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A Roth IRA is a type of self-funded individual retirement account (IRA) that allows investors to generate tax-deferred gains on their invested funds while also giving them the possibility of withdrawing the contributions made to the account without having to pay any taxes or penalties for doing so.
In this regard, Roth IRAs are a bit more flexible than traditional IRAs and this is perhaps the most attractive feature that they have to offer.
If you are thinking about opening a Roth IRA, we know that the market is filled with brokerage firms offering advice and platforms through which you can manage your holdings.
To help you in short-listing those alternatives, we have narrowed down this list down to 12 companies that we think excel at offering Roth IRA accounts for US residents.
Low Fees and Account Minimums
Hands-On Investors Runner-Up
Hands-On Millennials Runner-Up
No-Transaction Fees on Mutual Funds
Mutual Funds Runner-Up
Best Roth IRA Accounts of 2021
For each of the providers listed in this article, we will provide you with a summary of who they are, what they do, why we like them, and how much they will charge you for opening and managing your Roth IRA.
Betterment is a US-based automated investing platform that offers its clients the ability to build passively-managed portfolios by using algorithms that follow time-tested investment methodologies.
The company currently oversees some $16 billion in assets for individuals in the United States and its main focus is to help investors in achieving their financial goals.
What Do We Like About Betterment?
Betterment has taken its robo-advisory service to the next level by incorporating advanced features such as a tax-loss harvesting program, goal-oriented portfolios offered by top-tier institutions like Goldman Sachs and Blackrock, and other features including a cash management product and one-on-one sessions with professional advisors for those who prefer a human touch.
The portfolios that Betterment designs for its customers are tailored to each of them as the system considers the user’s financial goals, risk tolerance, income, employment status, and other relevant data to come up with a recommendation that suits them the best. Check out our full Betterment review to learn more.
Fees & Pricing
Betterment’s services are quite affordable, especially for individuals with a small account balance, as the firm charges an annual advisory fee of 0.25% for investors with less than $100,000.
Meanwhile, if the amount invested exceeds that threshold, the percentage fee goes up to 0.40% per year.
Additionally, Betterment charges a one-time fee for the one-on-one sessions that users can book with one of the firm’s Certified Financial Planners (CFP). These virtual meetings consist of 60-minute encounters and the cost of each session starts at $199.
Wealthfront is a fintech company that currently oversees $12 billion for investors in the United States through a trademarked approach known as Self-Driving Money™, which essentially aims to make life easier for investors by serving as a one-stop-shop for all things money management.
Wealthfront was named the #1 robo-advisor in the United States in 2019 by the well-known financial website Investopedia. Its automated passive investing solution has made it a reliable provider for individuals seeking to build their Roth IRAs.
What Do We Like About Wealthfront?
Wealthfront emphasizes that its service can save individuals tons of money by allowing them to focus on what they do best while the firm assesses the client’s financial situation and goals to recommend the optimal portfolio allocation for them.
Similar to Betterment, Wealthfront also incorporates advanced features to their robo-advisor including one known as Risk Parity, which seeks to assign a risk-adjusted weight to the asset classes that comprise the portfolio upon analyzing their historical risk/reward coefficients.
Meanwhile, the firm also offers a feature known as Smart Beta, which allows investors to improve their returns when investing in index funds like the ones that track the S&P 500 index. This proprietary approach involves determining which are the most promising individual stocks within the index and then increasing their weight in the portfolio accordingly. Read our full Wealthfront review to learn more.
Fees & Pricing
Wealthfront services generate a flat 0.25% annual fee on the amount held within the Roth IRA account along with any expenditures generated by the exchange-traded funds (ETFs) used to build the portfolio.
As the investing arm of one of America’s largest financial institutions (Ally Finance), Ally Invest offers its users the possibility of either taking the wheels of their Roth IRAs or letting the firm do the heavy lifting through its automated passive investing solution known as Ally Managed Portfolios.
What Do We Like About Ally Invest?
Ally’s edge is its dual approach to building retirement portfolios. The firm offers both a self-directed and automated investing alternative, giving investors the chance to pick between them when opening a Roth IRA.
If one were to go for the self-directed trading solution, Ally offers zero-commission trading and low-fee mutual funds and ETFs for building diversified portfolios.
