Written by James Royal – 13 min read – Edited By Brian Beers – Reviewed By Kenneth Chavis IV
A Roth IRA offers many benefits to retirement savers, and one of the best places to get this tax-advantaged account is at an online brokerage or robo-advisor. Although a Roth IRA requires the account holder to pay taxes on the money going in, it allows any contributions and earnings to be withdrawn tax-free. This gives workers a chance to contribute to a tax-advantaged account, let the money grow tax-free and never pay taxes again on withdrawals in retirement.
That’s why many experts think the Roth IRA is the ideal retirement account.
Best Roth IRA accounts to open in January 2022:
- Charles Schwab
- Fidelity Investments
- Interactive Brokers
- Schwab Intelligent Portfolios
- Merrill Edge
How a Roth IRA works
A Roth IRA requires you to contribute after-tax savings to the account, rather than pre-tax savings, as with a traditional IRA. Then it allows you to withdraw qualified earnings tax-free at retirement. So you pay taxes today in exchange for keeping your savings and earnings tax-free in the future. That’s one of many ways that a Roth IRA beats a traditional IRA.
It’s best to think of a Roth IRA as a “wrapper” that can go around many types of accounts to protect them from the taxman. Many companies offer a Roth IRA, including banks, brokerages and robo-advisors, and each allows you to make various types of investments.
What you can earn in a Roth IRA all depends on what you’re invested in. At a bank you can invest in CDs, which are safe and insured by the FDIC so that you won’t lose principal (up to $250,000 per depositor, per bank).
At brokerages and robo-advisors, you can invest in assets such as stocks and bonds that can earn much more over time, but aren’t protected and can lose money. While a CD specifies what you’ll earn each year, these other investments can fluctuate, sometimes drastically.
Overview: Top Roth IRA accounts in January 2022:
If you’re looking to maximize your retirement savings, here are several of the best Roth IRA accounts to consider:
Charles Schwab does it all: great education and training for newer investors, high-caliber tools for active traders, responsive customer service and no trading commissions on stocks and ETFs. Schwab shines all around, and it remains an excellent choice for a Roth IRA.
Schwab charges nothing for stock and ETF trades, while options trades cost $0.65 per contract. And mutual fund investors can find something to love in the broker’s offering of more than 4,000 no-load, no-transaction-fee funds. With no account minimum, it’s even easier to get started.
In addition to a fully featured trading platform called StreetSmart Edge, the broker offers mobile trading as well as a more basic platform. More advanced investors should find the array of research — from Credit Suisse, Morningstar, Market Edge and more — helpful, too
Read Bankrate’s Charles Schwab review.
Wealthfront is one of the top independent robo-advisors, and it brings a lot to the table for investors looking for someone to do the investing work for them. Wealthfront picks your investments based on your risk tolerance and time until retirement. All you’ll need to do is add money to the account.
Wealthfront chooses from investments in 11 asset classes, giving you a wide assortment of funds and increasing its diversification, which can reduce your risk. Besides picking your investments, Wealthfront also brings some serious tools, including a robust financial planner that can help you track all your assets in one place.
The management fee for Wealthfront is a reasonable 0.25 percent, right in line with the industry standard. If you want to hold cash outside your IRA (or amass cash waiting to go into it), you can also quickly open a “do anything” cash management account – with a debit card, competitive interest rates and early access to your paycheck – at no additional cost or monthly fee.
Read Bankrate’s Wealthfront review.
If you’re looking to have someone else do the investing and portfolio management for you, Betterment is an excellent choice. Betterment is a robo-advisor that does all the heavy lifting — selecting the appropriate investments, diversifying the portfolio and allocating funds — so that you can focus on something else. And it does that at a reasonable cost, too.
Betterment is one of the oldest and largest robo-advisors, and the company offers two tiers of service: Digital and Premium. In either case, Betterment will craft your portfolio based on your risk tolerance, time horizon and goals so that your portfolio meets the needs of your financial life.
Betterment Digital manages your investments from a selection of about a dozen exchange-traded funds and charges just 0.25 percent of your assets annually. You’ll get automatic rebalancing, so that your portfolio stays in line with its target allocation, automated tax-loss harvesting (which applies only to taxable accounts) and access to financial advisors via in-app messaging.
If you want the Premium package, you’ll need at least $100,000 in your account and will pay 0.4 percent in fees, but you’ll receive unlimited access to a team of certified financial planners.
Read Bankrate’s Betterment review.
With its clean layout, helpful customer representatives, lack of commissions and all-around low fees, Fidelity is an excellent broker for beginning investors or those opening their first Roth IRA. Fidelity also features a well-developed educational section, which is great for customers who are new to the new investing game and want to get up to speed quickly.
Those investors opening their first Roth will appreciate how Fidelity makes it easy to invest, down to the little details like the layout of its web pages. It’s easy to place an order or find information.
Fidelity also takes a customer-first approach with its fees. The broker has slashed nearly all its fees, including pricey transfer fees. It also chopped fees on its mutual funds, becoming the first broker to bring the expense ratio of mutual funds to zero (for a handful of its own funds).
When you’re ready to advance, Fidelity can also provide research, offering reports from nearly 20 providers. You get all this for zero commission, too.
Read Bankrate’s Fidelity review.
Interactive Brokers does everything that traders and professionals need, and does it at high quality. It excels at global trading and reach, speedy execution and its advanced trading platforms. In short, Interactive Brokers is great for advanced traders.
Interactive Brokers might be best known for its $1 commissions on trades up to 200 shares, and the broker charges a half-cent per share for additional shares. If you’re rifling through shares as an active trader, though, you may appreciate the broker’s volume-based discounts. Options pricing has no base commission and a per-contract fee of 65 cents, making it highly competitive.
