The best Roth IRA accounts may not help you save on income taxes now, but they can make a big difference in your finances in the future. Unlike a Traditional IRA, a Roth IRA account lets you make contributions with after-tax dollars. This means you pay income taxes on the money before you move it your Roth IRA.
While this means you’ll lose out on some extra money now, contributing to a Roth IRA can make a big difference in the future. This is because your money grows tax-free. When you withdraw from your account after age 59 1/2, you can use your Roth IRA funds without paying income taxes and without any penalty.
This all sounds great, but it can be easy to become overwhelmed when you start looking at where to open a Roth IRA. Not only that, but how will you invest the money that’s inside your Roth IRA?
There are a ton of online brokerage firms that let you open a Roth IRA and invest in various funds, but they’re not all the best. To help you with your search for the best Roth IRA account, we compared more than 30 financial companies to find out which ones offer the best Roth IRA accounts in terms of investment options, investment help, and fees involved.
If you’re hoping to take a tax hit now in order to save on taxes later in life, the best Roth IRA accounts can help. Keep reading to find out which ones offer superior investment options and user perks without exorbitant fees.
The Best Roth IRA Options of 2020
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Which Roth IRA Accounts Didn’t Make the Cut?
While the Roth IRA providers listed above are good ones, there are plenty of others that didn’t quite make it on our list. We didn’t include Wealthfront or Personal Capital, for example, because we found that Betterment offers a better platform and a more competitive total package among roboadvisors. We also didn’t include Acorns and plenty of other “techy” or app-based investment options that work in conjunction with consumer spending.
For the most part, we focused on traditional Roth IRA providers for our study, and only the ones that offer the best investment options with the lowest fees possible.
How We Chose the Best Roth IRA Accounts
The best Roth IRA accounts offer a broad selection of investment options with minimal fees. Beyond their investment options, the top Roth IRA accounts are also easy to open online and from the comfort of your home.
While a lot of thought and research went into our ranking, here are the main factors we looked for in the best Roth IRA accounts this year.
Opening a Roth IRA account can help you save on taxes later in life, but you’ll get the best results if you have a broad selection of investments to choose from. For our list of top Roth IRA accounts, we looked for providers that offer many investing options ranging from index funds to ETFs. The more options available from each provider, the higher they scored in our ranking.
Low Trading Fees
We also looked for Roth IRA accounts with low fees, both in terms of ongoing account management fees and individual trading fees. The Roth IRA accounts on our list tend to come with some of the lowest fees available today. Many also offer a range of fee-free investments to choose from.
Finally, we gave precedence to Roth IRA providers that offer hands-on investing help. Some of the accounts on our list will even choose all your underlying investments for you. Many also offer investor education and online tools that can help you learn how to invest for optimal results.
Reviews of the Best Roth IRA Companies
While we chose 14 different Roth IRA providers for our ranking, it’s possible one of these providers will ultimately suit your needs the best. The following reviews break down the highlights of each of these companies, how much you’ll pay in fees, and who they might be best for.
Ally Invest – Top All Around Roth IRA
Ally Invest is lesser known than some of the big guys listed below, but the quality of their investment offerings and their top-rated customer service mean I can highly recommend this deep-discount broker.
Ally Invest is online only, but their browser-based tools are intuitive and allow you to easily research your investments with customizable charting and real-time data.
What’s more, Ally Invest has absolutely one of the lowest stock trade commissions around at $0 per stock trade or ETF trade.
If you are looking to trade a lot within your Roth IRA, look no further. Mutual fund commissions are extremely low as well at just $9.95 per no load mutual fund trade. Additionally, Ally Invest has a collection of funds and over 500 commission-free ETFs you can choose from.
Betterment – Best Roth IRA for Hands Off Investing
In recent years, Betterment has made a splash in the world of investing. If you are a hands-off investor who wants to grow retirement wealth over time, Betterment might be the right choice for you.
Betterment is a different kind of brokerage firm aimed at those who don’t want to make decisions on specific mutual funds or ETFs. Betterment creates a portfolio for you based on your risk profile, using only stock and bond ETFs. You answer questions about your risk profile, and Betterment does the rest. You do need to sign up for automatic investing and commit to $100 per month in order to use Betterment.
