Advertiser Disclosure

Investing

Retirement Plan Options When You’re Self-Employed

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

Self-employment is a dream for many who crave the flexibility and sense of autonomy being your own boss provides. No more worrying about taking those long lunches or running out of vacation days. On the flipside, it also means you’re on your own when it comes to saving for retirement. There are no company-sponsored plans or matching funds, and no human resources department to consult about your best options — it’s all up to you.

The good news is there are a host of great investment tools to help you plan for your future and build a solid nest egg for retirement, many of which have similar benefits as employer-sponsored plans. Here are six of the most common retirement plans for self-employed individuals.

1. Traditional Individual Retirement Account (IRA)

How it works

There are several types of Individual Retirement Accounts (IRAs) you can establish if you’re self-employed. First up is a traditional IRA, which allows you to deposit money in an investment account before paying taxes on it. Your funds then grow — tax-deferred — over the years until you reach retirement, at which point you will have to pay taxes on the funds as you withdraw them.

IRAs are more flexible than 401(k)s in that you can withdraw money from them at any time without paying a penalty to cover certain costs, including higher education, buying your first home and medical costs. You will, however, need to pay taxes on the funds in the year in which they’re withdrawn with a traditional IRA. You also can’t leave your funds in an IRA forever. Required minimum distributions begin at age 70 and a half.

Contribution limits

You can invest up to $6,000 in a traditional IRA in 2019 (an increase of $500 in 2018). If you’re over the age of 50, you can contribute an additional $1,000 a year ($6,500 in 2018 and $7,000 in 2019) as “catch-up” contributions. Note: This is the total yearly limit for all Roth and traditional IRA contributions.

Some additional limitations may apply depending on your income and you or your spouse’s participation in other work-sponsored retirement plans.

How it’s taxed

A traditional IRA allows you to invest the maximum amount for growth (as opposed to paying taxes up front, which is the case with a Roth IRA) because the funds aren’t taxed until after they’re withdrawn.

Your contributions may also be fully or partially tax deductible in the year in which you make them, so that may also decrease your taxable income.

Who it’s best for

Typically, traditional IRAs are a good option if you’re currently in a higher tax bracket and expect to be in a lower one when you retire. They’re also an attractive option if you want the ability to access funds before retirement for certain expenses without paying a penalty.

2. Roth IRA

How it works

A Roth IRA works much like a traditional IRA, but there’s one big difference: when you actually pay taxes. With a Roth IRA, you pay taxes on your contributions in the year in which they’re made. Those funds then grow tax-free over the years until you reach retirement. When you’re ready to withdraw them — as long as you’ve reached the age of 59 and a half — they’re yours, tax-free.

IRAs are more flexible than 401(k)s in that you can withdraw money from them at any time without penalty to cover certain costs, including higher education, buying a home and paying for medical costs. There are no required minimum distributions.

Contribution limits

You can invest up to $6,000 in a Roth IRA in 2019 (an increase of $500 from 2018). If you’re over age 50, you can contribute an additional $1,000 a year ($6,500 in 2018 and $7,000 in 2019). Note: This is the total yearly limit for Roth and traditional IRAs combined.

How it’s taxed

Contributions to a Roth IRA aren’t tax-deductible, so you don’t get a tax break in the year they’re made. However, because you pay taxes up front, those funds are not counted as taxable income when you retire.

Who it’s best for

In general, Roth IRAs are a good option if you’re currently in a lower tax bracket and expect to be in a higher one when you retire. They’re also good if you want the ability to access your funds before retirement for certain expenses without paying a penalty or paying taxes on the funds when needs arise.

3. Solo-401(k)

How it works

A solo-401(k), also referred to as a one-participant 401(k) plan, works much like a traditional, employer-sponsored 401(k); however, it’s designed for individual business owners or the owner and their spouse. It allows you to invest funds in a retirement savings account that then grows tax-deferred — traditional solo-401(k) or tax-free (Roth solo-401(k) — over the years until you withdraw them at retirement.

Penalties apply for early withdrawal if the account is less than five years old and you haven’t reached the age of 59 and a half. However, you may be able to take out a loan from your 401(k).