Meanwhile, Ally’s automated solution – known as Ally Managed Portfolios – is a great alternative for investors who prefer to let a professional handle their Roth IRA account. The firm currently offers a selection of four different portfolios designed to serve investors based on their risk tolerance. Check out our full Ally Invest review to learn more.
Fees & Pricing
As mentioned above, Ally’s self-directed trading service offers zero-commission trades, which makes this provider a good alternative for investors who prefer to build their portfolios without any kind of assistance from a third party.
On the other hand, the managed portfolios’ solution charges a 0.3% annual fee on the assets held within the Roth IRA account. However, this fee can be waived if the client enrolls in Ally’s cash-secured feature.
Although TD Ameritrade was recently acquired by Charles Schwab, this broker will continue to provide its services to customers apart from its parent company at least until 2023 when the merger is finalized.
This means that users can still open a Roth IRA account with TD directly for now.
What Do We Like About TD Ameritrade?
TD offers multiple alternatives when it comes to building a portfolio for a retirement account such as a Roth IRA. Its Essential Portfolios solution is one and it requires a minimum deposit of $500. It gives account holders consultation time with a financial professional to help them start planning for retirement.
For investors with certain specific needs, TD offers a Personalized and Selective Portfolio solution that is usually an appealing choice for high-net-worth clients who may have more complex financial situations. Read our full TD Ameritrade review to learn more.
Fees & Pricing
TD charges for its services through a percentage-based fee that starts at 0.3% for Essential Portfolios. This fee goes up to 0.9% if the client signs up for the Selective and Personalized Portfolio solution.
Finally, clients can also opt for using the firm’s self-directed trading solution in case they prefer to build a portfolio without the help of TD’s team. Similar to other brokers, the firm offers zero-commission trades along with a selection of low-cost mutual funds and exchange-traded funds (ETF).
With more than $1 billion in assets under management, M1 Finance has become a strong player in the robo-advisory market, offering one of the cheapest solutions available for customers in the United States alongside other interesting features such as loans and cash management products.
What Do We Like About M1 Finance?
M1 Finance has designed more than 80 different investment portfolios for Roth IRAs. These portfolios feature fractional shares and low-cost exchange-traded funds (ETFs), two instruments that have become the cornerstone of automated passive investing platforms nowadays.
Additionally, M1 Finance also allows its users to schedule the monthly contributions they would like to make to their Roth IRAs while the system will periodically rebalance the portfolios to keep allocations in line with pre-defined levels. Read our full M1 Finance review to learn more.
Fees & Pricing
M1 Finance is a free service. For retirement accounts, there is a minimum deposit of $500 required to start investing.
Meanwhile, users can also upgrade their accounts by enrolling in M1 Plus – the firm’s premium service – which allows users to open custodial accounts for kids, access to low-interest-rate loans backed by the account’s balance, and use a second trading window.
The cost of subscribing to M1 Plus is $125 per year.
SoFi Invest is known by some as the ‘millennial’ investing platform, as the firm has designed its services in a way that caters to the needs and wants of America’s younger adult generation.
Along with other interesting offerings, SoFi has included the possibility of adding cryptocurrencies to the investment portfolio and it has also launched an interesting selection of low-fee ETFs that focus on areas of the economy that this generation of investors currently finds attractive.
What Do We Like About SoFi Invest?
The first thing to like about SoFi is that they don’t charge a fee for managing your Roth IRA as long as the account balance is lower than $10,000.
That said, the possibility of buying cryptocurrencies is another plus of signing up with SoFi, while the firm also has a team of dedicated financial advisors who can help you come up with the best course of action for building a portfolio for your Roth IRA. Read our full SoFi Invest review to learn more.
Fees & Pricing
Whether you choose to enroll in SoFi’s automated passive investing solution or if you prefer to build a portfolio on your own through its self-directed trading platform, SoFi’s services do not generate any kind of fees as they are a zero-commission broker.
Blooom is a growing asset management firm that specializes in building retirement portfolios for investors in the United States, currently overseeing $3 billion in assets while serving a young cohort of Americans seeking to prepare for a time in their lives when they are supposed to lay back and enjoy the proceeds of years of hard work.
The firm functions as any other robo-advisor but its services have been designed specifically with prospective retirees in mind, which makes this provider an interesting choice for individuals seeking to open a Roth IRA account.
What Do We Like About Blooom?
Blooom works as a subscription-based service that allows users to pick between three different packages.
