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Individual retirement accounts, also known as IRA accounts, are tax-deferred accounts that are used for retirement planning purposes, either as a supplement of an employer-sponsored 401(k) or as an alternative for self-employed individuals, entrepreneurs, and other non-dependent workers.
Traditional IRAs allow individuals to make periodical contributions and they function as a regular investment account except for the fact that taxes are only applicable when a withdrawal is made.
Since there are so many providers out there that currently offer IRAs for their platforms, the following article aims to short-list your potential candidates to the best 12 we have identified based on the features they offer.
Low Fees and Account Minimums
Mutual Funds Runner-Up
Hands-On Millennials Runner-Up
Hands-On Investors Runner-Up
No-Transaction Fees on Mutual Funds
Best IRA Accounts of 2021
To help you in comparing and choosing the IRA provider that suits you the best, we will highlight their competitive advantages while also providing information on their pricing.
Betterment is one of the leading robo-advisors in the United States, currently overseeing around $16 billion in assets for customers within the country by following a time-tested investment methodology that relies on algorithms to design portfolios that are tailored to the customer’s financial goals.
What Do We Like About Betterment?
Betterment’s individual retirement accounts enjoy the full range of features the firm currently offers, including a tax-loss harvesting program that can boost the portfolio’s gains over time and the possibility of allocating funds to an exclusive selection of portfolios that includes a socially responsible investing (SRI) portfolio and a smart beta portfolio designed by one of Wall Street’s most reputed investment banks, Goldman Sachs.
Additionally, the firm offers the possibility of having 60-minute virtual sessions with a financial expert during which the customer can plan for his/her retirement based on their current income, job situation, net worth, and other similar variables. You can learn more in our full Betterment review.
Fees & Pricing
Betterment charges a flat annual fee of 0.25% on the assets held within the IRA while the retirement planning package — consisting of a 60-minute consultation with a Certified Financial Planner (CFP) — costs $299.
Founded in 2008, Wealthfront is another strong player in the fintech space, currently managing around $12 billion in assets for customers in the United States through its robo-advisor.
The firm’s Self-Driving Money™ philosophy reflects its approach to investing, encouraging customers to rely on passive investing and long-term holding periods to achieve their financial goals.
What Do We Like About Wealthfront?
Wealthfront’s value proposition is that investors can save a ton of money, time, and effort by allowing their service to assist them in building a portfolio for their retirement account, offering an IRA that will also enjoy the benefits of tax-loss harvesting.
Additionally, Wealthfront offers certain advanced strategies to investors who may prefer to squeeze the market for a few extra basis points in return, including one named Risk Parity which determines the weight given to each asset class within the portfolio based on its risk-adjusted returns.
Additionally, the firm also offers a Smart Beta portfolio that uses the S&P 500 index as a baseline yet it twists the percentage assigned to each individual stock after assessing which of them are the most promising within the index. Read our full Wealthfront review to learn more.
Fees & Pricing
Wealthfront charges a flat fee of 0.25% on the assets held within the IRA along with any expenses generated by the exchange-traded funds (ETF) that comprise the investment portfolio.
Ally Invest is the investing arm of Ally Finance, a large publicly-traded financial services company based in the United States that is recognized as a powerhouse in everything concerning the financial markets.
The company has more than 350,000 active accounts while offering, among other services, multiple retirement planning solutions.
What Do We Like About Ally Invest?
For the purpose of managing an IRA account, Ally offers its customers the possibility of relying on an automated investing solution similar to the one offered by other robo-advisors within this list while clients can also take control of their accounts by enrolling in Ally’s self-directed trading platform.
For retirement planning purposes, Ally’s Managed Portfolios — the firm’s automated passive investing solution — seems like the best fit, with a list of four different portfolios available to customers for their different financial goals.
However, for IRAs, Ally has a specific portfolio known as the tax-optimized portfolio which aims to maximize returns through certain proprietary strategies. Check out our full Ally Invest review to learn more.
Fees & Pricing
Ally’s annual advisory fee for its managed portfolios is 0.3% of the assets held within the account, although the fee is waived if the client enrolls in the firm’s cash-secured alternative.
Fidelity is one of the oldest financial services companies within the United States. It was founded in 1946 by industry titan Edward C. Johnson and currently oversees more than $3 trillion in assets for customers in multiple corners of the world.
What Do We Like About Fidelity?
Fidelity offers a combination of technological advancements in the field of retirement planning through its Fidelity Go solution, which is designed for investment accounts with less than $10,000.
Additionally, the company offers customized retirement planning solutions for individuals with larger retirement balances as is the case with Fidelity Wealth Services, which helps them in building multiple portfolios for both retirement and other purposes at the same time.
