While people have different ideas of what they want their golden years to look like, nearly everyone has a goal of retiring at some point in the future. If you plan on a traditional retirement and want to maintain the same standard of living, it’s essential to save and invest with a high-quality retirement plan.
Many people invest primarily for retirement, with both employer-sponsored retirement plans and self-directed retirement plans playing an important role. While you probably don’t have as much say in your employer-based 401(k), 403(b), or 457 plan, you should have plenty of freedom with self-directed individual retirement accounts (IRAs). Learn more about the best retirement plans available this year and for expert tips on how to pick and manage your retirement plan.
Best Overall : Fidelity
Fidelity stands out as a top provider of retirement plans to large companies, small companies, and individuals. Fidelity offers 401(k) plans for large and small businesses; SEP-IRA, SIMPLE IRA, and Self-Employed 401(k) for small businesses; and individual retirement accounts including traditional, Roth, and rollover IRAs. While most people will probably manage their accounts online, Fidelity offers more than 200 retail locations for in-person help.
Unique retirement-focused offerings from Fidelity include its suite of retirement planning calculators and tools including the useful Fidelity Retirement Score, which helps you assess your retirement preparedness, and four mutual funds with no fees at all. For individual account holders, you generally won’t pay any recurring account fees or have to worry about account minimums.
Stock and ETF trades are commission-free at Fidelity, which also offers more than 3,400 mutual funds with no transaction fees.
Putting it all together, Fidelity offers an excellent package of retirement accounts that can help you achieve your long-term retirement investing goals.
Wide variety of retirement accounts
Helpful planning tools
Monthly fee for robo advisor for accounts with balances over $10,000
Fee for bonds and CD trades
Runner-Up : Charles Schwab
Charles Schwab is another major provider of corporate, small business, and individual retirement plans. Schwab offers online investment tools for both passive and active investors. That is likely to improve with the recently completed acquisition of TD Ameritrade, which will add to the suite of investment tools with the popular thinkorswim platform. If you need help in person, Schwab operates more than 600 branch locations.
Schwab accounts include commission-free online stock and ETF trades and give you access to nearly 4,200 mutual funds with no transaction fees. Most self-directed retirement accounts have no minimum balance requirements and no recurring fees. Schwab also offers a robo advisor, Schwab Intelligent Portfolios, that can pick and manage your retirement account investments for you.
Schwab is best for retirement investors who want to keep fees low and either want to manage their own investments or go completely hands-off with the robo advising option.
Full suite of retirement products
More than 600 branches
Low fees for most retirement products
IRA account transfers may cost up to $50
Best for Mutual Funds : Vanguard
Vanguard offers full corporate, small business, and individual retirement plans. A key reason for picking Vanguard over another brokerage for your retirement plan is its family of mutual funds (and ETFs). Vanguard is the second-largest asset manager worldwide, too, thanks, in large part, to its robust selection of retirement funds.
Vanguard is well-known as a pioneer in index funds, which are a type of mutual fund or ETF that mimics the performance of a major index. Because they don’t employ teams of expensive stock pickers, this type of fund generally comes with a very low cost. Vanguard charges an average fee of 0.10% for mutual funds compared to an average of 0.63% industry-wide.
Vanguard charges no fees to buy or sell its own mutual funds in a Vanguard account, so fans of Vanguard funds may get the best deal holding their retirement account at Vanguard as well.
Vanguard charges a $20 annual fee for Roth, traditional, and SEP IRAs held in a brokerage or mutual fund account. It waives the fee if the account balance is $10,000 or more; you sign up for e-delivery of Vanguard reports, statements, and confirmations; you own at least $50,000 in certain Vanguard assets; or you have an organization or trust account that you registered using an employee identification number.
There's a $25 fee for each Vanguard mutual fund account held in a SIMPLE IRA and a $20 fee for each Vanguard mutual fund account held in an Individual 401(k) or Individual Roth 401(k plan). These fees are waived if you own at least $50,000 of Vanguard assets.
Excellent track record with index funds
Low fee for mutual funds
Potential $20 account fee for IRAs
Robo advisor isn't as flexible and feature-rich as competitors
Best Robo-Advisor : Betterment
As we briefly touched on above, a robo advisor is a type of investment account where a computer allocates your funds based on a professionally-designed portfolio. Betterment created the modern robo advisor as we know it today and remains a well-known platform in the industry. For retirement, Betterment offers IRA accounts as well as 401(k) plans for businesses.
After you've signed up for a new account at Betterment, you’ll have the option to fill out a short survey answering questions about your age, finances, and retirement goals. Based on those results, Betterment will suggest a portfolio made up of low-cost ETFs. Betterment will keep your investments in balance with your goals and investment plan automatically.
For individual IRA accounts, Betterment charges a 0.25% annual management for regular accounts ($0 minimum balance) or 0.40% for a premium account ($100,000 minimum) that includes access to a human financial advisor.
Robust, well-known robo advisor platform
Easy to set up an investment strategy
Advisor access for accounts with at least $100,000
Fees charged on all balances
Best for Small Businesses : ForUsAll
ForUsAll is a retirement plan provider that is also a relative newcomer to the industry. But they came in with fresh ideas to undercut the typical small and midsize 401(k) provider with low-fee investment choices.
