in the default sweep account at most custodians. Buy a money-market fund (Vanguard's VMFXX, Fidelity's SPAXX, Schwab's SWVXX) for ~50–100 basis points more in 2026. The expense-ratio difference is meaningful over time.
For IRA CDs — shop credit unions in addition to banks. Credit-union IRA CD rates are often 0.25–0.5% higher than the major banks. DepositAccounts.com aggregates rates by term.
For IRA savings accounts — high-yield online banks (Ally, Capital One 360, Marcus, Synchrony) typically beat brick-and-mortar bank rates by 3–4×. As of 2026, the spread between top HYSA and average bank savings is roughly 4% vs. 0.5%.
For investment returns inside a brokerage Roth — the single highest-leverage choice is keeping fees low. A 1% fund expense ratio over 40 years compounds into roughly 30% lower final balance vs. a 0.05% index fund. See the Fee-Drag Calculator.

Frequently Asked Questions

What is the average Roth IRA interest rate?

There is no single rate. The Roth IRA is a tax wrapper, not an investment. A bank-IRA savings account in 2026 typically pays 0.5–4.5% APY. A brokerage Roth IRA holding low-cost S&P 500 index funds has averaged about 10% per year nominal over long historical periods. A money-market fund inside a brokerage Roth IRA pays roughly 4–5% in the current rate environment.

How much interest does a Roth IRA earn per year?

Depends entirely on what you invest in. A $7,500 contribution sitting in a 4% money-market fund earns about $300 in year one. The same $7,500 invested in an S&P 500 index fund returning 10% nominal earns about $750 in year one (with much higher year-to-year volatility). Over 30 years of compounding, the index-fund route historically reaches ~$130,000 from a single $7,500 contribution; the money-market route reaches about $24,000.

Is a Roth IRA better than a high-yield savings account?

For retirement money, yes — if you can tolerate market volatility and don’t need the money for years. A high-yield savings account (HYSA) offers liquidity, FDIC insurance, and taxable interest income. A Roth IRA offers tax-free compounding but locks money up until age 59½ for full benefits (contributions can come out anytime per IRC §408A(d)(4)). Build an emergency fund in HYSA first; max out the Roth IRA second.

Can I get a Roth IRA CD?

Yes. Many banks and credit unions offer IRA CDs. They behave like regular CDs: fixed rate, fixed term, FDIC-insured up to $250,000 per depositor per institution. As of 2026, IRA CD rates run from about 3% (1-year) to 5% (5-year). The interest is tax-free inside the Roth wrapper. The tradeoff: long-term, equity index funds have historically beaten CDs by a large margin, so IRA CDs are usually only the right answer for near-retirement allocations or capital-preservation needs.

What’s the difference between a Roth IRA at a bank and at a brokerage?

A bank Roth IRA generally only holds savings accounts and CDs (FDIC-insured, low rates). A brokerage Roth IRA can hold stocks, bonds, mutual funds, ETFs, REITs, money-market funds (SIPC-insured up to $500,000, market risk applies). The same IRC §408A rules apply to both. Most savers benefit from the brokerage route because of higher long-term return potential; bank IRAs make sense for short time horizons or savers uncomfortable with market risk.