Investing

Best Roth IRA Accounts in August 2022

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Before you open a Roth IRA account to take advantage of attractive features like tax-free growth and tax-free retirement income, it pays to compare different brokerage accounts. But with so many online brokerages, how do you know which ones offer the best Roth IRA accounts, and with the features you most value?

Don’t worry, because MagnifyMoney is here to help. We’ve evaluated a wide range of Roth IRA account providers and compared numerous features that matter most to you, like opening balance requirements, fees and investment options. From there, we’ve names the best Roth IRA accounts for August 2022 so you can start your wealth-building journey with confidence.

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Roth IRA account providerAdvisory feeBest for...
Charles Schwab
  • None for self-directed accounts
  • None for robo-advisor accounts
  • Live advisor: $300 for initial planning and then $30 a month
Self-directed investors and investors who prefer conservative robo-advising
Fidelity
  • None for self-directed
  • Robo-advisor accounts: 0% to 0.35%
  • Live advisor: 0.50%
Investors who want to focus on mutual funds
Merrill
  • None for self-directed accounts
  • Robo-advisor accounts: 0.45%
  • Live advisor: 0.85%
Bank of America customers
Ally
  • None for self-directed accounts
  • Robo-advisor accounts: 0% to 0.30%
Investors who want a robo-advisor account with a cash buffer set aside
Wealthfront
  • Robo-advisor accounts: 0.25% annually
Investors who want a robo-advisor account
Betterment
  • Robo-advisor accounts: 0.25%
  • Live advisor: 0.40%
Non-self-directed investors

The best Roth IRA accounts in July 2022

Schwab

SEE DETAILS

on Charles Schwab’s secure website

Charles Schwab IRAs have no opening or maintenance fees, required account minimums nor online commission fees for listed stocks, exchange-traded funds (ETFs) and many mutual funds. Whether you are a newer investor who’d like some great education resources or a more experienced hand who wants consistent market commentary, you can find both at Schwab, plus 24/7 customer service and 300 branches for in-person service and complimentary workshops.

Schwab Roth IRA account options

  • Self-directed: An active investor can use a Schwab One® Brokerage Account for their Roth IRA with no management fees or other requirements
  • Robo-advisor: Schwab Intelligent Portfolio investors must meet a $5,000 minimum and hold 6%-30% of deposits in cash
  • Live advisor: Schwab Intelligent Portfolios Premium requires a minimum balance of $25,000 and charges $300 for initial planning and then $30 a month ongoing

Other fees

While many online trades are free, other online trades do come with fees:

  • $2.25 per contract for futures and futures options
  • $1 per bond and a potential markup on CDs, corporate bonds, municipal bonds, government agencies and zero-coupon treasuries, including STRIPS
  • Up to $74.95 per purchase for mutual funds that are not part of Schwab Mutual Fund OneSource
Pros Cons
  • 24/7 live support
  • Few fees for self-directed and robo-advisor accounts
  • Educational resources
  • The robo-advisor option requires a high cash allocation

Fidelity

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on Fidelity’s secure website

Fidelity charges few fees — no management or trading fees — and Fidelity Flex® mutual funds largely have zero expense ratios (though they’re available only in fee-based accounts, like Fidelity Go). You need only $10 to start investing and many of Fidelity’s tools, such as the fund screener, have thoughtful filters to empower investors: You can search by anything from a ticker symbol to lists of socially responsible investments. If you think of a question at midnight, 24/7 customer support is there.

Fidelity Roth IRA account options

  • Self directed: No minimum amount required to open the account; no account fees.
  • Robo-advisor: Fidelity Go Roth IRA has no advisory fees for accounts with less than $10,000. It charges $3 a month for accounts between $10,000 and $50,000; larger amounts are charged 0.35% a year.
  • Live advisor: Fidelity Personalized Planning & Advice charges a 0.50% advisory fee and requires a $25,000 investment minimum.
Pros Cons
  • Only $10 to start investing
  • Wide range of investment types
  • Many funds in Fidelity Go have zero expense ratios
  • Advisory fees increase with larger amounts invested

Merrill

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on Merrill Edge’s secure website

Merrill Edge offers a wide range of investments, market news and research, tools such as a mutual fund expense calculator. As Bank of America owns Merrill, you can integrate your Bank of America account with your Merrill Edge account, transfer money using Zelle® and potentially earn discounts on Merrill Guided Investing and Bank of America loan products. Customer service is available 24/7.

Merrill Edge Roth IRA account options

You may be able to qualify for a 0.05 percentage point discount on Merrill Guided Investing if you meet average daily balance minimums across Merrill and Bank of America accounts.

  • Self-directed: No minimum amount required to open the account; no account fees.
  • Robo-advisor: Merrill Guided Investing charges a 0.45% annual fee and has a $1,000 account minimum.
  • Live advisor: Merrill Guided Investing with an advisor charges a 0.85% program fee and requires a $20,000 investment minimum.

