Best Roth IRA Providers for 2018
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Choosing the best Roth IRA providers can be a bit difficult, especially if you’re a new investor. Having spent nearly 15 years in the investment/brokerage industry, I know choosing a broker depends on a number of factors. Thankfully most online brokerages offer Roth IRAs, so you have plenty of options. With that in mind, I want to discuss the best Roth IRA account providers for 2018 based on a variety of needs.
Where to Open a Roth IRA: Best Roth IRA Companies
As I mentioned above, many brokers offer Roth IRAs. If you’re looking at a brokerage that doesn’t offer a Roth IRA, then you should look elsewhere as they’re so popular. What I love about Roth IRAs is they’re so darn flexible.
You can invest in virtually anything you want from stocks to bonds to mutual funds or Exchange-Traded Funds (ETFs). In certain instances, you can even invest in precious metals or real estate, but many stick to standard investments like stocks or ETFs.
You’ll also notice one key thing as we look at the best places to open a Roth IRA – they’re incredibly cheap. Most online brokers don’t charge you to open an account or assess any maintenance fees. As you’re saving for retirement, you want to keep the fees to a minimum and most Roth IRA providers help you avoid that through either no maintenance fees or lower commissions.
If you’re investing with little money, you still can open a Roth IRA. Many of the online brokers in this post have minimal to no balance requirements so you can start saving for retirement with little money if that’s your particular situation. I’ve listed below the best Roth IRA providers and will follow with a brief review of each brokerage later in the post.
Best overall IRA account provider: Vanguard
Best for beginners: Scottrade
Best for active traders: Ally Invest
Best for hands-off investors #1: Betterment
Best for something different #1: Lending Club
Best for something different #2: Fundrise
Best Overall Roth IRA Account Provider – Vanguard
Vanguard, in my opinion, is the best overall online brokerage in the space. My wife and I do all of our investing with Vanguard for a variety of retirement and non-retirement accounts. What makes Vanguard the best overall Roth IRA provider is that they make investing so darn simple and cheap.
Vanguard rests on a number of beliefs, but its core is this – keep fees as low as possible and invest for the long-term. If you’re a fan of lazy investing this is great as you’re not busy chasing gains but investing with the market and not caring about short-term fluctuations. However, Vanguard is not for everyone as you will see below.
Minimum to open an account: $1,000, but $3,000 in some cases
Commission: Tiered, starting at $7 per trade for the first 25 trades and $20 thereafter. It’s important to point out the more you have with Vanguard, the lower the commissions. Additionally, you can generally trade Vanguard funds for no commission.
Fees: No maintenance fees
The minimum balance requirement will hold some investors back. For others, they may not like the simplistic approach Vanguard takes and that’s fine as you need to be with a brokerage you like. If you’d like to read more about how they work, here’s our review of Vanguard.
Best Roth IRA Provider for Beginners – Scottrade
Scottrade is the best IRA provider for beginners for two reasons: they have the most user-friendly website in the online brokerage space, and they have a nationwide branch network of over 500 branches. Trading platforms can be overwhelming for many beginner investors, but the Scottrade site is simple to navigate and full of resources to help you start and learn about investing.
The branch network is a great resource for investors. You can open accounts, ask questions, take in deposits or get advice if you have a certain account balance.
Minimum to open an account: $500 for an IRA
Commission: Flat $7 for stocks and $17 for mutual funds
Fees: No maintenance or inactivity fees
Another great feature for Roth IRA investors is Scottrade’s 14,000 mutual funds offering, which is among the best in the industry. I will point out that while you can open a Roth IRA with Scottrade for $500, they do require $2,500 for non-retirement accounts.
Open an account with Scottrade and get up to $2,000 cash back. If you’d like to read more about how they work, here’s our Scottrade review.
Best Roth IRA Provider for Active Traders – ally invest
Ally Invest takes up two spots for IRA account providers – best for active traders and the cheapest. Whereas the Scottrade platform is pretty simple to use, the Ally Invest site is more robust as they target more active investors. If you want to trade more actively in your Roth IRA account, Ally Invest is likely the broker for you.
Ally Invest (formerly known as TradeKing) was recently acquired by Ally Financial so they might be able to offer additional services in the future that will set them apart from other Roth IRA account providers.
That aside, the biggest selling point of Ally Invest is their bargain-basement price of $4.95 for stocks and $9.95 for mutual funds. Ally Invest has about half the mutual funds as does Scottrade, but they set themselves apart with the low price.
Minimum to open an account: $0 needed to open
Commission: $4.95 for stocks and $9.95 for mutual funds
Fees: $50 inactivity fee
I will point out one key aspect of the inactivity fee at Ally Invest – there are two ways around it. If you place one trade a year or have an account balance of at least $2,500 they will not charge the inactivity fee. You just need to qualify for one to get out of paying the fee. I don’t like fees, but this one would not hold me back from opening an account.
You can open an account with Ally Invest and get up to $150 in transfer fees reimbursed.
If you’d like to read more about how they work, here’s our Ally Invest review.
