The best IRAs offer robust investment menus, low fees and a wealth of tools to help you save for retirement. SmartAsset gathered data on the best IRA providers to help you find the one that’s right for you. We also broke down our list based on which providers would be best for do-it-yourself investors or those who want some guidance. But first, we’ll give you a quick overview of IRAs and their benefits. A financial advisor can also help you invest in one like a pro.
What Is an IRA and Why Should You Get One?
An individual retirement account (IRA) serves as an excellent savings vehicle that helps you save for retirement while also taking advantage of a few tax breaks. For starters, the money you contribute toward your IRA is done on a pre-tax basis. This means it’s taken out of your paycheck before Uncle Sam takes a cut. As a result, contributing toward your IRA effectively reduces your taxable income. And depending on how much you make, you may be able to claim additional tax deductions based on how much you contribute in a given tax year.
For 2022, the IRA contribution limit stands at $6,000, with an extra $1,000 tacked on if you’re age 50 or older. For 2023, the IRA contribution limit stands at $6,500, with an extra $1,000 tacked on it you’re age 50 or older. But before you start investing, let’s take a look at the best IRA options available today.
Charles Schwab
Basic Account Details
| Minimum to Open Account | – $0 |
| Fees | – $0 Per online stock trade |
| Pros | – Pros: Commission-free Schwab ETF options |
| Cons | – Account closing fees |
Charles Schwab is one of the biggest names in the asset-management industry. So it’s no surprise that it offers a diverse range of investment options for its IRAs. Your choices also include exchange-traded funds (ETFs). The firm charges no commission for online ETF trades in your Schwab account. ETFs are becoming increasingly popular as low-fee investments. And if you want to open an IRA with Schwab, you can do it with as much or as little money as you want. The firm recently eliminated its minimum account balance requirement. It also charges no fees to open or maintain your account. This arrangement allows your investments to go a little further. In addition, you’d get access to several free online resources to help you save for retirement and understand your IRA.
TD Ameritrade
Basic Account Details
| Minimum to Open Account | – $0 |
| Fees | – $0 per online stock trade |
| Pros | – No transaction fees on more than 3,700 mutual funds – Build portfolio with no-transaction fee stocks, bonds, mutual funds and CDs – Digital tools including savings calculators |
| Cons | – $75 transfer out fee |
TD Ameritrade stands out for making it easier to manage and make the most out of your IRA through a wealth of digital tools and resources. You can use its savings calculator to figure out how much you should save to reach your personal retirement goals. Another one of its tools can help you determine whether a traditional IRA or Roth IRA is right for you. It goes a step further by offering a 401(k) fee analyzer powered by FeeX, a firm dedicated to making investment fees as transparent as possible. It can help you determine whether it would be a good idea to roll over assets from an employer-sponsored 401(k) into an IRA.
With TD Ameritrade, you have access to a wide fund universe to build your IRA portfolio with. Your options, include certificates of deposit (CDs), stocks, bonds and mutual funds with no transaction fees. The firm also offers commission-free ETFs.
In addition, the firm caters to a wide range of investor profiles. Through its affiliate TD Ameritrade Investment Management, you have access to automated-investing services or a financial consultant who can help you build a personalized portfolio. However, minimum investment fees for these services climb much higher than they would for other portfolio options.
E*TRADE
Basic Account Details
| Minimum to Open Account | – $0 |
| Fees | – Fees: $0 commission per stock, ETF; options contracts $0.65 |
| Pros | – More than 4,400 no-load, no-transaction-fee mutual fund options |
| Cons | – Not the lowest trading fees among discount brokerages – Higher minimum balances for automated investing and managed accounts |
At E*TRADE, you’d have access to a variety of retirement-savings options, including traditional IRAs, Roth IRAs and SEP IRAs. You can build your portfolio with a wide variety of investment options, including stocks, bonds, mutual funds, ETFs, and futures. In addition, you can build a personalized portfolio with the guidance of a professional through the affiliate E*TRADE Capital Management. These include “robo-advisor” portfolios as well as managed accounts that feature the expertise of a financial consultant. E*TRADE offers both passive and actively managed portfolio options that aim to outperform the market.
