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Updated on Friday, October 1, 2021
Roth individual retirement accounts (IRAs) are a powerful vehicle for retirement savings. That’s because in a Roth IRAs your money grows tax free. Here’s how it works: You deposit money into your Roth IRA on which you’ve already paid income taxes, you earn interest on those funds over the life of the account and withdrawals are not taxed as income — unlike withdrawals from traditional IRAs. There are other benefits of a Roth IRA: No required distributions, unlimited deposits for qualifying individuals, and lenient early withdrawal rules.
For many investors, Roth IRAs are an important component of a well-planned retirement strategy. But where should you open your Roth IRA? There’s no shortage of brokerages that want your retirement dollars, and this embarrassment of riches can make deciding difficult. We have surveyed the field of options and narrowed the list to the best Roth IRA accounts for both active investors and more hands-off savers. Read on for our review.
How we chose the best IRA account providers
To arrive at our list of the best Roth IRA accounts, we thoroughly reviewed the broker and robo-advisor landscape. In our latest round of research, we evaluated 39 different product offerings. For each product we collect dozens of different data points from fees, to portfolio construction, customer service, research offerings, account minimums and firm reputation.
For our rankings for the best Roth IRAs for active investors, the most important criteria were 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).
For our rankings for the best Roth IRAs for hands-off investors, the most important criteria were 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 Roth IRAs for hands-off investors
Many folks do not have the time, interest, or expertise to invest their money themselves. The great news is that you actually don’t have to. You can hire a robo-advisor to do the job for you. For a competitive annual management fee plus the expenses of the selected funds — usually totalling 0.35% to 0.50% of your portfolio per year — a robo-advisor will invest your money in a portfolio tailored to your financial goals. See below for our picks for best robo-advisors for Roth IRAs.
|Annual Management Fee||Average Expense Ratio (moderate risk portfolio)||Account Minimum to Start|
|Fidelity Go||$0||Close to 0.00%*||$0|
|E*TRADE Core Portfolios||$0||Close to 0.00%*||$500|
|Ally Invest Managed Portfolios||$0||0.08%||$100|
*Most of the Fidelity Go portfolios are composed of Fidelity Flex funds, which have 0.00% expense ratios. A small amount is held in the Fidelity Government Cash Reserves Fund, which does come with some expense charges. However, some of those fund expenses may be offset by a “variable fee credit”. See Fidelity’s FAQs for more.
Fidelity Go — Transparency and low costs
What you see is what you get with retirement powerhouse Fidelity’s robo-advisor Fidelity Go. Fidelity charges a 0 annual management fee and close to 0% in expense ratio fees. Considering that almost all robo-advisors pass on to customers ETF expense ratio fees — they range from 0.08% to more than 0.15% a year — Fidelity helps you feel confident you’re lining your own pockets, not the fund manager’s. With no minimum account size and no fees to transfer money in or out of your account, it’s easy to get started whether you’re scraping together Washingtons or swimming in Benjamins. One note of caution: Fidelity Go does invest solely in Fidelity-owned funds, so if you are a conservative investor, you may want to consider also investing with a robo-advisor that spreads your investments across different fund companies.
Fidelity Go Highlights:
- Low fees: 0 management fee and almost 0.00% expense ratios. Fidelity invests most of your money in their proprietary Fidelity Flex funds, which have 0% expense ratios and are only available to select customers. The company also provides rebates to offset the fees they charge to hold other funds.
- Size and experience: Fidelity is one of the biggest retirement brokerages in the US. The firm manages money for over 30 million customers, so your investment will be in very experienced hands.
- Both human- and robot-managed funds. The funds in Fidelity Go portfolios are a blend of actively managed and passively managed funds, so you get the advantages of both investing approaches.
E*TRADE Core Portfolios — Smart beta and SRI portfolio options
You may know E-Trade from their talking baby commercials, however robo-advisor Core Portfolios is more than just clever marketing. Low total fees — a 0.30% management fee and an average expense ratio of 0.06% — plus a low $No account minimums minimum balance make it easy to start investing and keep investing with Core Portfolios. One aspect that sets E-Trade apart is their diversity of portfolio options. Investors can choose between three different portfolio sets: core portfolios, socially responsible portfolios, or smart beta portfolios, each of which includes a mix of equities designed to meet more tailored investing goals. One item to watch out for with E-Trade retirement accounts are penalty fees: They charge $25 for early IRA distributions, if you need to recharacterize an IRA contribution to a Roth IRA, or if you accidentally overfund your Roth IRA.