Contribution limits

Like a traditional 401(k), you can contribute up to $19,000 in 2019 ($18,500 in 2018). If you’re over the age of 50, the limit increases to $25,000 in 2019 ($24,500 in 2018).

One notable upside to this plan is you’re allowed to contribute additional funds because you act as both the employer and employee when you’re self-employed. Total contributions can’t exceed $56,000 for 2019 ($55,000 for 2018), unless you’re over the age of 50, when there are allowances for “catch-up” contributions.

How it’s taxed

Like IRAs, you can choose either a Roth or a traditional solo-401(k). With a traditional solo-401(k), taxes are deferred on the money you contribute to your account until you withdraw funds in retirement.

If you choose to designate some of your funds as Roth contributions, however, you will pay taxes on them up front, with tax-free withdrawals in retirement. Contributions to a traditional solo-401(k) aren’t counted as taxable income in the year they are made, while Roth solo-401(k) contributions are.

Who it’s best for

A solo-401(k) is a good option if your income surpasses the IRA limits and you want to invest more for your future.

4. Savings Incentive Match Plan for Employees (SIMPLE) IRA

How it works

Traditional and Roth IRAs are funded entirely by employee contributions, whereas SIMPLE IRAs allow contributions from both the employer and employee, which means you’re playing both roles if you’re self-employed.

Like with other IRAs, there are penalties for early withdrawal (before the age of 59 and a half), and there are exceptions for many expenses, including education, health care costs and buying a first home. If you withdraw funds before your plan is two years old, however, that withdrawal is subject to a hefty 25 percent tax penalty.

Contribution limits

You can contribute up to $13,000 in 2019 (an increase of $500 from 2018) to a SIMPLE IRA, but not more than the amount you earn. Additional “catch-up” contributions up to $3,000 can be made if you’re 50 or older.

As the employer, you can also contribute dollar-for-dollar matching funds up to 3 percent of your net earnings or make an additional non-elective contribution equal to 2 percent of your income, up to $280,000 in 2019 (an increase of $5,000 from 2018).

How it’s taxed

Contributions to a SIMPLE IRA aren’t taxed in the year in which they are made, but they are taxed when they’re withdrawn in retirement. Contributions are also tax deductible by the employer in the year in which they are made.

Who it’s best for

A SIMPLE IRA is a good option if you want to contribute funds in excess of the limits of traditional and Roth IRAs. They’re also worth considering if you have 100 employees or less, as they’re easy to set up and don’t come with the same startup and operating costs that other plans may have.

5. Simplified Employee Pension (SEP) IRA

How it works

Like other IRAs, a SEP IRA allows you (as the employer) to invest funds, tax-deferred, until you need them in retirement. There are penalties for early withdrawal (before the age of age 59 and a half) and there are minimum distribution requirements.

There are two primary differences that set the SEP IRA apart from others:
1. A SEP IRA has higher contribution limits than traditional and Roth IRAs, and;
2. If you have employees who meet certain qualifications, you must make contributions to their SEP IRA in equal amounts for all employees. Contributions are only made by the employer (which is you) if you’re self-employed.

Contribution limits

You can contribute up to 25 percent of your net earnings to a SEP IRA, up to a certain limit. In 2019, the limit is $56,000, an increase of $1,000 from the prior year (2018). There’s no extra allowance for catch-up contributions as there is with other retirement accounts.

How it’s taxed

Contributions to a SEP IRA are tax deductible, as funds are taxed when they’re withdrawn in retirement. There’s no Roth option to pay taxes up front, as the contributions are made by the employer.

Who it’s best for

A SEP IRA is a good option if you’re self-employed and want to save a large amount of money for retirement. It’s also a good option if you have 100 employees or less and want to establish a retirement plan without the associated costs of other plans.

6. Defined benefits plan

How it works

Like an employer-sponsored pension, an individual defined benefits plan lets you put away a certain amount of money for a guaranteed return in retirement. The amounts are based on a formula that takes into account the number of years you’ve worked and how much you earn. You must enlist the help of an actuary to help determine your contribution and benefits.

Contribution limits

The amount you may contribute is based on a formula and will vary from person to person. Generally, however, the annual benefit can’t be more than the highest salary they were paid for three years in a row, or surpass the annual limit of $225,000 in 2019 (a $5,000 increase from 2018).

