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Fidelity vs. TD Ameritrade: Which Is Best for You?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone and is not intended to be a source of investment advice. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

Fidelity and TD Ameritrade are two giants of American finance. Both brokers offer competitive fees, diverse portfolio management options and great customer service. To help you decide which one is the right choice for your investing dollars, we’ve made a side-by-side comparison of each firm’s offerings.

TD Ameritrade is a good choice for investors who want to trade a wide variety of asset classes, including futures and even cryptocurrency — neither of which Fidelity offers. However, for the beginning investor, Fidelity is a great option, as it offers lower transaction fees and no account minimums for its robo-advisor option. There are other key differences as well, so read on for more details.

Fidelity vs. TD Ameritrade: Feature comparison

Fidelity TD Ameritrade
Current promotions
N/A
Get up to $600 when you open and fund an account within 60 calendar days of account opening, depending on deposited amount.
Stock trading fees
  • $0.00 per trade
  • $0.00 per trade
Minimum deposit to open account
  • $0
  • $0
Tradable securities
  • Stocks
  • ETFs
  • Mutual funds
  • Bonds
  • Options
  • Futures / commodities
  • Forex
  • Crypto-currency
  • Stocks
  • ETFs
  • Mutual funds
  • Bonds
  • Options
  • Futures / commodities
  • Forex
Account fees (annual, transfer, inactivity)
  • $0 annual fee
  • $0 full account transfer fee
  • $0 partial account transfer fee
  • $0 inactivity fee
  • $0 annual fee
  • $75 full account transfer fee
  • $0 partial account transfer fee
  • $0 inactivity fee
Commission-free ETFs offered
Mutual funds (no transaction fee) offered
Offers automated portfolio/robo-advisor
Account types
  • Individual taxable
  • Traditional IRA
  • Roth IRA
  • 529 Plan
  • Joint taxable
  • Rollover IRA
  • Rollover Roth IRA
  • Custodial Uniform Gifts to Minors Act (UGMA)/Uniform Transfers to Minors Act (UTMA)
  • Custodial IRA
  • SEP IRA
  • Solo 401(k) (for small businesses)
  • SIMPLE IRA (Savings Incentive Match Plan for Employees)
  • Trust
  • Guardianship or Conservatorship
  • Individual taxable
  • Traditional IRA
  • Roth IRA
  • 529 Plan
  • Joint taxable
  • Rollover IRA
  • Rollover Roth IRA
  • Coverdell Education Savings Account(ESA)
  • Custodial Uniform Gifts to Minors Act (UGMA)/Uniform Transfers to Minors Act (UTMA)
  • Custodial IRA
  • SEP IRA
  • Solo 401(k) (for small businesses)
  • SIMPLE IRA (Savings Incentive Match Plan for Employees)
  • Trust
  • Guardianship or Conservatorship
Ease of use
 
 
Mobile app iOS, Android, Fire OS iOS, Android, Windows phone
Customer support Phone, 24/7 live support, Chat, Email, 190 branch locations Phone, 24/7 live support, Chat, Email, 364 branch locations
Research resources
  • SEC filings
  • Mutual fund reports
  • Earnings press releases
  • SEC filings
  • Mutual fund reports
  • Earnings press releases
  • Earnings call transcripts
  • Earnings call recordings

Fidelity vs. TD Ameritrade: Fees & account minimums

Some brokers charge an annual or monthly fee to maintain your account, but neither Fidelity nor TD Ameritrade levy an account maintenance fee. When it comes to trading fees, Fidelity has the edge over TD Ameritrade. Fidelity charges a flat fee of $0.00 for all online trades; TD Ameritrade charges $0.00. If you make few trades, transaction fees may not matter as much. But if you are an active investor or like to day trade, transaction fees can add up and cut into your earnings.

Fidelity and TD Ameritrade offer investment management services, including robo-advisor products — Fidelity Go and Essential Portfolios — to manage your money if you’d prefer to take a hands-off approach. TD Ameritrade offers less expensive investment management services. But if you need more personalized advice, Fidelity may offer a better deal, depending on the size of your portfolio balance.

TD Ameritrade offers three different managed portfolio options. For Essential Portfolios, the annual management fee is 0.30% of your account balance with a minimum balance of $5,000. The Selective Portfolio, which has a broader range of Mutual funds and exchange traded funds (ETFs), has an annual management fee of 0.30% to 0.75% with a minimum investment of $25,000. A Personalized Portfolio, which features personalized advice, has an annual management fee of 0.60% to 0.90% with a minimum investment of $250,000.
Fidelity offers several different portfolio management options. For Fidelity Go, an affordable robo-advisor program, you’ll pay a 0.35% fee. For Fidelity Personalized Planning and Advice, a hybrid robo-advisor with coaching, you’ll pay a 0.50% fee and a minimum of $25,000. Fidelity also offers Portfolio Advisory Services, with professionally managed accounts. If you opt for this approach, your fee will be 0.50% to 1.50%, depending on your assets invested, and you’ll need a minimum of $50,000.

