The 8 Best Roth IRAs of 2020

Start saving for the future

Whether you want to start building your savings or bolster an existing portfolio, a Roth Individual Retirement Account (IRA) is a smart choice with long-term tax benefits. Because the money you put in has already been taxed, you won’t pay taxes when you need it during retirement. While all Roth IRAs have this benefit, some offer features and rates that set them apart.

First, investors should look at the minimum requirement for opening an account. Some firms have no minimum, which is great for first-time investors who don’t have a lot of cash on hand. However, other brokers may require up for $5,000 to get started. Decide how much you can invest from the start, and you can begin to narrow the list of options.

Once you know that you qualify to get started, you can look at additional essential features, such as return rates, investment strategies and how much control you get over your fund. Furthermore, some accounts come with helpful services for new investors while others require a DIY approach. Below are the best places to open a Roth IRA for every type of investor.

Best Overall: Vanguard

Courtesy of Vanguard

While some brokers and banks offer flashy features and enticing incentives, Vanguard just does a great job at handling money. If you want a Roth IRA that performs well from a broker who won't nickel and dime you at every turn, Vanguard may be your best option.

Perhaps the most significant appeal of the Vanguard option is that the company generally outperforms peers year-after-year. In fact, 93 percent of the firm's mutual funds and ETFs did better than the average comparable accounts over a decade. For all this performance, investors don't have to pay an arm and a leg for every transaction. In fact, the ratio of funds to fees is 82 percent less than the industry average. Vanguard achieves this by not charging you for sales loads, sales commissions or online account services.

The Roth IRAs at Vanguard also offers the rare combination of flexibility and simplicity. You can choose what types of investments to make, but the company makes it easy to pick. This means that Vanguard is an excellent choice for both experienced investors and newcomers.

Best Rates: Ally

Courtesy of Ally

If you don't mind having a bank with no physical locations, Ally might be an excellent fit for you. Because the company doesn't have to pay overhead fees for brick-and-mortar locations, they can offer higher yields than many competitors. Terms vary depending on the initial deposit, length of the investment and type of IRA that you choose.

One-year investments can give you a return of up to 2.50 percent, which is several times more than competitors. With some accounts, Ally ensures that the rate is fixed. That way, you know what to expect, and you can better plan for your future. Of course, great rates barely matter if you can’t figure out how to utilize the account. Ally makes it easy with 24-hour customer service. These accounts also offer the chance for you to compound interest daily.

There are a few drawbacks that you should consider before choosing Ally. For example, the IRA savings account has a limit of six transactions per statement cycle, which could be a disqualifying fact for investors who want to be more active. 

Best Robo-Investor: Wealthfront

Courtesy of Wealthfront

Robo-investing is shaking up the financial industry, and Wealthfront is one of the biggest players in this arena. With easy-to-use features and smart technology, it is the right choice for savers who like to be on the cutting-edge. Wealthfront’s goal is to make saving for retirement as comfortable as possible. This makes it a great option for those who want to be more hands-off. However, more involved investors or technophobes may not appreciate this choice. 

If you choose Wealthfront, you’ll first use the app to log in to your bank accounts. No more collecting statements; this app does the legwork for you. Then, the savvy people and tech behind Wealthfront will use your unique financial situation and global economic indicators to design a plan that's smart and simple. You'll have the chance to quickly check out your projected finances so you can adjust your plan as needed.

Finally, it’s time to put your money into the account and let it accrue. If you get a promotion or your financial situation changes in any other way, you can log in and change your plan. Wealthfront doesn’t limit you to a Roth IRA either. Your portfolio can include a 401(k) rollover, traditional investing account or any combination of these options. 

Best for Nervous Beginners: Merrill Edge

Merrill Edge
Courtesy of Merrill Edge

Getting started with investing can be daunting, but it doesn't have to be. Merrill Edge gives you an array of tools that make it easier. First, you can choose from three different management options to suit your comfort level. DIY online trading and investing come with the lowest fees but less help from the Merrill Edge team. The next level, Guided Investing, gives you access to Merrill Edge's robo-advisor.

Finally, you can choose to invest with a trusted, knowledgeable advisor. This is indeed the option that is best for beginners who want expert advice. First, you will schedule an appointment with an advisor near you. In that meeting, he or she will go over your current finances, goals and priorities. Together you'll come up with a plan that makes sense for you and your family. Merrill Edge will then manage your portfolio and work hard to keep you on track.

No matter which option you choose, the pricing structure at Merrill Edge is straightforward. You can breathe easy knowing what you can expect to pay. 

Best for Hands-Off Investors: Charles Schwab

Charles Schwab
Courtesy of Charles Schwab

As of the time of writing, 84 percent of customers who reviewed the Charles Schwab Roth IRA recommend the account. Considering how difficult it can be to find the right investment, this is an encouraging figure for anyone who wants a Roth IRA that is easy to manage. The minimum to open an account is just $1,000. You won’t pay fees for account opening or maintenance, but Charles Schwab may charge for things like commissions and funding.

All you need to get started is your license, social security number, employer information, recent bank statement and beneficiary information. Then, just make your first deposit and let Charles Schwab do the rest. If you have any questions or want to create a more comprehensive plan, you can head over to any of the firm's planning tools. These easy-to-use planners take the guesswork out of the equation. If you still have questions, you can reach out to the customer support team any time on any day.

For the Hands-On Investors: TD Ameritrade

TD Ameritrade
Courtesy of TD Ameritrade

Get your hands on a Roth IRA in just 15 minutes with TD Ameritrade. This firm is perfect for the experienced investor who wants to stay in total control of the account. Whether you prefer to invest in ETFs, mutual funds, stocks, bonds or CDs, you can make a portfolio that fits your desires. Bolster your portfolio with options and futures that you trade in your Roth IRA. If you’re a fan of annuities, you can get one from a respected third-party through your TD Ameritrade Roth IRA. All these options may be overwhelming for newcomers, but they can be thrilling for anyone who has done proper research.

The types of investments are just some of the ways you can micro-manage your account. Use the Smart Tools to make sure you’re on track. Dive deeper into the financial world with the latest research from big names like Morningstar® and Market Edge®. As you may expect with a big name like TD Ameritrade, you aren’t limited to IRAs here. You can create a full portfolio that includes a Roth IRA, rollover 401(k)s and much more. 

Best Cool Features: Betterment

Courtesy of Betterment

Betterment is one of the robo-advisors that has disrupted investing in all the right ways. Like many tech startups, this firm adds innovative features on a favorite product. In addition to the traditional benefits of a Roth IRA, Betterment customers get automatic diversification and rebalancing. Instead of relying on yourself or a human advisor to catch it when your portfolio is unbalanced, this smart system ensures balance and high returns for you.

In fact, Betterment does a lot of the hard work for you. This app automatically reinvests your dividends, so your money keeps making more money. Are you not ready to buy full shares? No problem. Make transactions based on an exact dollar amount. This leaves you in control. Another cool feature is the groundbreaking pricing model. You can say goodbye to transaction fees. 

Best for Marching to Your Own Beat: Fundrise

Courtesy of Fundrise

If traditional investment strategies seem like they are lacking something, Fundrise might be right for you. With this unique Roth IRA, your portfolio consists of commercial real estate properties. With this special situation, you can get away from the volatility of the stock markets with eREITs . These trusts tend to be more stable than stocks and bonds. While real estate investing used to only be for the wealthiest individuals, everyday people can get in on the action with Fundrise IRAs.