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An individual retirement account (IRA) is a smart investment vehicle for a variety of investment goals. It can help set you up for retirement, even if you already contribute to a 401(k), and it can be a valuable tool for tax planning.
But an IRA is only as good as the place you keep it. Brokers decide which investments you have access to and how much the account costs you, plus, they influence how much the account will grow over time.
In this guide, we'll share our picks for the best IRA accounts, plus some terms and details you should know to choose the right broker for your retirement savings.
Best IRA accounts at a glance
| Broker/Advisor | Best For | Commissions | Next Steps | |
|---|---|---|---|---|
TD Ameritrade
Rating image, 5.0 out of 5 stars.
|
Rating image, 5.0 out of 5 stars.
|
Best For:
Research |
Commission:
$0 stock trades |
|
Ally Invest
Rating image, 4.5 out of 5 stars.
|
Rating image, 4.5 out of 5 stars.
|
Best For:
Low fees |
Commission:
$0 stock and ETF trades |
|
E*TRADE
Rating image, 4.5 out of 5 stars.
|
Rating image, 4.5 out of 5 stars.
|
Best For:
Mobile platform |
Commission:
$0 stock trades |
|
Merrill Edge® Self-Directed
Rating image, 4.5 out of 5 stars.
|
Rating image, 4.5 out of 5 stars.
|
Best For:
Customer support |
Commission:
$0 stock and ETF trades |
|
Fidelity
Rating image, 5.0 out of 5 stars.
|
Rating image, 5.0 out of 5 stars.
|
Best For:
Investors |
Commission:
No account fees to open a Fidelity retail IRA |
|
Charles Schwab
Rating image, 4.5 out of 5 stars.
|
Rating image, 4.5 out of 5 stars.
|
Best For:
Retirement investors |
Commission:
$0 stock and ETF trades |
|
Vanguard
Rating image, 4.5 out of 5 stars.
|
Rating image, 4.5 out of 5 stars.
|
Best For:
Index funds |
Commission:
$0 stock and ETF trades |
Jump to
The Ascent's best IRA accounts
- Research: TD Ameritrade
- Low fees: Ally Invest
- Mobile platform: E*TRADE
- Customer support: Merrill Edge® Self-Directed
- Investors: Fidelity
- Retirement investors: Charles Schwab
- Index funds: Vanguard
Rating image, 5.0 out of 5 stars.
5.0 stars
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Bottom Line
TDA is one of our few 5-star all-around brokers, and it keeps that top rating for IRAs with its large amount of commission-free ETFs and mutual funds, along with strong sign-up promotions.
Read Full ReviewFees:
$0 stock trades
Account Minimum:
$0
Open Account
On TD Ameritrade's Secure Website.
Rating image, 4.5 out of 5 stars.
4.5 stars
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Bottom Line
Low fees, no account minimums, and over 100 commission free ETFs make Ally an attractive place to park your IRA funds, though it doesn’t offer any no-transaction fee mutual funds.
Fees:
$0 stock and ETF trades
Account Minimum:
$0
Rating image, 4.5 out of 5 stars.
4.5 stars
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Bottom Line
E*TRADE is a strong option for IRAs with hundreds of commission-free ETFs and over 4,000 no-transaction-fee mutual funds. Additionally, they don’t have account minimums for IRA accounts.
Fees:
$0 stock trades
Account Minimum:
$0
Rating image, 4.5 out of 5 stars.
4.5 stars
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Bottom Line
Seamless integration and added perks make Merrill Edge a top IRA option. Merrill also scores points for no account minimums and a wealth of no-transaction fee mutual funds.
Fees:
$0 stock and ETF trades
Account Minimum:
$0
Rating image, 5.0 out of 5 stars.
5.0 stars
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Bottom Line
Fidelity is a top option for IRAs with thousands of no-transaction fee mutual funds and hundreds of commission-free ETFs, along with no account fees or account minimums.
Fees:
No account fees to open a Fidelity retail IRA
Account Minimum:
$0
Rating image, 4.5 out of 5 stars.
4.5 stars
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Bottom Line
Schwab sports hundreds of no-commission ETFs and the largest amount of no-transaction-fee mutual funds of any broker we evaluated, and individual stock trades are now $0. Its lineup of retirement accounts expands beyond just online access to robust account management capabilities via its mobile app.
Fees:
$0 stock and ETF trades
Account Minimum:
$0
Rating image, 4.5 out of 5 stars.
