Top 8 IRA Accounts – August 2023

Top 8 IRA Accounts - August 2023

A Comprehensive Guide to Traditional IRA Accounts

Retirement planning is an essential aspect of personal finance, and one of the most popular and effective tools for saving for retirement is the Individual Retirement Account (IRA). Unlike employer-sponsored retirement plans like 401(k)s, IRAs are independent and can be set up by individuals over the age of 18 with taxable income.

In this comprehensive guide, we will explore traditional IRAs in detail, discussing their advantages and disadvantages, who should consider opening one, and what to look for in a good traditional IRA account. We will also provide expert insights from three investing and retirement experts to shed light on the topic.

Advantages and Disadvantages of Traditional IRA Accounts

Traditional IRAs offer several benefits that make them an attractive option for retirement savings. Contributions made to a traditional IRA are not considered part of taxable income for the year, allowing individuals to reduce their taxable income. This tax-deferred growth and earnings in a traditional IRA account can lead to significant savings over time. However, taxes on the funds are only paid once withdrawals are made during retirement, based on the individual’s income at that time.

According to Lazetta Rainey Braxton, MBA, CFP, “Contributions to the traditional IRA are not considered a part of the taxable income for the year that the contribution was made. As you allow that traditional IRA to grow, you’re going to have both tax-deferred contributions and tax-deferred growth and earnings. So when it is time for you to retire and take out those funds, it will be subject to ordinary income tax rates, based on your income during retirement.”

Brian Fry, CFP, highlights the flexibility and transparency of traditional IRAs compared to 401(k)s. He mentions that while there are tax-deduction advantages for IRA contributions, there are restrictions based on income. Additionally, early withdrawals from traditional IRAs can result in hefty penalties.

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Charlotte Geletka, CFP, CRPC, emphasizes the tax advantages and long-term growth potential of traditional IRAs. She states that contributions are tax-deductible within IRS income limitations, and the money in a traditional IRA grows tax-deferred. However, she highlights that traditional IRAs have restrictions on withdrawals, which can only be made once the account holder reaches the age of 59 ½.

Who Should Consider Opening a Traditional IRA?

Different individuals have different financial situations, and opening a traditional IRA may be advantageous for specific groups. Lazetta Rainey Braxton, MBA, CFP, suggests that those who want to keep their tax brackets low may choose a traditional IRA because the contributions reduce taxable income.

Brian Fry, CFP, highlights that households projecting lower taxes in the future than in the present may prefer a traditional IRA over a Roth IRA. Those under specific income limits, such as single households earning under $66,000 and married filing jointly households earning under $105,000, may find traditional IRAs suitable. Additionally, if an individual is not covered by an employer retirement account, a traditional IRA can be a good choice irrespective of income.

Charlotte Geletka, CFP, CRPC, recommends a traditional IRA for individuals without a retirement plan through their employer or for self-employed individuals. However, she cautions that earned income is a requirement for contributions and advises individuals to consult tax professionals or financial advisors to determine eligibility based on their income.

What Makes a Good Traditional IRA Account?

When looking for a traditional IRA account, it is essential to consider various factors. Investment selection is crucial, and a competitive IRA account should offer an expansive range of investments with commission-free and/or low-fee trading options. Additionally, retirement planning resources, access to human advisors, mobile investing opportunities, and robust customer support are desirable features.

Top Picks for the Best IRA Accounts:

1. Charles Schwab IRA: Best all around
2. Fidelity IRA: Best for retirement saving
3. TD Ameritrade IRA: Best for mobile trading
4. Ellevest IRA: Best for access to human advisors
5. Merrill Edge IRA: Best for IRA traders
6. E*TRADE: Best for passive investors
7. Betterment IRA: Best for automated investing
8. SoFi IRA: Best for beginner investors

It’s worth noting that each account has its strengths and weaknesses, which are further elaborated upon in the original article.

Expert Insights on Traditional IRA Accounts

To provide further insights, we interviewed three investing and retirement experts:

1. Lazetta Rainey Braxton, MBA, CFP, co-founder and co-CEO at 2050 Wealth Partners
2. Brian Fry, CFP, founder at Safe Landing Financial
3. Charlotte Geletka, CFP, CRPC, managing partner at Silver Penny Financial Planning

These experts shed light on various aspects of traditional IRA accounts. Lazetta Rainey Braxton, MBA, CFP, explains the tax implications and catch-up provisions associated with traditional IRAs. Brian Fry, CFP, discusses planning considerations and the lack of company match opportunities. Charlotte Geletka, CFP, CRPC, emphasizes the tax advantages, age restrictions, and potential for long-term growth.

Methodology for Selecting the Best IRA Accounts

In order to determine the top IRA accounts, we reviewed and compared more than a dozen options based on factors such as minimum account balances, account fees, investment selection, retirement planning resources, customer service offerings, and mobile app access. We cross-referenced our findings with popular comparison sites to ensure comprehensive research.

Other IRA Accounts Considered:

• Vanguard
• Fundrise
• Interactive Brokers
• Webull
• M1 Finance
• tastytrade

Further details about these accounts and their unique features can be found in the original article.

In conclusion, traditional IRAs offer unique advantages and considerations for individuals planning their retirement. Understanding the benefits, eligibility criteria, and available account options is essential in making informed decisions about opening a traditional IRA. By considering the insights of experts and conducting thorough research on the best IRA accounts, individuals can pave the way for a secure and comfortable retirement.

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