Capitalize is here to help you navigate different IRA providers and discover which IRA account could be the best fit for you: Best Robo-Advisor IRAs, Best Self-Directed IRAs, Best Traditional IRAs, Best Roth IRAs.
Updated on June 6, 2024
Learn about our Editorial Process
Charles Schwab does not offer direct investments in cryptocurrency. This probably won’t be a limitation investors looking to trade more traditional asset classes, though. Additionally, Charles Schwab offers cryptocurrency-related mutual funds and ETFs.
Additionally, its 0.45% interest rate on uninvested cash is lower than some other similar brokerages; while there are options to increase this rate, investors must opt into them.
A Schwab robo-advisor portfolio doesn’t offer socially responsible asset allocation options. It also requires a higher account minimum of $50,000 for a tax-loss harvesting service.
Robinhood doesn’t offer investment in certain types of asset classes that may be attractive to investors, such as fractional shares, and there are no physical branch locations at which to receive customer service; you must log in and request a callback or email support.
The recommended portfolio is a one-time-only event. Recurring investments are at the sole discretion of the customer. Retirement recommendations are not available to Massachusetts residents.
Alto enables you to invest easily in private assets through an IRA and is subject to all restrictions associated with IRC 4975 (c)(3), and IRC 408 (e)(2)(A), which generally restricts investments in IRAs between parent-child familial relationships, in addition to investment in S-Corp stocks, and direct investments in collectibles that the IRA owner personally maintains. For now, you cannot invest in publicly traded assets like stocks and bonds.
Furthermore, Alto does not offer account types outside of IRAs – though as an IRA provider, it offers a range of IRA types.
Obviously, for those who are interested in funding their IRA accounts primarily with crypto, Bitcoin IRA is a standout. But for those who are interested in padding out their crypto IRAs with other types of assets, like stocks, bonds, or mutual funds, Bitcoin IRA may not be the first choice. Additionally, Bitcoin IRA doesn’t offer access to other types of alternative assets like venture capital or real estate. The company is focused specifically on the crypto IRA, so those looking for conventional IRAs will need to look elsewhere.
Additionally, cryptocurrency is well known for having substantial risks and unpredictable market behaviors. Given the importance of retirement funds specifically, investors should proceed with some caution and a lot of research.
As mentioned above, Ally’s trading tools could have better third-party research and educational tool integration, like advanced charting tools, to help investors make the most of their investment choices.
Also, Ally robo portfolios do not come with automatic tax loss harvesting.
An IRA, or individual retirement account, is an investment account that allows you to save for retirement in a tax-efficient way. You can also use an IRA to transfer, or roll over, money from 401(k)s and other retirement accounts, tax-free.
Like 401(k) accounts, IRAs allow you to invest your savings in stocks, bonds, ETFs, and other assets. They have similar tax advantages: Both traditional 401(k)s and IRAs give you the option to deposit money before taxes, and your money grows tax-free until you withdraw it.
Also similar to cashing out a 401(k) from an old job, IRAs have withdrawal restrictions: You may face a 10% early withdrawal penalty and pay ordinary income tax on the money you withdraw before age 59 1/2 unless you qualify for an exception.
If you’re like many Americans, the retirement funds in your IRA may be the most valuable asset you have, aside from your home if you own it. So choosing the right IRA account — and researching IRA providers — are key steps to successful retirement planning.
IRAs are available from many financial institutions and banks. If you choose a self-managed portfolio, you’ll manage the assets and decide what to invest in. Many investment firms also offer a robo-advisor, which uses algorithms and automation to make investment decisions for you. In either case, you’ll likely be able to choose from assets like stocks, bonds, and ETFs.
IRAs from banks typically offer conservative investments, like certificates of deposit and IRA savings accounts. These investments typically offer a fixed rate of interest over a certain period of time. Because of higher interest rates, IRA CD rates are more appealing now than they have been in a decade. An online financial institution can often provide even higher-than-average rates, thanks in part to their lower-than-average overhead. Still, in terms of earning potential, the best IRAs are usually those that let you invest in the stock market.
While many 401(k)s require contributions to come directly from a paycheck before taxes, IRAs allow you to contribute at your own pace. With most IRA providers, you can contribute online using your computer or mobile device, and even set up automatic transfers on a regular basis.
But you’ll need to heed the annual IRA contribution limit, which changes each year. In 2024, you can contribute up to $7,000 to a traditional or Roth IRA if you’re 49 or younger. If you’re at least 50 years old, the contribution limit is $8,000.
There are two main types of IRAs, traditional and Roth, each with specific tax benefits. We’ll also cover some less common IRA types: SEP and SIMPLE IRAs.
Traditional IRAs are funded with pre-tax money, which means you may be able to deduct contributions on your tax return during the year you make them. Then, the contributions and their earnings grow on a tax-deferred basis until you withdraw funds in retirement, similar to the way it works with most 401(k)s. For these reasons, we call them “tax-me-later” accounts: The money usually goes in and compounds tax-free, but you owe ordinary income taxes when you withdraw money.
