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Table of Contents
A Roth IRA (Individual Retirement Account) is one of the best places to save for retirement. Why? Because you put money in this account after paying income taxes on it and then your investments grow entirely tax-free.
Roth IRA’s will offer more flexible investment options in your account and, if you follow the account rules, during retirement you won’t have to pay any tax on your withdrawals.
Zina Kumok, Personal Finance Expert
If you’re young or not at your salary peak, a Roth IRA may be one of the best retirement investment options. It can help you avoid paying taxes later on, though you won’t get a tax deduction right now.
It can be helpful to establish what type of investor you are when searching for the best Roth IRA account:
Hands-On Investors
Hands-Off Investors
These are experienced investors or those looking to learn about the world of investing and manage their own investments.
These investors should look for Roth IRA accounts that are best for “hands-on” investors.
These providers usually charge low or no fees.
These are beginner investors or those less interested in managing their own investments.
These investors should look for Roth IRA accounts that are best for “hands-off” investors.
These providers will manage your investments for an annual fee.
Many providers use robo-advisors for automatic investing. Robo-advisors use a form of asset allocation called Modern Portfolio Theory (MPT) to allocate funds within your retirement account.
With this in mind, check out some of the best Roth IRA account providers below and get one step closer to your retirement goals in a tax friendly way.
Best For Beginners Seeking A Hands-Off Investing Experience
Wealthfront invests in low-cost ETFs and is a front-runner when it comes to robo-advisors or automated investing. The robo-advisor requires you to fill a questionnaire to assess your risk tolerance and create an investment portfolio accordingly.
Wealthfront provides several retirement account options such as:
Traditional IRAs
Roth IRAs
SEP IRAs
401(k) rollovers
Why We Like It
Low initial account opening requirements: Wealthfront allows you to open an investment account with as low as $500.
Affordable portfolio management charges: The robo-advisor has a low portfolio management fee of 0.25%
Portfolio Readjustment: Your investment portfolio holds all the investments you have in retirement and non-retirement accounts. In accordance with specific portfolio milestones, Wealthfront rebalances your retirement portfolio for you.
Tax-loss harvesting with all accounts: Tax-loss harvesting is a strategy investors can use to reduce capital gains taxes. Wealthfront can help you with this process and also provides free financial planning.
Best For Investors Seeking Lower Investment Management Options
Betterment’s robo-advisor manages over $22 billion in assets-under-management. Betterment Roth IRA allows investors to link external savings and retirement accounts with their Roth IRA.
Investors having $100,000 or more can opt for Betterment Premium, which comes with features such as unlimited access to a financial advisor, flexible portfolios, and guidance to manage major financial goals. Betterment Premium has a higher management fee of 0.40%.
Why We Like It
Includes special features: Goal-based portfolio recommendations, automatic contributions, portfolio rebalancing and dividend reinvestment features.
Access to certified financial planners: Especially useful for Betterment Premium account holders managing larger amounts.
Use of funds with low expense ratios: No minimum account requirements for the Betterment Digital Plan and only 0.25% in management fees.
Vanguard is one of the largest index fund and mutual fund houses in the US by asset size, and is a good choice for anyone seeking a Roth IRA account for retirement savings.
When it comes to investing with Vanguard, one of the primary benefits is access to over 3,100 mutual funds and ETFs run by the investment management firm. This makes Vanguard Roth IRA ideal for passive investors seeking tax-free growth.
Why We Like It
Access to over 3,100 Vanguard mutual funds and ETFs: Vanguard’s investment pool ensures that you can always find the right mutual fund or exchange-traded funds (ETF) for your portfolio.
No trading charges for Vanguard mutual funds or ETFs: As an investor, you can minimize your net portfolio fees.
Helpful customer support: However, their high fund minimums could be an issue for some investors.
Best For Commission-Free Trading And No-Cost Index Funds
Fidelity is a heavy-weight investment management firm with over $3.3 trillion net assets under management. Fidelity offers free trading and investors can choose among 3,500 no-transaction-fee mutual funds or ETFs, alongside access to zero-fee index funds.
Perfect for those wanting to learn more about investing, Fidelity has a solid research recommendation module, providing investment suggestions from some of the leading market research firms.
Why We Like It
Unparalleled features: Access to over 3,500 transaction-free mutual funds and zero-fees index funds.
Commission-free trading for stocks and ETFs: Fidelity offers free trading, which means no portfolio funds are lost in trading fees.
Intuitive mobile app & trading platform: Fidelity provides you with investment advisory services.
E-Trade has built a reputation for its low-cost and commission-free trading platform. As an online broker, E-Trade offers an advanced trading platform for investors, especially those involved in active trading, and allows investors to open a Roth IRA.
E-Trade comes with research services from multiple firms available for free for all of its users. They offer trading for:
Stocks
Mutual funds
ETFs
Options, bonds and futures
Why We Like It
Over 4,400 zero transaction mutual funds: alongside a range of trading services for different financial needs.
Educational resources: E-Trade offers extensive guides and research services for both beginners and expert investors.
Robust mobile app and web trading platform: E-Trade provides both web and mobile-app based investment trading services.
Merrill Edge brings the benefits of online brokers and offline financial advisors to one single account. Customers can access a Merrill Edge advisor at over 2,500 Bank of America branches.
Merrill Edge Roth IRA offers commission-free trading for most financial instruments (stocks, mutual funds, options, futures, bonds ETFs), along with access to over 2,600 no-transaction-fee mutual funds. However, the account might be a bit limited for advanced traders, in terms of the available stocks.
Why We Like It
Integration with Bank of America: If you’re an existing Bank of America customer, you can integrate and see all of your accounts within a single dashboard.
In-person and online support: Access to online support and in-person advice.