Vanguard
Basic Account Details
| Minimum to Open Account | – $1,000 |
| Fees | – Commission-free stock, ETF, options trades |
| Pros | – Load-free mutual fund choices – TDF options |
| Cons | – May not be the best for active traders – $20 annual fee per mutual fund if you have less than $1 million balance |
In the world of investing, Vanguard stands out for its low fees. In fact, the firm claims expense ratios on its mutual funds and ETFs fall about 82% lower than the industry average. And you can use these to build an IRA portfolio. You can also invest in a target-date fund (TDF). This is a professionally managed mutual fund with an asset allocation deemed appropriate for your age and risk tolerance.
The fund automatically rebalances as you approach your expected retirement age to preserve your savings. If you want to take a hands-off approach to investing and let fund managers take the wheel, these options may be right for you. Or you can create your own portfolio. Vanguard offers a tool that recommends an asset allocation based on your risk appetite, time horizon and financial situation. The firm also offers a stream of online calculators and resources to help you plan your retirement.
Merrill Edge
Basic Account Details
| Minimum to Open Account | – $0 |
| Fees | – Unlimited $0 online stock, ETF trades with no trade or balance minimums, $29.95 for broker-assisted trades |
| Pros | – Several investment options – Digital tools – Access to award-winning research |
| Cons | – Higher fees for robo- and advisor-guided investing – May not be the best option if you’re a “manage-it-for-me” investor. |
If you’re a hands-on investor, Merrill Edge gives you access to a wide array of funds with which to build your IRA portfolio. You can invest in stocks, bonds, mutual funds, ETFs and options. You’d also have access to the firm’s proprietary research and tools to help you make investment decisions. Or you can plan your retirement with the guidance of a financial advisor.
Wealthfront
Basic Account Details
| Minimum to Open Account | – $500 |
| Fees | – 0.25% after $5,000 account balance |
| Pros | – Automated investing, Portfolios get re-balanced for you |
| Cons | – Higher account minimum for an account than most providers |
Robo-advisor firms are changing the world of automated investing, and Wealthfront emerges as one of the biggest players in the game. You can open an IRA through the company with $500. From there, you can invest in a range of mutual funds, including ETFs tracking more than 11 asset classes.
These include real estate, natural resources and emerging market bonds. The firm also recently built the Wealthfront Risk Parity Fund, which invests in several asset classes and aims for risk-adjusted returns.
However, Wealthfront particularly stands out in retirement planning. It offers a free digital service called Path, which builds a personalized retirement planning strategy for you. It also recommends how much you should be saving to meet your goals. This makes it a solid choice for hands-off investors who want all the investing decisions made by professionals. In addition, the firm offers tax-loss harvesting strategies.
Betterment
Basic Account Details
| Minimum to Open Account | – $0 |
| Fees | – 0.11% expense ratio on funds in Betterment portfolios – 0.25% with balances up to $100,000 |
| Pros | – Automated investing – Diversified portfolio with no need to make manual trades |
| Cons | – May not be the best for active traders – Limited fund options |
Betterment stands as one of the largest robo-advisors around. The firm aims to make investing as simple and inexpensive as possible. It tries to meet that goal by offering low-fee ETFs. And the firm will automatically rebalance your asset allocation over time. All points considered, Betterment is an overall great choice if you’re a hands-off investor.
How to Open an IRA
It typically takes about 15 minutes to open an IRA through an online brokerage or robo-advisor. You usually just need to provide the following information: Contact information and Social Security number, as well as bank account and routing numbers for initial contribution. Even if you have an employer-sponsored 401(k) plan, you should consider opening an IRA as well. 401(k) plan menus are typically limited. IRA providers usually give you access to a much more diverse pool of investment options that can be suitable for different kinds of investors.
And keep in mind that the greater the return on these investments and the sooner you start saving, the more likely you’d be prepared for a comfortable retirement.
Tips for Retirement Planning
- One of the best choices you can make when it comes to retirement planning is saving as early as possible. But it’s not always easy to know how much you should save. That’s why we developed the best retirement calculator.
- Because of the tax implications, it might be best to invest with the guidance of a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Photo credit: ©iStock.com/Sezeryadigar, ©iStock.com/insta_photos