In the world of investing, Individual Retirement Accounts (IRAs) offer an excellent way to grow your wealth in preparation for retirement. With their tax advantages and wide investment choices, IRAs can be an indispensable tool in your financial planning arsenal. But like any other investment vehicle, you need to understand the details of this before you put your money in…
I’m a trader first, but I’ve spent my career gathering all the information I can about the investment world. I’ve looked at CDs, money market accounts, and Roth 401 accounts, done evaluations that include account fees and other charges. Both retirement investors and small account traders should know what these passive investments have to offer — it’s a LOT.
This article explores different types of IRAs, reviews the top IRA accounts that I’ve found in my thorough analysis, and answers frequently asked questions about IRAs. Let’s get into it!
Table of Contents
- 1 What is an Individual Retirement Account (IRA)?
- 2 Types of IRAs
- 3 My Top Picks for Best IRA Accounts for All Types of Investors
- 3.1 Vanguard — Best IRA Account for Index Fund Investors
- 3.2 Fidelity — Best IRA Account for Beginner Investors
- 3.3 Charles Schwab — Best IRA Account for Hands-On Investors
- 3.4 TD Ameritrade — Now Available to Schwab IRA Account Investors
- 3.5 E-Trade — Best IRA Account for Frequent Traders
- 3.6 SoFi — Best Fintech IRA Account
- 3.7 Betterment — Best IRA Account for Passive Investors
- 4 Exploring IRA Trading Platforms
- 5 Things You Need to Know Before Choosing an IRA
- 6 Evaluating Your Investment Selection
- 7 Key Takeaways
What is an Individual Retirement Account (IRA)?
An IRA is a tax-advantaged investment account designed to help individuals save for their retirement. Unlike a regular brokerage account, IRAs offer tax benefits such as tax-deductible contributions or tax-free growth, depending on the type of IRA.
The primary purpose of these accounts is to promote long-term investment and savings for retirement.
An IRA is more than just a retirement savings account. It’s a strategic financial tool that can help you maximize your wealth. But to make the most of it, you need to understand the difference between various types of accounts.
Let’s start with the basics — the difference between a margin account and a cash account. If you don’t know how each works, read this guide on Margin Account vs Cash Account. It will help you understand the pros and cons of each and make an informed decision.
Types of IRAs
When it comes to IRAs, there are several types, each with unique characteristics, benefits, and rules. Knowing which one to pick is crucial.
Spousal IRAs, inherited IRAs, and small business IRAs each serve distinct needs. The type of IRA that suits you best will depend on factors such as your marital status, whether you’ve inherited an IRA, and whether you own a small business. Employers too can contribute towards their employees’ retirement via employer-sponsored IRAs.
Let’s cover the four primary IRA types — Traditional, Roth, SEP, and SIMPLE.
A traditional IRA allows you to make pre-tax contributions, meaning the money you contribute could be deducted from your income for tax purposes.
The investments grow tax-deferred until retirement, at which point withdrawals are taxed as ordinary income.
In contrast to traditional IRAs, Roth IRA contributions are made with after-tax dollars, meaning you won’t get a tax deduction for your contributions.
However, the money grows tax-free, and you can make qualified withdrawals in retirement without owing any taxes.
Roth IRAs are unique in that they allow for tax-free growth and tax-free withdrawals in retirement. This makes them an attractive option for many investors. But choosing the right Roth IRA account is crucial. You need to consider factors like fees, investment options, and customer service.
If you’re considering opening a Roth IRA, check out this list of the Best Roth IRA Accounts.
A Simplified Employee Pension (SEP) IRA is designed for self-employed individuals and small business owners. It operates similarly to a traditional IRA, but it allows for significantly higher contribution limits.
The Savings Incentive Match Plan for Employees (SIMPLE) IRA is a type of IRA for small businesses and self-employed individuals. It’s similar to a traditional IRA but with mandatory employer contributions.
My Top Picks for Best IRA Accounts for All Types of Investors
Here are my picks for the best IRA accounts:
- Vanguard — Best IRA Account for Index Fund Investors
- Fidelity — Best IRA Account for Beginner Investors
- Charles Schwab — Best IRA Account for Hands-On Investors
- TD Ameritrade — Now Available to Schwab IRA Account Investors
- E*TRADE — Best IRA Account for Frequent Traders
- SoFi — Best Fintech IRA Account
- Betterment — Best IRA Account for Passive Investors
Several financial institutions offer IRAs, each with their own pros and cons.
Choosing the right IRA account is a personal decision that depends on your financial goals, investment style, and risk tolerance. But if you’re a beginner, it can be overwhelming. There are so many options out there, and each one has its own set of features and benefits. To help you get started, here’s a guide on the Best Stock Broker for Beginners. It will help you understand what to look for in a broker and how to choose the one that’s right for you.
No broker is perfect — you need to find the one that’s best for you. I look at the types of financial products available, which markets you can access and stocks you can trade, customer service, interest rates and fees, order executions and more.
Here are my top picks for best IRA accounts:
Vanguard — Best IRA Account for Index Fund Investors
My first IRA account pick is Vanguard.
Vanguard is known for its low-cost index funds and offers a variety of IRA account types, including traditional, Roth, and SEP IRAs.
As far as financial products to invest in, Vanguard offers a wide variety of investment vehicles including stocks, ETFs, and even crypto assets. Vanguard’s ETF trades have some of the lowest costs in the business. Because of the variety of these offerings, as well as its accuracy and integrity, Vanguard has attracted more than its share of IRA investors over the years.
Fidelity — Best IRA Account for Beginner Investors
My second IRA account pick is Fidelity.
Fidelity offers no account minimums, a variety of investment options, and top-notch customer service, making it a great choice for those just starting out.