4.5 stars
We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs.Our ratings are based on a 5 star scale. 5 stars equals Best. 4 stars equals Excellent. 3 stars equals Good. 2 stars equals Fair. 1 star equals Poor.
Bottom Line
Vanguard gets dinged slightly in our model for having high-ish account minimums for some of its services and an often-pricey fee structure for individual stocks, but it remains the gold standard for index funds and ETFs.
Fees:
$0 stock and ETF trades
Account Minimum:
$0
What is an individual retirement account?
An individual retirement account (IRA) is a tax-advantaged investment account you can use to save for retirement. One of the biggest benefits of an IRA is that, unlike a 401(k), it isn’t tied to your employer, and it offers way more flexibility in how you invest your money for the future.
Some investors think of an IRA as a tax-efficient container for holding investments. In practice, that's all it is -- an account in which you can hold investments and enjoy tax benefits that you wouldn't receive if you used an ordinary brokerage account. The trade-off is that the account is designed to be used for retirement, so you lose the tax benefits if you withdraw money before then.
Let's look at the three most common types of individual retirement accounts:
- Traditional IRA: A traditional IRA is one to which your contributions are tax deductible, and you pay taxes when you withdraw the money in retirement. Traditional IRAs are best if you expect to be in a lower income tax bracket in retirement than while you're working. You can withdraw from a traditional IRA after age 59 1/2 without penalties; early withdrawal gets you a tax penalty.
- Roth IRA: With a Roth IRA, your contributions aren't tax deductible, and instead you pay no taxes when you withdraw the money. Because you've already paid taxes on the contributions, you can withdraw from Roth IRA contributions anytime without penalty. Roth IRAs are generally best if you expect to be in a higher tax bracket in retirement, or if you need to keep some of your retirement savings more liquid.
- SEP IRA/SIMPLE IRA: SEP IRAs and SIMPLE IRAs are for self-employed workers and small business owners. SEP and SIMPLE IRAs are treated like traditional IRAs for tax purposes, meaning that contributions are made with pre-tax dollars, and withdrawals are taxed as income in retirement. The primary advantage of SEP and SIMPLE IRAs is that they have substantially higher maximum annual contribution limits than a traditional or Roth IRA.
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Why use an IRA?
An IRA offers several major advantages over a traditional brokerage account. When deciding between a brokerage account vs. an IRA, the primary difference comes down to how your investments are taxed, which can have a huge impact on the ultimate value of your investments.
In a traditional brokerage account, dividends, interest, and capital gains are taxable, whether you withdraw the proceeds or not. If you sell an investment that's appreciated by $5,000 over the year, you would owe taxes on the $5,000 gain. If you pay, say, 20% taxes on that gain, you would have only $4,000 to reinvest after paying $1,000 in taxes.
With a traditional IRA, you pay taxes only when you withdraw from the account. So if you sell an investment that's appreciated by $5,000, you won't pay taxes on the gain unless you withdraw the money from the IRA. That lets you lock in a gain and reinvest the money -- taking advantage of compound interest -- without losing some of the gain to taxes.
Likewise, Roth IRA gains aren't taxed at all, because the account is funded with post-tax dollars. So if you have a $5,000 gain on an investment, you can reinvest without losing money to taxes, and you can withdraw the increased amount in retirement without paying taxes.
An example of IRA tax benefits
Let's illustrate the benefits of using an IRA over a taxable account.
Assume you start with a $5,000 balance and pay 20% tax on capital gains. For simplicity, also assume that every time your account balance doubles, you reinvest.
| IRA | Taxable account | |
|---|---|---|
| Starting balance | $5,000 | $5,000 |
| First double | $10,000 | $9,000 |
| Second double | $20,000 | $16,200 |
| Third double | $40,000 | $29,160 |
| Fourth double | $80,000 | $52,488 |
Realistically, most people don't employ such a strategy (selling everything each time their balance doubles), but many investors frequently sell stocks or funds to keep their accounts in line with their investment goals.
As you can see, the taxable account rapidly falls behind the IRA's growth because of the tax drag. When the IRA balance doubles, the taxable account balance increases by only 80%, due to the 20% tax applied to capital gains. This difference may seem small, but it really adds up as your investments appreciate and your account balance grows.
The discount broker advantage
We think discount brokers (the brokers you see on our list) are the smartest place for individual investors to open an IRA. That's because discount brokers have substantially reduced the cost of investing, which helps you save more for retirement.
