Planning for retirement is crucial, and an Individual Retirement Account (IRA) is a popular choice for many people. Not only does it help you save for the future, but it also provides tax advantages thanks to the U.S. government. Setting up an IRA online is a quick and easy process that can jumpstart your retirement savings journey.
Investing in the financial markets is one of the best ways to build a nest egg for retirement. To do this, you’ll need a brokerage account or a robo-advisor:
- A brokerage account allows you to choose your investments, such as stocks, bonds, and funds.
- A robo-advisor creates and manages a portfolio for you based on your risk tolerance and time horizon.
Whether you prefer a hands-on approach or want professional management, there are various IRA accounts you can open.
Top IRA Accounts for 2024
- Charles Schwab
- Wealthfront
- Fidelity Investments
- Vanguard
- Betterment
- Interactive Brokers
- Schwab Intelligent Portfolios
- Merrill Edge
- Fundrise
- E-Trade
- Firstrade
- Fidelity Go
Overview: Top IRA accounts in 2024
Discover some of the best brokers and robo-advisors to consider when opening your IRA.
Charles Schwab
Charles Schwab is a reliable brokerage that offers a wide range of investment options, including stocks, bonds, and mutual funds. With no transaction fees on thousands of mutual funds and commission-free trades, Schwab is a top choice for many investors. Whether you prefer active or passive management, Schwab has the tools to meet your needs.
Best for: Investors seeking active or passive management options.
Wealthfront
Wealthfront is a leading robo-advisor that constructs personalized portfolios based on your financial goals and risk tolerance. With features like automatic rebalancing and tax-loss harvesting, Wealthfront offers professional portfolio management at a competitive fee. Additionally, you can access a cash management account and goal-based planner.
Best for: Investors looking for low-cost professional portfolio management.
Fidelity Investments
Fidelity is a well-rounded brokerage known for its customer service, trading platforms, and diverse investment options. With thousands of no-fee mutual funds and competitive pricing, Fidelity caters to both active traders and passive investors. Their range of services ensures a high level of satisfaction for investors.
Best for: Investors interested in active trading or passive investing.
Vanguard
Vanguard is renowned for its low-cost mutual funds, making it an ideal choice for passive investors. With a wide selection of funds and zero online trading commissions, Vanguard offers a cost-effective way to manage your IRA. Whether you prefer index funds or actively managed funds, Vanguard has options to suit your investment style.
Best for: Investors seeking passive management with access to Vanguard’s funds.
Betterment
For those who prefer a hands-off approach, Betterment’s robo-advisor service is a great option. With a low management fee, tax-efficient strategies, and the option to access human advisors for a higher fee, Betterment provides a comprehensive solution for IRA investors. Whether you want automated portfolio management or personalized advice, Betterment has you covered.
Best for: Investors looking for a robo-advisor to manage their IRA.
Interactive Brokers
Interactive Brokers offers extensive access to global markets, making it a top choice for active traders. Whether you opt for the Pro platform for advanced trading capabilities or the Lite platform for commission-free trades, Interactive Brokers provides a secure and versatile investment platform. With a focus on execution quality, Interactive Brokers caters to investors seeking diverse market opportunities.
Best for: Investors who trade actively and want access to international markets.
Schwab Intelligent Portfolios
Schwab Intelligent Portfolios combines professional portfolio management with low costs, making it an attractive option for investors. With no management fees and access to low-cost ETFs, Schwab Intelligent Portfolios offers a personalized investment approach. For investors seeking human advice, the premium tier provides unlimited access to financial advisors for a flat fee.
Best for: Investors looking for cost-effective portfolio management.
Merrill Edge
As a part of Bank of America, Merrill Edge offers a range of investment options and personalized service. With access to stock research and in-person assistance at Bank of America branches, Merrill Edge provides a comprehensive investment experience. Whether you prefer active trading or long-term investing, Merrill Edge has the resources to support your financial goals.
Best for: Investors seeking a blend of online trading and in-person support.
Fundrise
For investors interested in alternative assets, Fundrise offers a unique opportunity to invest in real estate through an IRA. By investing in REITs, investors can benefit from real estate income within a tax-advantaged account. While Fundrise requires a long-term commitment, it can be a lucrative option for those looking to diversify their IRA holdings.