Betterment also offers the ability to automatically contribute the maximum each year. Betterment will figure out how much you need to contribute each month to hit the maximum, and if the IRS raises the contribution limit, Betterment will automatically adjust your monthly contribution to match. This isn’t required, though, so if you can only start with $100 a month, that’s your choice.
Betterment charges a percentage-based fee on the total amount you have invested with the firm, ranging between 0.25% for their digital plan to .40% for their premium plan. The digital plan doesn’t require a minimum balance, but you do need at least $100,000 to use their premium plan.
Betterment is a great choice for beginner investors because the percentage-based fee system can work out to be cheaper for smaller accounts than the flat rate fees of the other guys. As your account grows, you might want to move your money, but for the beginner, Betterment is an amazing choice. For more info, here is my full Betterment review.
Lending Club – Best Non-Stock Investments
Lending Club is the top peer-to-peer lender in the United States. Unlike the other brokerage firms in this post, Lending Club allows you to invest in loans that are made to other people. So, instead of investing through the bank, you get to be the bank.
Since inception, Lending Club has funded over $16 billion in loans. I am personally getting just under 9% return on my investments in Lending Club and have been VERY happy with the results. Read more about that in my full Lending Club review.
The way Lending Club does a Roth is to partner with another company that sets up a self-directed Roth IRA. This allows you to direct your investments and not be limited to just stocks.
Lending Club retirement accounts come with a $5500 minimum to open an account, followed by fee-free account management.
TD Ameritrade – Best for ETF Trading
Another brokerage firm that mixes online discount trades with brick-and-mortar locations is TD Ameritrade. This brokerage has more than 125 locations around the country that you can walk into whenever you have a question you want to be answered in person. However, the online trading platform is easy to use, and you are likely to accomplish just about anything you want without assistance.
Trade costs are competitive on the stock and ETF side, with a no-fee commission structure. It’s also worth noting that TD Ameritrade has a collection of more than 550 commission-free ETFs. If you are trying to build a long-term retirement portfolio, using these ETFs can lower your costs, even though you will still have to pay the expense ratios.
You do need to watch out for the mutual fund charge of $49.99 per trade, however. That can be a real problem and erode the effectiveness of your portfolio. As I’ve stated in my full TD Ameritrade review, I love everything else about TD Ameritrade except the $49.99 no-load mutual fund commission. That is simply too high.
If you are going to build an ETF portfolio, I can still recommend the company as a solid option thanks to the competitive commissions on ETF and stock trades, as well as the option for in-person help.
E*TRADE – Solid Option Overall
When you think of online trading, E*TRADE is probably the company that comes to mind first.
The company has been around since 1992 and has constantly been pushing the industry to innovate trading technologies for customers.
Technically E*TRADE does have brick-and-mortar locations for you to go to, but there are only 30 in the entire country. E*TRADE is primarily an online discount brokerage firm, and they are an industry leader in this space.
E*TRADE offers a comprehensive suite of professional-grade trading platforms, allowing you to access accounts and market information from your desktop or phone – or even your Apple Watch©.
In trade for their awesome tools, E*TRADE’s fees are ZERO in many cases and there are more than 1,000 mutual funds available that come with no load and no transaction fee. Adding these to your Roth IRA will lower your fees. And then you get the best of both worlds; although you will still be responsible for the expense ratio charged on the fund. Check out my full E*Trade review for more information.
Wealthsimple – Good for Beginners
Wealthsimple is another great option in the Roth IRA space. This robo-advisor provides you with automated account management alongside personal advice from Wealthsimple’s trained experts by phone, text, or email.
Wealthsimple assesses your risk, creates a diversified portfolio to suit your goals, then balances your account to help you achieve those goals, with dividend reinvesting and tax-loss harvesting.
This robo-advisor provides customers with 16 categories of ETFs, and it stands out for its socially-committed options like investing towards housing initiatives and clean energy. While there are no account balances for Wealthsimple’s basic plan and no annual account fees, there are advisory fees in the range of 0.40 to 0.50%.
All in all, Wealthsimple could be a great choice for your Roth IRA if you are a socially concerned investor drawn to the simplicity of automated account management.
Motif Investing – Good for Active Traders
Motif Investing offers another unique way to invest your money and instantly diversify your portfolio without spending hours researching companies.
Instead of having to buy stock in several different companies, with Motif Investing you can buy one “Motif” which has 30 different stocks in it. All of the stocks inside of the motif revolve around the same industry.
