August 2023’s Top 7 Roth IRA Accounts

August 2023's Top 7 Roth IRA Accounts

The Best Roth IRAs for Retirement Planning: A Comprehensive Guide

Are you starting to think about retirement? It’s never too early to plan for a secure financial future, and one of the best ways to do that is through a Roth IRA. In this comprehensive guide, we will take a closer look at Roth IRAs, their advantages and disadvantages, and provide you with a list of the best Roth IRAs available.

Before we dive into the specific recommendations, let’s first understand what a Roth IRA is. Unlike traditional IRAs or 401(k)s, which are funded with pre-tax dollars, Roth IRAs are funded with after-tax contributions. This means that when you withdraw funds from a Roth IRA in retirement, you won’t have to pay any taxes on the earnings.

Now, let’s explore the best Roth IRAs available and what sets them apart.

The Best Roth IRAs

Charles Schwab IRA: Best all around

Charles Schwab offers a wide variety of investment options for those with retirement accounts. They provide 24/7 customer service and an easy-to-navigate website. Schwab’s Roth IRAs include stocks, bonds, CDs, ETFs, and mutual funds. Additionally, they provide retirement educational content and offer more resources and tools after you set up your account.

Fidelity IRA: Best for retirement planning

Fidelity is a well-known and reputable financial institution that offers several retirement accounts, including Roth IRAs. They provide commission-free trades and access to thousands of mutual funds. Fidelity also offers a robo-advisor, Fidelity Go, that specializes in automated investing and retirement assistance. Their retirement resources and tools will help you in your retirement planning journey.

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Merrill Edge IRA: Best for active trading

Merrill Edge’s Roth IRAs stand out for their flexibility. They offer access to stocks, bonds, options, ETFs, and mutual funds. You can choose between three different investment platforms: Merrill Edge Self-Directed, Merrill Guided Investing, or Merrill Guided Investing with an advisor. They also provide 24/7 customer service support and various other retirement accounts.

TD Ameritrade IRA: Best for mobile trading

TD Ameritrade’s Roth IRAs are free to open and offer several commission-free ETFs, fixed income investments, and no-transaction-fee mutual funds. They provide access to third-party research and analysis from reputable sources like Morningstar Investment Management, CFRA, and Market Edge. While managed portfolios are no longer available for new clients, TD Ameritrade still offers self-directed Roth IRAs without any advisory fees.

Betterment IRA: Best for automated investing

Betterment specializes in personalized investing and retirement assistance. They offer Roth IRAs with no minimum account size requirements and an annual fee of 0.25%. Betterment provides access to crypto portfolios, socially responsible investment options, and multiple other portfolios focused on different market goals. They automatically rebalance your account and reinvest dividends on your behalf.

SoFi IRA: Best for beginner investors

SoFi offers competitive Roth IRAs with no trading fees and commission-free stock and ETF trades. They provide access to certified financial planners (CFPs) and offer both active and automated IRA accounts. SoFi also offers several other spending and saving account options, making it a suitable choice for beginner investors looking to start their retirement savings journey.

Wealthfront IRA: Best for goal planning

Wealthfront’s Roth IRAs come with a range of account types and investment strategies. They offer free trading commissions and goal-based planning. You can take advantage of tax-loss harvesting and other strategies to optimize your investments. However, you need a minimum deposit of $500 to open a Roth IRA with Wealthfront, and there is an account fee of 0.25%.

These are just a few of the best Roth IRAs available. Each has its own unique features, so it’s important to consider your individual needs and preferences before making a decision. It might also be helpful to speak with a financial advisor to determine the best option for you.

Advantages and Disadvantages of Opening a Roth IRA

To help you make an informed decision, we interviewed three retirement and investing experts to discuss the advantages and disadvantages of opening a Roth IRA.

According to Charlotte Geletka, CFP, CRPC, a managing partner at Silver Penny Financial Planning, Roth IRAs work best for those with a long time horizon until retirement or those in a low tax bracket now, anticipating a higher tax bracket in retirement. However, one downside is that not everyone is eligible to contribute to a Roth IRA, as income limits apply.

David Brooks, CIS, CHRS, founder and president at Retire SMART, highlighted the advantage of early access to funds in case of emergencies without any tax or penalty consequences. However, he also cautioned that the belief in being in a lower tax bracket during retirement is often unfounded.

Tanya Nichols, CFP, founder and president at Align Financial, discussed how income limits can diminish the potential benefits of Roth IRAs. She emphasized that the decision to open a Roth IRA should be based on an individual’s financial circumstances and objectives.

Who Should Open a Roth IRA Account?

According to our experts, anyone can benefit from opening a Roth IRA. Young people with a long time horizon until retirement and individuals with lower current income but anticipated salary increases in the future are ideal candidates. It’s important to consider your future tax bracket, current tax rate, and ability to maximize contributions before opening a Roth IRA.

Other Advice for Individuals Considering Opening a Roth IRA

Our experts shared some additional advice for individuals considering opening a Roth IRA. Charlotte Geletka recommended exploring eligibility to contribute to a Roth IRA until April of the following year and speaking with a financial advisor to make the most of this retirement savings tool.

David Brooks suggested understanding the fees and expenses associated with opening an account and opting for a fiduciary rather than a commission-based broker.

Tanya Nichols emphasized the importance of good spending habits, saving for emergencies, and setting aside money for long-term retirement savings before considering opening a Roth IRA.

Methodology

To determine the best Roth IRAs, we considered factors such as low fees, investment choices, retirement planning resources, customer service support, and mobile accessibility. We interviewed three retirement and investing experts to gather insights into Roth IRA accounts. Charlotte Geletka, CFP, CRPC, David Brooks, CIS, CHRS, and Tanya Nichols, CFP, provided valuable perspectives on the advantages and disadvantages of Roth IRAs.

Conclusion

A Roth IRA is an excellent retirement savings vehicle that can provide tax-free withdrawals in retirement. Understanding the advantages, disadvantages, and best options available is crucial when considering opening a Roth IRA. By following our comprehensive guide and consulting with financial experts, you can make an informed decision that will set you up for a financially secure future.

(Note: All opinions expressed in this article are those of the experts interviewed and do not constitute financial advice. Please consult with a qualified financial advisor before making any investment decisions.)

Disclaimer: Our experts answer readers’ investing questions and write unbiased product reviews. In some cases, we receive a commission from our partners. Our opinions are always our own.

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