The best thing about Blooom is that the system can provide recommendations for existing portfolios rather than forcing the user to liquidate all their holdings to then build a portfolio from scratch.
Additionally, users can also communicate with professional human advisors via e-mail or live chat for those who sign up for the premium package. Read our full Blooom review to learn more
Fees & Pricing
Blooom’s subscription fees start at $95 per year for the Essentials package, which entitles the user to enjoy the robo-advisor’s services for only one retirement account.
Meanwhile, the Standard package costs $120 per year and gives the users access to additional features like automatic rebalancing along with the possibility of talking with a Certified Financial Planner (CFP) via e-mail.
Finally, the Unlimited package is the premium subscription offered by Blooom and it costs $250 per year. This package gives the user full access to all the firm’s services along with live-chat consultations with a professional advisor on an as-needed basis.
Charles Schwab is one of the largest and most well-reputed asset management and brokerage firms on Wall Street, currently overseeing more than $3 trillions in assets for investors in and outside the United States.
Founded in 1971, Schwab was one of the first firms to introduce online trading – known as discounted brokerage services back then – and they have grown to become a pillar of the industry.
What Do We Like About Charles Schwab?
Schwab is considered a powerhouse when it comes to asset management, as the firm offers three ways to manage the funds you invest in your Roth IRA.
First, you can choose to build your portfolio without their help by using Schwab’s proprietary trading platform.
On the other hand, you could also enroll in Schwab’s Intelligent Portfolio program, which is essentially a robo-advisor that will build a portfolio for you if you invest $5,000 or more.
Finally, you can also opt for being enrolled in the firm’s asset management program, which gives you access to Schwab’s team of professionals who will hold your hand in the process of managing your retirement account. To be eligible for this, you need to invest at least $25,000 with the firm. Read our full Charles Schwab review to learn more.
Fees & Pricing
Schwab’s self-directed trading platform works as a zero-commission broker while the company also offers multiple low-cost ETFs and mutual funds that investors can use to build their diversified portfolios.
As for the firm’s robo-advisory service, Schwab’s Intelligent Portfolios are built for free unless the user enrolls for the premium version of this program – which includes the assistance of a human advisor – in which case the investor will have to pay a one-time planning fee of $300 and a monthly advisory fee of $30.
On the other hand, if you have over $1 million to invest, management fees will go up to 0.8% of your Roth IRA’s balance as you will be enrolled in Schwab’s Private Client service.
Founded in 1946, Fidelity is one of the largest and oldest financial institutions in the United States with more than $3 trillion in assets under management while employing thousands of professionals to offer a wide range of services including self-directed trading and automated passive investing – both of which can be used to manage your Roth IRA account.
What Do We Like About Fidelity Investments?
Similar to Schwab, Fidelity has three alternatives for individuals seeking to build a retirement fund through a Roth IRA.
First, it is possible to build a portfolio without the assistance of a professional by using this broker’s self-directed trading solution, which is a zero-commission service that offers access to thousands of US-listed exchange-traded funds (ETF) and mutual funds.
Meanwhile, Fidelity also offers an automated passive investing solution called Fidelity Go®, which uses algorithms and time-tested investment methodologies to build portfolios easily for investors regardless of the amount of capital they have put into their Roth IRA.
Finally, investors can also opt for the firm’s Personalized Planning & Advice solution, which is available for clients with an account balance higher than $25,000. This option gives clients access to a dedicated team of advisors through one-on-one coaching sessions. Read our full Fidelity review to learn more.
Fees & Pricing
Fidelity’s self-directed trading platform is a zero-commission service and there are no maintenance fees for opening these kinds of accounts.
Meanwhile, the firm charges $0 to clients who enroll in its Fidelity Go® service as long as the balance of the Roth IRA account is lower than $10,000.
From that point forward, fees go up to $3 per month for accounts with a balance of $10,000 to $49,999 and land at 0.35% if the balance moves above $50,000.
Finally, the Personalized Planning & Advice service generates an annual 0.5% fee on the Roth IRA’s balance.
Merrill Edge is a well-reputed asset management firm that was acquired by Bank of America during the financial crisis of 2007-2008. The firm now counts on the strong backing of this powerful financial institution to offer a wide range of services for prospective retirees.