When you retire, you might find yourself in a lower tax bracket than you were when you were working. The tax deferral allows you to pay tax at that lower rate when you finally withdraw the money.
Traditional IRA contributions are often tax-deductible. That means if you contribute $7,000 to a traditional IRA, your taxable income would likely be reduced by $8,000.
However, if you or your spouse has access to an employer-sponsored retirement account, your modified adjusted gross Income, or MAGI, will determine how much of your contribution you can deduct — if any. If you’re unsure, it’s best to check with the IRS or a Certified Financial Planner to see how much of your IRA contribution might be deductible.
Roth IRAs work in the opposite manner from traditional ones: They’re funded with money you’ve already paid taxes on (after-tax dollars), and your money grows tax-free. You can then look forward to tax-free withdrawals in retirement if you follow certain rules.
Roth IRA gains aren’t subject to taxes upon withdrawal, so long as you’ve held your account for at least five years and are at least 59 1/2 years of age. You can also withdraw your contributions, though not their earnings, at any time without a penalty.
To keep it simple, think of Roth accounts as “tax-me-now” accounts: You pay taxes before putting the money in, but then you generally get to withdraw it tax-free. That makes them a great option for people who expect to be in a higher tax bracket in retirement. They’re also a good choice if you simply want tax-free retirement income. Roth IRAs also make for an easy way for beneficiaries to pass wealth on to their heirs.
The IRS limits the tax advantages of Roth IRAs to people earning below a certain amount. To contribute directly to a Roth IRA in 2024, your taxable income cannot meet or exceed:
To contribute up to the full annual Roth IRA contribution limit, you’ll need to earn less than:
SEP IRAs are designed for employers as well as self-employed individuals. The SEP IRA is game-changing especially for those who work for themselves. That’s because you can contribute to your SEP IRA as both employer and employee, dramatically increasing the total amount you can contribute. In 2024, the total SEP IRA contribution limit is $69,000 or 25% of the employee’s compensation — whichever is lower. But if you have eligible employees, you’ll need to contribute the same percentage to their SEP IRAs that you contribute to your own account.
SIMPLE IRA is short for Savings Incentive Match PLan for Employees. It’s designed for small business owners, generally those with 100 or fewer employees. With a SIMPLE IRA, the employer is actually required to either:
Self-employed people and independent contractors can also use a SIMPLE IRA to increase their overall retirement savings.
There are a few factors to consider when deciding on an IRA provider for your new account. Many beginners compare IRA providers based on fees and available investment products or simply choose a financial institution they’re already familiar with.
Most large financial institutions offer an IRA of some type, many with no account minimum required. No matter which provider you choose, you can always change providers. IRA-to-IRA transfers are generally easy, so you’re not locked in.
If you’re unsure, you can also contact each provider’s customer support service to see if their IRA offering meets your needs. Plus, you’ll learn more about how their customer service works before you actually need to use it.
Anyone who earns income from working can contribute to a traditional IRA, though the deductibility of those contributions depends on your access to an employer-sponsored plan). Income limits apply to after-tax Roth IRAs, though. If you’re a high earner, you may not be eligible to contribute directly to a Roth. You can only open a SEP or SIMPLE IRA if you’re self-employed or own a small business.
You can contribute up to $7,000 a year (total) to traditional and Roth IRAs in the tax year 2024 if you’re 50 or younger. If you’re at least 50 years old by the end of the tax year, you can contribute an additional $1,000, for a total of $8,000 in the tax year 2024.
Keep in mind that with IRAs, the question isn’t whether you’ll pay taxes — it’s when. If you expect to be in a higher tax bracket during your retirement years, a Roth IRA may make more sense if you’re eligible to contribute. If you expect to be in a lower tax bracket, a traditional IRA might better serve you.
Keep in mind, too, what investment options are available to you. Money doesn’t just magically grow once you contribute it to your IRA; you have to actually buy investments, a process known as asset allocation. Most providers offer access to more traditional assets like individual stocks, bonds, mutual funds, index funds, and ETFs (exchange-traded funds), but if you’re interested in alternative asset classes like cryptocurrency or forex, be sure to check that your would-be provider offers them before you apply. Some providers may even be crypto-centric, if you prefer to focus on more contemporary investments. Investing in multiple different types of assets gives you a more diversified portfolio, which can help mitigate risk.
Self-Managed IRAs give you the opportunity to manage your investments on your own, picking and choosing specific trades. You can find self-managed IRAs at online brokers like Fidelity, Charles Schwab, Vanguard, E*Trade, or TD Ameritrade. They’re typically used by more active investors who want more control over their portfolios. You’ll likely have the opportunity to invest in many different assets including stocks, bonds, and ETFs to create a diversified portfolio. It’s best practice to look for a commission-free IRA with low fees.