Other fees

Some online trades do come with fees:

  • $0.65 per options contract
  • $19.95 per transaction for no load mutual funds
  • $1 per bond, including secondary trades, corporate bonds, municipal bonds and government agencies.
  • Broker-assisted trades typically cost a $29.95 service fee
Pros Cons
  • 24/7 customer service
  • Clear investment research
  • Potential Bank of America loan discounts
  • Merrill Guided investing has a high price tag compared to competitors

Ally

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on Ally Invest Managed Portfolios’s secure website

Ally Invest offers Roth IRAs with no maintenance fees and commission-free trades on listed stocks, ETFs and options. Its self-directed account has no minimum investment requirement and no annual fees, while its two robo-advisor options give investors a choice: Pay no management fees and keep a 30% cash allocation or pay a 0.30% annual advisory fee.

Ally Invest Roth IRA account options

  • Self-directed: There are no account fees and no minimum deposit for cash accounts; there is a $2,000 minimum for margin accounts.
  • Robo-advisor: Both of Ally’s robo-advisor options require a $100 minimum investment. The cash-enhanced robo-advisor portfolio holds 30% of your deposits in cash in exchange for no account fees. The market-focused robo-advisor has a 0.30% annual advisory fee.

Other fees

Some online trades do come with fees:

  • $0.50 per contract fee for options
  • $1.00 per bond
  • $24.95 per transaction for CDs
  • $9.95 per transaction for no-load mutual funds
Pros Cons
  • 24/7 customer service
  • Low-fee or no-fee robo-advisor options
  • Commission-free trade options
  • The no-fee robo-advisor requires a high cash allocation
  • No live advisor services
  • No physical branches

Wealthfront

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on Wealthfront’s secure website

Wealthfront is a robo-advisor investment company that provides curated portfolios that you can accept as-is or further customize. It features tools for goal-based savings, dynamic planning and tax-loss harvesting. It doesn’t charge fees for account opening, closing or withdrawal, trading/commission, account transfer nor its cash account option.

Wealthfront Roth IRA account options

  • Robo-advisor: 0.25% annual advisor fee
Pros Cons
  • Large degree of customization possible
  • No trading fees
  • Strong planning tools
  • No self-directed accounts or live advisor services available
  • No physical branches

Betterment

SEE DETAILS

on Betterment’s secure website

Betterment offers great tools, including Tax Loss Harvesting+, tax coordination, savings priority, goal tracking and automated features like dividend reinvestment and recurring deposits. There is no minimum deposit and you can customize your portfolio. Betterment’s 0.11% average expense ratio is significantly lower than the national average, which is around 0.41%.

Betterment Roth IRA account options

  • Robo-advisor: The Digital plan has no minimum balance requirement and costs 0.25% per year but that fee reduces to 0.15% on balance portions over the $2 million mark.
  • Live advisor: The Premium plan requires a minimum balance of $100,000 and charges 0.40% annually; 0.30% on balance portions over the $2 million mark
Pros Cons
  • Great tools and automated features
  • Portfolio customization available
  • Self-directed accounts not available

Roth IRA vs. traditional IRA comparison

Before you open a Roth IRA account as your personal retirement plan, take a moment to compare the two most popular IRA types so you choose the best option for where you are today.

Roth IRAs

  • Eligibility. Subject to income limits.
  • Contributions. Made with after-tax money.
  • Tax-deductible contributions. No.
  • Investments. Grow tax-free.
  • Withdrawals during retirement. Tax-free.

Traditional IRAs

  • Eligibility. Anyone with earned income.
  • Contributions. Made with pre-tax money.
  • Tax-deductible contributions. Yes, but subject to income limits.
  • Investments. Grow tax-deferred
  • Withdrawals during retirement. Taxed as ordinary income.

If you want a bit of help deciding between these two types of IRAs, check out our side-by-side comparison of Roth and traditional IRAs, including when one might be the better fit for your finances.

How much do you need to open a Roth IRA?

With many brokers, the answer is zero. You can open an account and begin adding money whenever it suits you. However, some brokers have an account minimum for new clients, so be sure to choose a brokerage with an opening balance requirement that aligns with your investing plans.

No matter how much you decide to deposit when you opening your Roth, you’ll be subject to the same maximum annual contribution limit. For 2022, 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.

Here’s an added bonus: If you open a Roth IRA today and you later find that you no longer meet the income guidelines (congrats on the raise, by the way), you can open a Traditional IRA. The assets in your Roth will continue to grow tax-free and you can keep saving for retirement with your new IRA that’s not subject to income limits.

Can you over-contribute to a Roth?

If you’re thinking of stashing more than the IRS-mandated annual maximum in your Roth, please think twice. It’s not an act to which the IRS takes kindly.

If you make an excess contribution to your Roth, withdraw the excess immediately. If you don’t, you’ll be subject to a 10% penalty for every year you leave the excess in your account. For example, if you contribute $500 too much to your Roth for the year, the IRS will charge you $50 each year the excess remains in your account. Ouch.

How we chose the best Roth IRA accounts

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, account minimums and we also considered ease of use and customer support options.

Frequently asked questions

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. We’ve compared Roth and traditional IRAs side by side to help you choose the best option.

With a Roth IRA, your contributions (the money you deposited) are always yours to withdraw penalty-free. If you need to withdraw some of your earnings — the money earned from your contributions — you’ll have to pay an additional 10% penalty to the IRS if 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.

Roth IRAs are designed for long-term investment. You should be comfortable salting away funds for at least five to eight years, and ideally, until you’re retired. Investing long term provides enough time for funds to grow and to recover in case of market fluctuations.

For 2022, 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.

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.