A Roth IRA is a retirement account that you contribute after-tax income to, then withdraw the money tax-free. You can put in up to $6,000 each year if you’re below age 50, or $7,000 if you’re 50 or older. That amount is reduced if you exceed certain income levels.
The big difference between a Roth IRA and its traditional counterpart is linked to paying taxes. Traditional IRAs are centered on tax-deferred growth potential. Roth IRAs provide tax-free growth potential. You receive tax-free funds from your Roth IRA once you meet the qualifications, but you’re required to pay taxes on the funds from a traditional IRA when you receive them.
Best Roth IRA Providers of February 2021
Here’s a quick look at the best Roth IRA providers so that you can compare fees and promotional offers. These providers were selected based on factors such as cost, investment options, customer support and technology features.
|Broker||Account Minimum and Fees/Commission||Promotion|
||$100 to $500 referral bonus|
||Up to $600 for new Merrill Edge Self-Directed accounts|
1. Best for Hands-Off Investors: Betterment
One of the first robo-advisors, Betterment remains one of the largest such advisors in the market. It offers customized plans based on your answers to a survey about your financial goals.
Betterment offers two levels of service for customers: digital and premium. When you sign up for an account, you can set goals and roll over previous 401(k) plans. The digital advisor manages your investments, rebalancing your portfolio automatically.
2. Best for Self-Directed Investors: Charles Schwab
Charles Schwab won the 2020 J.D. Power award for Self-Directed Investor Satisfaction, cementing its reputation as a great company for investors who like to take control.
Schwab offers support around the clock and provides investors with an assortment of resources and financial services. Seasoned investors appreciate the low fees, while less experienced investors benefit from access to helpful tools.
3. Best for Hands-On Investors: E-Trade
In the 1980s, online trading wasn’t even on the radar for most companies — but E-Trade was a pioneer in the field. Now it’s part of banking giant Morgan Stanley. The merger, completed Oct. 2, 2020, brings E-Trade’s revolutionary platform to Morgan Stanley.
E-Trade has a long history and provides a wide array of investment options for those who like to diversify. Customers have access to thousands of commission-free mutual funds. E-Trade is a well-known online brokerage site that puts investing in the hands of its customers through an easy trading platform.
4. Best for Mutual Funds: Fidelity
Fidelity is a big name in retirement savings in the United States. The company offers a good mix of physical locations and online investment services to suit your preferences.
Fidelity offers an impressive number of mutual funds and exchange-traded funds. It does not impose trading fees, giving Roth IRA investors a great deal of choice. Also, customers have access to thousands of mutual funds with no transaction fees.
If that feels overwhelming, you can do your research using the available reports and other helpful materials provided by this brokerage. In addition, customer service representatives are available to help you sort through options.
5. Best for Convenience: Merrill Edge
Merrill Edge is part of Bank of America, which is good news for Bank of America account holders. Merrill Edge is a respected name, and it gains even more credibility from its association with BofA, one of America’s most valuable banking brands.
Merrill Edge is relatively simple, making it usable for a broad swath of investors. You won’t be intimidated if you’re just starting to dabble in financial management, and you’ll be able to do everything you need to if you’re experienced.
6. Best for Beginners: SoFi
Several tools are available to help you evaluate your goals and select the product that’s best for you. When you need extra assistance, you can speak to a financial planner about your situation at no cost and learn more about your investment options.
7. Best Value for Investors: Vanguard
Vanguard earned its reputation as a leading mutual fund provider. The company has more than 125 mutual funds and over 70 ETFs that carry the Vanguard name.
In addition to its impressive collection of funds, Vanguard offers a low-cost fee structure unrivaled in the market. Customers pay 82% less than the industry average. There is a $20 annual fee for IRAs, but you can easily waive this.
Where Is the Best Place To Invest In a Roth IRA?
The best place is through a bank or broker that is convenient for you. When choosing the best Roth IRA option, there are several factors to keep in mind before you open an account:
- Account minimums: Make sure you have enough money to meet the minimum requirement.
- Contributions: Contributions to a Roth IRA are not tax-deductible.
- Fees: They can add up quickly and take away from your earnings.
- Income: Your income determines how much money you’re allowed to contribute to a Roth IRA each year.
- Growth: Find out how your earnings compound.
- Qualifications: Income restrictions determine eligibility for Roth IRAs. You might not be eligible if you make too much money.
A robo-advisor is an automated system that assesses an individual’s financial situation and needs. It surveys customers to gather enough information to suggest investment strategies and rebalance investments periodically.
An online broker allows clients to use a digital trading platform. Investors can use an online broker to buy and sell investments.
Andrew DePietro contributed to the reporting for this article.
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This article has been updated with additional reporting since its original publication.