Interactive Brokers also does surprisingly well on mutual funds, offering more than 4,100 without a transaction fee, and you can also trade about 50 different ETFs commission-free. In addition, the company offers a “lite” version of its service, which charges no commissions on stocks or ETFs and has no account minimum, competing effectively against Schwab and Fidelity.
At Interactive Brokers, you can trade almost anything that trades on a public exchange: stocks, bonds, futures, metals and more. Plus, you can access virtually any world market to make a trade, so the investing world is really at your fingertips. Altogether, these attributes make Interactive Brokers the best for active traders.
Read Bankrate’s Interactive Brokers review.
Fundrise is a relatively new player on the scene, and it’s known for getting investors access to real estate. Real estate is a popular investment, and because it tends to pay cash dividends, it can be a smart investment inside a Roth IRA, where dividends are earned tax-free. Fundrise won’t be a good choice for all investors, but for those looking for this niche, it could be a snug fit.
Fundrise creates real estate investment trusts, or REITs, using investors’ money to buy real estate or mortgages. It also offers a more speculative set of funds that use investors’ money to develop residential real estate. These investments tend to offer sizable dividends and some opportunity for appreciation over time. Like many alternative investments, Fundrise’s offerings require you to lock in your money for years, though you may be able to get it out with a penalty.
Fundrise’s returns have been solid so far, earning an average of 10.1 percent annually since 2014, compared to the 10 percent average annual return of the Standard & Poor’s 500 Index over long periods. And it’s relatively easy to get started with an account minimum of $500.
Schwab Intelligent Portfolios
If you’re a fan of Schwab’s investor-friendly street cred but don’t want to invest your Roth IRA yourself, consider its robo-advisor: Schwab Intelligent Portfolios. This service will create a portfolio based on your financial needs, including when you want the money and how much risk you want to take.
One of the biggest positives of Schwab’s robo-advisor is its management cost: zero. That’s right, you won’t pay Schwab anything for managing your account, but you’ll still have to pay for the funds that you’re invested in, as you would anywhere. Schwab invests your money in its in-house funds, and these funds remain some of the market’s cheapest. So you’re putting the relatively low Roth annual maximum contribution into nearly full effect.
Schwab’s base service does not offer human advice, but you can upgrade to its premium tier and receive unlimited access to certified financial planners, if you need their help for those less-routine tasks. The cost for this upgrade is reasonable for what you’re getting: $30 a month, and a one-time $300 setup fee.
Perhaps the key downside for potential customers: Schwab requires a $5,000 minimum deposit to get started in the base service, though admittedly that’s less than one year’s maximum IRA contribution. If you want the premium tier, you’ll need $25,000 to get going.
Read Bankrate’s full review of Schwab Intelligent Portfolios.
Vanguard is great for investors who are looking to minimize costs, especially if they’re long-term buy-and-hold stock investors. Vanguard has long been known for its low-cost mutual funds and exchange-traded funds, and it’s expanded that reputation into its brokerage, too.
Vanguard was founded on the principle of helping investors take advantage of the stock market in a low-cost way. So not only does the broker offer zero commissions on stock and ETF trades, it also provides more than 3,400 mutual funds without a transaction fee.
The brokerage adds to its reputation with education and planning tools. Investors will find videos, podcasts and articles that provide market commentary and help them make sound investment decisions. You’ll find tools to help you plan for retirement as well as for college and other financial goals.
Read Bankrate’s Vanguard review.
Merrill Edge is the web-based broker from the storied and well-regarded Merrill, now owned by Bank of America. Merrill Edge is a great fit for those who already have an account at the bank. And for those who need customer service in person, it might be just what they need.
Merrill is a solid, full-service broker that does a lot right. It provides deep research from the broker’s large team of analysts, and it offers solid educational resources for new investors looking to get up to speed.
But where it really out-distances the competition is its ability to provide in-person assistance to clients. If you’re near one of more than 2,500 Bank of America locations offering the service, you can access customer support right at the bank. If you need a more personalized financial plan, Merrill’s team can also manage that.
Merrill is a great fit for current Bank of America customers, because your accounts are integrated on one platform, and you can access it all from the bank’s site.
Read Bankrate’s Merrill Edge review.
How much do you need to open a Roth IRA?
It doesn’t take a lot to get started with a Roth IRA. But every bank, brokerage and robo-advisor has its own requirements. However, it’s usually not difficult to find one that will allow you to open an account with no money.
While minimums aren’t a problem, one of the most important parts is not contributing too much. Investors need to be aware what the annual maximum contribution is and not go over it. For tax year 2022, you can contribute $6,000 to a Roth IRA (or $7,000 for those age 50 or older) as long as your income doesn’t exceed a certain amount. The maximum amount is tied to inflation and grows over time, so you’ll need to watch for changes.
One thing you won’t have to worry about, however, is having too many Roth IRA accounts. You’re allowed to have as many as you like, but you may not contribute more than the annual maximum. If you have three Roth accounts, you can divide that annual maximum among the accounts in any way you see fit.
The Roth IRA is a powerful retirement tool, and so it’s important that you pick the Roth IRA provider that’s going to give you the best results. Here are the best Roth IRAs to open.
|PROVIDER||COMMISSIONS||MINIMUM TO OPEN||HOW TO BEGIN|
|Charles Schwab||$0||$0||Open account|
|Wealthfront||Management fee: 0.25 percent of assets annually||$500||Open account|
|Betterment||Management fee: 0.25 percent of assets annually||$0||Open account|
|Interactive Brokers||$1 minimum/$0 with IBKR Lite||$0||Open account|
|Schwab Intelligent Portfolios||Management fee: $0||$5,000||Open account|
|Merrill Edge||$0||$0||Open account|