Fidelity offers a comprehensive lineup of financial products, from IRA accounts to insurance and loans to Fidelity Go, their robo-advisor. They are known for their excellent customer service, wealth of educational resources, and competitive offerings on everything from IRA accounts to mortgage rates.
Charles Schwab — Best IRA Account for Hands-On Investors
My third IRA account pick is Charles Schwab.
Schwab provides an extensive library of educational resources, sophisticated trading platforms, and a wide range of investment options.
Schwab shines with its wide variety of investment options, integrating offerings from stocks to futures. It’s also an excellent platform for those interested in exploring robo-advisor services. For the tech-savvy investor, Schwab’s mobile offerings also support trading on the go.
TD Ameritrade — Now Available to Schwab IRA Account Investors
My fourth IRA account pick is TD Ameritrade… which is now part of Charles Schwab.
Following a recent merger, Charles Schwab and TD Ameritrade now provide a combined platform with robust trading capabilities and a wide variety of investment options. Schwab’s brokerage was the largest in the world before the merger, and TD Ameritrade is adding its advanced trading tools and comprehensive research resources to the mix.
A full integration of both brokers — which will make TD Ameritrade’s award-winning thinkorswim trading platform available to Schwab users — is scheduled for late 2023.
Schwab’s mortgage lenders provide competitive rates for homeowners looking for mortgage or refinance options.
Overall, the combined capabilities of Charles Schwab and TD Ameritrade make this platform a strong contender for best IRA account brokerage.
E-Trade — Best IRA Account for Frequent Traders
My fifth IRA account pick is E-Trade.
E-Trade provides a powerful trading platform with advanced tools and features, making it an excellent choice for retail traders. It’s one of the brokers I find myself using the most.
The broker provides fast executions, low fees, and a wide array of shares to trade and short.
E-Trade stands out for its options trading platform and extensive menu of investment choices, including futures. Its seamless integration of services from investing to banking to credit cards covers most bases. It also offers competitive rates on mortgages and refinancing options.
SoFi — Best Fintech IRA Account
My sixth IRA account pick is SoFi.
SoFi started as a student loan refinancer, but has since expanded to offer a variety of financial products — including SoFi Invest, SoFi’s investing platform.
SoFi offers a suite of personal finance products from insurance to credit cards, in addition to competitive investment accounts. It also offers robo-advisory services with SoFi Automated Investing.
Betterment — Best IRA Account for Passive Investors
My seventh IRA account pick is Betterment.
As a robo-advisor, Betterment manages your IRA for you based on your risk tolerance and investment goals. This makes it suited to some investors who prefer a hands-off approach.
Exploring IRA Trading Platforms
Active traders have the option to manage their IRA investments via the trading platforms offered by the brokerage they choose. A good trading platform will have research tools, great charts, watchlists, and more. This will give you the option of actively managing your investments — a strategy I prefer!
When it comes to trading platforms, StocksToTrade is first on my list. It’s a powerful trading platform that integrates with most major brokers. I helped to design it, which means it has all the trading indicators, news sources, and stock screening capabilities that traders like me look for in a platform.
Things You Need to Know Before Choosing an IRA
Choosing the right IRA involves factors like:
- The IRA type that suits your tax situation and retirement goals
- Understanding the various investment options available
- Knowing the fees associated with the IRA
- The IRA provider’s reputation and customer service
An IRA is a long-term investment. Make sure your choice fits you for the long haul.
Reviewing IRA Providers
The best IRA provider for you may not be the best for everyone. That’s the same with any broker, and I usually tell my students to try out every broker they’re interested in before settling on one or two…
It isn’t quite as easy with IRA accounts. While you can transfer an IRA from one bank to another without triggering tax penalties, you can’t change the type of IRA account as easily. This is a decision you want to take seriously.
Maximizing IRA Tax Benefits
IRAs come with significant tax benefits. Depending on your income, you could be eligible for a Saver’s Tax Credit on your IRA contributions.
Traditional IRAs allow for tax-deductible contributions, while Roth IRAs offer tax-free growth. Utilize the tax benefits and maximize your savings by studying up and using the right tax software.
Taxes are important no matter which trading strategy you use. Check out my guide to day trading taxes here.
Utilizing Additional Financial Services
Many IRA providers also offer a lineup of financial services. For instance, services like life insurance, homeowners insurance, renters insurance, debt consolidation, credit score rehabilitation, and even home equity loans are sometimes offered.
At SoFi Invest, you can start an IRA while refinancing your student loans. These additional services can be the difference between an IRA provider that’s just okay and one that fits you perfectly.
Evaluating Your Investment Selection
Within an IRA, you have a wide array of investment options, such as cash, stocks, index funds, and more. You can enlist an investment advisor to offer help and advice that aligns with your risk tolerance and retirement goals.
Strategies developed by investment advisors consider various factors such as your current financial situation, future needs, and market conditions. The use of robo-advisors, offered by many platforms, has also been on the rise due to the lower costs involved in managing your portfolio.
IRAs are a powerful tool for retirement savings, providing tax advantages and a broad range of investment options. The best IRA for you depends on your investment style, retirement goals, and the IRA’s cost.
Research and compare different IRA providers before making your decision to ensure it aligns with your long-term financial goals.
Even if you’re not in the market for an IRA now, building your knowledge account is a good investment. Research and study should be the bedrock of any trading or investment strategy you decide on.
I’ve built my Trading Challenge to pass on the things I had to learn for myself. It’s the kind of community that I wish I had when I was starting out.
We don’t accept everyone. If you’re ready to work hard, I want to hear from you.
Do you invest in an IRA? Let me know in the comments — I love hearing from my readers!