These days, saving for retirement may seem like a struggle, but it’s an important thing to do in order to live comfortably once you leave the workforce.
In preparing for retirement, you should consider a Roth individual retirement account (IRA). Participants make annual contributions to the account, and over time, your savings grow tax-free. Unlike with a traditional IRA, you must pay income taxes on your contributions, but once you withdraw your savings, you don’t have to pay any further taxes — so long as you meet the qualifications.
Read on for an overview of the best Roth IRAs for you to open and a list of commonly asked questions.
6 Roth IRA accounts to open
So you’ve decided to open a Roth IRA but you don’t know which account to choose. Which is the best retirement planning tool? To help narrow down the selection, we’ve compiled a list of the six best Roth IRAs currently available for you to open.
E*Trade caters to investors who prefer a hands-off investment account. No account minimum is required, and there are no fees when it comes to trading.
The platform is simple to use, and, should you run into any problems, E*Trade is known for its top-notch customer support.
Account holders also gain access to a wide variety of investments to pick from, whether that’s commission-free stocks, mutual funds, or exchange-traded funds (ETFs). Either way, you have access to extensive research conducted by E*Trade’s professionals to guide you in this process.
The most notable downside to the E*Trade platform is that their website can be challenging to navigate, despite their user-friendly mobile app.
SoFi Automated Investing
Another good option for those looking for a more passive form of investing is a SoFi IRA. They come with zero management fees, and there’s no minimum amount required to set up an account. SoFi also offers account holders free financial counseling services and loan discounts with an initial deposit.
SoFi is also a great choice for beginners and those who don't want to spend a lot of money. You have access to a broad range of affordable investment entities, free financial advisor services, including customer support and financial planners.
Last but not least, Wealthfront is another suitable option if you're just entering the realm of investing. The investment process is automated, and the chosen investment entities stem from the account holder's preferred level of risk. There are no trading fees or transfer fees.
However, you must make a minimum deposit of $500, and there’s a managing fee of 0.25 percent.
Fidelity is also designed for beginner investors. Though there is a 0.05% annual fee if your account balance is under two million, Fidelity boasts over 100 physical establishments if you have questions that are unanswerable by phone.
No minimum deposit is required, and educational resources including robo-calculators that help you track your retirement savings progress are available to all account holders.
J.P. Morgan is a great choice for individuals who would like to be more involved in the investing process. Just like E*Trade, there are no costs regarding trading-related activities and no account minimum.
This is a fantastic investment option for Roth IRA beginners because the platform is very straightforward. More advanced investors may not enjoy this account because it offers limited research into other investment opportunities and brokers.
Though there is a mandatory management fee of one-quarter percent, there’s no minimum amount required to open a Betterment IRA. And, to offset the low cost of the company’s services, you have access to a year of free management if you make an up-front deposit.
Betterment is a prominent Robo-advisor IRA platform on the market. Account holders can tailor their investment portfolios however they like thanks to free customization tools.
One potential downside to this account is that market indexes and index funds aren’t available for investing.
Ally Invest Robot Portfolios
Ally Invest comes with a general management fee of 0.3 percent, and you must put a minimum of $100 into your account upon opening it.
If you wish to deal with only American securities, Ally invest will charge you no trading fee. There’s no minimum account threshold, and you may be eligible for a $3,500 cash bonus if you make a deposit.
Considered one of the best overall IRAs, Charles Schwab account fees depend on the type of investment vehicle you choose.
Charles Schwab's brokerage account has no commission fees if you invest in stocks or ETFs, and no transaction fees for certain mutual funds. Account holders have access to a broad range of retirement planning tools, including round-the-clock customer support.
There’s a management fee of 0.65 percent.
Roth IRA account FAQs
How a Roth IRA works
Briefly mentioned, a Roth IRA is an after-tax savings account. You pay taxes on the contributions you make while working to withdraw those funds tax-free upon retirement. If you decide on early withdrawal, you may face a penalty.
What are the benefits of a Roth IRA?
A primary benefit of a Roth account is that many companies offer it, and it allows account holders to invest their funds into a wide variety of investment types. How much you earn depends on the contribution amount, as well as what you decide to invest in, and, by extension, how well those assets perform.
Secondly, contributions grow tax-free, and you don't pay taxes on them after withdrawals.
How much do you need to open a Roth IRA?
Every platform has different requirements, although many don't require you to put any money into the account upon opening one.
Can anyone open a Roth IRA?
You can open a Roth IRA at any age if you're earning a steady income and make less than a certain amount. This threshold is dependent on your filing status. You can also open as many Roth IRAs as you like.
What's the difference between a Roth IRA and a traditional IRA?
Once more, a traditional IRA account lets you make contributions without paying taxes. Your funds also grow tax-free. However, when you qualify for retirement saving withdrawals, your funds are considered taxable, regular income.
How does a Roth IRA grow?
A Roth IRA grows from regular contributions and from compounding interest on those contributions. Even if you stop adding money to your account, your savings will still grow. Roth IRAs can also be invested into the stock market to generate a profit.
Ultimately, the decisions of which Roth IRA to open, and by extension which company to enter business with, depends on your preferences. How much you’re willing to spend and how involved you want to be in the process can guide your decision. Don’t be afraid to do your research and look around. Regardless of what you choose, setting up a retirement account is becoming a necessity.
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