Set It, But Don’t Forget It

One of the great things about individual retirement accounts (IRAs) is that they can significantly grow your retirement savings, even with modest contributions.

But you’ll only see growth with proper management, and that requires more than just making regular contributions. It requires t intentional, strategic investing and monitoring your performance.

The “set it and forget it” attitude that some people maintain can lead to missed opportunities and little to no returns. So if you want to see some momentum with your retirement savings, you have to use your IRA the right way.

Why You Should Be Paying Attention to Your IRA

IRAs are powerful tools for long-term retirement savings. You contribute money to the account, then invest those funds in assets like stocks, bonds, ETFs, or mutual funds.

Earnings grow tax-deferred in a traditional IRA or tax-free in a Roth IRA, helping the value of your account increase faster over time.

However, too often, people only contribute to their IRA, completely forgetting about (or neglecting) the need to then invest that money.

“It is pretty common for folks to leave IRA funds uninvested,” said Jamie Clark, CFP and founder of Ruby Pebble Financial Planning. “They might hear ‘make a (Roth) IRA contribution before the tax deadline!’ and make said contribution, but then not actually invest the funds.”

If the funds just sit in cash (they may be placed in a money market fund), they lose value to inflation and miss out on compounding growth, the key benefit of retirement accounts. A few months or years without investing them can significantly delay your retirement timeline.

“Most retirement savings targets assume a certain level of return from investments,” Clark told Investopedia. “If the funds are left uninvested, you are missing out on the value of compound interest, and it could take longer to reach your goals.”

Not Investing Your Funds Could Mean Losing Out on Thousands

Let’s say you contribute $4,000 annually to an IRA invested in a stock index fund averaging a 10% annual return. Your account could grow to more than $720,000 over 30 years.

But if you left that money uninvested in a money market fund, earning little to no interest, you’d miss out on roughly $600,000 in potential growth (depending on the interest rate of the money market fund fund).

How to Properly Manage Your IRA

Opening an IRA or rolling over funds from your previous employer’s retirement plan is a great move, but it’s only the first step. If you want to see real growth, you have to know how to manage the account effectively over time.

Invest Your Contributions

Until your money is invested according to your goals and risk tolerance, your IRA can’t do its job.

“For most investors, it’s a good idea to have a diversified portfolio,” said Clark. “You should acknowledge how old you are, how long it is until you will need the money, and over what time period you will withdraw this money.”

If you’re rolling over an old retirement account into an IRA, it’s important to handle the process carefully to avoid unexpected taxes or missed investment opportunities.

Choosing the wrong type of IRA for your rollover—for example, moving pretax funds into an after-tax Roth IRA—can trigger a large, surprise tax bill.

Delays in depositing a rollover check can also result in penalties or lost investment time in the market, which may reduce your long-term growth potential.

“It’s … important to be intentional with the flavor of the IRA when doing a rollover. If the prior account contained all pre-tax funds, depositing it fully into a Traditional IRA can help reduce unintended tax consequences.”

“And lastly, you want to make sure to deposit the [rollover] check in a timely manner so you don’t miss out on time in the market or risk additional tax consequences,” said Clark. 

Regularly Review Your Account

Once you invest, remember to perform regular check-ins to stay on track. At least once a year, you should review your investment choices, performance, fees, and whether your portfolio still aligns with your goals.

“You should review your IRA at least annually. Look for what it has been invested in, if there are any uninvested funds in the account, what the expense ratios are on the holdings, whether it’s time to shift your asset allocation as you have gotten older and/or your risk tolerance has changed with recent performance, and whether your beneficiaries are still aligned with your wishes,” advised Clark. “You could consider all of your investments together, not just the one IRA, as well,”

Another often overlooked step is rebalancing, which helps you keep your portfolio aligned with your target asset allocation and risk tolerance as market performance shifts.

“If you don’t regularly rebalance back to your target asset allocation, typically over time, your portfolio will shift more towards stocks than bonds because their rate of return tends to be higher historically. That can lead to higher volatility in your portfolio than you might be comfortable with,” Clark explained. 

The Bottom Line

An IRA is more than just a tax-advantaged account–it’s also a long-term investment vehicle that requires regular attention and care.

Simply funding it isn’t enough. To truly benefit, you must invest the money, monitor the performance of your investments, and adjust your investment strategy periodically.