With more than $2 trillion in assets under management and 14,000 financial professionals working on behalf of its clients, we can safely say that Merrill knows how to treat its customers, which means that you should seriously consider them as your partners in the process of building a retirement fund.
What Do We Like About Merrill Edge?
Merrill also offers the three-pronged approach offered by Fidelity and Schwab, yet the annual fees and minimum deposits vary depending on the solution that the client opts for.
In this regard, we believe that one of the strongest points of Merrill compared to its rivals is the amount of research and effort that they put into providing self-directed investors with valuable materials to help them in making informed decisions for their portfolios.
These materials can come directly from Bank of America’s Global Research team and other firms on Wall Street and they can be quite valuable for those who prefer to take the wheels of their Roth IRA accounts. Read our full Merrill Edge review to learn more.
Fees & Pricing
Merrill offers zero-commission trading for US-listed instruments including stocks and ETFs and no minimum deposit is required to open a self-directed trading account with this provider.
Meanwhile, Merrill’s automated passive investing platform – called Merrill Edge Guided Investing – charges a 0.45% annual fee and a minimum investment of $5,000 is required.
Finally, Merrill also offers the possibility of receiving personalized financial advice for building a portfolio within a Roth IRA account through its Guided Investing with an advisor package. This solution generates a 0.85% annual fee and requires a minimum investment of $20,000.
Vanguard is perhaps best known for being one of Wall Street’s biggest advocates of the power of passive investing, with the firm currently managing hundreds of different exchange-traded funds (ETF) and mutual funds that allow investors to get exposure to many areas of the market at a low cost.
The firm was founded in 1975 and since then it has become a top provider of passive investing products for individuals looking to build diversified portfolios. It provides access to a team of experienced financial professionals who can advise clients on multiple matters including retirement planning.
What Do We Like About Vanguard?
One of the things that make Vanguard stand out from its peers is that the firm offers access to a wide selection of all-in-one retirement funds and commission-free mutual funds and ETFs.
The savings resulting from purchasing these zero-fee funds can add up over time if one takes into account the effect of compounding during the long holding period of a Roth IRA.
On the other hand, the firm also provides access to individual instruments and third-party funds in case the investor prefers to include other funds outside the range of options offered by Vanguard directly. Read our full Vanguard review to learn more.
Fees & Pricing
Vanguard offers a robo-advisor. This solution is called Vanguard Digital Advisor and the firm charges a 0.15% annual management fee – possibly the lowest percentage-fee among all the paid providers within this list.
Meanwhile, if the client prefers to receive human advice during the journey he/she can sign up for Vanguard’s hybrid solution. This program charges a higher 0.3% annual fee and requires a minimum investment of $50,000.
Even though E*TRADE was recently acquired by Morgan Stanley, the firm will continue to provide its retirement planning services to individuals in the United States.
With more than five million customers, E*TRADE self-directed trading services and automated investing solutions are worth a look.
What Do We Like About E*Trade?
E*TRADE excels at providing self-directed trading services for investors who prefer to take the wheels of their Roth IRAs by offering zero-commission trades and access to hundreds of exchange-traded funds (ETF) and mutual funds through its proprietary trading platform.
Meanwhile, for hands-off retirees, the firm has come up with a solution called E*TRADE ore Portfolios, which allows users to choose between four different portfolio alternatives that should fit every type of investor based on their risk tolerance. Check out our full E*TRADE review to learn more.
Fees & Pricing
For investors who prefer to manage their accounts without the assistance of a professional, E*TRADE offers zero-commission trades for US-listed instruments.
Meanwhile, the Prebuilt Portfolios solution charges an annual 0.3% advisory fee and requires a minimum investment of $500 for portfolios comprised of mutual funds and $2,500 for portfolios that are built using exchange-traded funds (ETFs).
Meanwhile, if the client prefers to get access to a dedicated financial advisor, the fee goes up to 1.25% of the Roth IRA’s balance.
In A Nutshell
FAQ About the Best Roth IRA Accounts
Now that we have taken a closer look at these twelve providers, you may want to take a moment to clarify some fundamental concepts about Roth IRAs. This will help clear up any doubts about how these accounts work and what they have to offer compared to other available alternatives.
What Is a Roth IRA?
A Roth IRA account is a retirement planning tool that allows individuals to enjoy tax-deferred gains on their monthly contributions while also giving them the possibility of withdrawing money from the account without having to pay taxes or penalties – also known as qualified withdrawals.