Best Roth IRA Provider for Hands off Investors – Betterment
Are you a hands-off investor? Do you want someone else to manage all the facets of investing for you? Are you a new investor? Betterment may be the option for you. Betterment is one of the best automated retirement programs for new investors as they customize a portfolio based on your goals and needs.
Investing with Betterment is a bit different than going through a traditional online brokerage. You don’t invest in stocks or actively trade. Instead, Betterment puts you in a basket of low-cost ETFs based on how you answer 12-15 questions. From there, Betterment manages your portfolio to make sure it stays on track with where you should be.
Minimum to open an account: $0
Commission: A new commission structure of a flat .25 percent charged annually, based on your account balance.
Fees: No maintenance or inactivity fees
In years past, you’d have to pay high fees to someone to do the same exact thing for you. As Betterment is one of the biggest players in the robo-advisor space, their pricing is among the best in the industry. I will add that they’ve recently changed their pricing structure. While still good, it’s a bit higher than their main competitor.
Best Roth IRA Providers for Something Different – Lending Club
I’ve never been big into P2P Lending, but many like to invest in peer-to-peer loans. If you like to invest in P2P Lending, you may want to consider a Roth IRA with Lending Club. If you’ve never invested in P2P loans, I’d strongly caution you to do your due diligence prior to opening a Roth IRA through someone like Lending Club.
The reason is quite simple; you’re investing in loans given out to individuals. They may default which means you could lose out on your investment. Honestly, you can lose a lot in a standard brokerage account, but that’s a much different risk than offering personal loans.
Minimum to open an account: $1,000
Commission: 1% of payments received plus collection fees
Fees: $100 annually if you invest less than $10,000
Lending Club offers a variety of other retirement account types, in addition to self-directed Roth IRAs. Go to Lending Club to learn more about your investment options – and get up to a $3,000 bonus when you open an account.
Best Roth IRA Providers for Something Different – fundrise
Last on the list of best places to open a Roth IRA is Fundrise. Fundrise allows you to invest in commercial real estate. Not everyone likes to invest in the stock market and real estate investing is a great alternative for those seeking investment opportunities.
You often need to be an accredited investor (meaning you have loads of money and meet other requirements) to invest in commercial real estate.
That is not the case with Fundrise as they allow anyone to start investing with as little as $500 in a Roth IRA. They also allow Traditional, SIMPLE and SEP IRAs if you don’t want a Roth.
RealtyMogul is another good option to invest in real estate. You need to have $1,000 to start, but has lower fees than Fundrise.
Minimum to open an account: $500
Fees: .85% per year
I’m a big fan of Fundrise as they allow you to diversify your investing efforts and can do without a high requirement. With Fundrise, you invest in an eReit – which is a pool of many commercial real estate properties, helping you balance out returns.
Like investing in the stock market, commercial real estate investing is passive (through a firm like Fundrise as you don’t own the building outright) so it requires little effort.
If you’re looking to diversify your investing, Fundrise is worth a look at only requiring $500 to start investing in real estate.
Should You Open A Roth IRA?
Before opening a Roth IRA, you need to make sure it’s the best retirement account for you. Comparing the Roth vs. the Traditional IRA, there is one main difference in how you’re taxed. With the Traditional IRA, you get the tax benefit now as contributions are tax deductible now.
The Roth IRA, on the other hand, allows you to get the tax benefit when you withdraw the funds at retirement. Assuming you’ll be in a lower tax bracket in retirement, you’d want to take the tax benefit then.
However, there are a few key reasons why a Roth stands out in my opinion. The main reason is you can withdraw contributions from a Roth tax-free. If you do withdraw from a Traditional, you’ll run into a 20 percent tax hit, at the very least. Not that you should withdraw contributions from a Roth IRA, the ability to do so without a penalty is very enticing.
If you withdraw gains from a Roth, you’ll run into the same tax hit, so it’s important to keep that in mind. Additionally, there are special exemptions for first-time homebuyers and for college expenses you don’t get to enjoy with a Traditional IRA.
Assuming your 401(k) is a Traditional 401(k) there’s also the argument for tax diversification with a Roth to help you during retirement. There may be other considerations you need to keep in mind when looking at a Roth vs. Traditional IRA so make sure to speak with a tax professional if you have specific questions.
Finding the best place to open a Roth IRA is important so you can start saving for retirement relatively worry free. Find the one that works best for you and start investing!
What do you look for when choosing a Roth IRA provider? Would you ever invest in non-stock investments in your IRA?
John is the founder of Frugal Rules, a dad, husband and veteran of the financial services industry whose writing has been featured in Forbes, CNBC, Yahoo Finance and more.
Passionate about helping people learn from his mistakes, John shares financial tools and tips to help you enjoy the freedom that comes from living frugally. One of his favorite tools is Personal Capital , which he used to plan for retirement and keep track of his finances in less than 15 minutes each month.
Another one of John's passions is helping people save $80 per month by axing their expensive cable subscriptions and replacing them with more affordable ones, like Hulu with Live TV.
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