Roth IRA accounts are must-have investment accounts, and it’s easy to see why. Though your contributions are not tax-deductible, the investments held in your account grow on a tax-exempt basis. This is because your contributions are made post-tax. And once you reach age 59½ and have been in the plan for at least five years, you can begin taking withdrawals of both contributions and accumulated investment earnings completely tax-free.
Interested? You should be! And if so, you might be asking, where can I invest in a Roth IRA?
We have an easy answer for hands-off investors: Robo-advisors. In this guide, you’ll see the nine best robo-advisors for Roth IRAs.
Since a major advantage with Roth IRAs is tax-free withdrawals, it’s in your best interest to accumulate as much investment income in one as possible. The more your account grows, the more you’ll be able to take out when retirement rolls around.
Robo-advisors are an outstanding choice for Roth IRAs. This is because they give you the ability to fund your account and have it professionally managed for an extremely low fee.
The average fee is around 0.25% per year, which means you can have a $50,000 Roth IRA managed for just $125 per year.
That management will include portfolio creation, security selection, complete diversification, periodic portfolio rebalancing, and dividend reinvestment. That’s a lot of investment management for a relatively small annual fee.
Best of all, a robo-advisor provides you with passive investment management. Other than funding your account, you have no other concerns in connection with your Roth IRA. All the mechanics of managing it will be handled for you, leaving you free to tend to the rest of your life.
Coming up, the best robo-advisors for Roth IRAs!
Best for: Best all-around robo-advisor for Roth IRAs.
Why SoFi Automated Investing is a good robo-advisor for Roth IRA: SoFi Automated Investing gets our vote for the best all-around robo-advisor for Roth IRAs. The account requires no minimum initial investment and no advisory fee. You’ll also have access to financial advisors at no additional cost. SoFi has evolved into a full-service personal finance platform and also provides SoFi Active Investing. Active Investing is great for those who want to hold some of their money in self-directed investments.
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Best for: Robo-advisor with the option to engage in self-directed trading on one of the best brokerage platforms in the industry.
Why Fidelity Go is a good robo-advisor for Roth IRAs: This robo-advisor comes in at a close second behind SoFi Automated Investing. There’s no minimum initial investment and your plan will be managed by one of the largest and most respected brokerages in the world.
Meanwhile, you can engage in self-directed investing through a Fidelity brokerage account, allowing you to invest in just about any asset or security you want. Your account will be invested in Fidelity Flex Funds, which include both active and passive funds with no expense ratios. And customer service access and quality are at the top of the industry.
The main negative with this robo is the fee structure. The first $10K is managed free—so far, so good. The next $40K is managed at just $3 per month, which will be lower than most of the competition on a percentage basis at the higher end of the balance range. But at $50K and up, the advisory fee rises to 0.35%, which is higher than the industry average.
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Best for: No fee robo-advisor with the option to engage in self-directed trading on one of the best brokerage platforms in the industry.
Why Charles Schwab Intelligent Portfolios is a good robo-advisor for Roth IRAs: Much as is the case with Fidelity Go, Charles Schwab Intelligent Portfolios provides an opportunity for you to engage in self-directed investing through a Charles Schwab brokerage account. It is also one of the top brokerage firms in the industry, enabling you to invest in just about anything you choose.
Meanwhile, Charles Schwab Intelligent Portfolios has no advisory fee on the basic account only operating fees associated with the ETFs. But if you do want access to financial advisors, you can trade up to the Premium account. There will be a fee for this service level, but it’s low among those firms offering access to financial advisors.
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Best for: Robo-advisor, plus comprehensive financial management, including high-interest savings and no-fee checking.
Why Betterment is a good robo-advisor for Roth IRAs: Betterment offers comprehensive management of your Roth IRA and other accounts. It also provides a high-interest cash account as well as a checking account with a Visa debit card and no fees.
