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 Overall IRAs.
Reviewed by
Stang Gappa
Reviewed by
Stang Gappa
Updated on June 6, 2024
Learn about our Editorial Process
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.
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.
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.
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.
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 noted, Roth IRAs are after-tax retirement savings accounts. That means that, although you won’t get a deduction on the contributions you make in the short term, your funds can grow—and eventually be withdrawn—tax-free in retirement time, so long as you follow all the rules. (More on those below.)
Additionally, because they aren’t subject to required minimum distributions (RMDs) during the original account-holder’s lifetime, Roth IRAs are a popular and convenient way for beneficiaries to pass wealth down to their heirs.
Furthermore, since you’ve already paid taxes on your contributions, you’re able to remove them from your account at any time, for any reason—though not any earnings they might have gained. Still, this flexibility paired with the powerful tax advantages of Roth IRAS make them deeply attractive to many investors.
Let’s take a closer look by comparing them to their traditional counterpart.
Many people already know traditional IRAs, whose tax structure matches the default of many employer-sponsored retirement accounts like 401(k)s. Unlike Roth IRAs, traditional IRAs are funded with pre-tax dollars, which means the contributions are usually tax deductible in the short term, but withdrawals are taxed in retirement.
Traditional IRAs:
Roth IRAs:
Unlike with traditional IRAs, there are specific eligiblity criteria that govern who can contribute directly to a Roth IRA. These criteria are based on income thresholds that the IRS change from year to year.
For 2024, single filers whose Modified Adjusted Gross Income (MAGI) is $161,000 or more are ineligible to contribute directly to a Roth IRA; the same is true for married couples filing jointly who earn $240,000 or more. If you’re a single filer who earns between $146,000 and $161,000, you can contribute a reduced amount (lower than the annual contribution limits, which we’ll get to next); for married couples filing jointly, that phaseout bracket is $230,000 to $240,000.
Like all IRAs, Roth IRAs are subject to annual contribution limits that govern how much an individual can contribute to any and all IRAs they may own. Again, these can change from year to year, but for 2024, the annual contribution limit is $7,000—or $8,000 for those aged 50 or over, who are eligible to make catch-up contributions.
Just like you may face fees for making an early withdrawal, it’s important to pay close attention to the IRA contribution limits, because contributing more than the limit can lead to financial penalties.
As mentioned, Roth IRAs have a suite of tax benefits that make them such a powerful vehicle for those who are eligible to contribute: namely, the tax-free growth and eventual withdrawal of retirement income. (For comparison, traditional IRAs offer tax-deductible contributions and tax-deferred growth, which is powerful in its own right—but still subject to income tax come retirement time.)
It is important to understand, though, that Roth IRA contributions don’t reduce your taxable income, so if you’re planning on your retirement savings to help you take deductions in the short-term, a Roth IRA may not be the right fit.
Because you’ve already paid taxes on your Roth IRA contributions, you can take them out at any time. The same can’t be said for the growth they’ve earned, however. Just like with a traditional IRA, except in a few circumstances, you’ll need to wait until you reach retirement age (59 1/2) to take out Roth IRA distributions without paying an early withdrawal penalties.
Roth IRAs are also subject to a series of five-year rules, which basically state that your account must be open for at least five years before distributions are taken in order to avoid paying additional taxes. This is true even if you’ve reached retirement age or are otherwise qualified to take a distribution.
If you’re serious about your retirement savings, selecting the right IRA provider is critical. Different providers charge different fees, offer different investment options, and have various levels of customer service availability. And there are a lot of providers out there to choose from these days, so doing your homework is a must.
Fortunately, as you’re comparing various providers, you can narrow the list of main concerns down to just a few.
Of course, we’re all about making it easy for you—so here are a few of our top picks among online brokers.
Fidelity Investments offers access to a Roth IRA with low fees, including no monthly account management fees or minimum account balances as well as low-cost investment options. For instance, investors can choose from index funds with low expense ratios and enjoy commission-free trades on U.S. stocks, ETFs and options (though a contract fee applies for options trades).
For those hoping for some automated help with their investments, Fidelity also offers the Fidelity Go robo-advisor, which is available with $0 advisory fees for investors with up to $25,000 in assets under management.