Most online brokers offer free trading, so you won't lose a chunk of your investments to fees. Not all brokerage firms have reduced their trading prices, though.
Many full-service brokerage firms still charge $100 or more per trade, while others clip massive commissions on mutual funds, equal to a percentage of the amount you invest. In theory, these high fees and commissions help traditional brokerages offer more hands-on attention and advice. But in practice, high commissions also encourage brokers to make decisions with your money that put more money into their pockets.
Self-directed investors now have access to more affordable tools that can help them select the investments they think are in their best interest -- and save money on fees and commissions. To compare top brokerages, see our expert reviews of the best online stock brokers.
Best IRA accounts for mutual fund investors
While an individual retirement account offers more investment choices than virtually any other retirement account, the investments you can buy inside your IRA are ultimately limited by the selection your broker offers.
Many investors use funds to simplify their investment decisions. With access to just three funds, you could build a diversified portfolio that could withstand major fluctuations in the market.
If you use mutual funds or exchange-traded funds (ETFs) to build a portfolio, you'll want to be picky when choosing a broker. That's because mutual fund availability and costs differ from broker to broker.
Here are some examples of brokers that offer mutual funds.
| Broker | Mutual Funds | No-transaction-fee Mutual Funds |
|---|---|---|
| Ally Invest | More than 12,000 | None |
| Charles Schwab | More than 10,000 | More than 4,000 |
| E*TRADE | More than 7,000 | More than 4,400 |
| Fidelity | More than 10,000 | More than 3,000 |
| Interactive Brokers | More than 11,000 | More than 4,300 |
| Merrill Edge | More than 3,000 | More than 3,000 |
| TD Ameritrade | More than 13,000 | More than 3,700 |
| Vanguard | More than 6,000 | More than 3,000 |
Choosing a broker that offers a large assortment of no-transaction-fee mutual funds can help you avoid commission expenses. This is particularly advantageous if you're just starting out because this can save you a tremendous amount of money over time.
Best IRA accounts for stock investors
If you plan to invest in individual stocks in your IRA, you can be less discerning when picking a brokerage. That's because virtually all brokers offer the same basic ability to buy or sell shares of companies listed on U.S. stock exchanges.
Investors who want to buy and sell individual stocks may find commissions, functionality of the broker's platform, and other features to be more important than fund investors do.
Here's what some major online brokerages offer for individual stock trading.
| Broker | Stock Commission | American Depository Receipts (ADRs) | Foreign Stocks |
|---|---|---|---|
| Ally Invest | $0 | Yes | ADRs only |
| Charles Schwab | $0 | Yes | ADRs plus 30 countries |
| E*TRADE | $0 | Broker-assisted trades | ADRs only |
| Fidelity | $0 | Yes, but only for the whole account | ADRs plus 25 countries |
| Interactive Brokers | $0 | Yes, but only for the whole account | ADRs plus more than 100 markets around the world |
| Merrill Edge | $0 | Yes | ADRs and broker-assisted trades internationally |
| TD Ameritrade | $0 | Yes | ADRs and broker-assisted trades internationally |
| Vanguard | $0 online ($25 for broker-assisted trades over the phone) | Yes | ADRs only |
As you can see, all of our picks for the best IRA brokerage firms charge $0 for an ordinary stock trade.
Given the virtually nonexistent difference in pricing among major online brokers, you might choose a broker based on more personalized features. For example, a Merrill Edge investment account can be linked to a Bank of America checking account, and a Charles Schwab account can link with a Schwab online bank account.
What are the contribution limits for IRAs?
The amount you can contribute to an individual retirement account in a given tax year depends on the type of the account, your income, and your age.
The maximum contribution amounts for 2021 are detailed in the table below. Keep in mind that these are the maximums -- you may be restricted based on your income and whether you have another retirement plan available through your employer.
| Account Type | Younger Than 50 | 50 or Older |
|---|---|---|
| Traditional IRA | $6,000 | $7,000 |
| Roth IRA | $6,000 | $7,000 |
When can you make IRA contributions?
IRA contribution limits follow a weird calendar. You can contribute for any given year up to the tax-filing date for that year. For example, if you want to make contributions for the 2021 tax year, you have until the tax deadline in 2022 to do so.
The timeline extends to the tax-filing day for tax-planning purposes. Some people wait until tax time to figure out whether it makes sense to contribute to a traditional IRA, Roth IRA, or both.
