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Updated on Friday, October 1, 2021
Individual retirement accounts (IRAs) are investment vehicles designed to help you save for retirement. If you have a company-sponsored retirement plan, like a 401(k), IRAs are an important supplement to further boost retirement savings. If you’re self-employed, IRAs are your main tool for saving up the nest egg you need to retire.
There are a variety of different IRAs available, and which one you choose depends on your unique employment and financial situation. The two main types are Traditional IRAs and Roth IRAs, which differ in the tax treatment of the funds you place in each account. With a Traditional IRA, you pay income taxes on the funds when you make withdrawals, while with a Roth IRA, you pay taxes on your contributions upfront, allowing the money to grow tax-free.
If you’re self-employed or run a small business, you’ll want to look at opening a simplified employee pension (SEP) IRA. SEP IRAs are available to anyone working as a business sole proprietor, earning freelance income or running a business with one or more employees.
Read on as we round up the best IRA account providers for both active and passive investors. For people who want to take an active role in choosing the investments held in their IRAs, we offer a selection of brokerage firms with premium trading resources. For those who would rather fund their IRA and let somebody else handle the investing process, check out our list of best robo-advisor services.
How we chose the best IRA account providers
We regularly review the latest IRA account offerings — we’ve evaluated 39 different offerings in this round — and have selected our top choices. All of the providers on this list may well be worth considering, with those at the top scoring the best in our methodology.
To determine our list of the best brokerage IRA account providers we focused on trading fees, account minimum, the diversity of investment products offered (stocks, bonds, ETFs and mutual funds) and low account fees (yearly fees, transfer fees and inactivity fees)
To determine our list of the best automated IRA account providers, we focused on management fees and account minimums and considered ease of use and customer support. See our methodology article for more details on how we created our rankings.
Best IRA providers for hands-off investors
Many people lack the time and specialized knowledge required to make the best possible investing decisions. This makes choosing a robo-advisor to manage your IRA a good bet. Robo-advisors are automated investing services operated by established brokerages and stand-alone companies. Robo-advisors generally charge annual management fees, usually 0.25-0.50% of your account balance, in addition to other fees to own ETFs and mutual funds. In return, computer algorithms written by financial professionals maximize your earnings to build a nest egg that will carry you through retirement. These are our picks for the best robo-advisors to manage your IRA.
|Annual Management Fee||Average Expense Ratio (moderate risk portfolio)||Account Minimum to Start|
Charles Schwab Intelligent Portfolios
|0.25% (up to $100,000); 0.40% ($100,000.01 or more)||0.11%||$0|
SoFi Automated Investing
Wealthfront — Low fees, great tools
Wealthfront’s low annual costs and free financial planning tools are well-suited to IRA investors. Their annual cost is one of the lowest on this list, with a 0.25% management fee and 0.09% average ETF expense ratio. The $500 minimum to open an account is a bit higher than others on this list, but still attainable for many folks looking to build a nest egg. There is little human interaction at Wealthfront, which saves you time and helps the company keep costs low. This can be a drawback for those who would have complicated tax situations or who prefer a bit of personal attention.
- An annual management fee of 0.25%; average ETF expense ratio of 0.09%
- Investments are diversified and automatically rebalanced across four to five asset classes using a portfolio of low-cost ETFs tailored to your risk profile
- IRAs available: Traditional IRAs, Rollover IRAs, Roth IRAs and SEP IRAs. Wealthfront does not offer inherited or beneficiary IRAs
Charles Schwab Intelligent Portfolios — Automated investing from a leading brokerage
Charles Schwab Intelligent Portfolios can be a smart choice for automating your IRA investments, but do not let the 0% management fee mislead you: Instead of charging a fee, Charles Schwab requires that Intelligent Portfolios clients hold 6-30% of deposited funds in cash at a 0.70% APY, which will decrease overall returns in years where the market returns above 0.70%. In addition, Charles Schwab charges a higher expense ratio for owning their ETFs, which averages 0.14% for a moderate portfolio. The minimum deposit requirement of $5,000 to open an account may be a touch high for investors just starting out. Customer service is one of Schwab’s highlights. As a well-established broker, the company has over 350 branch locations where you can get in-person assistance with your IRA investing questions. Plus, 24/7 phone support is available.