How it’s taxed

Taxes are deferred up front and paid on the funds when they’re withdrawn during retirement. The contributions are tax deductible in the year in which they are made.

Who it’s best for

A defined benefits plan may be a good option if you’re a high earner and want to save aggressively for retirement.

How to open a self-employed retirement plan

To open any of these retirement plans, there are numerous online brokerages that can help, or if you prefer a more personal approach, you can seek out a financial advisor in your area. Banks can also help you establish some of these accounts as well. It may also be wise to work with an accountant to make sure you file the proper forms and pay the correct amount of taxes.

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.

Julie Ryan Evans
Julie Ryan Evans |

Julie Ryan Evans is a writer at MagnifyMoney. You can email Julie here

Advertiser Disclosure

Investing

Betterment Review 2019

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

Robo-advisor Betterment uses exchange-traded funds (ETFs) and a high degree of automation to manage your portfolio. In addition, it’s possible to speak with financial professionals to receive more tailored advice on retirement and other financial goals.

Investors most likely to benefit from Betterment include beginning investors hoping for a low barrier to entry, as well as intermediate investors who are interested in keeping a portion of their portfolio in set-it-and-forget-it accounts. Investors interested in trading individual stocks or taking a more hands-on approach aren’t likely to benefit as much from Betterment.

Betterment
Visit BettermentSecuredon Betterment’s secure site
The bottom line: Betterment is great for investors looking to get started with minimum fuss — and who aren’t interested in active trading.

  • Easy to get started
  • Set up different investing goals
  • Benefit from tax optimization

Who should consider Betterment

Betterment is for investors who would like an automated approach to investing. Anyone can benefit from Betterment, but it’s especially helpful for beginner investors hoping to start growing their wealth.

Because of the low barrier to entry — there are no account minimums and you can get started with a minimum deposit of $10 — it’s possible for almost anyone to begin investing.

It’s also a great resource for intermediate investors looking to accomplish different goals with “buckets” of money. With Betterment, it’s possible to set varying levels of risk for different goals, with different asset allocations based on when you’re likely to need the money.

Finally, intermediate and advanced traders can use Betterment to build a long-term retirement portfolio, although there is no active trading. Betterment offers a place for assets to grow over longer periods at a pace that is likely to track the market as a whole.

Consider your goals and what you hope to accomplish with your investment portfolio. While Betterment can potentially be a good choice for anyone who keeps a portion of their portfolio in long-term assets, it’s not ideal for those who prefer to actively manage their portfolios or engage in active trading.

Betterment fees and features

Amount minimum to open account
  • $0
Management fees
  • 0.25% for Digital offering (no minimum account balance)
  • 0.40% for Premium offering ($100,000 minimum account balance)
Account fees (annual, transfer, inactivity)
  • $0 annual fee
  • $0 full account transfer fee
  • $0 partial account transfer fee
  • $0 inactivity fee
Current promotions

Three months free for new customers who are referred by an existing Betterment account holder

Account types
  • Individual taxable
  • Traditional IRA
  • Roth IRA
  • Joint taxable
  • Rollover IRA
  • Rollover Roth IRA
  • SEP IRA
  • Trust
Portfolio
  • 12 asset classes represented in ETF portfolio
Automatic rebalancing
Tax loss harvesting
Offers fractional shares
Ease of use
Mobile appiOS, Android
Customer supportPhone, Email

Management fees

Betterment’s pricing starts with a 0.25% management fee for the basic Digital account. This pricing is in line with other robo-advisors like Wealthfront, which also charges 0.25%.

Balances above $100,000 earn Betterment’s Premium account status, featuring unlimited access to personalized advice for a management fee of 0.40%. This isn’t out of line with other robo-advisors: Wealthsimple charges 0.40% for account balances above $100,000. Wealthfront, however, maintains the 0.25% management fee, no matter the size of your account. Once your balance reaches $2 million, your fee drops to 0.15%.

In addition to regular management fees, it’s also important to note that you’ll pay expense ratios on the ETFs Betterment selects on your behalf. Betterment’s recommended portfolios feature expense ratios of 0.07% to 0.15%. According to Betterment, this is much lower than the industry average.

