The 8 Best IRA Accounts of 2020
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An Individual Retirement Account, or an IRA, is a type of tax-advantaged savings or investment account. For most people saving for retirement in the United States, an IRA is a crucial part of your savings process. A traditional IRA gives you the ability to save with pre-tax dollars — this works similar to a 401(k), 403(b), or 457 account sponsored by an employer — but there is one big difference: you control your investments (and fees) entirely. With a traditional IRA, the dollars you save lower your taxable yearly income. Instead, you pay taxes when you withdraw in the future, presumably with a lower income and lower income tax rate.
You can find an IRA at most banks and brokerage firms, so how do you know which is the best? When choosing a brokerage to house an existing, rollover, or new IRA account, it is important to consider a set of criteria: account fees, trading fees, investment availability, and research access. Follow along below to find the best IRA for your unique retirement needs.
Fidelity ranks as our top overall IRA account provider thanks to a combination of factors. Fidelity is a top provider of mutual funds and ETFs for retirement investing and gives Fidelity IRA account holders access to those funds with no trading fees. Fidelity offers traditional Roth, rollover, and self-employed IRAs with no minimum and no recurring account fees.
Account holders have access to both Fidelity and non-Fidelity funds — a key reason Fidelity stands out from the pack. Most stocks and ETFs come with a $4.95 trade fee. Fidelity account holders also get access to over 10,000 no-transaction-fee mutual funds.
Another great benefit of Fidelity is the financial wellness and educational focus of the company. With Fidelity, you get access to top research and reports plus a wide range of tools, articles, and videos to improve your financial health.
Schwab was a close runner-up on the heels of Fidelity for best overall IRA account. The company offers an identical $4.95 trading fee, nearly identical accounts, and a similar availability for stocks, bonds, and funds. Schwab offers lower-cost ETFs and mutual funds in some categories, but it is tough to beat Fidelity when it comes to retirement-friendly funds.
Schwab offers free trades for Schwab funds in a Schwab IRA account, and a number of those funds go head-to-head with Fidelity and Vanguard for pricing and performance. If you want to keep your banking and investing under the same roof, Schwab may be more appealing thanks to its Schwab Bank accounts. Schwab also offers a leading trading platform, high-quality investment research, and excellent customer service.
Want to learn more? Check out our full review of Charles Schwab.
If you want to keep things really simple and with one fund family, Vanguard is the best low-cost IRA option for you. Vanguard is one of the biggest money managers in the world with over $5 trillion under their management.
Vanguard is famous for its ultra-low-cost mutual funds and ETFs, which you can buy and sell for free from a Vanguard IRA. According to a 2016 Vanguard report, the average expense ratio is 0.18% at Vanguard compared to an industry average of 1.01%. That can lead to big savings over the years which you can save and invest for retirement.
The big downside of a Vanguard IRA is access to non-Vanguard assets. If you want a diverse portfolio of Vanguard funds, this is the perfect account. If you want a diverse account with stocks, bonds, and funds, you may want to look elsewhere.
If you don’t know much about investing and just want to hand your money over to an advisor who will take care of everything (but don’t want to pay an arm and a leg for it, either), Betterment is the best choice for your needs. Betterment is the first of a group of well-known robo-advisors, a term for asset managers that allocate your funds into one of several pre-built portfolios that aligns with your needs.
Betterment charges a 0.25% annual fee with no minimum balance. For accounts over $100,000, you can upgrade to a premium plan that charges 0.40% with access to a human financial adviser.
Betterment automatically handles everything for you. It does trading (at no extra cost), rebalancing, and picks all of your investments from a list of low-cost funds from Vanguard, Schwab, and BlackRock’s iShares.
With a low $4.95 trade fee for stocks and ETFs, Ally Invest is an excellent choice for any investor. But with a lower $3.95 cost for investors who place 30 or more trades per month and maintain a $100,000 or higher average daily balance, it's even better for active investors.
Ally is a little lighter on research than some of the older, larger brokers. But Ally is a great place to invest for low fees and good customer service, and is particularly enticing for active traders with a six-figure or higher balance.
Merrill Edge is the investment arm of Bank of America. Merrill Edge IRAs come with no monthly fee and a $6.95 cost per trade. That said, big customers with balances over $50,000 can qualify for 30 monthly commission-free trades. Even better, with $100,000 in combined Bank of America / Merrill Edge balances, you can qualify for 100 free trades per month.
Merrill Edge offers a wide range of funds and investment options. Merrill Edge IRA customers get access to over 2,700 no-transaction-fee mutual funds, though there are no commission-free ETFs.
Because the fees are a little higher, this account is not ideal for the most active traders. However, if you already have a relationship with Bank of America or Merrill and want to grow your investments under the same roof, the free trades for accounts with $50,000+ balances might make this account a better option for you than the brokers that charge $2 less per trade.
TD Ameritrade offers all the important features you could ask for from an IRA. That includes no monthly or annual fees, a range of account options, research and reporting resources, and excellent online trading platforms. TD Ameritrade stands out for its educational resources for new investors, making it a top destination for investment rookies getting started with an IRA.
Stock trades cost $6.95 and mutual fund trades cost $49.99, roughly the industry standard for both. It also offers more than 4,000 no transaction fee mutual funds, and a cutting-edge trading platform called Thinkorswim which is ideal for expert traders. Wherever you are on your investment journey, TD Ameritrade caters to you.
Read through our full review of TD Ameritrade.
Robo-advisor Wealthfront offers traditional, Roth, SEP, and rollover IRAs and charges an annual 0.25% management fee. Wealthfront includes automatic rebalancing and investments in a range of low-fee funds including its own Wealthfront Risk Parity Fund, which charges a modest 0.11% expense ratio.
You can open an account with $500 and get started quickly. One useful feature at Wealthfront, the Path tool, helps you plan for retirement and other financial goals. After plugging in your information, Wealthfront gives you a holistic view of your finances in addition to managing your IRA.