Intelligent Portfolios Highlights:
- No annual management fee, although customers must keep 6% to 30% of portfolios in cash; average expense ratio of 0.14%
- Investments are diversified across up to 20 different asset classes and auto-rebalanced
- Starting at Schwab can benefit investors who anticipate opening other account types down the road
- IRAs available: Traditional IRAs, Rollover IRAs, Roth IRAs, SEP IRAs, inherited IRAs and Custodial IRA
Betterment — Low fees for balances under $100K
Betterment is one of the most prominent names in automated investing. They offer a full suite of robo-advisor features for IRA investors at low cost, with no minimum deposit. Annual management fees for accounts under $100,000 are 0.25% plus an average 0.11% expense ratio. The annual management fee jumps to 0.40% for accounts $100,000 and up. Betterment gives another advantage to accounts with over $100,000 deposited, allowing those clients to actively manage some assets. If active management is your goal, though, you can avoid Betterment’s 0.40% fee by opening a free brokerage account. If you are managing more than $100,000, you may want to consider a different robo-advisor.A feature that sets Betterment apart versus peers is its Tax-Coordinated Portfolio, which attempts to decrease the amount you pay in taxes. It does this by placing assets that will be taxed highly into IRAs, which have big tax breaks, while placing lower-taxed assets in taxable accounts.
- No minimum deposit and low fees for balances under $100k
- Betterment invests your deposits in ETFs diversified across 12 different asset classes with a strategy personalized to your risk profile
- The tax-coordinated portfolio feature works to lower your tax bill by placing high-tax items in a tax-advantage IRA account
- IRAs available: Traditional IRAs, Rollover IRAs, Roth IRAs, SEP IRAs, inherited IRAs and inherited Roth IRAs
SoFi Automated Investing — Low costs, great perks
SoFi Automated Investing is one of the most competitively-price automated IRA providers, featuring no annual management fee and an ultra-low 0.08% average expense ratio. Valuable perks come with opening a SoFi account, including free access to SoFi financial advisors who can help you create a retirement plan, plus free career counseling and discounts on loans. SoFi also offers an attractive 0.25% APY on deposits in their checking/savings product, though customers must open that account separately.Automated Investing’s main downside is that their portfolios are less customizable than peers’ offerings, with only five different risk levels to choose from, as opposed to at least 10 available from others.
SoFi Automated Investing Highlights:
- No annual management fee, an average expense ratio of 0.08%, and a $1 minimum deposit
- IRA and Roth IRA portfolios contain less municipal bonds and more corporate bonds to maximize returns for these tax-advantaged accounts
- Investments are invested in low-cost ETFs diversified across 16 different asset classes and automatically rebalanced monthly
- IRAs available: Traditional IRAs, Rollover IRAs, Roth IRAs and SEP IRA
Best IRA providers for active investors
If you are confident in your ability to make financial decisions and are willing to put in the time and effort needed to maintain an investment portfolio, a traditional brokerage IRA can be a good option. With the selected IRA providers below, you have complete control over how investments are allocated within the account. The best part: You pay no management fees.
|Fee per trade||Commission-free ETFs||No transaction fee mutual funds|
Charles Schwab — Free fixed-income consultation
Broker Charles Schwab’s multitude of low-fee investment options and customer service offerings make them a top pick for IRA investors. Schwab offers a number of ways to keep fees low with a low $0.00 per trade commission, $0 minimum to open an account and a large selection of commission-free ETFs and no-transaction fee mutual funds.Especially relevant for investors approaching retirement, Schwab offers free consultations with fixed-income specialists. Customer service is a highlight at Schwab with over 350 branch locations if you need in-person help and 24/7 phone support available. High fees for transfers out of your account or for foreign stock trading are gotchas to look out for.
Charles Schwab Highlights:
- Free consultation with fixed-income specialist, an advantage for investors close to retiring
- Low trading commissions at $0.00 per trade
- There is no minimum deposit to open an IRA with Schwab, so it is easy to get started
- IRA available: Traditional IRAs, Rollover IRAs, Roth IRAs, inherited IRAs and Custodial IRAs.
Fidelity — Strong mutual fund offerings
Fidelity is a top pick among investors saving for retirement, and for good reason. Their vast selection of no-fee mutual funds and ETFs help investors hold onto more of their retirement savings. Fidelity’s lineup of mutual funds with 0% expense ratios are especially noteworthy for fee-conscious investors. Low $0.00 per trade commissions will attract investors who likely actively manage trades in retirement accounts.Fidelity also offers several options for hands-off retirement investors, including its robo-advisor, Fidelity Go, a lineup of well-regarded target date mutual funds, and private client services. For folks looking for in-person help, Fidelity offers over 190 branch locations, and can help by phone 24/7 if you would rather stay home. Low fees and a wide offering of investments make Fidelity a compelling option for beginners.