Finally, there are additional fees if you want access to specialized financial planning. If you have $100,000 or more invested with Betterment, you get access to these services as part of your annual management fee. However, if your balance is lower, you pay a flat fee for financial advice ranging between $199 and $299 per advisory session.

Portfolio options and portfolio management

Betterment chooses an investment portfolio for you based on your goals and time horizon. The core portfolio includes stock and bond ETFs allocated in a way that helps you reach your goals. It’s also possible to tweak your asset allocation in your account.

In addition, Betterment offers different portfolio options based on specific goals and targets. Here are some of the additional choices available with Betterment:

  • Socially Responsible Investing (SRI): This portfolio focuses on reducing exposure to companies that have a negative social impact. The expense ratio is a little higher with these portfolios, around 0.14% to 0.22%, depending on the allocation within the portfolio.
  • BlackRock Target Income Portfolio: Aimed at retirees, this portfolio is designed to provide a regular income stream. The portfolio focuses on bond investments that offer dividends that can be used for income rather than focusing on principal and capital appreciation.
  • Goldman Sachs Smart Beta Portfolio: Rather than using basic asset allocation principles, this portfolio focuses on assets that possess four characteristics considered to drive performance — strong momentum, good value, low volatility and high quality. It’s possible to adjust this portfolio in 101 different ways.

With all portfolios, Betterment handles automatic rebalancing when your assets experience a certain amount of drift. For example, if market performance is resulting in an asset allocation that is too far outside the target for your portfolio, Betterment will sell and buy different assets to bring your portfolio back to its target.

Another way Betterment automatically manages your portfolio is by using tax optimization strategies. Different assets are assigned to your accounts based on their overall tax efficiency. Additionally, when certain assets lose value, Betterment will sell them automatically in an effort to offset capital gains in other areas. With the help of the Tax Loss Harvesting+ feature, rebalancing can occur daily.

Financial planning features

If you want a big-picture view of your finances, Betterment’s account sync feature can be helpful. With this feature, you connect some or all of your outside accounts to Betterment, which lets you view all of your financial information in one place. The app then offers personalized recommendations for managing your money.

You have the option to speak with Betterment financial professionals about planning for specific goals and life milestones. Account holders above the $100,000 balance requirement get unlimited access to personalized advice and help by phone and email as part of the management fee.

If you don’t meet this threshold, you can pay for advice packages tailored to the goals you’re working on. Here are some of the Betterment advice packages available for a flat fee:

  • Getting Started: A 45-minute phone call with a certified financial planner (CFP) who can provide step-by-step help setting up a Betterment account that helps you maximize a variety of goals. Price: $199.
  • Financial Checkup: Get a review of your investment portfolio and how it fits into your financial situation in a 60-minute call with a Certified Financial Planner. Price: $299.
  • College Planning: Aimed at families who want help getting set up for college costs and using higher education plans. It consists of a 60-minute phone call that can help you review your choices and decide what’s best for you. Price: $299.
  • Marriage Planning: Planning to tie the knot soon? Get help as you navigate goals, priorities and merging finances in a 60-minute phone call. Price: $299.
  • Retirement Planning: Set up a 60-minute holistic review of your portfolio, current situation and more that can help you make better decisions for your retirement. Price: $299.

The Betterment Advisor Network can also help you get your own dedicated financial advisor who can help you with almost any financial need. Betterment will help match you with a professional who is likely to fit your goals and priorities.

Everyday Savings Account

Betterment offers Federal Deposit Insurance Corporation (FDIC)-insured banking options. While the checking account isn’t universally available yet, it is possible to use Everyday Savings to earn up to 2.04% APY. Additionally, there are no limits on withdrawals and no minimum balance. You also don’t have to worry about paying fees on your balance. The money in your Everyday Savings account is actually held at partner banks — it’s possible to opt out of a specific partner bank, if you wish.

In addition to providing a high-yield savings option, you can also decide to use the Two-Way Sweep feature. With this feature, Betterment automatically analyzes a connected account each day and will move excess cash from your connected account and into your savings account. If you need the money back in your main account, Betterment will sweep it from your Everyday Savings without the need to take further action on your part.

