A Roth IRA has increasingly become a must-have account in recent years. But who are the best brokerages for Roth IRA accounts? In this guide, we’re going to summarize the best features of eight popular investment brokerages, and why we think each is one of the best choices for your Roth IRA account.
Below is our list of what we believe to be the best brokerages for Roth IRA accounts:
Why Betterment is a good option for a Roth IRA: Betterment is a very popular robo-advisor, and an excellent choice if you prefer to have your account professionally managed for a very low fee. Betterment will handle all the details, including portfolio selection, periodic rebalancing, and dividend reinvesting. Your only responsibility will be to fund your account.
Your Roth IRA will be invested in a fully diversified portfolio that will include US and international stocks and bonds. And you can open an account even if you have no money. If you qualify for the Premium plan, you’ll also have unlimited access to financial advisors.
Why M1 Finance is a good option for a Roth IRA: M1 Finance is a robo-advisor, much like Betterment. But it takes a completely different approach by allowing you to choose your own investments. This is done through a system they refer to as “pies”. Each pie is a portfolio that can be filled with “slices” of up to 100 individual stocks or ETFs. They also offer prebuilt pies if you don’t want to select your own investments.
You can build as many pies as you want, and once you do, M1 Finance will provide robo-advisor management, free of charge.
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Why Personal Capital is a good option for a Roth IRA: Personal Capital is designed for investors with larger account balances. You’ll need a minimum investment of $100,000, but that comes complete with access to a team of financial advisors. And with an account balance of at least $200,000, you’ll have access to two dedicated financial advisors.
Personal Capital isn’t a robo-advisor, but more of a comprehensive investment management service. They can handle multiple accounts, including both taxable and retirement accounts, with the combination of both counting toward the minimum investment requirements.
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Why SoFi Invest is a good option for a Roth IRA: SoFi is perhaps best known for student loans. In recent years they’ve expanded their product menu to include investments. They offer both SoFi Active Investing for self-directed investors, and SoFi Automated Investing for those who prefer to have their accounts professionally managed. You’ll have access to SoFi financial advisors with either plan.
SoFi Active Investing offers commission-free trading of stocks and ETFs, as well as investing in cryptocurrency. SoFi Automated Investing provides full portfolio management, including rebalancing and dividend reinvesting. With either, you can also take advantage of a high-interest cash account.
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Why Webull is a good option for a Roth IRA: Webull may be the top choice broker for active traders. That’s because it’s set up specifically as a trading app for active traders. But you’ll need to be a knowledgeable, self-directed investor to get the best benefit from Webull. Both customer support and investor resources and tools are limited.
Webull now offers NASDAQ TotalView, providing Level II Advanced quotes and trading, which can be particularly beneficial for active traders. It gives you access to the bid and ask prices for stocks you’re tracking, as well as the number of shares investors are looking to trade.
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Why Firstrade is a good option for a Roth IRA: Firstrade is another investment service designed for self-directed and active investors. But it offers more trading tools and investment research than Webull. For example, they provide comprehensive research from respected investments, authorities, like Morningstar, Zacks and Benzinga. And if you like to invest in mutual funds – as many do in their retirement accounts –Firstrade offers more than 11,000 commission-free mutual funds.
The main downside for retirement investors with Firstrade is that it doesn’t offer a managed portfolio option.
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Why Charles Schwab is a good option for a Roth IRA: Schwab is the largest investment brokerage firm, which tells you something about the service they offer. It may best be described as a full-service broker with commission-free trading. They also offer 24/7 customer service, and a wealth of investing tools and research, as well as no fewer than three free trading platforms.
And while Schwab is best known for self-directed investing, they also provide a managed portfolio option. Schwab Intelligent Portfolios provides complete investment management with no management fee. That will give you the option to have at least some of your Roth IRA portfolio professionally managed while also maintaining self-directed investing.
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Why Fidelity is a good option for a Roth IRA: Much like Schwab, Fidelity is a full-service investment platform offering commission free trades of stocks, options, and ETFs. They also provide an incredible amount of investor research and investor tools to help you maximize your investment performance. But they also offer a managed portfolio option, Fidelity Go. Unlike Schwab Intelligent Portfolios, Fidelity Go requires no minimum account balance. However, they do charge a management fee, though the first $10,000 is managed free.
Fidelity offers 24/7 customer service, as well as more than 300 branch offices throughout the country.
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If you’re reading this article, you probably already have a good idea what a Roth IRA is and why it’s well worth having. But let’s do a quick summary anyway.
A Roth IRA works very similar to a traditional IRA. You can contribute up to $6,000 per year – $7,000 if you’re 50 or older – and the funds in the account accumulated investment income on a tax-deferred basis.
But unlike a traditional IRA, Roth IRA contributions are not tax-deductible. However, any withdrawals taken from the account are completely tax-free – both contributions and investment earnings – once you reach at least 59 ½ years old and have participated in a Roth plan for at least five years.
Because Roth IRA contributions are not tax-deductible, they can be withdrawn at any time, free from income tax or the 10% early withdrawal penalty. (However, both tax and penalty will apply to any early withdrawals of accumulated investment income.)
You should also be aware that there are income limits beyond which you cannot make a Roth IRA contribution. For 2021 single taxpayers, a Roth IRA contribution is fully permitted up to an income of $125,000. It phases out between $125,000 and $140,000, after which no contribution is permitted.
For married taxpayers filing jointly, the contribution for 2021 is fully permitted up to a combined income of $198,000. It phases out between $198,000 and $208,000, after which no contribution is permitted.
Just as is the case with a traditional IRA, you can invest a Roth IRA just about anywhere you want. That’s why the choice of the brokerage account to hold your Roth IRA is so important.
As you can see, different investment brokers can accommodate different investor preferences. If you prefer self-directed trading, you may want to consider Webull or Firstrade. If you prefer a managed option, Betterment or Personal Capital offer a better option. But if you want to combine both self-directed investing and a managed option, M1 Finance, SoFi, Charles Schwab or Fidelity will get the job done for you.