Automated (Robo-Advisor) IRAs are offered by Betterment, Schwab Intelligent Portfolios, and a growing number of trading platforms. A robo-advisor sets up a diversified portfolio for you and uses technology to automatically rebalance it over time. They’re a good fit if you want to outsource your investing decisions and the asset allocation process, or if you don’t feel qualified to make your own trades. To use a robo-advisor, you’ll generally pay an annual fee that’s expressed as a percentage of your assets, known as a management fee or an advisory fee. Some robo-advisors offer access to a team of Certified Financial Planners (CFPs) in the event you have questions for a human.
Obviously, the less expensive your retirement funds are to maintain, the more money is left over for your retirement—so look for an option with low-cost account fees, as well as $0 trading commissions. You can also look up expense ratios, which are investment fees for mutual funds and ETFs. Many online brokerage accounts are available these days with very low fees overall, and you can usually find online calculators to help compare different scenarios.
If you’re managing your IRA, choosing a provider that offers research and retirement planning tools can make a huge difference, especially if you’re a beginning investor. Different providers offer different levels of these tools. Some providers even offer educational resources after you open an account to help you brush up on your knowledge. While you may not be able to check out the web portal before you sign up, you can read reviews to get a sense of what’s available.
Sometimes, there’s just no substitute for talking to a human being. But not every IRA provider offers the opportunity to connect with one. If having access to live customer service is important to you, look into this availability ahead of time. Check out reviews on third-party sites like TrustPilot, too. Similarly, if you want to work one-on-one with an investment advisor or financial planner, find out if the provider you’re considering offers those services. Be aware that they may come at an upcharge or require a certain minimum investment threshold.
Good news: These days, opening an IRA account is easier than ever. In most cases, it can all be done online. Simply follow the instructions offered by the IRA provider you’ve chosen. You’ll fill out your basic demographic information and likely be asked to upload proof of identity and location, like a photo ID or a bank statement. From there, you’ll fund your account and get started
A rollover IRA is a type of IRA that’s tagged to receive money from another retirement portfolio account. This transfer is known as an IRA rollover. IRA rollovers involve moving eligible assets from an employer-sponsored retirement plan, such as a 401(k) or 403(b), into an IRA. You can also roll over one IRA to another.
401(k) rollovers are not subject to the standard contribution limits, because they aren’t considered contributions. Since this is money you’ve previously saved, there’s no upper limit on how much money you can transfer in a rollover transaction. There’s usually no transaction fee associated with a rollover, and there isn’t any minimum balance requirement to move out your old retirement funds.
You’ll need to have separated from your previous employer, though, to be eligible for an IRA rollover. You’ll also need to make sure that your rollover IRA matches the tax status of the account you’re moving in. For example, if you have a pre-tax 401(k) at your former employer, you’ll want to open a traditional IRA to receive your old plan. Otherwise, you’ll owe taxes on the amount you convert from a traditional account to a Roth account. If you have a Roth 401(k), your rollover IRA should also be a Roth IRA.
Save yourself the hassle and let the experts at Capitalize roll over your old 401(k)s into your new IRA.
If saving is difficult for you, consider setting up an automatic transfer to your IRA each month. Just be sure not to contribute more than the annual limit, which can lead to fees and penalties.
If you have access to an employer-sponsored retirement plan, it may make sense to contribute to both your IRA retirement portfolio and that 401(k) or 403(b). If you need help, enlist a Certified Financial Planner or other fiduciary to review your situation.
Investing is not a one-and-done action. For best results, you’ll need to review and rebalance your portfolio regularly to ensure it’s performing well. Retirement planning tools can help you make smart decisions and create a diversified portfolio that’s built to last. An investment advisor can help you gain a sense of retirement security.
Check in with your IRA on a regular basis. However, don’t get scared off if you see your balance dip. Market fluctuations come and go. But in the long run, investing in a diversified mix of stocks has a good track record of building wealth.
Choosing the right IRA account and provider is an important step toward reaching your personal finance goals and maximizing your retirement fund. The earlier you get started, the better. When it comes to investing, more time means more opportunity for your money to grow. Whether you’re looking for your first-ever online brokerage account or are planning to roll over an old 401(k), today is a great day to take the first step.
Capitalize can help you find old 401(k)s and consolidate them into one new IRA through a fast, easy and free rollover service. That means you get to focus on what matters: Planning what to do with your hard-earned wealth.
To help you compare, we’ve compiled a list of popular providers in the following categories:
The best IRA for your situation depends entirely on your personal financial situation. When comparing IRAs, look at each option’s short- and long-term benefits, and whether you plan to make pre- or post-tax contributions.
As with any major financial decision, consider making an appointment with a qualified financial advisor (CFP) or tax professional (CPA) who offers broad financial planning guidance. You’ll want to make sure that your IRA fits into your overall investment strategy.
Most people who open an IRA choose either a Traditional IRA or Roth IRA. However, other options, such as a Crypto IRA, also exist. Most, if not all IRA brokerage accounts offer access to popular low-cost index fund investments.
IRAs are an excellent savings account for anyone wanting to be more hands-on with retirement investing. But they’re not the only account available, so be sure to investigate all of your options with regard to your personal finances as a whole — and always be aware of any account fees you’re charged.
Reviewed by
