The Best Brokerage for Opening a New IRA Account
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Are you looking to save for the long-term and reap tax benefits? An individual retirement account or an IRA offers these benefits and more. While many people wait years and years to open an IRA, it only takes a few minutes to set up these accounts and start growing your money to save for retirement.
With experts agreeing that you need $1 million in savings to retire, you probably have already considered opening a savings account with your bank. That’s not the best way to go if you want to grow your money fast. The best IRA accounts offer more than just your average savings account.
For those who have contributed to social security, you still should consider investing because as Drew Carey put it, “As far as your personal goals are and what you actually want to do with your life, it should never have to do with the government. You should never depend on the government for your retirement, your financial security, for anything. If you do, you’re screwed.”
IRAs offer a powerful resource that many people don’t feel they have access to unless they have an employer who offers an account. Even if you have a 401(k), you may still want to go with an IRA because there are more investment selections available to grow your money. However, you can easily open an IRA on your own and possibly save even more by doing so. Ultimately, your success depends on the brokerage you go with to open an IRA.
There are a few different brokerages that provide incentives to choose their firm for an IRA. These accounts work just like savings accounts except you can earn more by investing these savings within certain markets. The average yearly return is 8 percent if you invest in the stock market, so if you invested more than $300 a month, you could end up with a sizeable six-figure nest egg after 25 years.
So what brokerages made our list for the best IRAs?
Best IRA Brokers Reviews
We evaluated some of the top online brokers for their IRA accounts. We looked at fees, account minimums, investment options, customer satisfaction, and online tools. Based on our findings, these picks proved to have the best options when it came to retirement planning too.
1. Merrill Edge: Best Overall IRA
With no account minimums and up to $500 in a cash bonus with a qualifying deposit, Merrill Edge offers great incentives with intuitive mobile banking apps and research tools.
- Robust research tools
- Easy-to-use, mobile-friendly apps
- Free trades for some customers
- Standard $2.95 on trade commissions
- Minimum balance required, depends on whether using active trading platform or not
Merrill Edge offers a number of different investment options, and their IRAs are quite popular. You can grow a tax-deferred or a tax-free IRA for retirement. Merrill’s clients typically gain above-average returns, and you can choose your investments, ranging from individual stocks to mutual funds to options.
Technically, Merrill Edge is a discount broker, which means you won’t get the full-service treatment, but you’ll have access to all of their online tools and mobile banking apps. These help you analyze your portfolio and check on your IRAs in real-time.
With high-quality customer service and research tools, Merrill makes it easy to open an IRA with a small deposit, and you don’t have to keep to an account minimum. If you already use Bank of America for banking, going with Merrill Edge is a no-brainer.
2. TD Ameritrade: Most Popular for IRAs
With no commissions, no account minimum, and lots of retirement planning tools, you can’t go wrong with TD Ameritrade. The brokerage has been in business for many decades and offers a variety of different analysis tools and mobile banking apps.
- No account minimum
- Commission-free mutual funds, stocks, and ETFs
- Great customer support
- Lots of research tools
- Costs much more for broker-assisted or financial advisor trades
- High margin rates
- Too many platforms with different tools between desktop and mobile
For advanced investors, TD Ameritrade is one of the best because of their historic tools with decades of data on stocks, bonds, mutual funds, and ETFs. However, recently TD Ameritrade reduced all commissions to zero on stocks and ETFs. There are also quite a few fee-free mutual funds as well.
TD Ameritrade is one of the best places to set up an IRA because of its no-hassle platform and no account minimum. They also provide a cash bonus of up to $600 with a qualifying deposit. Customers may choose between stocks, ETFs, mutual funds, and bonds to invest.
With a library of educational resources and even a free paper trading account, you can test out different investment strategies and keep a close eye on your savings accounts. The only issue is possibly that there are too many tools, and it can be difficult to go between desktop and mobile looking for the same analysis.
3. E-Trade: Best App and Tools for Retirees
For retirement investors who want to quickly set up an IRA and choose their investments wisely, E-Trade offers a variety of smart tools and advice. There’s no minimum to get started and no commission fees for stocks or ETFs.
- $0 fees
- $0 account minimum
- More research tools and user-friendly mobile app
- 4,400+ no-transaction-fee mutual funds (Only NTFs)
- Non-NTF mutual funds have a high cost of $19.99 per trade
Since pioneering the digital brokerage age, E-Trade is probably the best when it comes to mobile investment apps and education tools. You can use their investment analysis, portfolio testing, and other third-party research programs to get the most out of your IRA. There are also no annual maintenance fees or inactivity fees.
As for retirement planning tools, E-Trade has the My Virtual Advisor tool that shows you how to create the best investment portfolio possible. You can create a portfolio based on your retirement timeline, risk tolerance, income needs, and other factors. It’s pretty handy to get a look at the best investments in just a minute.