Strengths of Betterment

Betterment is always adding new goals and features. Here are some of the most helpful features it currently offers:

  • Tax optimization: Betterment uses tax loss harvesting to help offset taxes on your gains. The company also uses its Tax-Coordinated Portfolio to give you the maximum tax benefit. Certain assets are assigned to your IRA, while others are kept in your taxable accounts.
  • Betterment Everyday: Betterment now offers FDIC-insured checking and savings accounts. While the checking product is still in the roll-out stages, it’s possible to earn up to 2.04% APY with Everyday Savings.
  • Set up different goals: One of Betterment’s most useful features is the ability to set up different goals. It’s possible to have a traditional IRA and a rollover IRA, as well as open a Roth IRA. It’s also possible to open taxable accounts for a variety of other goals. Set different asset mixes for each type of account and adjust what you add simply and easily.
  • Chance to talk to a human: Betterment offers customer service by phone in addition to email. However, you can also speak with a financial professional with packages starting at $199, depending on what you’re looking for. It’s also possible to be matched with an advisor if you meet the requirements for access to the Betterment Advisor Network.
  • Portfolio projection tools: Set goals with the help of Betterment’s projection tools and track your progress toward reaching your objectives. Betterment offers insight into whether you’re on track with your goals as well as graphs to help you visualize the potential of your portfolio.

Drawbacks of Betterment

While Betterment is a great choice for many investors, it’s not for everyone. There are some drawbacks, and no Betterment review would be complete without mentioning them.

  • No active trading: If you’re interested in choosing your own investments and actively trading, you won’t be able to do that with Betterment. While you can do a little more self-directed investing with a Premium account, the reality is that you’re mostly limited to choosing your prefered asset mix rather than picking individual investments.
  • Lack of 529 and education savings accounts (ESAs): There are no custodial accounts with Betterment, and you can’t set up a 529 or ESA to save for your child’s education. A similar robo-investing company that does offer a 529 is Wealthfront.

Is Betterment safe?

Anytime you invest, there is a chance you could lose money. Poor market conditions can always lead to a loss. However, Betterment’s use of modern portfolio theory in its asset allocation helps reduce your exposure to risk. Additionally, Betterment carries Securities Investor Protection Corporation (SIPC) insurance, protecting each of your Betterment accounts up to $500,000 in the event of a failure by the company. (Note that market losses aren’t covered by SIPC insurance.)

In addition to making sure an investment company is SIPC-insured, you also can use the Financial Industry Regulatory Authority’s BrokerCheck to find out about disclosures and actions, and search the Consumer Financial Protection Bureau’s Consumer Complaint Database. The Better Business Bureau is also a good source of information.

Final thoughts

Betterment is a great choice for beginner investors looking to get their feet wet and for long-term investors hoping to grow a retirement portfolio. For investors with more than $100,000, it can also be a decent place to keep your money if you’re looking for basic advice.

However, for active traders and those who want a little more control over their assets, Betterment might not be the best choice. Instead, it could make more sense to use platforms like E-Trade or Robinhood if you want to get involved with active trading. Stockpile is also a good choice for investors who want to buy individual stocks using fractional shares.

Overall, though, Betterment is a great choice for building wealth for the long term, including setting accounts for specific goals and using tools that help you see if you’re on track to meet your objectives.

Open a Betterment accountSecured
on Betterment’s secure website

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.

Miranda Marquit
Miranda Marquit |

Miranda Marquit is a writer at MagnifyMoney. You can email Miranda here

Advertiser Disclosure

Investing

Ally Invest Review 2019

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

Not having enough cash to open an online brokerage account can be seen as a barrier to starting your investing journey. If that’s a concern check out Ally Invest, which doesn’t have a minimum balance requirement.

Ally Invest is a good choice even if you don’t already have another account with Ally Bank. This online broker offers a wide range of account features, as well as a robo-advisor option. Take advantage of Ally Invest’s online platform and mobile app to track your investments whenever and wherever you wish.

Ally Invest
Visit AllySecuredon Ally Invest’s secure site
The Bottom Line: Ally Invest is an affordable broker with a wide range of investments to choose from.

  • Zero commissions on buying or selling ETFs, U.S. exchange-traded stock and options.
  • There’s no minimum deposit required for a self-directed trading account and no minimum account balance requirement.
  • Ally Invest offers tons of investment options, including stocks, bonds, mutual funds, options, futures and forex.
  • Managed portfolios don’t have advisory fees, annual charges or rebalancing fees.