The best part about Motif Investing is the ability to buy a professional motif portfolio that has 30 stocks or ETFs with one simple trade for $0 at next market open. You won’t be able to beat those trading fees anywhere. See my full Motif Investing review for more.
Firstrade – Good for Low Fees
The benefits of Firstrade are obvious: low fees. But that isn’t the only thing that the discount brokerage offers to investors.
Thanks to Morningstar, Firstrade gives you plenty of information and research about stocks, EFTs, and mutual funds. On top of that, Firstrade offers a well-designed site that is simple to navigate, making it easy even for those who have never invested online.
If you’re looking for a brokerage that gives you $0 commission trades on stocks, mutual funds, ETFs and more while also providing plenty of tools, Firstrade is the place to go. More thoughts are available on my full Firstrade review.
Firstrade is not the fanciest and won’t have all the bells and whistles, but they get the job done, and they do it without all of the massive fees.
Firstrade has a couple of promotions. The more money you deposit in your account, the more you’ll earn in cash and free trades.
USAA – Best Roth IRA for Military and their Families
USAA provides a variety of services and accounts for military personnel and their families. If you or one of your family members has ever been a part of any military service, you should be able to open an account with USAA.
While USAA’s trading fees might be a little higher than other options, they offer just about any insurance or financial product you will need. As a result, USAA offers the ability to have all of your accounts and policies bundled with a single company.
Moreover, if you have the premium account, you will have a lot of fees waived, and your trading fees will be even lower.
As an investor or account holder, you should have no worries about the financial stability of the company. They have been in business since 1922, making them an excellent resource for any active military, retired military, or family members.
Ellevest- Best for Women
With Ellevest, you can “Invest Like a Woman, Because Money is Power.” The robo-advisor’s tagline defines its female focus, using an investing algorithm based uniquely on women’s financial needs. Ellevest does so by looking at their income, goals, and current stage in life to determine how best to target their investment strategy.
In addition to that emphasis, Ellevest focuses on women with what it calls “Impact Portfolios,” which are socially minded investments into corporations and organizations that seek to advocate for women’s leadership.
Ellevest is an ideal option for women looking to transfer their account to a robo-advisor with ease. Setting up your Roth IRA to Ellevest is simple and fee-free.
You simply enter your age, profession, income, retirement goals, and current Roth IRA balance to see a personalized investment strategy which you can revise to your preferences. After you transfer your Roth to Ellevest, they’ll manage your account, with no minimums and a low annual fee.
Charles Schwab – Low Cost
Charles Schwab is an interesting company that is really a full-service brokerage that is trying to play in the discount brokerage space. For stock and ETF trades, it does this well with an $8.95 commission on those trades.
Currently, you’ll pay $0 with Charles Schwab for standard stock and option trades, although you’ll pay $.0.65 per options contract. Passively managed mutual funds from Schwab also cost only .07%, whereas you could easily pay .015% or more with another brokerage firm.
If you are looking for investor and customer support, Charles Schwab should be your go-to. Not only do they have 24-hour phone support, but you can also chat with agents and customer service representatives.
If you live close to one of their branches, you can even go to their complimentary workshops.
Vanguard – Low Cost
Vanguard is well known for their high quality funds that have performed better than peer-group averages over the last ten years. The average fund expense ratio for Vanguard funds is also 83% less than the industry average, which means your Roth IRA money could grow at a faster rate without being dragged down by unnecessary management fees.
In terms of opening a Roth IRA with Vanguard, you can choose from more than 200 commission-free Vanguard mutual funds and ETFs. Competitive trading commissions are also offered on non-Vanguard mutual funds and ETFs as as well stocks and bonds.
Finally, Vanguard’s online platform makes it easy to open an account, contribute regularly, and track your investment performance over time.
T. Rowe Price – Low Cost
T. Rowe Price lets you open a Roth IRA with a starting balance of just $1,000, although you should keep in mind that an annual brokerage fee applies. Fortunately, T. Rowe Price offers a broad selection of no-load mutual funds with low expense ratios.
Note that you have the option to choose from target date funds in your Roth IRA along with more than 100 mutual funds to suit your investing needs. The brokerage firm’s online platform also makes it easy to watch your investments and their performance over time, set up automatic contributions, and overwise oversee your investment plan in one place.