- 500+ commission-free ETFs, 3,600+ no-transaction fee mutual funds and some proprietary Fidelity funds with 0% expense ratios
- No fees on early IRA withdrawals or transfers in or out of accounts
- Great educational resources and useful checklists for retirement
- IRAs available: Traditional IRAs, Rollover IRAs, Roth IRAs, SEP IRAs, inherited IRAs and custodial IRACustodial IRAs.
TD Ameritrade — Broad selection of no-fee funds
TD Ameritrade has a strong IRA offering with almost 4,000 no-fee mutual funds and over 500 commission-free ETFs, paired with strong customer support offerings. Investors comfortable managing their own funds will appreciate TD’s selection of analyst reports, charting tools and watch lists. The high $0.00 per trade commission is TD Ameritrade’s main drawback. If you plan on doing heavy stock or options trading inside your IRA, a broker with lower fees may be a better choice. If you’re willing to pay a premium on trades for full-service customer support and a strong assortment of ETFs and mutual funds, TD Ameritrade is a solid choice.
TD Ameritrade Highlights:
- Large selection of no-transaction-fee mutual funds
- Special offers available for qualifying TD Bank customers including free trades and account rebates
- No fees for early withdrawal, over-contributing, or recharacterizing IRA contributions
- IRAs available: Traditional IRAs,Rollover IRAs, Roth IRAs and SEP IRAs.
E-Trade — Wide assortment of investments, be careful of fees
E-Trade offers one of the broadest assortments of no-transaction-fee mutual funds in the industry with over 4,000 no-transaction-fee mutual funds available, making them an excellent home for your IRA. Their robust research tools make it easy to select your investment portfolio and no minimum deposit to open an account makes it easy to get started. Trading fees are higher than some peers at $0.00 per trade, though they do drop to $0.00 per trade when you place more than 30 trades per quarter.Be aware, however, that E-Trade charges $25 for any early distribution, even those that can be taken penalty-free from IRAs and Roth IRAs, such as first-time home purchases, medical expenses or education expenses. They also charge a $25 fee if you accidentally overfund an IRA or if you need to recharacterize an IRA contribution to a Roth IRA contribution or vice versa.
- Deposits of more than $25,000 in a new E*Trade retirement account qualify for cash bonuses and 500 free trades
- Expansive selection of no-transaction-fee mutual funds, over 4,200 in total
- Offers proprietary robo-advisor Core Portfolios for hands-off investors
- IRAs available: Traditional IRAs, Rollover IRAs, Roth IRAs, SEP IRAs, inherited IRAs and Custodial IRAs.
Individual retirement account FAQs
What is a Traditional IRA?
A Traditional IRA is the most basic variety of IRA. With a Traditional IRA, your contributions are tax-deductible in the year you make them and funds in the account grow tax-deferred. You pay regular income tax on distributions made from the account in retirement.
For 2020, you are allowed to contribute $6,000 per year to a Traditional IRA ($7,000 if you’re 50 or older). These contributions are in addition to one made to a 401(k) employment savings plan, however there are limits to how much you may deduct from your taxes depending on how much you make.
Anyone can open a Traditional IRA if they earn taxable income in the year in which they make a contribution. However, the funds you contribute to a Traditional IRA aren’t allowed to grow indefinitely. Holders are subject to or required minimum distributions, which means you’ll need to start taking distributions from the IRA once you reach the age of 72. In addition, you pay a 10% penalty if you withdraw funds before the age of 59 ½.
What is a Roth IRA?
A Roth IRA is the other main variety of IRA. Contributions to a Roth IRA are not tax-deductible in the year you make them, but your money grows tax-free in the account and you pay no taxes on the income when you withdraw the money in retirement.
The contribution maximums are the same as a Traditional IRA: for 2020, you may add $6,000 per year to a Roth IRA ($7,000 if you’re 50 or older). Like a Traditional IRA, these contributions are allowed on top of ones made to a 401(k) employment savings plan, however there are strict rules capping the annual totals you may put into a Roth IRA depending on how much you make.
One big advantage of a Roth IRA that’s different than a Traditional IRA is that you can withdraw money from a Roth IRA at any time without paying penalty. Note that there are rules dictating how much and when you may make early withdrawals from a Roth IRA. Also, Roth IRAs do not have required minimum distributions.