If you take money out of your account, either as a partial withdrawal or a total withdrawal, you may have to pay the brokerage firm a fee. With TD Ameritrade, you’ll pay $75 for a full account transfer, but $0 for a partial transfer. Fidelity charges no transfer fees at all, either for partial or full transfers.

TD Ameritrade and Fidelity do not have account minimums for most accounts, making them good choices for beginning investors. However, TD Ameritrade does have a $5,000 minimum deposit for its Essentials Portfolio, its robo-advisor offering.

Fidelity vs. TD Ameritrade: Tradable securities

Besides stocks and bonds, Fidelity and TD Ameritrade allow you to invest in a variety of asset classes:

  • Mutual funds: If you interested in investing in professionally managed mutual funds, TD Ameritrade offers over 13,000 funds, while Fidelity offers more than 10,000 mutual funds.
  • Options trading: Options are a contract that allows you to sell securities at a predetermined price over a set period of time on the options market. TD Ameritrade allows you to engage in options trading with no trade minimums and no hidden fees. Fidelity also offers options trading, and you can earn up to 500 commission free trades, good for two years.
  • ETFs: If you’re working on diversifying your portfolio, investing in ETFs makes sense. TD Ameritrade gives you access to over 550 commision-free ETFs, while Fidelity offers over 500 commision-free ETFs.
  • Foreign exchange trading: For investors interested in trading on the foreign exchange market, you’ll have to sign up with Fidelity Forex LLC, a subsidiary of Fidelity. With Fidelity Forex, you’ll get access to currencies for more than 35 countries and complete direct transfers from your Fidelity brokerage accounts. TD Ameritrade offers access to currencies for more than 20 countries.
  • Futures: With futures trading, you agree to sell an asset or security at a set price at a predetermined time in the future. TD Ameritrade offers over 60 futures products, while Fidelity doesn’t offer futures trading.
  • Cryptocurrency: TD Ameritrade recently announced that its offering investing through ErisX, a regulated exchange for Cryptocurrency trades, but it’s not yet available. Fidelity doesn’t offer Crypto-currency trading at this time.

Fidelity vs. TD Ameritrade: Special features

  • Guidance for beginners: If you’re new to investing, you may need some help understanding the basics and getting started. TD Ameritrade introduced an innovative chatbot named “Ask Ted” that’s designed to help. Available around the clock, the bot can help you make informed investment decisions.
  • Trade platforms: TD Ameritrade offers customers Trade Architect and thinkorswim, platforms that provide you with analysis tools, studies, and paper trading. Fidelity’s trading platform is also excellent. Investors who make 36 trades in a 12-month period can access Active Trader Pro, allowing you to do in-depth research before investing.

Fidelity vs. TD Ameritrade: Which is best for you?

Fidelity and TD Ameritrade are quite similar, offering many of the same investment types and account options. For beginner investors, Fidelity‘s robo-advisor offering with no minimum is helpful. However, if you are looking for more investment options, TD Ameritrade is the winner.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Kat Tretina
Kat Tretina |

Kat Tretina is a writer at MagnifyMoney. You can email Kat here

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Investing

5 Times to Invest With a Taxable Account

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone and is not intended to be a source of investment advice. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

young woman holding piggy bank
iStock

“Invest in your retirement.”

“Contribute enough to your 401(k) to get the full match.”

“Open an IRA.”

We’ve all heard these standard snippets of advice. However, while investing in your retirement is important, it’s not the only way to invest; a taxable account is another smart option.

Taxable accounts don’t have the same benefits as IRAs and 401(k)s, which enjoy tax-deferred growth. But they do offer flexibility and other perks. Below, find out how taxable accounts work and what their advantages are.

5 times a taxable account could be beneficial

An individual taxable account is an investment account offered by a brokerage. With a taxable account, you can invest in assets like stocks, bonds and mutual funds. As your fund grows in value based on the stock market’s performance, you’ll owe taxes each year on your investment income.

While retirement accounts like 401(k)s and IRAs have tax benefits, they often have limitations too. Taxable accounts offer greater flexibility and control over your money. Here are five situations where investing in an individual taxable account may make sense.