Who should consider Ally Invest

If you’re new to investing, Ally Invest is a great option. It doesn’t have an account minimum to start, which lets you start investing even if you only have a few extra dollars. The managed portfolio — Ally’s take on a robo-advisor — requires $100 minimum to get started. The managed portfolio include a variety of individual retirement accounts (IRAs):

  • Individual
  • Joint
  • Traditional
  • Roth
  • Rollover
  • Custodial

Ally Invest is also a solid choice if you’re trying to minimize the impact fees have on your overall investments. Ally doesn’t charge trading commissions on exchange traded funds (ETFs), options or U.S. exchange-traded stocks.

Once you’ve opened your account, Ally Invest’s online trading platform and research tools are easy to use. While you won’t find earnings transcripts, SEC filings, earnings press releases or audio calls, you can still dig into technical data using free screeners and other tools powered by Recognia.

Ally Invest fees and features

Current promotions

New Ally Invest accounts accounts receive 90 days of commission-free trades, up to $500 in value, regardless of deposit amount. Cash bonuses are available for new accounts starting at $50 for if you deposit or transfer at least $10,000.

Stock trading fees
  • $0.00 per trade
Amount minimum to open account
  • $0
Tradable securities
  • Stocks
  • ETFs
  • Mutual funds
  • Bonds
  • Options
  • Futures / commodities
  • Forex
Account fees (annual, transfer, inactivity)
  • $0 annual fee
  • $50 full account transfer fee
  • $50 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
  • Coverdell Education Savings Account(ESA)
  • Custodial Uniform Gifts to Minors Act (UGMA)/Uniform Transfers to Minors Act (UTMA)
  • SEP IRA
  • SIMPLE IRA (Savings Incentive Match Plan for Employees)
  • Trust
Ease of use
Mobile appiOS, Android , Windows phone
Customer supportPhone, 24/7 live support, Chat, Email

Commissions and fees

Online brokers, including Ally Invest, have reduced trading commissions to zero on a wide range of assets. As mentioned above, Ally Invest offers commission-free trading of ETFs, U.S. exchange-traded stock and options. However, the online broker still charges some fees:

  • Bonds: $1.00 per trade
  • Mutual funds: $9.95 per trade
  • Margin accounts: Varies
  • IRA transfer fee: $50
  • IRA closure fee: $25
  • Returned checks, ACH or wires: $30
  • Paper statements: $4
  • Restricted accounts and broker-assisted trades: $20 plus commission
  • Short stock: daily charge at cost
  • ATM withdrawals: $1

Additionally, Ally Invest will reimburse you up to $150 in transfer fees you might accrue from your current brokerage firm.

Fees mentioned in the article are accurate as of the date of publishing.

Tradable asset categories

Ally Invest allows you to trade a variety of asset classes, including:

  • Stocks
  • ETFs
  • Options (equity and index)
  • Mutual funds
  • Bonds
  • Margin account
  • Forex

If you’d rather take a hands-off approach, you can look into managed portfolios, which is Ally’s version of a robo-advisor. There are four different portfolio types:

  • Core: A variety of diversified choices, including international, domestic and fixed-income assets. You can choose your risk tolerance, from conservative to aggressive.
  • Income: If you’re in retirement or close to it, this option allows you to take a conservative risk tolerance with higher dividend returns.
  • Tax optimized: If you earn a lot of money, you can make after-tax contributions to your investment account, which can lower your tax bill and maximize investments.
  • Socially responsible: This account is filled with ethical companies that practice sustainability, energy efficiency or other initiatives that are good for the environment.

While these portfolios are managed and rebalanced algorithmically by computers like other robo-advisors, Ally Invest says that live financial analysts design its portfolios.

