The Best Roth IRA Options of 2022
In a nutshell, the Roth IRA is a retirement savings option specifically designed for people with higher incomes. The Roth IRA allows you to deposit money into an account that grows tax-free. In other words, you don’t pay taxes on the principle or the interest that your investments generate.
On top of that, you can withdraw your contributions (not your earnings) at any time without penalty, and your earnings can be withdrawn tax-free at any time after you are 59.5 years of age.
Of course, that’s only the quick overview. If you’re interested in getting more specific about the rules of this unique investment option, you should check out our post on how to open and fund a Roth IRA.
However, if you’re just curious about what some reputable brokerage firms have to offer, we’ve put together a short list of some of the biggest and most common Roth IRA options of 2022. Let’s take a look at a few of the best options.
Which Roth IRA Accounts Didn’t Make the Cut?
There are many factors that go into deciding where to open a Roth IRA. It’s the same approach to opening any other type of IRA. I’ve opened a couple of different Roth IRA accounts over the years with two online brokerages (TD Ameritrade and Scottrade). I won’t go into lengthy descriptions on why I chose each service because they both still offer low-cost index funds to investors and both have their pros and cons.
Both accounts hit the core requirements and I would encourage people to open either if they’re looking for an online broker. Below are some of the factors you’ll need to consider before opening a Roth IRA account. Your age, income, and investment objectives are some of the most important considerations. I’ve laid out a few of the best brokerages to open a Roth IRA.
How We Chose the Best Roth IRA Accounts
To find the best Roth IRA accounts, we first started with the accounts that offer the most interest on your deposited money. We did not consider the convenience of banking and the simplicity of the interface in making our selections. The monthly interest earned was our only focus, and we spent a considerable amount of time poring through the fine print in each account’s terms and conditions. The following criteria were taken into consideration when deciding which IRA should rank as the best online account:
- Minimum Investments
- Early Withdrawal Penalties
- Options for Automatic Withdrawal
- Retirement Investment Eligibility
We also evaluated additional requirements to be met by each account, such as IRA account ownership by employers, as well as custody of the assets. Of course, rates and fees took precedence over other criteria when deciding on overall rankings. We put a maximum amount limit on the amount of interest points that could be earned to aid in our evaluation process. The limits ranged from 1-3%, depending on the account and term.
Investment Options
“What is the best place to open a Roth IRA?” is one of the most commonly asked questions about Roth IRAs. So where should you open an account?
To get started, you’ll need to select an investment institution, which could be a bank, brokerage firm, mutual fund company, insurance company, or any other financial services firm that provides Roth IRAs.
The first question you’ll need to answer is whether you want to invest individually or use an investment advisor to handle your Roth IRA for you. When you manage your account yourself, you’re responsible for all the decisions involving your investments. Over time, it’s likely that you’ll want to hire an investment advisor. Even if you manage your account yourself, you should consult an advisor periodically.
In this section, we’ll walk you through the most important questions to ask when you’re considering opening a Roth IRA account.
Low Trading Fees
Online trading can be expensive, especially when you want to buy and sell frequently. So when shopping around for a broker, you might be tempted to just look at the trading commissions. There are many factors to consider when opening an IRA and we’ve provided a fuller picture to help you pick your Roth IRA broker.
The Vanguard Group is famous for being a low cost company. They are also known for their low cost mutual funds. It’s no surprise that they are the low price leader of online trading.
As one of the top leaders in the industry, Fidelity has eliminated many of the back-office costs by centralizing customer service and building their own software and infrastructure. They’ve passed those savings on to investors, providing them with some of the lowest fees of the biggest brokers.
Another large corporation is Charles Schwab, the company behind the popular cash management account and brokerage services. Getting access to their trading platform also opens up a full suite of investment and banking services. They are fairly active in trying to attract new customers, and offer some of the best deals to open a Roth IRA.
TD Ameritrade is one of the largest brokerage companies, and is also one of the top choices among beginners. In terms of trading fees, they do have great offerings. In addition to cheap online stock trade prices, they also offer commission-free ETF trades.
Investing Help
Roth IRAs are popular for a lot of reasons, but the main one is that taxes are deferred, not eliminated. So unlike a traditional IRA, there is no penalty for taking money out before getting to retirement age.
