Best Roth IRA Investment Accounts in 2024
A Roth Investment Retirement Account, or Roth IRA, is a type of retirement account for individuals to invest money into for their future.
It allows a working professional to save a certain portion of the paycheck and invest it over their working lifetime to build a retirement fund. Money can then be withdrawn from this retirement account during retirement to pay for cost of living expenses.
An IRA account is an important pillar of any financial plan.
Roth IRA accounts allow investments in stocks, bonds, or mutual funds. You might ask as to why it wouldn’t make sense to simply invest directly in stocks, bonds, and mutual funds.
The answer is the tax benefits that a Roth IRA offers. Withdrawals from the Roth IRA account during retirement are tax-free.
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With direct investing, you will pay capital gains tax and any other applicable taxes. The logic behind this benefit is the fact that when you make contributions to your Roth IRA, you do so using your post-tax income on which you have already paid income taxes.
If you have enrolled in your company’s 401(k) plan, then you can still open a Roth IRA account. If the company matches your contribution, then inquire if that can be done in your Roth IRA.
However, remember that Roth IRA is independent of any 401(k) plan which your employer might be offering.
One advantage of a Roth IRA over a conventional 401(k) is that you may be able to invest in a wider variety of assets. You can, therefore, build a diversified portfolio with optimal returns over a long period of time.
Some key points that you can consider when choosing where to open your Roth IRA are:
- Minimum balance requirements
- Investment options offered
- The extent of control or input that you can have over your portfolio
- Availability of technology-driven robo-advisory model, if that is your preference
- The service or management fee and any other charges involved
- The level of customer service
- The reputation and brand of the service in question
We researched some of the best-known Roth IRA account providers including brokerages as well as asset management companies. The following are the top picks:
TD Ameritrade is one of the most popular online discount brokers. It has a host of IRA offerings including a Roth IRA.
Being an online platform, Ameritrade has plenty of tools and information that helps any account holder to conduct research and make informed investments.
Ameritrade also offers access to an online retirement counselor who can answer any questions that one may have about financial planning or the Roth IRA.
Fees for stock trades are $6.95 per trade, but some plans can give you some free trades.
There are plenty of mutual funds and ETFs to choose from as well. Ameritrade is great for those who want to follow a hands-on approach and take advantage of the online platform that the company offers.
No minimum account balance needed to start off.
Ally Invest is a DIY online platform similar to Ameritrade. It has no physical branches. There is no minimum account balance requirement when opening a Roth IRA with Ally Invest. Another plus point is no annual fee or inactivity fee.
Ally Invest also allows account holders to convert their accounts from a traditional IRA to a Roth IRA for a mere $50 fee.
The per-trade fee charged at Ally Invest is $4.95 which is much lower than Ameritrade’s $6.95. Frequent traders can get an even lower fee of $3.95 per trade.
Ally Invest also offers IRA savings accounts which earn a fixed rate of return. So, there is something for both active and passive investors. The 24-hour customer service feature is also another plus point.
Robo-advisories have been gaining a lot of traction these days. They basically use algorithms and artificial intelligence to build and maintain a portfolio.
Passive investors who want to follow an “invest and forget” approach will find such services quite valuable. Betterment is a robo-advisory that offers a Roth IRA.
Since technology is cheaper than humans, the cost-structure of robo-advisories like Betterment is also lower.
The Digital Level plan has a fee of 0.35% for balances under $10,000 and a 0.25% fee for balances between $10,000 and $99,000. There is also a Premium Level for balances of $100,000 and above. The fee for this plan is 0.4% and you also get detailed advice and support.
Wealthfront is another robo-advisory option with an even lower cost structure than Betterment. There is no annual fee for the first $10,000. Beyond that amount, you pay a fee of 0.25%.
The technology-driven platform takes care of building the portfolio and then rebalancing it according to market conditions and your financial inputs.
A minimum of $500 is necessary to open a Roth IRA account. Being a technology-driven solution, Wealthfront has good online tools for retirement planning.
Its tool calculates inflation, social security, and other information put together by economists and then combines it with your personal financial information to give you a post-retirement scenario for your profile.
Wealthfront also runs a referral program through which you can receive free credits for signing up family and friends with Wealthfront.
Some individuals may find the online services to be inadequate and would rather prefer having a full-service offering through which they can meet a person to discuss their retirement plan.
For such consumers, there are large asset management companies like Charles Schwab. It has physical branches as well as an online presence. Its Roth IRA offering can hand-hold an investor and provide all the guidance that is needed.
Schwab has a trading platform, offers commission-free ETFs, and investment opportunities in other asset classes like no-minimum balance index funds. One needs to put up a minimum of $1,000 to open an IRA account. Regular monthly contributions of $100 can waive this requirement.
A low trading fee of $4.95 is charged, which is quite low for a full-service provider. Plus, there are over 250 commission-free ETFs and more than 4,000 no-fee mutual funds to choose from.
Other perks include research reports and around-the-clock phone support. There is even a robo-advisory product. With Charles Schwab, you pretty much get the entire spectrum of products and services for retirement planning.
Another top full-service option is Merrill Edge. This option is great for Bank of America customers because the two are part of the same business.
So, your bank account and Roth IRA account can be linked and you can access support through one of Bank of America’s 2,100 locations.
There is no minimum opening balance requirement and no annual or inactivity charge.
The trading fee is $6.95 per trade. There are a few fee waivers if you are a high-net-worth individual with a large account balance. Alternatively, you can also opt to invest in some of the 300 no-commission ETFs.
Merrill Edge also has a robo-advisory option. Overall, this option is great for new investors, for those who have a Bank of America account and can simply open a Roth IRA as an add-on and for those with large account balances.
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