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Managing an inherited IRA can be tricky, especially when returns seem lower than expected. Suze Orman recently addressed a listener's concern about her inherited IRA’s slow growth over the past decade — and she didn't hold back.
IRA Growth of Just $26K Over 10 Years
On a recent episode of the "Women & Money" podcast, Orman and co-host KT read a letter from a listener named Irene. Irene shared that she inherited a $240,000 IRA from her husband 10 years ago. Over the past decade, the account grew to $266,283 — an increase of just over $26,000.
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Irene asked Orman if this type of growth was typical for a moderate growth, preservation-focused investment strategy. Orman's response was direct: "That's horrific."
Orman stated that this level of growth amounts to about a 1% annual return. Compared to broader market performance, this is extremely low. The S&P 500, for example, has averaged around 12% annually over the past ten years.
What Could Have Been
Orman said that if the money had simply been invested in an S&P 500 index fund, Irene could have seen significantly higher returns. At a 12% annual rate of return, the $240,000 could have grown to approximately $745,000.
Even a more conservative approach could have yielded better results. Orman noted that with a moderate 6% annual return, the account could have reached about $429,000 — a significant increase compared to the current balance of $266,283.
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High Fees Could Be a Factor
Orman also raised concerns about fees. She suggested that the financial advisor managing Irene's IRA may have been charging high fees, which could have eaten into the returns. "I will bet you any amount of money, he made as much money as you did in fees," Orman said.
She advised Irene to ask her advisor about the fees charged over the past decade. If the advisor collected around 1% in fees annually, that would explain why the returns were so low despite the strong market performance.
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What Irene Can Do Now
Orman recommended that Irene consider transferring the IRA to another firm. Since the funds are in an IRA, an IRA transfer would allow her to move the money without tax consequences.