That being said, there’s a lot to know about how to open a Roth IRA and make the most of it. Make sure you understand the basics of a Roth IRA, how to open one and the best places to open one.
Reviews of the Best Roth IRA Companies
It’s easy to get overwhelmed when choosing a Roth IRA company. Part of that is because of the offers they make: dollar-for-dollar matching, high rate of return and a wide range of account types.
The problem is that these things aren’t all created equal. The offers are made just to make you feel good. And they want you to make a decision then and there.
The reality is, not all Roth IRA services are created equal. Don’t get taken in by the extravagance of the companies!
How do you find the best Roth IRA companies of 2019? We’ll help you find the one that’s right for you.
Ally Invest – Top All Around Roth IRA
If you are thinking about making some charitable donations this year, you should first take a look at these tips from the Washington Post.
It is a good idea to compare the rates of different charities before deciding where to place your money. Try to find an organization that spends more money on services rather than fund raising. If you have a specific project or program that you would like to fund, it is a good idea to contact that charity to see if they are able to receive donations.
Also there are some tax benefits of donating to charity, so depending on the type of donation you make, it could even reduce your tax liability.
Betterment – Best Roth IRA for Hands Off Investing
We’ve reviewed seven robo-advisors and Betterment had the best mix of features for a long-term investor. Betterment was the best of the robo-advisors we reviewed and is the best choice for most people, thanks to its extensive automated features and the ability to customize those features.
Additionally, the transparency provided by Betterment’s wealth management tools is super helpful in managing both your overall accounts and in tracking your goals. Among the robo-advisors we reviewed, the only ones that offered a more extensive mental model of cash flow and liquidity management were WiseBanyan and Wealthfront. However, there are limitations with these two robo-advisors that made them difficult to recommend to long-term investors.
We did not find a perfect robo-advisor, but we found a robo-advisor that was a perfect fit for most people — Betterment.
Lending Club – Best Non-Stock Investments
You can generally split IRA accounts into two categories: those that invest in the stock market, such as mutual funds and ETFs, and those that invest in something other than stocks, such as real estate and precious metals. A Roth IRA is a retirement account where you pay taxes regularly on the money you contribute, with the understanding that you can withdraw that money and any interest earned tax-free after age 59½.
Mutual funds, ETFs, stocks, bonds, ETFs and CDs are all good places to invest for a traditional IRA. But what about Roth IRAs? There are a few investments that you can use for your Roth IRA that differ from the traditional IRA. These include non-stock opportunities, which are also known as alternative investments. These include real estate and precious metals.
TD Ameritrade – Best for ETF Trading
E*TRADE – Solid Option Overall
For this section, we’ve spent over an hour on hold with each of the companies to try to find out what information the companies are legally required to provide to customers. Unfortunately, after all that time, we didn’t learn anything that really helped us. So, we’re simply listing providers in this section and providing information directly from the companies’ websites.
Wealthsimple – Good for Beginners
Wealthsimple makes investing easy and is now applying the same principles to create a special IRA account. Wealthsimple IRA is an online platform which is accessible via your computer or smartphone.
It has competitive low fees and low minimum investments. Most users are tech-savvy and can easily interface with its “robo-advisor” portfolio. The goal is to help investors make their money grow in a simple and safe way with a broad range of investment options. There is no minimum account size for an IRA and IRA investors can choose from a range of retirement savings portfolios. These are customizable based on age, income, and investment objectives.
It also offers customizable retirement savings advice and can be accessed via Android or iOS. This is great for instant access and for quickly tracking the performance of the portfolio. DIY users will love the various investment options and the wealth management team that will help you with your long term goals.
This is a good option if you are looking for a low cost and low minimum account, have a consistent income, and have a financial plan for your future.
Firstrade – Good for Low Fees
IRAs with branches are good for investors who want to maintain personal relationships with their broker and want access to face-to-face broker assistance. When you open a Roth IRA with Firstrade, you have access to over 20 physical branches located in and around major metropolitan areas in the United States.
The investment choices available to Firstrade clients are extensive. The firm offers research reports, brokerage services, financial planning, educational material, and institutional services. These services will help you establish a solid investment strategy and select the appropriate investments for your investments.