Beginner and advanced investors like E-Trade as a broker. They offer traditional and Roth IRAs, and its research area offers unique analysis and charting tools. You’ll also enjoy the commission-free ETFs and stock trades. While not all brokerages are one-size-fits-all, you can definitely see why so many investors go with this user-friendly brokerage.
4. Interactive Brokers: Best for Investment Selections and Active Traders
Like most other brokerages, Interactive Brokers offers commission-free trading on stocks, ETFs, and some mutual funds. You also get your pick of no-transaction-fee mutual funds. There are over 8,200 to pick from.
- Free trades
- Large amount of mutual funds, stocks, and ETFs to trade with
- Access Pro for more research and roboadvisor tools
- Some complex menu options and pricing make it difficult for beginners
- Inactivity fees occur on Pro tier
- Minimum deposit of $5,000 to get started
Interactive Brokers has come a long way since starting out as a trader-only brokerage model. Only knowledgeable traders used to be able to understand the clunky interface, but nowadays, Interactive Brokers offers the most mutual funds options and no fees on most trades. The one thing that may hinder getting started is the initial deposit. IB asks for investors to contribute $5,000 to get started with their IRAs.
You can trade from anywhere using their mobile apps for Android and iOS. In addition, IB removed all service fees for client IRAs in the past year. You no longer have to pay a fee to have an account.
Customers can access a wide range of research tools that give you access to analyst ratings and individual stock history. It’s easy to curate your top news and trends for your dashboard on a desktop. The Brokerage mutual fund/ETF replicator tool is probably one of the best apps because it allows you to find similar funds to what you already invest in.
5. Wealthfront IRA: Best for Hands-Off Investors
When you want to invest without the hassle, Wealthfront offers a simple approach. You simply sign up and get a robo-advisor to help you by creating a portfolio from low-cost ETFs. However, their fees and account minimum may drive away newer investors.
- Automatic rebalancing
- Mobile financial planning tools
- Includes management and advice
- 0.25% in management fees
- $500 account minimum
- $5000 deposit required for free management
- No large balance discounts
- No human advisors
- No access to fractional shares
Wealthfront is one of the best for robo-advisors. Their tools are modern, unique, and easily accessible through the mobile app. However, you may pay higher fees for the constant management and vigilance of a digital stock investing know-it-all. Wealthfront aims to be the brokerage with the best AI tools, and it’s pretty much there.
The main issue is that fees are a bit high at 0.25% management fee and a required account minimum of $500. However, you can use the tools to your advantage and save money with a tax-optimization service.
With its automated investment approach, investors don’t have to stay active to reap the benefits of having an IRA with Wealthfront. It’s as simple as going online and opening an account. Wealthfront also includes planning tools, diversified portfolios, and IRA management options. While it’s not a real person, the AI is built to spot threats and prevent them before your portfolio takes a hit.
6. Betterment IRA: Best IRA Account for Beginners
If you want to stand back and like automated banking, Betterment is the option for you. While there are some pretty high fees, you can make a qualifying deposit for one year of free management tools.
- All inclusive management
- No account minimum
- Free management up to a year with a qualifying deposit
- Highly rated by customers
- Pushy towards financial advisor upgrade
- Costs $100,000 minimum to access human financial advisors
Investors love the way that Betterment has offered low-cost ETFs with a managed account option. With automatic rebalancing, extensive tax-deductible strategies, and retirement planning, Betterment is a great tool for retirement investors who are in it for the long run.
You can use the asset location tool to define what investments are the best for your different accounts. There are also several types of IRAs available including traditional, Roth IRA, and Rollover IRA.
Betterment offers a robust mobile-friendly app that allows you to check in on your accounts and analyze your portfolio in seconds using their account tools. There are a variety of portfolio research options, too. These include socially responsible investing (SRI), BlackRock target income portfolio, or the Goldman Sachs Smart Beta Portfolio. Each of these tools appeals to young investors because they get to drill down into the data.
7. SoFi: Best for Automated Investing
If you want to keep your costs low and only have a small amount to deposit, then you may want to try SoFi’s new automated options and unique mobile app. With automated investing, beginner investors can take a hands-off approach without losing sight of their goals. There’s also a 0% management fee.
- No management for robo-advisor accounts
- Diversified portfolios with ETFs
- Offers traditional, Roth, and SEP IRAs
- Automatic rebalancing
- Above average customer support
- Only need to invest $100 to get started
- Limited in your account access and abilities
- No tax loss harvesting
Even if you are an advanced investor, you may not have the time to monitor your IRA constantly. SoFi counts on hands-off investors to utilize their AI-infused platform. You can talk to robo-advisors about your trades and get a risk assessment for your portfolio.
With free career counseling, education resources, and a free mobile app it’s easy to get started. You can also access certified financial partners for an additional fee.