1. You plan to use the money before you retire

When you invest in a retirement account, accessing your money before retirement age can cost you. For example, if you have a 401(k) and make a withdrawal before age 59 and a half, the penalties can be costly. Not only will you owe federal and state income tax, but you’ll also pay a 10% early withdrawal penalty. That means if you need access to your money before you retire, you’ll lose a big chunk of it thanks to taxes and penalties.

With an individual taxable account, however, you’re not subject to the same rules. A taxable investment account can be cashed out at any time and for any reason without penalty. If you plan to save money for a major goal besides retirement, a taxable account may make more sense than a retirement account.

2. You want to use the money for various goals

There are many tax-advantaged investment accounts that can be used for a variety of purposes. However, how you use the money in those accounts typically is limited to the account’s specified intention. For example, 529 plans can be advantageous for college savings, but you can withdraw from a 529 plan only to pay for qualified education expenses — or face a 10% penalty on the withdrawals plus income taxes.

Unlike 529 plans and other tax-advantaged investment accounts, you can use a taxable account for anything. If you’re planning to buy a home, start a business, splurge on an epic vacation or simply invest money for a rainy day, you can use an individual taxable account as your savings vehicle and withdrawal money from it penalty-free.

3. You have a lot of money to invest

If you want to save aggressively for a particular goal, you may find tax-advantaged investment accounts restrictive. That’s because most have set contribution limits For example, as of 2020, you can contribute only up to $6,000 a year to a traditional or Roth IRA ($7,000 if you’re age 50 or older). That limit may not be enough if you want to aggressively save for your future goals.

While some taxable accounts may require a minimum starting contribution, they don’t limit how much you can invest. When you’re saving for a big purchase or expense, that freedom can be a huge advantage.

4. You earn too much for specialized investment accounts

Some tax-advantaged accounts have income limits. If you earn over the limit, you cannot contribute to that type of account. For example, if you want to open a Roth IRA, you can contribute the maximum amount as long as your income is under $124,000 if you’re single (or under $196,000 for couples who are married filing jointly). After that number, your contribution amount is phased out.

There are no income limits for individual taxable accounts, so you don’t have to worry about income restrictions and can invest your money as you wish.

5. You don’t want to worry about minimum distributions

With some retirement accounts, you’re required to take minimum distributions each year. Per IRS regulations, you have to withdraw money from a traditional 401(k) or IRA once you reach age 72. How much you have to withdraw depends on your age, year-end account balance and withdrawal factor.

For example, let’s say you had $500,000 in a traditional IRA and were 72 years old. You would have to withdraw roughly $18,870 this year to meet the required minimum distribution, even if you don’t need the money.

Individual taxable accounts don’t have required minimum distributions. You have complete control over when you start taking out money and how much you withdraw.

Opening a taxable investment account

If you’re looking for a way to invest that offers more flexibility and control than 401(k)s, IRAs or 529 plans, a taxable account may be best for you. It allows you to contribute as much as you want for whatever you want and to withdraw money on your own schedule.

If you decide that individual taxable accounts are right for you, you can open a brokerage account. For more information on how to get started, learn how brokerage accounts work.

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Kat Tretina
Kat Tretina |

Kat Tretina is a writer at MagnifyMoney. You can email Kat here

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Investing

529 Plans vs. Roth IRA: Which is best for college savings?

Editorial Note: The content of this article is based on the author’s opinions and recommendations alone and is not intended to be a source of investment advice. It has not been previewed, commissioned or otherwise endorsed by any of our network partners.

If you have children, you want to give them the very best. Often, that includes an excellent college education. However, helping your child pay for school has gotten much more expensive in recent years. In fact, the cost of attending a public, four-year college has gone up 25% in just ten years, according to data from The College Board.
If you want to contribute to your child’s education, it’s best to start saving when they’re young. Thankfully, there are several savings vehicles you can use to save for college, including 529 plans and Roth IRAs. Below, find out how these savings vehicles work and how to decide which one is best for you.

529 vs Roth IRA: How they compare

529 plans are offered either by your state or by an individual school. They are accounts created specifically for saving for education expenses. A 529 plan is an investment account, so you contribute money and choose investments; over time, the account grows with annual returns.

Roth IRAs are mainly for retirement savings. You contribute with post-tax dollars, so when it comes time to withdraw your money, you don’t have to pay taxes again. However, some people opt to use Roth IRAs for education savings, too.

But which is best for you? 529 plans and Roth IRAs differ in several key ways.

1. Tax benefits and penalties

According to Lloyd Sacks, a Certified Financial Planner and managing director of the private client group at Sacks & Associates, contributing to a 529 plan has some benefits when it comes to your taxes.

“Some states allow a deduction for contributions made to in-state 529 plans,” he said.