For employers, ForUsAll is a bargain. Businesses pay just $200 per month for plans up to $250,000 in assets and no fees for larger plans. This friendly and low-cost provider is great for independent businesses that don’t want the costs or hassles of the giant providers. And employees will be thrilled with the low fees and risk-sensitive investment options.
Specializes in 401(k) plans
Suite of services makes plan administration easy
Limited scope of retirement products
Best for Teachers : TIAA
Teachers often have somewhat unique retirement needs compared to other professions. Their needs may include a pension plan, 403(b) or 457(b) plan. TIAA has worked with educators on retirement planning for more than 100 years. And while the company has grown in recent years to include non-retirement products and accounts outside of education, TIAA has maintained its educator-friendly plans for teachers, universities, and other schools looking for retirement options.
Employees with TIAA employer-sponsored retirement plans can choose between different investment options, which may include annuities. Small businesses and self-employed business owners can look to SEP or SIMPLE IRAs at TIAA. If you’re on your own, a TIAA IRA includes online commission-free stock and ETF trades in addition to a list of mutual funds with no transaction fees if you hold them for at least six months. If you like keeping your money in-house, TIAA also runs its own family of mutual funds.
Long history of working with teachers
No transaction fees on many mutual funds if held for six months
Retirement options include annuities and other guaranteed-income products
No robo advisor
|Broker||Why We Chose It||Management Fees|
|Vanguard||Best for Mutual Funds||0.10% for mutual funds (reflects average expense ratio)|
|Betterment||Best Robo Advisor||0.25% or 0.40%|
|ForUsAll||Best for Small Business||$0|
|TIAA||Best for Teachers||$0|
What Are Retirement Plans?
The goal of most retirement plans is to help an individual or couple achieve financial independence by the time they reach retirement age, typically between the ages of 65 and 70. There are many different types of retirement plans that can be used individually or together with other plans to help you achieve your retirement goals.
How Do Retirement Plans Work?
A retirement plan is an investment account in which you can contribute funds, and in many cases tax-free funds, to be invested in a variety of ways. The goal to grow the total value of the account. Some retirement plans, like 401(k)s, allow you to invest tax-free funds for tax-deferred investments. Other accounts, like a Roth IRA, allow you to grow your account after you’ve paid taxes and withdraw tax-free once you reach the age of retirement.
What Are the Types of Retirement Plans?
There are six main types of retirement plans:
- 401(k) Plan: This is a workplace account that your employer can offer and additionally match your contributions. These accounts enable you to invest funds from your paychecks into the account before any taxes are withheld from your earnings. The gains in the 401(k) continue to grow tax deferred until you withdraw the money in retirement.
- Traditional Individual Retirement Accounts (IRAs): An IRA is a tax-favored account into which you can contribute up to $6,000 each year as of 2021. This increases to $7,000 annually if you’re age 50 or older. You can take a tax deduction for your traditional IRA contributions on your annual tax return. An IRA allows you to make your own investment choices. You typically pay income tax on both the money you invest and the gains when you make withdrawals.
- Simple IRA: The Savings Incentive Match for Employees (SIMPLE) IRA works similar to a 401(k). It’s an IRA that small businesses can offer to their employees. They must have fewer than 100 employees. Contributions are made with pre-tax dollars and gains are taxed at withdrawal.
- SEP IRA: A Simplified Employee Pension (SEP) IRA is a way for self-employed taxpayers to contribute a portion of their incomes to their own retirement accounts. You can contribute up to $58,000 as of 2021 or 25% of your annual income, whichever is less. You can claim a tax deduction for your contributions.
- Roth IRA: Roth IRA contributions are made with after-tax dollars, but gains earned within your account aren’t taxed. In some cases, can withdraw contributions you’ve made before retirement age without penalty, and earnings are tax-free after you’ve held the account for at least five years after you made your first contribution. As with a traditional IRA, you may contribute up to $6,000 in 2021 or $7,000 if you are 50 or older. However, the IRS may limit your contributions based on your modified adjusted gross income and your filing status.
- Roth 401(k): The Roth 401(k) is a combination of a Roth IRA and the traditional 401(k). With an employer-sponsored Roth 401(k) account, contributions come from your after-tax dollars and the gains aren’t taxed when you withdraw later if you maintain the account for a minimum of five years.
The right account for you will depend on your goals, how much you think you’ll be able to accumulate in your retirement account, and when you think you’ll want to begin tapping into the funds.
How Much Makes a Good Retirement Fund?
Many experts believe that your retirement fund should be 80% of your pre-retirement income per year for the years you plan on being in retirement. You’d need $80,000 per year in retirement to live comfortably if you have a pre-retirement income of $100,000. You should have $1.6 million at the time of retirement if you plan on being in retirement for 20 years and you want to live comfortably throughout that time.
How Much Can You Contribute To a Retirement Plan?
The amount you can contribute to your retirement plan varies by what plans you have. For most plans, such as a 401(k) plan, you can contribute up to $19,500 per year as of 2021. A traditional IRA has a limit of $6,000 per year, or $7,000 if you’re age 50 or older, while SEP IRA limits are $58,000 or 25% of your income. SIMPLE IRA plans come in at $13,500 for 2021. These contribution limits can change from year to year and are established by the IRS.
How We Chose the Best Retirement Plans
We looked at more than a dozen of the best retirement plan providers nationwide and narrowed the list down to the top six providers based on a number of factors, including what types of retirement plans each offers. We also compared the management fees, investment experience, focus on retirement planning, and overall customer reviews.