Free, high-quality stock research services: Merrill Edge offers an extensive, free market research service to its customers.
Best For Investors Seeking Premium Research And High-End Trading Experience
Charles Schwab’s Roth IRA is one of the best Roth IRAs our team identified for its strong research-driven recommendations. Charles Schwab uses a range of sources to provide optimum information and can easily connect with Google Assistant and Alexa for regular updates on ratings.
Charles Schwab offers free trading services, access to over 3,500 no-fee mutual funds and no-fee index funds. They also allow for investors to purchase fractional shares.
Why We Like It
Premium research recommendations: The broker offers its individual ratings, along with ratings from Morningstar, Ned Davis, Credit Suisse, and more.
Robust trading platform: A trading experience to match some of the best technology-driven brokers.
Schwab Intelligent Portfolios robo-advisory solutions: Access to a robo-advisory along with traditional brokerage services.
Zina Kumok, Personal Finance Expert
If your employer offers a 401(k), make sure to take advantage of any matching contributions before opening an IRA.
Best For Beginner Investors Seeking Educational Resources Or Assisted-Trading Services
TD Ameritrade is a Roth IRA provider that offers $0 trading for stocks and over 4,000 mutual funds, alongside portfolio guidance services for its customers. There are no account minimums with TD Ameritrade Roth IRA.
TD Ameritrade has over 11,000 low-cost mutual funds and an extensive education module for new investors. The platform even provides a virtual trading simulator for its users.
Why We Like It
Extensive online education module for investors: Including articles, videos, slideshows, quizzes, and much more
Access to offline as well as online services: Offering branch access, online trading and account management services.
Financial advice and consultation for investors: You get access to high-quality research services with your account.
Best For Advanced Stock Traders Seeking Lower Pricing And Access To International Markets
A popular name among active traders, Interactive Brokers provides competitive pricing for volume traders and access to international securities.
Interactive Brokers Roth IRA is ideal for traders who intend to trade frequently and makes a suitable choice for margin traders, with rates as low as 1.5% plus benchmark rates. They offer both automated investor services in addition to a trading, retirement account.
Why We Like It
Robust trading platform: Their trading platform is one of the best in the market, coming with intuitive trading tools and solid research data.
Volume pricing for advanced traders: Investors can choose out of 70 plus portfolios, with fees ranging between 0.08% and 1.5%.
Margin facilities available for both membership levels: Interactive Brokers provide access to their Desktop Trader Workstation to both Lite as well as Pro users.
Zina Kumok, Personal Finance Expert
Before opening a Roth IRA, make sure you are eligible for one. If you aren’t, you can open a traditional IRA and roll it over into a Roth IRA.
Frequently Asked Questions (FAQs)
What is a Roth IRA?
A Roth IRA is a tax-advantaged retirement investment account. A Roth IRA allows you to put money you’ve already been taxed on into the account, so the contributions you make into the account are not tax-deductible. Once you have this money in your Roth IRA account, you will select investments to make your money grow.
Can anybody open up a Roth IRA account?
Not everyone can contribute to a Roth IRA as there are income limits. Your ability to make annual contributions to a Roth IRA may be limited, or even eliminated depending on your income level (modified adjusted gross income, or MAGI). If you make too much money you might be out of luck.
For example, one exception is the spousal IRA, which you can use if you are married to boost your retirement savings – even if only one of you earns an income.
If your Federal filing status is:
Your 2023 Roth IRA contribution is reduced if your MAGI is:
You can’t contribute to a Roth IRA for 2023 if your MAGI is:
Single or head of household
More than $138,000, but less than $153,000.
$153,000 or more.
Married filing jointly or qualifying widow(er)
More than $218,000, but less than $228,000.
$228,000 or more.
Married filing separately
Less than $10,000.
$10,000 or more.
How much can you contribute to a Roth IRA?
As of 2023, the contribution limit for a Roth IRA in 2023 is $6,500 a year unless you are over 50 in which case, you can do up to $7,500.
What happens once I fund my Roth IRA with money?
A Roth IRA is an investment account. This means the money you put into this account can be used to invest in things like stocks, bonds, mutual funds, etc. You do, of course, still need to buy stocks and bonds to invest this money into, so it’s useful to ask your provider for investment options and advice.
What is the difference between a Roth IRA and a Traditional IRA?
With a traditional IRA your contributions are tax-deductible in the year they are made, but with a Roth IRA, your withdrawals in retirement are not taxed because the money you’ve contributed to it has already been taxed before you put it in.
Can you open a Roth IRA if you’re under 18 years old?
As long as you earn income you can open up a Roth IRA, but if you’re under the age of 18 years old you will need to open a custodial Roth IRA. As the custodian, the adult will control the assets in the Roth IRA until the child reaches the age of majority. At that point, the account belongs to the child.
Is there a maximum age limit to make contributions to a Roth IRA?
There is no age limit on how old you can be to contribute to a Roth IRA.
How should I invest my money in a Roth IRA?
When you invest in a Roth IRA, you will have multiple investments to choose from like stocks, bonds, mutual funds, etc. We recommend you find a low-cost index fund because these have lower expenses and fees than actively managed funds and reduce your risk of losing money compared to investing in individual stocks.
What is the advantage of a Roth IRA?
The tax advantage of a Roth IRA is that your withdrawals in retirement are not taxed because the money you’ve contributed to it has already been taxed before you put it in.
Is a Roth IRA the same thing as a Roth 401(K)?
No – a Roth 401(K) is sponsored by your employer. If you are lucky enough to receive an employer match on your Roth 401(K), the match will not be tax favored so you’ll have to pay the tax on that portion when you withdraw your funds during retirement.
Can I contribute to a Roth IRA and a Roth 401(K)?
Yes. You can contribute to both but the contribution limits will still apply to the Roth IRA.