Best for: Investors interested in real estate investments within their IRA.
E-Trade
E-Trade is a versatile brokerage that caters to both active and passive investors. With commission-free trading, a wide selection of mutual funds, and advanced trading platforms, E-Trade offers a comprehensive investment experience. Whether you’re a seasoned trader or a long-term investor, E-Trade has the tools to support your financial goals.
Best for: Investors looking for diverse investment options and trading capabilities.
Firstrade
Firstrade is a popular choice for traders due to its commission-free trading and extensive mutual fund offerings. With thousands of no-transaction-fee funds and access to research reports, Firstrade provides a robust platform for retirement savings. Whether you prefer active trading or passive investing, Firstrade has the resources to help you achieve your financial objectives.
Best for: Investors seeking commission-free trading and diverse mutual fund options.
Fidelity Go
For investors looking for a hands-off approach to portfolio management, Fidelity Go offers a low-cost robo-advisor service. With no fees for accounts under $25,000 and a portfolio built with Fidelity funds, Fidelity Go provides a cost-effective investment solution. Additionally, investors benefit from Fidelity’s educational resources and customer service.
Best for: Investors interested in professional portfolio management at a competitive fee.
Understanding the IRA
A traditional IRA offers tax benefits that can help you save for retirement. By contributing pre-tax income, you can reduce your current tax bill and let your investments grow tax-deferred until retirement. It’s important to understand the rules and advantages of an IRA to maximize its benefits and secure your financial future.
Many financial institutions offer IRAs, each with different investment options that can impact your earnings. Depending on your risk tolerance and investment goals, you can choose assets that align with your retirement strategy.
Opening an IRA Account
Opening an IRA account is a straightforward process that can be done online with a brokerage or robo-advisor. By providing personal and financial details, you can set up your IRA in minutes and start funding your retirement savings. It’s essential to choose the right provider based on your investment preferences and financial goals.
With various options available, you can select a provider that best suits your investment style and long-term objectives. Researching the best brokers and robo-advisors can help you make an informed decision when opening your IRA.
Traditional IRA vs. Roth IRA
Both traditional and Roth IRAs offer tax advantages for retirement savings, but they have key differences that may impact your financial strategy. Understanding the benefits of each type of IRA can help you make an informed decision based on your financial situation and retirement goals.
- A traditional IRA allows you to contribute pre-tax income, which can lower your current tax bill. However, withdrawals during retirement are taxed as income, making it ideal for individuals expecting lower tax rates in the future.
- In a Roth IRA, contributions are made with after-tax dollars, offering tax-free withdrawals during retirement. This option is beneficial for individuals anticipating higher tax rates in the future or seeking tax-free income in retirement.
Choosing between a traditional and Roth IRA depends on your current financial situation and long-term tax strategy. While both accounts offer tax benefits, the optimal choice may vary based on your individual circumstances.
Types of IRAs
- Traditional IRA: Contributions are made with pre-tax income, providing immediate tax benefits. Withdrawals during retirement are taxed as income, making it a suitable option for individuals expecting lower tax rates in the future.
- Roth IRA: Contributions are made with after-tax dollars, allowing for tax-free withdrawals during retirement. This account is ideal for individuals seeking tax-free income in retirement or anticipating higher tax rates in the future.
- Rollover IRA: Converting a previous employer’s 401(k) plan into an IRA provides more investment options and flexibility. Rollover IRAs are beneficial for individuals looking to consolidate retirement accounts and access a wider range of investments.
When to Open an IRA
Opening an IRA is a smart move at any stage of your career, but the earlier you start, the better. Roth IRAs are particularly advantageous for young professionals in lower tax brackets, as contributions made in your 20s and 30s can have a significant impact on your retirement savings. Additionally, individuals aged 50 and older can make catch-up contributions to accelerate their retirement savings.
Transferring Your IRA
If you’re considering switching IRA providers, transferring your account is a simple process that can be done at any time. By opening a new IRA account and contacting your new provider, you can initiate the transfer seamlessly. It’s essential to transfer your IRA directly to avoid potential tax implications and ensure a smooth transition.
When transferring an IRA, it’s crucial to maintain the same account type to avoid tax liabilities. Whether you’re moving funds between traditional IRAs or Roth IRAs, understanding the transfer process can help you navigate the transition effectively.