What is a rollover IRA?
One big perk of individual retirement accounts is that you can roll over balances from an employer-sponsored plan like a 401(k) into an IRA. Many people open a rollover IRA when they change jobs, thus moving their retirement investments from a 401(k) to a new IRA.
There are two ways to do a 401(k) rollover to an IRA:
- Direct transfer: This is by far the easiest method. In a direct transfer, any investments you hold in a 401(k) or other retirement account can simply be moved to an IRA. You don't have to sell your investments to move cash over. For example, if you own shares of several mutual funds, those shares are just moved from your existing accounts to your rollover IRA.
- Indirect transfer: An indirect transfer can be messy. In an indirect transfer, your investments are sold, and your 401(k) plan sponsor will send you a check for the balance. You then have 60 days to deposit the check into a rollover IRA to avoid paying taxes and penalties on the amount as a withdrawal.
We recommend doing a direct transfer whenever possible because it will minimize the effort required and can potentially save you a fortune in transaction costs.
FAQs
-
Some brokers set a minimum initial investment required to open an IRA. This is more common if you're opting for a professionally managed IRA or want to put your IRA into a robo-advisor. Most brokers that offer a self-directed IRA have no minimum deposit requirement, so you can get started with as little as a few dollars.
If you're opening an account with a small initial investment, look for a brokerage with zero or low fees. You'll likely also want a broker that lets you purchase fractional shares or ETFs so you can buy into stocks even if you can't afford a full share.
-
The IRA contribution limit changes annually. For 2021, you can contribute a maximum of $6,000 to an IRA or $7,000 if you are 50 or over and eligible for catch-up contributions. If either you or your spouse have access to a workplace retirement plan, your eligibility to make tax-deductible contributions will phase out at higher income levels.
-
Most online brokerage firms let you open a self-directed IRA for free. This means you chose your investments. If you want professional management or a robo-advisor to select investments, you'll pay a fee for these services.
Some brokerages charge a commission for buying and selling assets within your IRA. But an increasing number of online brokers are eliminating commission fees for stock trades and offering commission-free ETFs or no-load mutual funds. You might instead pay a flat monthly fee.
However, you'll still pay fees associated with certain types of investments, such as fund management fees for mutual funds. These fees are paid to the fund managers, not your brokerage firm, and they'll apply no matter which broker you use to buy the investment.
-
Yes. Many people think they can only have one IRA, but this is simply untrue. You can hold as many IRAs as you want -- but the contribution limit applies across the board. Opening more than one account doesn't increase your limit. In other words, the contribution limit is per person, not per account.
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The exact process for withdrawing money from an IRA depends on the broker, but it typically won't take longer than a day or two. You can choose to withdraw large sums of money periodically, or take smaller amounts whenever you need it.
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It depends. The ability to make tax-deductible traditional IRA contributions is income-restricted if you have a retirement plan through your employer. And with a Roth IRA, the ability to contribute is income-restricted, although there's a backdoor contribution method that can allow anyone to use a Roth IRA to save on taxes in retirement.
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The short answer is that it depends on what you invest in. If you put your IRA funds into speculative investments, you could potentially lose all of your money. On the other hand, if you invest wisely in blue-chip stocks, ETFs, and mutual funds, the chance of losing all of your money is virtually zero.
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Maybe. Anyone can contribute to a traditional IRA, but in order to deduct your contributions, your income must be below certain thresholds if you have a 401(k). If you already have a Roth IRA, you may still qualify for deductible traditional IRA contributions, but your total contributions to both accounts cannot exceed the IRS's annual maximum.
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It depends, but it's worth pointing out that some bank IRAs don't offer much in the way of investment products and are focused on things like Certificates of Deposit (CDs) and money market accounts, which aren't likely to produce strong returns over time, or even to beat inflation. You'll notice that all of our favorite IRAs are offered by brokers, not by traditional banks.
About the Author
Matt is a Certified Financial Planner® and investment advisor based in Columbia, South Carolina. He writes personal finance and investment advice for The Ascent and its parent company The Motley Fool, with more than 4,500 published articles and a 2017 SABEW Best in Business award. Matt writes a weekly investment column ("Ask a Fool") that is syndicated in USA Today, and his work has been regularly featured on CNBC, Fox Business, MSN Money, and many other major outlets. He’s a graduate of the University of South Carolina and Nova Southeastern University, and holds a graduate certificate in financial planning from Florida State University.
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