The focus of the firm is to provide a seamless, integrated, and collaborative experience for both individual and institutional clients. The investment strategies provided cater to a wide range of clients, including individuals, businesses, foundations, and pension plans.
Financial planners are available by phone and in-person to answer any questions you might have. Account management services are also offered to keep you informed on how your portfolio is performing. It is ultimately up to you and your financial planner to develop a plan that is right for you.
Investors who are interested in opening a Roth IRA with Firstrade will find that its brokerage services, investment tools, reports, and account management provide an excellent road map toward financial independence.
USAA – Best Roth IRA for Military and their Families
With today’s interest rates so low, it is hard to find a saving account that offers enough to keep up with inflation. That is why having a Roth IRA represents an excellent opportunity to raise your savings rate.
But what is the best place to open a Roth IRA if you aren’t looking to save at the bank?
Choosing the best place to open a Roth IRA is not as easy a question to answer as it once was, due to regulators’ crackdown on bank interest rates. However, USAA is the only current institution to offer interest as high as 3.03% on its Roth IRA. However, USAA only caters to members of the military, National Guard and their families. This may be a limiting factor, but it is still worth considering the USAA Roth IRA if you fall into this category.
Ellevest- Best for Women
Ellevest has a solid plan to manage your funds online. With their new app, you can track your finances, receive regular updates, and have a real impact on a woman’s future.
Their fees are low, and they have no account minimums.
Charles Schwab – Low Cost
One place you could consider opening your Roth IRA is at The Charles Schwab Corporation. They are a huge and experienced brokerage with an online presence and a brick-and-mortar bank.
Depending on your needs, you could open either a regular brokerage or a Roth IRA account at Schwab. You could also open an ordinary pension or trust as well as a social security account if you want.
The advantages of Schwab include:
A Robo-advisor available with the IRA account. This is a great feature … almost as good as a personal financial planner.
A large selection of investments and a wide array of trading features.
One of the best customer service teams in America … phone, email, and live chat.
An app that you can use on your tablet, phone or desktop to monitor your accounts.
Vanguard – Low Cost
While there are some very good companies out there that offer low costs, Vanguard is the best place to open a Roth IRA overall.
The reason behind this is they have lower costs than the competition, because they head a mutual fund family.
Mutual funds have busy fee schedules, but Vanguard has an unparalleled one that many are willing to pay for the peace of mind that it provides.
That's because they don’t have to worry about hidden fees that an advisor would be comfortable with.
This is also why Vanguard doesn’t have training services.
T. Rowe Price – Low Cost
I’ve used this company for my own Roth. I’ve always selected the plain vanilla option, which they make simply and clearly. I’ve also spoken to customer service on a number of occasions and I’ve never felt like I was being pressured into more than I needed. The site is great for beginners and has really good tools on calculating your first contribution.
Fidelity – Low Cost
Fidelity offers a few different plans to investors. Their brokerage services are well represented across a wide spectrum of investments, with options like exchange traded funds, stocks, bonds, index funds, and mutual funds.
Investing with Fidelity is simple and easy. New investors can get started with low minimums and find access to a wide variety of mutual funds and ETFs.
The portfolio tab lets you view all of your holdings from every account, and you can quickly get a snapshot of your portfolio and order any of the purchases you’ve made.
The research tab helps investors select their purchases or sort through the many financial decisions they will make. The research tab breaks down topics into 14 useful categories including: research, watch list, market value, highlight, focus list, customize a portfolio, economic calendar, spotlight, and enter up to six questions.
Investors can get useful tips and tools from Fidelity like its new report for tax strategies, a retirement calculator, and a 401(k) calculator.
The customer service tab goes above and beyond the call of duty by offering remote enrollment, tax help, and customer education.
What You Need to Know When Opening a Roth IRA
The market has plummeted over the past decade, and financial experts are predicting more bad days ahead. If you’re fearful of losing your retirement savings, you’re not alone. In fact, while the market has been on the decline, Roth IRA investing has become one our country’s fastest growing financial secrets.