Perhaps one of the most interesting advantages of Fidelity, compared to plain-vanilla robo-advisors, is the possibility of receiving human advice through a team of professionals who can assist the client in building his/her retirement portfolio while providing guidance in regards to best practices to further assist them in achieving their financial goals. Read our full Fidelity review and Fidelity Go review to learn more.
Fees & Pricing
Fidelity’s fees vary depending on the balance of the account, starting at $0 in fees for IRAs with less than $10,000.
Meanwhile, the fee goes up to $35 per year if the account’s balance is lower than $49,999 and then it goes flat at 0.35% for accounts with a balance above $50,000.
That said, the percentage fee goes up for the firm’s hybrid retirement solution — which includes the advice of a human professional — to 0.5% per year. To be eligible for this solution, the client must have an account balance higher than $25,000.
Vanguard is considered a household name when it comes to passive investing, which is why the company founded by legendary investor John C. Bogle must be mentioned when analyzing the best IRA accounts on the market.
Founded in 1975, Vanguard has launched a vast number of products and solutions including exchange-traded funds, mutual funds, and other similar vehicles that allow future and current retirees to manage their investments.
Additionally, Vanguard counts on a large number of financial professionals who are qualified to counsel investors in building their retirement portfolios based on their current situation and future goals.
What Do We Like About Vanguard?
One of the many benefits of opening an IRA account with Vanguard is the possibility to access their vast selection of investment funds without paying a fee, including retirement-specific funds such as their “all-in-one” Target Retirement Funds.
Additionally, investors can customize their portfolios at will by picking individual stocks or funds based on their due diligence and preferences, which is a level of flexibility not provided by all the brokers within this list. Check out our full Vanguard review and Vanguard Digital Advisor review to learn more.
Fees & Pricing
Vanguard’s robo-advisor, known as Vanguard Digital Advisor, costs around $1.5 per year (0.15%) for every $1,000 invested.
On the other hand, the firm’s hybrid solution — which incorporates the assistance of a human advisor — costs around $3 per year (0.3%) for every $1,000 invested but requires a minimum investment of $50,000.
Charles Schwab left its mark on the global financial industry by introducing cheap online brokerage services at a time when most trades were made over the phone.
Since then, this financial institution has grown to become a household name on Wall Street, currently overseeing more than $3 trillion in assets for its clients while specializing in providing top-notch advice for investors.
What Do We Like About Charles Schwab?
Schwab Intelligent Portfolios is the firm’s robo-advisor program, which lets investors off the hook when it comes to fees as long as their accounts have balances lower than $5,000.
Additionally, the company provides access to human advisors if the IRA holds more than $25,000 in assets, in which case the fee remains $0 but there is a one-time $300 planning fee and a monthly $30 advisory fee.
Moreover, Schwab will also let individuals build customized portfolios by using their IRAs through the firm’s self-directed trading solutions. This one-stop-shop approach to investing is perhaps the most attractive aspect of Schwab’s services for prospective retirees. Read our full Charles Schwab review to learn more.
Fees & Pricing
Charles Schwab does not charge advisory fees for managing a retirement portfolio unless the customer decides to enroll for the premium version of the Intelligent Portfolio’s solution.
That said, for clients with an account balance higher than $1 million, a 0.8% annual advisory fee applies.
Chicago-based M1 Finance has emerged as a competitive player in the automated investing landscape, currently managing more than $1 billion in assets for thousands of customers while also offering cash management solutions with perhaps the most competitive pricing out there.
What Do We Like About M1 Finance?
M1 Finance’s value proposition has two particularly appealing elements. First, the company offers its services for free, which means that users can use the firm’s robo-advisor without having to pay any advisory fees.
This particular aspect is highly beneficial, especially in the long run, as the money saved in fees can be reinvested and add up to a sizable amount once compounded, which effectively boosts the retirement portfolio’s gains over time.
Secondly, M1 Finance offers the possibility of building customized portfolios comprised of self-picked individual stocks and exchange-traded funds (ETFs), while also offering a decent selection of pre-designed portfolios to make investing easier for self-directed account holders. Check out our full M1 Finance review to learn more.
Fees & Pricing
As stated above, M1 Finance is a free service. However, investors can sign up for M1 Plus, which is the firm’s premium package, for a $125 a year fee. This premium version of M1 Finance’s services allows the user to enjoy trade executions within two daily windows instead of one.
Founded in 2011, SoFi Invest is the go-to robo-advisor for millennial investors who would like to incorporate innovative instruments such as cryptocurrencies into their portfolios while enjoying the services of a firm that understands the way they see life and finance.