E*TRADE Core Portfolios Highlights:
- E-Trade does not invest your dollars in their own proprietary funds, reducing potential conflicts of interest. Some investors prefer this approach, which is the opposite tack to the one taken by Fidelity, for example.
- Socially responsible investing (SRI) and smart beta portfolios provide options for investors who want to tailor their IRAs for specific goals. SRI strategies allow you to put your money to work with only vetted socially and environmentally responsible companies, while smart beta attempts to outperform more conventional funds with frequent reweighting of equity holdings.
- Low fees: 0.30% management fee and 0.06% avg expense ratio.
Wealthfront — Premium strategies for large accounts
Wealthfront is one of the pioneers of the robo-advisor movement, and their continued commitment to ultra-low fees makes them an attractive place to grow your Roth IRA. The annual cost is a 0.25% annual advisory fee on investments management fee plus an average expense ratio of 0.07% to 0.16%, which is in line with other leading robo-advisors. If you’re looking for guidance, Wealthfront offers a suite of free tools to help you plan for retirement and other major financial life events. Since Wealthfront is all-digital, face-to-face interaction isn’t an option, which some folks may love — or dislike. If you want to shoot the breeze with your broker at their desk, other options may suit you better.
- Premium investment strategies available for investors with large accounts including Risk Parity for accounts over $100,000 and Smart Beta for accounts over $500,000.
- A minimum deposit of only $500 to open an account makes Wealthfront accessible for beginning investors.
- Free financial planning tools for retirement, college savings, college and time off for travel.
Ally Invest Managed Portfolios — Automatic portfolio rebalancing, extra account options
Like a trusted family member, Ally Invest Managed Portfolios will babysit your retirement savings so that you can go have more fun — it’s up to you whether that means hiking an extra mile in the woods or rehearsing your Elvis impression for karaoke. Ally’s robo-investing service offers ETF portfolios diversified across five different asset classes to give you the best chance at growth, while keeping fees to a minimum. Ally offers 24/7 support as well, which means that you’ll never be on your own if you have to sort out a complicated retirement question. One drawback with Ally is that, once you deposit money in a Roth IRA, they charge you fees if you try to transfer or close an account — $50 for a full or partial account transfer or $25 to close an IRA account.
Ally Invest Managed Portfolios Highlights:
- Low, $100 minimum deposit makes it easy to start investing for retirement.
- Automatic portfolio rebalancing adjusts for market swings, ensuring that your portfolio matches your priorities.
- Ally offers many services beyond Roth IRAs, including a savings account with a 0.50% APY, traditional brokerage accounts, CDs, and money market accounts.
Best Roth IRAs for active investors
The brokers below offer up a universe of retirement investing options for investors who are confident making more of their own investing decisions. If the idea of choosing the stocks, bonds and funds for your retirement sounds exciting – and you have the time to devote to it – a Roth IRA account with one of the brokers below will allow you to avoid management fees and keep more of your retirement dollars to yourself.
|Fee per trade||Commission-free ETFs||Commission-free ETFs|
Fidelity — Best overall offering
It is not by chance that Fidelity leads our rankings for Roth IRAs, both for active investors and hands-off investors. In terms of investing selection, Fidelity has very robust offerings for retirement investors, including over 3,600 no-transaction-fee mutual funds and over 500 commission-free ETFs. There is no minimum deposit to open an account, and while Fidelity’s $0.00 per trade fee is not the lowest in the industry, it is on the low end. Fidelity does not attempt to lock you in to their service, charging no fees to transfer funds or close your account. While their website and app may not have the bells and whistles of some of the newer brokerage startups, Fidelity remains a cornerstone for retirement investors with solid offerings and low fees.
- Low fees: Fidelity charges a $0.00 per trade commission and no fees to transfer funds or close accounts.
- Fidelity’s proprietary ZERO funds charge 0.00% in expense ratios: This means that every penny of growth stays right in your portfolio.