For those who love mobile banking and want to check up your accounts without pulling out any money, an IRA from SoFi may be the best thing for your portfolio.
What to Look for When Picking an IRA
What matters most for your retirement? Perhaps you want to invest on your own, which means you want to invest with no fees. You may want hassle-free, hands-off investing that includes management options. If you like to do everything from your mobile phone, you may want a brokerage that allows you to check in on your phone and use tools to analyze the strength of your portfolio. There are all kinds of brokerages, so picking the best one for your IRA really depends on your preferences.
What Does It Cost to Set Up the IRA?
Some brokerages charge several fees to open an account. There may be a management fee, balance minimum, maintenance fee, inactivity fees, or other fees that eat into your retirement nest egg. You want an IRA that grows over time and doesn’t dwindle your earnings with fees. Investors who want to save on fees should open with a broker that charges little to no fees at all. You may want to pay a management fee if you are using a brokerage with an account manager or robo-advisor.
Low-cost mutual funds are typically the way to make low-cost investments that build over time. You can invest in a variety of mutual funds to diversify your portfolio. In this case, you want to check the expense ratio when you invest in mutual funds. It should be less than 0.5 percent.
No Trading Commissions
Most brokerages have done away with trading commissions as of 2019. Even TD Ameritrade and Charles Schwab removed commissions from stocks, ETFs, and most mutual funds. When searching for a brokerage, you should also check how many mutual funds are available and whether they have no-transaction-fee investments. This saves you a ton of money over time, especially if you are an active investor who may change your investments from time to time.
Investment Education and Customer Service
If you are new to IRAs and retirement planning, then you want a brokerage that has tools to help you succeed. Nowadays most brokerages have online tools to help you analyze your portfolio to ensure that it’s strong against any dip in the stock market, and there are also retirement planning tools that help you factor in what you need to contribute to reach your goal. Other brokerages have a robo-advisor or human financial advisor who can help you choose investments that are worthwhile.
Do they have 24/7 customer support? This is a big one as many brokerages can be confusing, and it’s easy to make a mistake if you are new at investing. The best companies have 24/7 customer service via phone or online chat. You should look at reviews and check what the customer satisfaction rating is on their support staff before jumping into an account.
Bank vs Brokerage IRA: Which One is Better?
We didn’t want to include any traditional bank IRAs in our top picks because it’s generally a better deal to go with a brokerage. This is because most banks do not tap into the power of investing in the stock market and increasing your investment with market returns each year. Bank IRAs generally only have certificates of deposit and savings accounts, and while these guarantee a small rate of return, it takes too long to grow your investments this way. The stock market returns 10 percent on average each year while CDs only return 3 percent.
Are Brokerage IRAs Risky?
With the number of tools and analysis options, your brokerage won’t let you make investments that are too risky typically. However, there are some occasions when IRAs lose money. In these situations, these dips occur because you invested in only one or two companies. Instead, you should diversify your IRA by investing in different sizes of companies, different industries, and spreading it between bonds, stocks, and mutual funds. By diversifying, you ensure that if one company starts to go south, your IRA won’t take that big of a hit because you have an overall strong portfolio.
How Do Taxes Work with IRAs?
There are no income restrictions on IRAs. Anyone can go to a brokerage or bank to open an IRA savings account. If you have a 401(k) through your employer, then there are some restrictions. For example, you may not be able to deduct as much or anything based on your income if you have a 401(k) through work.
If you do exceed the limits, however, you are still able to add the maximum contribution to your fund, but some or all of it may fall into a nondeductible contribution. You can still defer taxes on your investment until you decide to retire.
Roth IRAs do have income limits for eligibility, and if you earn over $124,000 as a single or over $200,000 when you’re married, your contribution limit is smaller or completely ineligible. These limits are set every year, so these are the limits for 2020.
Should You Open an IRA?
There are significant tax benefits for those who want to open a traditional IRA. As long as you keep your money in your investment account, you won’t owe any taxes on your investment’s earnings. This means that any returns made from interest are yours to keep, and these tend to grow the most due to compound interest.
If you do qualify for an IRA with a deductible tax benefit, then you keep even more of your money as you are reducing your taxable earnings for each year that you contribute. This means that if you have a marginal tax rate of 20 percent, a $5,000 IRA contribution reduces your taxes by $1,000.
Conclusion: Are IRAs the Best Way to Save for Retirement?
In general, most financial advisors tell investors to open an IRA because of the long-term benefits. It’s the easiest way to earn money each year and build up to a six-figure or more retirement goal. You also get to pick your own investments with most IRAs, or you can let a robo-advisor or financial advisor help you manage the account.
Once you decide to open an IRA, you should pick a wide range of investments, but mutual funds are the best way to go if you want to earn a return each year according to most experts. If you don’t want to make investments on your own, then you may pay a small fee for a managed account.