So, if you’re thinking about opening a Roth IRA account, you’re making a smart financial move … but you need to know a thing or two before you invest. The Roth IRA is one of the safest retirement investment accounts around. But that doesn’t mean it’s totally risk-free. Here’s what you need to know about establishing and maintaining a Roth IRA account.
Make Sure You’re Eligible
If you want to open a Roth IRA (or any other type of IRA), you’re probably wondering if you’ll qualify for one. If you’re like most people, who only have a few hundred dollars to invest, you probably think that you’re out of luck, since the Roth IRA has strict income limits.
But in reality, even if you earn up to six figures, you can still open a Roth IRA. How is this possible? For one thing, not all IRAs are Roth IRAs. The only IRA that’s eligible for a Roth conversion is a Roth IRA.
If your income is too high for you to open a Roth IRA, you may still be able to open a Traditional IRA.
Building the Roth IRA Habit
The benefits of starting a Roth IRA are enormous and some would say priceless. While that may be a bit of an exaggeration, it’s fair to say that the tax benefits are worthy of your investment. So if you’re interested in starting a Roth IRA, you’re in a great place to learn how you can start an automatic Roth IRA contribution for 2019.
You can start a Roth IRA the first business day of each new year. This is in January of each year. Even if you don’t have a lot of money saved up to put towards the contribution, with just a few dollars you can get the ball rolling.
If you’re interested in starting a Roth IRA, you need to come up with a plan and fees are a big part of that. It’s possible to open a Roth IRA with a number of different investment and financial institutions.
Here’s a look at the best places to open a Roth IRA.
Should I Combine My Investment Accounts?
If you are looking to start investing in the stock and bond markets, having a Roth IRA is one of the first steps you should take. A Roth IRA is essentially a retirement investment account that is funded with after tax income. There is no tax to pay on distributions in retirement when you follow the rules. Since your original investment money is coming from your after tax income, it stands to reason that the interest, dividends and capital gains that you receive from investment growth should be tax free. This allows for your money to grow tax deferred in a Roth IRA.
The Roth IRA is named after Senator William Roth who created the IRA tax benefits savings account to help workers save for retirement with after tax dollars. Unlike the Traditional IRA that allows your investment growth to be tax deferred, but taxes are paid when money is withdrawn in retirement, you do not have to pay any taxes on your investment earnings with a Roth IRA.
The downside to a Roth IRA is that the contribution limit is much lower, if you have a limited income or a family to support.
If you are looking to open a Roth IRA, you may be asking yourself where should I open my Roth IRA? What are the best places to open a Roth IRA? Some of the best places to open a Roth IRA are:
How to Think About Taxes
“Everything’s taxed,” says certified financial planner and New York-based financial planner Michael Kitces. Kitces is referring to the income tax for your 401(k) contributions, the income taxes on your mutual fund gains, and the eventual income tax when you withdraw funds from your retirement accounts, such as a Roth IRA or traditional 401(k). Every penny of income you earn is taxed at some point.
One way to keep things simple is to think about the tax efficiency of the mutual funds you’re investing in. There are mutual funds that are tilted toward growth, others that are tilted toward income, and still others that are invested in highly stable government bonds.
“For investment-based retirement accounts like a traditional 401(k) and an IRA, your goal is to take advantage of tax-advantaged, investment growth,” explains Kitces. That means mutual funds that are low-turnover, actively managed, and tilted toward income will be the most tax efficient for retirement accounts.
Typically, actively managed investments will have higher turnover. This is because actively managed mutual funds seek to outperform the market and have to buy and sell securities on a more regular basis to try to beat their benchmarks.
Summary
The Roth IRA is an investment account that combines many benefits of the traditional IRA and a tax-free savings account. As such, it has been in place for many years, but has undergone significant changes since its introduction. It is now typically offered at most banks or investment houses. In addition, bank and credit union accounts are not limited to local capabilities, and can be found in many locations around the nation.
As a result, it is still possible for those who live near a bank or credit union to open a Roth IRA at the same bank or credit union in which they already keep their current accounts. You should also remember, however, that several large investment groups operate nationally, and that their locations may be much farther away than a local bank or credit union. If you decide to open an account at one of these larger groups, you should be aware of how to conduct business over the Internet. This may help you in deposits and transaction, as well as saving the cost of a long trip.