SoFi has grown rapidly among young investors, currently serving more than 1 million customers in the United States through its self-directed trading platform and automated investing service.
What Do We Like About Sofi Invest?
Similar to M1 Finance, SoFi does not charge an advisory fee as long as the IRA’s balance is under $10,000.
Aside from that, the robo-advisor works pretty much like any other within the industry. Meanwhile, Sofi also has a team of Certified Financial Planners (CFP) that can advise investors as needed and a retirement account can be opened with as little as $1. Read our full SoFi Invest review and our SoFi Automated Investing review to learn more.
Fees & Pricing
SoFi does not charge advisory fees for its automated investing feature while investors who prefer to build a portfolio on their own through an IRA can use the firm’s active investing solution, which features zero-commission trading for US-listed stocks and ETFs.
E*TRADE has recently become a subsidiary of Morgan Stanley yet its services will continue to function as they did prior to the acquisition.
The firm was founded in 1982 and currently serves more than 5 million customers in the United States, providing them with self-directed trading and automated investing solutions.
What Do We Like About E*Trade?
With E*TRADE, prospective retirees have the choice of either managing their portfolio by themselves or picking one of the firm’s Core Portfolios — a solution that requires a minimum investment of $500 for mutual funds and $2,500 if the portfolio is comprised of exchange-traded funds.
Essentially, the firm offers four choices of portfolios that go from conservative to aggressive depending on the risk tolerance of the client, along with other variables.
This seemingly easy approach to investing can be advantageous when building a retirement portfolio as investors can put things on auto-pilot. Read our full E*TRADE review to learn more.
Fees & Pricing
E*TRADE charges an annual 0.3% advisory fee for its core portfolios if their market value is higher than $500.
Meanwhile, the firm’s Blend Portfolios — which incorporate the assistance of a financial consultant — charge annual fees ranging from 0.9% to 0.65% depending on the balance of the account.
Finally, if the investor would like to have a dedicated financial advisor who will oversee his or her portfolio, the advisory fee goes up to 1.25%.
In A Nutshell
Firstrade is the name of a former financial services company known as First Flushing Securities, which was founded in 1985 by John Liu.
This provider, unlike others mentioned within this list, offers self-directed trading services only, which means that investors would have to manage their IRA accounts by themselves.
What Do We Like About Firstrade?
Firstrade can be an appealing choice for Chinese individuals as the firm specializes in caring for their needs, offering a website that is fully translated (Chinese Simplified and Traditional).
Fees & Pricing
Firstrade does not charge commissions for trading US-listed instruments within their platform and there is no minimum deposit required to open an IRA with this provider.
Charles Schwab recently acquired TD Ameritrade and its platform and services should be merged with those of Schwab in 2023.
However, for the time being, TD continues to provide its services separately, including IRA accounts.
What Do We Like About TD Ameritrade?
TD’s investment solutions include a robo-advisor, known as the Essential Portfolios, which require a minimum $500 deposit and provides access to a financial consultant for individuals seeking to start planning for their retirement.
Additionally, TD offers Selective Portfolios and Personalized Portfolios, which are goal-oriented portfolios that are overseen by TD’s Investment Management Team.
These advanced portfolio management features are perhaps what makes TD such an appealing IRA provider — especially for individuals with a high net worth or a complex financial situation that requires in-depth advice. Read our full TD Ameritrade review to learn more.
Fees & Pricing
Advisory fees start at 0.3% for the Essential Portfolios and they go up to 0.9% for the Selective and Personalized portfolios.
On the other hand, investors can also build portfolios on their own by using TD’s self-directed trading solution.
Although known now as a subsidiary of Bank of America, Merrill Lynch was at some point one of the largest independent asset management firms in the United States.
Now, after the reorganization that occurred in the financial sector during the 2007-2008 subprime crisis, the firm is backed by a large institution, BofA, which has helped it in building a sizable $2 trillion asset base that is managed by a team of more than 14,000 advisors.
Its self-directed trading solution, Merrill Edge®, can be used for building a retirement portfolio easily, while users can also rely on the firm’s Guided Investing robo-advisor, which requires a minimum investment of $5,000.
What Do We Like About Merrill Edge?
Merrill Edge provides top-notch technological tools, including a sophisticated trading interface and an incredible robo-advisor for investors who may want to have the possibility of choosing one way or the other when managing their IRAs.
Meanwhile, Merrill Edge’s investors can also rely on the assistance of a human advisor, although that comes at a higher price. Read our full Merrill Edge review and Merrill Edge Guided Investing review learn more.
Fees & Pricing
For self-directed investors, the cost of managing their retirement portfolio is $0 and there are no account minimums.