One of the best-known names in the business (and the host of many solid and reliable target-date index funds), Vanguard has a reputation for its robust investment options as far as classic assets are concerned. Along with equity and bonds, investors can choose from classic stock market investment options like ETFs and mutual funds as well as opening a CD or money market account.
Vanguard also stands out from the crowd for its status as a privately (rather than publicly) traded company, which is to say its investors are also part owners. Vanguard does charge a $25 annual management fee for each brokerage account, including Roth IRAs, which is waived if your assets under Vanguard management reach $5 million.
Charles Schwab is another heavy-hitting name in the investment industry, and it offers Roth IRAs with no regular account management fees or monthly minimums. Plus, its investment options include traditional assets like stocks, bonds, and ETFs, as well as access to cryptocurrency, futures, and foreign exchange (forex) investments for foreward-thinking investors.
Charles Schwab is also well known for its user-friendly trading platform and robust educational resources and planning tools like calculators, which can help even beginning investors get their feet wet with confidence.
E*TRADE is another good contender for investors looking for an actively-managed account—though with its Core Portfolios product, you can take advantage of robo-advisory assistance, too. With $0 account minimums and $0 fees, including commission-free trades, E*TRADE is a worthy choice for both beginning, hands-off investors and experienced investors who take a more hands-on approach.
Merrill Edge is an investment trading platform that’s integrated with Bank of America, making it a convenient option for those who are already BoA customers. Among the most interactive brokers on the market, Merrill Edge also offers a low fee structure and access to multiple different types of accounts (including brokerage accounts) in one place. However, some of the best discounts on higher-tier services are reserved for Bank of America Preferred Rewards members.
Whether it’s a rollover or a new account, once you open your new Roth IRA, the real fun begins. Now, it’s time to get started investing.
Choosing from many different asset classes allows you to create a well-rounded and diversified portfolio, strong enough to handle even the toughest market fluctuations. Customizing your mix also gives you more agency when it comes to aligning with your retirement goals and risk tolerance.
That said, there are a few common asset classes (investments you can buy with your retirement funds) you should know about. Here’s a quick review.
Exchange-traded funds, or ETFs, are pre-mixed baskets of various different assets, which means they automatically build diversification into your portfolio. Many exchange-traded funds offer the high growth potential of stocks along with the risk reduction brought by including a certain percentage of lower-return assets like bonds. They may be actively or passively managed, and tend to have lower assocaited costs (expense ratios) than mutual funds. Plus, many providers offer commissions-free ETF trades, making them even more budget-friendly.
Mutual funds work very similarly to ETFs, except that they’re more often actively managed by financial professionals, which means they may perform better over time (though of course there is no guarantee). Because they’re actively managed, they usually have a slightly higher expense ratio than ETFs, but they’re still a great way to easily build diversity and longevity into your portfolio.
Index funds are a type of mutual fund that track a specific segment of the market or existing index, like the S&P 500. Most index funds are passively managed, which, again, means they’re often available with lower expense ratios than actively managed mutual funds.
Individual stocks are likely the first asset you think of when you think of the stock market. This is the asset class we were all taught about in school: pieces of a publicly-traded company that allow you to benefit from the growth of that company as it earns money.
Bonds, on the other hand, are basically loans to government agencies or other organizations. In exchange for that loan, the organization promises a certain amount of interest growth over time.
Stocks and. bonds work well in tandem because they help equalize risk level. Stocks tend to have a lot of growth potential, but also a relatively high amount of risk. Bonds, on the other hand, are the opposite: relatively low growth potential, but also relatively low risk. Thus, adjusting your ratio of stocks and bonds can help you achieve your goals while also mitigating potential losses.
As we all know, some companies are really successful—so successful that buying even a single share of their stock takes a lot of money. (For example, at the time of this writing, a single share of Meta costs more than $470. Imagine the capital gains you would have seen if you’d invested at its 2012 IPO!)
Fractional shares allow you to buy into a stock even if you can’t afford to buy an entire share. A popular option for those seeking a self-directed account, fractional shares are an important one to keep in mind if you want to buy into the big guys!