The rules prevent people earning above a certain amount from opening a Roth IRA. However, there is a tax strategy called a “backdoor IRA” that lets you open a Traditional IRA and then convert it to a Roth IRA.
What is a SEP IRA?
A simplified employee pension (SEP) IRA is designed to let the self-employed and small business owners save for retirement. With a SEP IRA, you get a tax deduction on contributions and funds kept in the account grow tax-deferred. SEP IRA withdrawals in retirement are taxed at regular income tax rates.
Maximum annual contribution limits for SEP IRAs are much higher than other IRAs, because the holders of this type of IRA do not have access to 401(k)s. The maximum contribution for 2020 is $57,000. Eligible SEP IRA owners cannot contribute more than 25% of their annual compensation.
For small business owners that have employees, owners must contribute to their employees SEP IRA accounts at the same rate that they contribute to their own SEP IRA account. Small business employees generally can’t contribute to a SEP IRA set up by their employer — although they can make Traditional IRA contributions in some cases.
What is an IRA rollover?
An IRA rollover is an IRA used to house funds that initially accrued in a different retirement account, such as a 401(k). If you change jobs or otherwise find yourself without access to an employer-sponsored retirement plan, a rollover IRA can help keep your assets invested and growing — while keeping you from paying the taxes and penalties you would face if you cashed out the old account.
The easiest way to perform an IRA rollover is to have your existing account custodian transfer the funds directly to the new account or write a check made out to the new trustee in your benefit. You also can do an “indirect rollover,” where you cash out the account and reinvest the funds manually, but there are some important caveats to keep in mind before taking this approach.
As required by the IRS, your retirement account manager must withhold 20% when writing you a distribution check, even if you intend to reinvest it later. Although you have a 60-day window in which you can redeposit the funds without incurring a penalty, you must redeposit the entire amount, which means you’ll need to make up the difference out of your own pocket.
How do I open an IRA account?
You can open an IRA at your bank, at a wealth management firm, at a brokerage or through online robo-advisors. The specific steps required to open an IRA will depend on your chosen account custodian. You’ll be asked verifiable identification information, such as your Social Security number, and you may also be required to meet a certain minimum initial deposit.
Once your account is open and funded, you can begin to research and invest in specific stocks, bonds and other securities and investments. The investments you choose will dictate how the account will generate income from capital gains over time, so it’s important to select and properly allocate your assets as soon as you open your account.
What are the advantages/disadvantages to managing my IRA myself?
Some folks want to handle their investments by themselves. In order to manage your own IRA, you should feel confident in your ability to invest and make decisions with meaningful sums of money — it is your retirement savings after all. With a brokerage IRA, you will have full control over where and how your money is invested, and by doing it yourself you will not pay any management fees.
The downside is that you will have to spend time and energy researching investment decisions and rebalancing your portfolio. You also do not get the advantage of having a professional money manager in your corner. Luckily, a number of brokers will offer free consultations to get you going, and by investing in mutual funds and ETFs, you can leverage the expertise of some of the best money managers in the world.
What are the advantages/disadvantages to automating my IRA?
Many people would prefer to have a professional manage their investments, either because of lack of time or investing expertise. Choosing an IRA managed by a robo-advisor lets a computer algorithm written by investing professionals is a great strategy a hands-off investor.
This comes at a price. Most robo-advisors charge an annual management fee of around 0.25-0.50% of your account balance. Additionally, you lose some of the customization that comes with managing your own investments. Most robo-advisors will assign you one of their predetermined portfolios based on a questionnaire. As a result, you could end up with a portfolio that isn’t as optimal as a custom one or that contains companies that you would rather not own.
One last thing to consider is that many of these robo-advisors are relatively new. If you are young, chances are that the industry and robo-advisors’ offerings will likely change by the time you are retiring.
What investments should my IRA broker offer?
Ensure that the broker you choose has a strong selection of commission-free ETFs and mutual funds along with screening and portfolio-building tools to help you choose the right investments. Most brokers offer a “select list” of mutual funds, which often feature funds created and managed by the same broker. As with all investing decisions, be skeptical and make sure to compare funds from a number of different companies to try and get the best return while paying the lowest fees.
The “Find a Financial Advisor” links contained in this article will direct you to webpages devoted to MagnifyMoney Advisor (“MMA”). After completing a brief questionnaire, you will be matched with certain financial advisers who participate in MMA’s referral program, which may or may not include the investment advisers discussed.