These accounts are commonly used either as a supplement of employer-sponsored programs such as 401(k)s. They can also be opened by self-employed individuals who would like to enjoy the benefits of tax-deferred gains to build a retirement fund.
How Does a Roth IRA Account Work?
A Roth IRA works like a taxable investment account in the sense that the investor can put his or her money into virtually any kind of financial instrument. However, it comes with the added benefit of deferring the taxes paid on the gains realized by the account until the individual starts withdrawing these earnings.
How Much Money Do I Need to Open a Roth IRA Account?
The minimum deposit required to open a Roth IRA varies depending on the brokerage firm you decide to work with.
In most cases, a self-directed investment account can be opened with $0. On the other hand, other investing solutions such as robo-advisors and managed accounts typically require a minimum deposit that can go from as little as $1 to as much as $50,000 for the most advanced and customized programs.
How Much Money Can I Contribute to a Roth IRA?
Right now, an individual can contribute up to $6,000 per year to a Roth IRA if they are 49 years old or younger.
Meanwhile, individuals older than 50 years old can contribute as much as $7,000 per year.
Traditional vs. Roth IRA – What Is the Difference?
Traditional and Roth IRAs share certain similarities such as the tax-deferred status of gains. However, there are important differences between these two types of retirement accounts.
Here’s a summary of those differences:
- Contributions: Contributions made to a Traditional IRA are tax-deductible. Meanwhile, those made to a Roth IRA are considered after-tax contributions. Aside from that, the upper limit of contributions per year is the same.
- Eligibility: Only individuals with an annual income below a certain level qualify for a Roth IRA while everyone with earned income can open a Traditional IRA.
- Withdrawals: Investors can withdraw their contributions from a Roth IRA without generating a penalty or tax as a result. That said, there is a minimum five-year holding period before this benefit can be enjoyed. Meanwhile, all withdrawals made from a traditional IRA will be taxed and penalized if the individual is less than 59 ½ years old.
Are Roth IRAs a Good Investment?
Roth IRAs are a great way to build a retirement fund due to the tax-deferred status that the gains generated by the account will receive while the flexibility provided by being able to withdraw money from the pool of contributions without incurring a penalty or tax give these accounts an additional appeal compared to others.
Pros of Roth IRAs
- Can be easily opened with most financial institutions in the United States
- Gains are taxed only once they are withdrawn from the account
- Individuals can withdraw their earnings before reaching the retirement age and without incurring a penalty under certain circumstances
- Roth IRAs give individuals the possibility of building a portfolio without the assistance of a third party
- They can be a great supplement to an employer-sponsored retirement program
Cons of Roth IRAs
- Making after-tax contributions can reduce the amount of extra gains that could have been obtained from investing these taxes like in a traditional IRA
- As of 2021, Roth IRAs cannot be opened by individuals or households earning more than $125,000 and $198,000 per year respectively
How Do I Choose a Good Roth IRA Account?
Roth IRA account providers should give you as much flexibility as legally possible when it comes to the instruments that you can incorporate into your portfolio.
In this regard, your choices should not be limited to the ETFs or mutual funds offered by the provider directly as you should also have access to funds managed by third parties without having to pay higher fees for investing in them.
Additionally, you should shop around to see which provider fits you the best based on:
- The amount of money you plan to deposit in your Roth IRA
- The approach you prefer when it comes to managing your money (hands-on vs. hands-off).
- The kind of features that you would like to have access to
Meanwhile, it is important to make comparisons between percentage-fee and fixed-fee services. As a rule of thumb, it is often a better idea to compare the cost of a service as a percentage of the amount of assets you hold since some fixed-fee services can be quite expensive if the amount you will be investing is small.
Finally, it is important to make sure that the provider you pick is properly regulated by US federal authorities.
Now that you have a shorter list of candidates to pick from, it should be easier to filter them based on your individual preferences.
Finally, make sure that the provider you pick can facilitate the process of building a retirement fund for you by making it easier to keep track of your advance. they should also help you build the discipline required to make periodical contributions through features such as scheduled deposits.
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Alejandro is a financial writer with 7 years of experience in financial management and financial analysis. He writes technical content about economics, finance, investments, and real estate and has also assisted financial businesses in building their digital marketing strategy. His favorite topics are value investing and financial analysis.