- Helpful retirement planning tools and dashboards: These tools help you build a retirement savings plan and stay on track.
Charles Schwab — Best customer service
The buddy system isn’t just for kids, it’s actually great for retirement planning. Charles Schwab stands out among its peers for IRA customer support, with a dedicated IRA phone line to help answer questions and free consultations with Schwab fixed income specialists, which is a great resource for investors close to retirement. The smorgasboard of investing options that Charles Schwab offers through its Roth IRAs should be enough to satisfy any retirement planner. It’s easy to start, with $0 minimum deposit to open an account, and $0.00 per trade commissions should keep your piggy bank intact. One caveat to keep in mind is Schwab’s transfer fees. It costs $25 to partially transfer an account to another brokerage and $50 to transfer an entire account.
Charles Schwab Highlights:
- Excellent customer service: Schwab offers a dedicated IRA phone line, 24/7 support and over 350 branch locations for in-person consultations.
- Strong low-fee investment selection: The firm gives investors access to over 500 commission-free ETFs and more than 3,400 no-transaction-fee mutual funds.
- A broad selection of educational resources: Schwab’s handy retirement calculators and investing educational resources help you make a retirement plan and keep the plan on track.
E*TRADE — Great mutual fund selection
Opening a Roth IRA at E-Trade is simple with no minimum deposit required to start. Once you are in the door, low-cost choices abound: E-Trade offers over 4,200 no-transaction-fee mutual funds and over 270 commission-free ETFs, accompanied by planning tools and screeners to help you make the right selections for your retirement portfolio. The standard trading commission, $0.00 per trade, is on the high side, though this drops to $0.00 per trade when over 30 trades per quarter if you trade more than 30 times per quarter. Fees can sneak up on you if you are not careful, so keep an eye out. E*TRADE charges a $25 penalty if you overfund an IRA, if you need to recharacterize an IRA contribution, or if you want to make early IRA withdrawals.
- Trading bonuses: Cash bonuses and 500 free trades available for new accounts with deposits of more than $25,000 within the first 60 days.
- Wide selection no-fee funds: E*TRADE gives investors access to more than 4,200 no-transaction-fee mutual funds and over 270 commission-free ETFs.
- Powerful mobile trading apps: E*TRADE gives you access to charting tools and research materials for when you’re on the go.
TD Ameritrade — Best investment selection overall
The smorgasboard of investing options at TD Ameritrade is enough to satisfy even the largest appetite for retirement investing. TD Ameritrade’s low-fee offerings are impressive with over 500 commission-free ETFs and over 3,900 no-transaction fee mutual funds. TD also provides free analyst reports, tools and watch lists in order to help you sift through these plentiful options. With retirement-specific fees TD Ameritrade generally scores well, with no fees for early withdrawals, over-contributing or recharacterizing IRA contributions. TD Ameritrade’s trading fees are on the high side at $0.00 per trade, so if you plan to trade a lot you may want to consider lower-cost brokers.
TD Ameritrade Highlights:
- Useful retirement planning resources: TD offers its users a plethora of retirement planning resources, including calculators, educational videos and webcasts.
- Trading bonuses for large accounts: The firm rewards investors with up to 500 free trades for the first 60 days.
Individual retirement account FAQs
What is a Roth IRA?
A Roth IRA is an after-tax investment account, meaning you deposit dollars into your account on which you’ve already paid taxes. Your funds grow tax-free over the life of the account, and you receive qualified tax-free distributions in retirement. A big benefit is that there are no required minimum distributions (RMDs), meaning that you are not required to withdraw funds at age 70 ½. There are also no age restrictions for contributing to a Roth IRA, so as long as you have earned income you can contribute.
In order to make tax-free withdrawals, five taxable years must have elapsed since contributions were first made to the account, and one of the following secondary criteria must also be met:
- The account owner reaches age 59 ½.
- The account owner becomes disabled.
- The account owner meets the IRS’ first-time homebuyer qualifications.
- The account owner dies, and distributions are made to a beneficiary or the estate.
Roth IRAs are good vehicles for passing on tax-free assets to beneficiaries and heirs because they aren’t subject to required distributions, so they can grow until the account owner’s death.
What should I look for when comparing brokerages for Roth IRAs?