Trading technology and experience

Ally Invest allows you to set up an investing platform with customizable features that work best for you. You can create custom watchlists to observe market data that’s relevant to your investments. This also helps you monitor particular stocks or other investments — if they drop to a favorable amount, you can jump in to buy. Other technology highlights include:

  • Profit/loss graph: If you’re interested in a particular investment, the profit/loss graph gives you the chance to see the potential of it before buying. This is helpful if you’re considering an investment but want to determine whether it’ll earn you money without actually putting money towards it.
  • Market data: When you’re looking to learn more about a company, your investment platform lets you check company quotes, charts, high and low prices, dividend dates, peer performance comparisons and other news about the company.
  • Probability calculator: Unsure about an investment’s potential performance? This lets you check the volatility of it and see if it will help you hit your investment goals.

Ally Invest has mobile apps for iOS and Android users, or you can log in to your account through your mobile browser to use the Ally Invest LIVE platform. From there, you can check your watchlist and stream quotes.

You can also check quotes, charts, earnings, company news and more when you log in to your account and click “Research.”

Strengths of Ally Invest

Ally Invest has plenty of strengths to help it stand out from the competition, including the following:

  • No minimum deposit required: Ally Invest doesn’t have a minimum initial deposit requirement, which makes it simple to get started with only a little cash. You can also earn a cash bonus for opening an Ally Invest account if you deposit or transfer just $10,000, compared with a $25,000 minimum to earn a cash bonus with E*Trade or $20,000 with Merrill Edge.
  • Powerful tools and intuitive trading platform: Ally Invest’s online site offers you powerful tools to screen investments. Its trading platform is intuitive and provides the features necessary to be an informed investor. This includes a dashboard you can customize to your preferred view, as well as real-time streaming quotes and up-to-date data.
  • Responsive online and phone customer service: Ally Invest can be contacted via phone 24/7. There’s also an online chat feature, where you can get answers within seconds from helpful customer service agents. Email support is available, as well.
  • Hundreds of ETFs. Ally Invest offers 500+ ETFs from Vanguard, GlobalX, iShares and others.

Drawbacks of Ally Invest

Ally Invest also has some downsides to consider:

  • Mutual fund transaction fees: Ally Invest charges a $9.95 transaction fee per trade for no-load mutual funds. But many competitors offer options without any transaction fees, including E*Trade, which offers more than 4,400 fee-free funds.
  • A mobile app with minimal features: While you can do the basics with Ally Invest’s mobile app, it offers far fewer features and investment tools than competitor apps such as TD Ameritrade Mobile.
  • No physical branches: Ally Invest is an online-only company. There are no physical branches, unlike competitors such as Merrill Edge or E-Trade, which has more than 30 branches spread across the country.

Is Ally Invest safe?

Ally Invest is a trusted online brokerage with more than $4.7 billion in assets under management. It’s a member of the Federal Deposit Insurance Corporation (FDIC) and the Securities Investor Protection Corporation (SIPC), so you can rest assured that the cash in your accounts is safe. And since the company has passed its Financial Industry Regulatory Authority (FINRA) broker check, you can count on the fact that it’s in full compliance with regulations.

Since Ally Invest is online-only, it’s also important to review Ally’s data protection policies. The good news is Ally Invest promises that they use “multiple levels of security” to keep your info safe. This includes 128-bit SSL encryption for any exchange of data from your browser and Ally’s servers if your personal information is being transmitted. The downside, however, is that Ally’s privacy policy does permit Ally Invest to share your information with third parties. While common, it’s important to keep in mind.

Of course, once you invest your money, there’s always a risk of losses. Investing means you can potentially lose money. Research what you’re investing in carefully, and diversify your portfolio to minimize the risks you’re taking.

Bottom line

Thanks to the fact it has no minimum deposit requirement for its self-directed brokerage accounts, Ally Invest is a great choice if you’re looking to get started investing and you don’t have a ton of money. Commission-free investments give you a diverse offering of low-cost or no-cost options.

But the high mutual fund transaction fees are a turnoff. Along with that, not being able to meet with an advisor face-to-face could deter you from signing up. Since Ally doesn’t have physical branches, you may feel like you’re missing out without the in-person interaction.

Overall, it’s a great option for beginning and intermediate investors. The offerings might not be as detailed for expert investors, but if you’re looking to get started or enhance your experience, Ally Invest might work for you.

Open an Ally Invest accountSecured
on Ally Invest’s secure website

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.

Christy Rakoczy
Christy Rakoczy |

Christy Rakoczy is a writer at MagnifyMoney. You can email Christy here