That deduction can help reduce your taxable income, potentially leading to a smaller tax bill.

Roth IRAs don’t offer the same benefit. However, withdrawals from Roth IRAs contributions are free from income taxes.

2. Withdrawal rules for education

If you withdraw earnings from a Roth IRA before your retirement, you typically are subject to early withdrawal penalties. However, there is an exception in some circumstances.

“If [the money is] used for qualified higher education expenses, the 10% early withdrawal penalty on earnings is waived, but you are still responsible for taxes on the earnings in this case,” Sacks said.

529 plan withdrawals can only be used for education expenses, or you will be subject to penalties and taxes. You’ll pay the full income tax on the withdrawal, plus a 10% penalty fee.

3. Investment options

With a Roth IRA, you have several different investment options. You can invest in individual securities, such as stocks, bonds, certificates of deposit, exchange-traded funds, or mutual funds.

529 plans have fewer options. Depending on which state you open your 529 in, you may only have access to a small range of investment options, such as index funds. You aren’t limited to opening a 529 in your home state so it pays to shop around for the best investments options and lowest fees.

4. Contribution limits

Roth IRAs and 529 plans have very different contribution limits. If you want to save aggressively, a 529 plan allows you to sock away more money than a Roth IRA.

For 2020, the annual contribution limits for a Roth IRA are set at $6,000, with a $1,000 catch-up contribution for those over the age of 50. Meanwhile, 529 plan contribution limits are set by individual states.

5. Financial aid

What savings vehicle you choose can impact the financial aid package your child is eligible to receive. The Free Application for Federal Student Aid (FAFSA) looks at your savings differently depending on the type of account you use.

“Retirement accounts, like a Roth IRA, are not considered assets on the FAFSA, and will not impact a student’s ability to receive financial aid for college,” said Sacks.

Because Roth IRA accounts are exempt from the FAFSA, your Roth IRA balance won’t affect what financial aid your child is eligible to receive. A 529 plan balance, on the other hand, can affect your FAFSA.

“A 529 plan will impact a student’s ability to receive financial assistance towards college expenses,” said Sacks.

However, that doesn’t mean that one is better than the other. With a 529 plan, there are tax advantages to making contributions, which can be an effective tradeoff against FAFSA implications.

6. Plan B: What if you don’t use it for college?

When it comes to planning for college, it can be hard to predict where your child will be at the age of 18. If your child decides not to go to college, that can affect your finances.

With a 529 plan, you’re subject to a 10% penalty if you don’t use the money for qualified education expenses for the selected beneficiary, which can eat up a big chunk of your savings. If your child does decide not to go to school, you can switch the beneficiary to another child, another relative, or yourself. You can also use the funds to pay for trade school or even K-12 education.

A Roth IRA doesn’t carry the same penalties. If your child decides against going to school, you can keep the money in your savings for your retirement, penalty-free.

You should consider a Roth IRA for college savings if:

  • Your retirement savings are low. If you don’t have substantial savings for retirement yet, a Roth IRA can do double duty; you can save for retirement while simultaneously saving for college. If your child doesn’t go to college, you can use the funds you saved for your retirement.
  • If you’re not sure your child will go to college. Because the Roth IRA offers greater flexibility, it’s a better option if you’re not certain your child will go on to a university.

You should consider a 529 plan for college savings if:

  • You need to save aggressively. If there are only a few years left until college, or you think your child will opt for a more expensive private school, contributing to a 529 plan with higher contribution limits makes more sense than a Roth IRA.
  • You aren’t eligible for a Roth IRA. If you’re ineligible for a Roth because your income is too high, a 529 plan makes sense.
  • Your state offers a tax deduction. Some states offer tax benefits if you contribute to a 529 plan, making them a smarter option.

Saving for college

Saving for college can be overwhelming, especially when it comes to deciding on the best savings plan for you. If you’re torn between a Roth IRA and a 529 plan, the Roth IRA offers greater flexibility.

“Unless the clients fall into the high net-worth category or are fairly affluent, I usually recommend saving and investing in a Roth IRA if they are eligible to contribute to one,” said Sacks. “By utilizing the Roth IRA, a client is able to save for college expenses while also funding their own personal retirement in the event they fall short of their savings goals through other means; the funds within a Roth IRA can be used for either purpose.”

Advertiser Disclosure: The products that appear on this site may be from companies from which MagnifyMoney receives compensation. This compensation may impact how and where products appear on this site (including, for example, the order in which they appear). MagnifyMoney does not include all financial institutions or all products offered available in the marketplace.

Kat Tretina
Kat Tretina |

Kat Tretina is a writer at MagnifyMoney. You can email Kat here