On the other hand, Merrill’s Guided Investing program requires a minimum $5,000 investment. The firm charges an annual 0.45% fee on the assets held within the IRA.
Moreover, if the investor would like to incorporate a human advisor in the mix, the fees go up to 0.85% and there is a $20,000 minimum required to be eligible for this service.
FAQ Best IRA Accounts
We’ve found some of the most frequently asked questions with regards to IRAs. Here are our answers.
What Is an IRA?
An Individual Retirement Account (IRA) is a tax-deferred account that helps investors in funding or supplementing their retirement funds alongside other employer-sponsored programs such as a 401(k).
IRAs are typically more flexible when it comes to the asset classes that can be bought although there are limits to the amount of money that can be put into the account on a yearly basis.
How Does an IRA Account Work?
In a traditional IRA, the earnings produced by the instruments held within the portfolio are taxed once the individual reaches his/her retirement age or if money is withdrawn earlier than that.
Aside from that, the account works pretty much the same as a taxable investment account, except for the fact that there is a cap on the amount of money you can deposit into the account during a given calendar year.
If money is withdrawn before the retirement age, aside from the applicable income tax, the investor has to pay an additional 10% penalty for early withdrawals.
How Much Can I Contribute to an IRA?
For individuals under 50 years old, the maximum yearly limit is $6,000. Meanwhile, for older individuals, an extra $1,000 can be added to the account every year as catch-up contributions.
It is important to note that there are penalties if you exceed these thresholds on your IRA.
Traditional vs. Roth IRA: What Is the Difference?
The main difference between a Traditional IRA and a Roth IRA is related to how withdrawals are taxed.
In a Traditional IRA, contributions and earnings are taxed with an extra 10% on top of the applicable federal tax if they are made before the retirement age. That said, contributions are tax-deductible.
Meanwhile, Roth IRAs allow investors to withdraw their contributions without having to pay any taxes even if the withdrawal is made before they reach the retirement age. On the other hand, contributions are not tax-deductible.
Moreover, individuals can maintain the tax-deferred status of their Traditional IRA even if they reach retirement age in case they prefer to start withdrawing money from a taxable investment account first.
As for eligibility, virtually anyone can open a Traditional IRA while Roth IRAs can only be opened by individuals with earnings lower than $139,000 per year as of 2020. As for joint tax filers, the threshold goes up to $206,000.
Are IRAs a Good Investment?
An individual retirement account is an excellent vehicle for investors seeking to build a retirement fund as they can save money in taxes that, once compounded, can add up to a sizable amount.
Moreover, contributions made to an IRA can, in some cases, be tax-deductible, while money can be withdrawn progressively from the account once the individual reaches the retirement age.
IRA Accounts Pros
- Individual retirement accounts (IRAs) are widely available and offered by most financial institutions in the United States.
- Individuals can choose how they would like to manage their accounts – either by building a portfolio on their own or by letting a third party do the work for them.
- IRAs are tax-deferred accounts and can help individuals rake in significant tax savings and compound the earnings obtained from these savings over time.
- The amount of money required to open an IRA is typically low, even as low as $1 in some cases, and they can be a great supplement to an employer-sponsored retirement program such as a pension fund or a 401(k).
- The contributions made to an IRA are often tax-deductible.
IRA Accounts Cons
- The annual limit for contributions is rather low, although it should be enough to build a sizable amount of retirement funding if the maximum limit is deposited every year.
- Early withdrawals — those made before reaching the retirement age – are taxed with an additional 10%.
How Do I Choose a Good IRA Account?
First of all, you should start by listing your preferences when it comes to the way you will be managing your portfolio and how much you are willing to pay for accessing a managed investing service.
Initially, you should determine if you will manage your investments on your own or if you prefer letting a third party do it for you. In any case, certain providers allow you to do both things with separate portions of your portfolio.
Once you have defined that, you should also pick a provider that offers the most competitive pricing in relation to the features, services, and selection of asset classes provided.
Some providers can be screened out due to their above-average fees, while others are so cheap that they offer no value other than providing a platform to place trades.
In this regard, you’ll probably feel comfortable paying the most competitive price for the features and services you would like to have access to.
Picking a broker for opening an individual retirement account can be an overwhelming task given the large number of providers existing on the US market nowadays.
However, by using the following list as guidance, you can narrow down your picks to a handful of providers, while possibly drilling down their offerings as much as possible to ultimately choose the one that fits you the best.
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Alejandro is a financial writer with 7 years of experience in financial management and financial analysis. He writes technical content about economics, finance, investments, and real estate and has also assisted financial businesses in building their digital marketing strategy. His favorite topics are value investing and financial analysis.