Buying real estate has long been one of the soundest investment strategies—but you don’t have to become a property baron to benefit. Thanks to funds called REITs (real estate investment trusts), real estate is sometimes available among the investment options in your investment account, including in your Roth IRA.
Just like a carpenter needs a hammer and nails to build something beautiful, smart investors need the best planning tools and educational resources available to help ensure their portfolios are going in the right direction. Here are some of the resources available to modern investors—though, again, specific availability depends on which provider you choose, so be sure to review their offerings ahead of time.
Robo-advisors are a lot what they sound like: wealth management services that are led, at least in part, by robots. More specifically, robo-advisors utilize a mix of software algorithms and human intervention to help automate investing, so you can simply set up your portfolio and largely forget it.
Robo-advisors still allow you to customize your account by asking questions that reveal your goals and risk tolerance, and you can make adjustments later down the line. With their relatively low fees (compared to human advisors) and ease of use, robo-advisors like Wealthfront and Betterment make smart investing more accessible to everyone.
For self-directed investors, the use of an investment calculator can help a great deal. These nifty tools help you estimate your future retirement savings based on factors like how much you contribute each month and what type of investments you make.
Along with any investment calculators that are built into your provider’s platform, you can also find a wide range of helpful calculators online, including retirement savings calculators that can help you determine how much you really need to comfortably retire, compound interest calculators that can help you estimate how much you may have in a certain number of years, and Roth IRA conversion calculators, which can show you what your tax liability will be if you make a Roth IRA conversion in a given year.
Many investment platforms also build in other financial planning tools that can give you a leg up on your portfolio, like performance tracking or access to third-party educational resources that can help you make investment decisions.
Retirement planning simulators can investors help visualize different financial situations—and their outcomes—so you can plan your portfolio accordingly. Many Roth IRA providers build retirement planning simulators into their platforms, but you can also find these services available through independent third parties.
Understanding your personal risk tolerance is key to determining what your asset allocation should look like—and it’s worth repeating that risk tolerance is personal. Whereas some investors are willing to take big risks for big rewards, others want to remain more conservative. Risk assessment tools and questionnaires can help you get a better sense of where you land along that spectrum—and, in the case of robo-advisors, can help create a portfolio customized to your needs.
Finally, there’s no substitute for the power of human financial advisors, who have access to a whole swath of planning tools that can help them create an investing methodology unique to you and your needs. If you do hire a financial advisor, be sure to choose a fiduciary who is committed to your personal finance best interests. A Certified Financial Planner (CFP) is usually a good choice.
Here are some highlights as far as planning tools and educational resources from some of our top-pick providers.
To get the most out of your Roth IRA and its tax benefits, it’s worth contributing the full annual contribution limit if you can afford it. Again, for 2024, those limits are $7,000 or $8,000 for investors aged 50 and over, who qualify for catch-up contributions. (These limits are up from $6,500 and $7,500 in 2023.)
Keep in mind that the annual contribution limit applies to any and all IRAs you may own, including traditional and Roth IRAs. These limits change annually and are publicized by the IRS—and it’s worth keeping up with those changes, since contributing as much as possible each year can help you maximize your long-term retirement planning.
We’ll also reiterate the income limits for Roth IRA eligiblity here. In 2024, the phase-out ranges look like this:
Single Filers:
Married Couples Filing Jointly:
Keep in mind that these income ranges are based on Modified Adjusted Gross Income (MAGI), which may be different than you net income. Note: Married couples filing separately whose MAGI is $10,000 or more, and who lived together at any point during the tax year, are not eligible to contribute directly to a Roth at all.
If you out-earn the Roth IRA limits, you may not be able to contribute directly to a Roth IRA account—but there is a legal loophole known as a backdoor Roth. In order to use this strategy, investors make contributions to a traditional IRA, then convert the account to a Roth. (Of course, you will need to pay taxes on the contributions.)
Roth IRAs are a powerful vehicle to maximize your retirement savings—and choosing the right provider is the first step.
Got your best choice in mind and ready to initiate your rollover? Capitalize can help. We’ll walk you through the process step by step so you can sit back, relax, and enjoy taking advantage of the many tax benefits offered by your new rollover Roth IRA.