Fidelity – Low Cost
Also consider Fidelity Investments for your Roth IRA. This brokerage firm offers IRA accounts with no annual account fees and no minimum balance to get started. A broad range of investment choices are available, and Fidelity offers helpful tools that can help you optimize your investment strategy and grow wealth over time.
Fidelity also offers $0 commissions for online U.S. stock, ETF, and option trades, which you simply cannot beat. Like others on this list, Fidelity also lets you open and account online and get started investing right away. From there, their online platform makes it easy to research investment options and track your progress over time.
What You Need to Know When Opening a Roth IRA
Saving money on taxes later in life sounds like a no-brainer, but there are still plenty of things you should know about Roth IRA accounts before you sign up. Because eligibility requirements and contribution limits are determined by the Internal Revenue Service (IRS), you’ll also need to stay on top of these crucial details. Here’s everything you need to know before you open a Roth IRA with one of the brokerage firms we profiled above.
Make Sure You’re Eligible
It’s important to establish that you qualify for a Roth IRA. For starters, you need to have earned income. If you are a stay-at-home partner, your spouse can make contributions to your Roth IRA. It’s also possible for minors to contribute to custodial Roth IRAs if they earn money from a job.
You also need to meet income requirements based on your tax filing status. The IRS evaluates these requirements each year and can make changes based on inflation.
For 2020, married couples filing jointly can contribute the full amount to a Roth if their modified adjustable gross income (MAGI) is below $196,000. For incomes between $196,000 and $205,999, the contribution maximum is lowered and ultimately phased out.
Single filers can contribute the maximum to a Roth IRA if they earn less than $124,000. For incomes between $124,000 and $138,999, contribution limits are lowered and phased out.
In 2020, you can contribute up to $6,000 to your Roth IRA each year. If you are ages 50 or older, you can make an additional “catch up” contribution of $1,000 per year for a total annual contribution of $7,000.
It’s also possible to convert a Traditional IRA to a Roth account, or to roll over a 401(k) into a Roth IRA. However, there are tax consequences associated with this decision. You will have to pay taxes on the amount you convert or rollover today, and that can mean a hefty tax bill. Consult with a financial professional before you make this type of conversion.
Building the Roth IRA Habit
Having trouble getting into the habit of sending money into your Roth IRA? You’re not alone. All of the above companies provide some sort of automatic investment option, which can help a lot.
Automatic investing is one of the best ways to build your Roth IRA without having to think about it every month. Simply open an account with a brokerage firm above and set up automatic contributions, and you’re good to go.
Should I Combine My Investment Accounts?
Of course, you may have investment accounts, Roth IRAs, and Traditional IRAs across several different companies. You have multiple logins to remember to check up on your investments, and having some understanding of your asset allocation is not easy. Some investors consider combining their accounts for this reason, but this strategy comes with a lot of paperwork and headache.
Enter Personal Capital. The company aims to solve the problems of managing multiple accounts, tracking your asset allocation, watching the performance of your investments, and helping you keep all of your financial tasks in order. With a slick web interface and mobile apps that work on iOS and Android, you can see everything together in one well-designed space. On top of that, Personal Capital offers a fee analysis to help you reduce what you pay.
The best part about Personal Capital? The software is 100% free.
How to Think About Taxes
With a mounting national debt, many people believe personal income tax rates will eventually be forced to increase. So, even if you think that you will have a lower income during retirement, you might still be in a higher tax bracket or have other tax considerations impacting your finances.
Even if the national debt issue is somehow solved, the government doesn’t tend to lower a tax once it is set.
If you think that tax rates are going to go up by the time you retire, the best retirement account for you to open if you qualify for it is the Roth IRA.
A Roth IRA can be especially beneficial to you if you are just starting your first job. Chances are that you won’t make very much. Your tax liability might be fairly low anyway, so paying taxes on your low income isn’t likely to be a huge burden to you today. Plus, you have even more time on your side to let compound interest work its magic on your behalf.
The best Roth IRA accounts of 2020 can help you save for retirement while reducing your tax burden later on. Make sure to compare each of the Roth IRA providers on this list in terms of their fees and investment options before you pull the trigger.
There is no reason to put off investing for retirement. Open a Roth IRA today with one of the best brokers. It’s easy, inexpensive, and your future self with thank you.