No minimum initial investment is required for the Digital plan, and it comes with a very comfortable 0.25% annual advisory fee for balances up to $100K. The U.S. stock allocation includes value stocks, giving you an opportunity to outperform the general market. And the Betterment Cash account has a current APR of 0.10% if you also want to hold uninvested cash with your Roth IRA.
Betterment Basic Features:
Best for: Roth IRA, plus comprehensive financial management with broader diversification, including high-interest savings and no-fee checking.
Why Wealthfront is a good robo-advisor for Roth IRAs: Wealthfront offers much the same service level as Betterment, but it also adds increased diversification by including real estate and natural resources. It also offers a high-yield cash account that pays a rate comparable to Betterment. The fee is 0.25% on all account balances. The primary reason why Wealthfront rates a notch below Betterment is the minimum initial investment of $500. Otherwise, the two robos are roughly equal.
Best for: Choosing your own investments that are then professionally managed.
Why M1 Finance Expert Pies is a good robo-advisor for Roth IRAs: What separates M1 from the other providers on this list is ability M1 users have to choose their own investments. Users also have the option to select portfolios made by experts who work for the service.
Either way, you’ll invest using a system called “pies.” These are many portfolios composed of up to 100 ETFs and individual stocks. Since M1 allows the use of fractional shares, you can build a pie with as little as $100. You can also build as many pies as you like. Once created, it will be automatically managed for you including periodic rebalancing. Best of all, there are no fees to manage your account.
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Best for: Investors who love investing in Vanguard funds.
Why Vanguard Digital Advisor is a good robo-advisor for Roth IRAs: Vanguard Digital Advisor is a newcomer on the robo-advisor block. If this were a standalone robo-advisor, that might be a problem. But when it’s part of Vanguard, it’s not a concern. Vanguard is the world’s largest provider of mutual funds, and the second largest provider of ETFs. It manages more than $6.7 trillion for over 30 million investors. This fact alone assures you you'll be in good hands.
Your account will be invested in Vanguard funds, which are so popular they are commonly found in the portfolios of both robo-advisors and human-guided investment advisories. Their funds feature some of the lowest expense ratios in the industry, which translates into higher average returns.
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Best for: New Roth IRA investors.
Why Acorns is a good robo-advisor for Roth IRAs: Like most other providers on this list, Acorns is a robo-advisor providing automated investment management at a low fee. But what separates it from the pack is that it’s also a micro-savings app. That means it can help you save the money needed to fund your Roth IRA. That makes it perfect for Roth IRA beginners.
The funding process is based on a system known as round-ups. On the Acorns app, you’ll include one or more spending accounts that will round up your credit and debit card purchases. These round ups will ultimately be transferred to your investment account. For example, if you make a purchase for $5.33, Acorns will round the purchase up to an even $6.00, transferring the $.67 extra to your investment account. That creates a passive savings method that’s perfect if you’ve had difficulty saving the money to invest.
Best for: Roth IRA, plus comprehensive wealth management for larger investors.
Why Personal Capital is a good robo-advisor for Roth IRAs: The advantage Personal Capital offers is the ability to manage all your investment and retirement accounts, including your Roth IRA. You’ll also have access to live financial advisors, a feature not available with most robo-advisors. If you have a minimum account balance of $200,000 under management, you’ll receive a dedicated financial advisor. Although the advisory fee for Personal Capital is higher than other robo-advisors, it is well below what you would pay for traditional, human-guided investment management.
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If you haven’t started a Roth IRA yet, there’s no time better than right now. A Roth IRA is the type of account that will ensure that at least some of your retirement income is completely tax-free. You can easily open an account with one of the above robo-advisors, some of which won’t even require you to have an upfront investment.
If you’ve been trying to manage your own Roth IRA account and not having much success, now is also an excellent time to switch your account over to a robo-advisor.
The only thing better than tax-free income in retirement is tax-free income in retirement without the need to manage the account that produces it.
A robo-advisor will do exactly that for you, which is why you should consider opening one today.