Where to Open a Roth IRA Online
A Roth Individual Retirement Account (IRA) is a retirement plan similar to a traditional one. The major difference between the two is the way that they are taxed.
With the traditional IRA, you make contributions pretax and get a tax deduction. But later, when you withdraw your funds in retirement, you need to pay income tax. On the other hand, with Roth IRA, you contribute with after-tax dollars. When you withdraw money during retirement, you don’t pay any taxes.
Because of the easy way that you can open and manage your account, as well as the fact that it will be tax-free in the future, many people opt for a Roth retirement plan. If you opt for a Roth IRA, you should make sure that you’re eligible for the plan. Then, you check all the available options and decide where to open the account.
In this article, we will look at some of the best places to open your Roth IRA.
Before You Open a Roth IRA
Before you open a Roth IRA, you should make sure that you are eligible. Most citizens are eligible to open a Roth IRA, but if you earn around the minimum eligibility limit, the plan may not be available for you. You can check all the filing options and limits on the Roth IRA website.
You should also decide on your investment type. There are two investment types to choose from:
- “Do-it-yourself” type – If you are a “do-it-yourself” type of investor, you can open a Roth IRA with an online broker and select your own investments. You can make your own plan and you will not pay any account fee. The only costs that you have to think about are commissions and investment fees (expense ratios).
- Hands-off investor – If you want a proxy agency to manage your plan and make your investment portfolio, you can open an account with online investment services called robo-advisors. You will have to pay a small fee for the service to do everything for you.
Where to Open a Roth IRA
If you want to open a Roth IRA by yourself, there are many different places to choose from. In this article, we will look at some of the best.
1. Ally Invest
Ally is a well-known Roth IRA provider and regularly tops the lists of best overall places to start your retirement plan. Ally is a modern provider that exists only online. It compensates for its lack of physical presence with one of the best rates and lowest fees.
You don’t need any money to set up an account and you can withdraw all the funds. So, the minimum account balance is $0. The terms will change depending on the length of the investment, type of IRA, the amount of money you deposit. If you opt for a 1-year investment you will have a 2.5% return.
Since all the tools you need to manage your account are on the internet, you will have full 24-hour access to all the necessary data, charts, research, and customer support.
Vanguard manages your money better than most other Roth IRA providers. It is consistent and reliable. More than 80% of Vanguard’s mutual funds and exchange-traded funds outperformed their peer-group averages every year for the past ten years.
Unlike its peers, this provider doesn’t take a chunk of your money for every single transaction you make. As such, there are no sales loads, commissions, and account services for managing documents electronically. Overall, the fund to expense ratio is a whopping 82% less than the industry standard.
Vanguard also offers simplicity in choosing the right IRA plan and flexibility with trading commissions outside of Vanguard. The company has existed since 1975 and is one of the most stable in the business.
Betterment offers great plans for new and experienced investors. You can choose between a hands-off approach and a DIY type of investing. It’s one of the newer Roth IRA providers but is already topping many lists.
They average around 1.61% higher increase in returns with their retirement plans compared to traditional investors. You can get a clean and organized view of your net worth. In addition, you can sync all bank accounts and other funds and investments into one place. When you do this, you can even find out if you have outside accounts that are costing you a lot because of the fees or not invested cash.
Betterment builds its entire strategy on a proven, Nobel-prize winning method. In the long-term, a diverse portfolio of low-cost index funds will perform better than a high-cost portfolio that you actively manage. If you’re not happy with the service within 90 days, you can get a complete refund on management fees, too.
4. TD Ameritrade
TD Ameritrade is an old and reliable Roth IRA provider with over 35 years of experience. It has slightly higher fees than other brokers, but it compensates for this minor shortcoming with one of the best platforms, especially if you are an experienced investor.
You can link your account to TD bank and gain a flat-rate commission on trades and research. TD Ameritrade offers you to do independent investment research, or you can use research from the best in the business like ResearchTeam and S&P.
TD Ameritrade has over one hundred local branches. You can trade free for two months once you open a new account. There are no account minimums, so you can withdraw all the balance and not have to pay any maintenance fees. The flat-rate is $7 for any internet equity trade.
Fidelity has the strongest pedigree from all the providers mentioned in this list, and that is not a dig at the others. This provider has simply had the longest presence since it was formed way back in 1946. To this day, they managed over $2.5 trillion in total assets. One trillion has twelve zeros, so you can imagine how much that is.
Fidelity is a grand company, and because of that, it is a great option for a big-time investor. If you are a small investor, then you should opt for a different one.
With Fidelity, you can link your accounts between all your family members. With this, you can always track and monitor the finances of the whole family.
You can also choose Fidelity as your bank and link everything to a single plan. You can plan your day-to-day budget together with your retirement plan and other long-term investments like college savings for your children. If you’re a big-time investor, you will love all the features.
Frequently Asked Questions
How much money can I put in my Roth IRA?
The amount of money that you can put in your Roth IRA depends heavily on a number of factors ranging from your age to your income. Some people may not have the option at all. For example, a single person who makes more that $124,000 per year or a married couple who makes over $174,000 per year couldn’t start a Roth IRA in 2019.
Individuals under the age of 50 can add a maximum of $6,000 but those over the age of 50 can add $7,000.
There are options that offer no minimum available online but you will probably need to come out some of pocket for some brokerage fees. Other options do have minimums from $250 to $1,000. If you’re concerned about minimums, it’s best to do some research and find one that fits your specific needs.
What documentation do I need to start a Roth IRA?
When you start the process using one of the methods above having the right documentation will help you move forward smoothly. You will need your driver’s license or a valid government issued ID. Next, you’ll also want to have your social security number handy.
Have your financial account numbers ready to begin the process and include your employer and their address if applicable.
These are the top 5 best Roth IRA providers to plan your retirement thoroughly and in time. If you have any others to add or have any kind of experience with some of our top suggestions, let us know in the comment below!