With a large number of brokers to choose from, you need to do research to ensure you choose the best Roth IRA account for your needs. Here are a few factors to compare during your search:
- Annual fees: Brokers assess an annual fee for Roth IRAs, often expressed as a percentage of the assets under management. Although this fee may be as low as 1% and may seem negligible, as your account grows, that small percentage can become quite a chunk of change. You can start your search by looking for accounts with the lowest annual fees possible. Some providers don’t charge any annual fees and instead make money from trades and commissions.
- Minimum initial funding: Does the Roth IRA provider require a certain minimum initial deposit to get started, and if so, can you afford it? If you have a decent stash of funds to invest, you also could look for bonuses and promotions, where the account provider gifts money or other perks when you meet a deposit minimum.
- Commissions and trading fees: Most Roth IRA custodians assess a commission for each trade you make, which means you’ll lose some money whenever you buy or sell assets. However, some brokerages also offer commission-free assets, such as ETFs and mutual funds. Choosing the right broker can help you minimize or entirely avoid these fees.
- Investor tools to help you make smart investing decisions: Although all investments carry some risk, some investment strategies are smarter than others. Many brokerage accounts offer research tools and access to live financial professionals to help you choose the best funds for your Roth IRA.
Should I get a Roth IRA or a traditional IRA?
Like everything to do with finances, it depends on your unique situation. Generally speaking, if you think you will be in a higher income tax bracket after you retire than before you retire, you’ll want to invest more in a Roth IRA, which allows you to withdraw earnings tax free. If you think you will be in a lower income tax bracket in retirement than before retirement, then you’ll want to have more invested in a traditional IRA.
Realistically, predicting your future income tax bracket can be like trying to predict the weather in Kansas City, Mo. four months from Tuesday: There are a lot of unknown factors. A hybrid approach, with money split between a Roth IRA and a traditional IRA, while also contributing to a 401(k), can be a good balance for many folks. It gets you the main benefits of a Roth IRA — tax-free growth, no required minimum distributions and more lenient early withdrawals — while also leaving open the benefits of a traditional IRA or 401(k) — an upfront tax deduction and tax-deferred growth.
What if I need to take money out of my Roth IRA?
If you watch enough heist movies you know that even best-laid schemes rarely go according to plan. Luckily, if life throws your grand financial plan off track and you need to withdraw money from your retirement savings, Roth IRAs offer flexibility. The principal — the money that you deposited into a Roth IRA account — is always yours to withdraw penalty-free. If you need to withdraw some of the interest earnings — the money earned from the principal — you will have to pay an additional 10% penalty to the IRS on earnings you withdraw before age 59 ½ or before the account is five years old. This 10% penalty is in addition to any taxes you have to pay on the withdrawal as normal income.
How long should I keep money in my Roth IRA?
As with any long-term investment, you should be comfortable salting away funds in a Roth IRA for at least five to eight years, and ideally until you are retired. Stock market fluctuations can cause investments to decline in down years, and a five-to-eight year time frame provides enough time for funds to recover in case of a drop, based on historical market cycles. If you are lucky enough to be able to retire, you’ll want to look at all of your retirement accounts and balance withdrawals from your Roth IRA with your other income strategies.
How much can I contribute to a Roth IRA?
For 2019, you can contribute up to $6,000 per year to your Roth IRA (or $7,000 if you’re 50 or older) as long as your income is not above the IRS limits. Don’t throw in the towel if your income is above the IRS cap, though. There are ways to roll money into a Roth IRA through a “backdoor IRA”, which entails opening up a Traditional IRA that you then convert to a Roth IRA.
What is a Roth 401(k)?
A Roth 401(k) is a type of retirement plan that many employers offer their workers. The main difference to a traditional 401(k) is that contributions are made using after-tax dollars, instead of pre-tax dollars. By using after-tax dollars, you can withdraw any interest earnings tax-free, come retirement time. A main benefit to Roth 401(k) accounts is that there are zero income caps, meaning that you can contribute money to a Roth 401(k) even if you make more than the income caps for a regular Roth IRA. One big difference to a Roth IRA is that you do have to start taking required minimum distributions starting at age 70 ½. Luckily, you can roll a Roth 401(k) over into a Roth IRA, which would help you avoid required minimum distributions.
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.