Best IRA Accounts – Details On The Top IRA Providers
Our best IRA accounts review features Betterment as the most suitable IRA account provider for newbie’s and people of all ages. We selected Vanguard as the provider for intermediate and advanced investors. There are also three smaller reviews for Ally Invest, Charles Schwab and E-Trade as our runners up. At echeck.org, we always suggest that you shop around prior to making any investment, so we have added a list of other IRA providers at the very bottom of this “Best IRA Accounts” review. They are IRA providers that have a trusted name and a reasonably good online reputation.
Skip To The Reviews
Below is a skippable list of links that will take you down to the reviews on this page. It is for people who do not want to know about the way this article was written, or about how we ranked the companies, or want to know what an IRA is. The links below are for people who just want to skip to the reviews.
A Note On How This Article Was Written
Our “Best IRA Accounts” review has been written in a very different way to our usual articles and reviews. While I try to keep things as user friendly as possible, there are times when I have to delve into detail, and that detail may confuse people who are not experienced investors. I have tried my very best to keep this article as user friendly as possible so that almost anybody can understand it. However, there are a few drawbacks to this.
A Quick Explanation Of The Drawbacks To How This Article Was Written
As I said in the introduction, I have tried to create a review that everybody can understand, from the newest newbie to the most advanced investor, but there are a few drawbacks to this.
There are places where I feel I should have elaborated significantly more to help newbie investors, but it would have bored and annoyed readers who are advanced investors.
There are also places where I had trouble describing the importance of certain issues. For example, I lay out a fact and an investor may think, “Wow, that is impressive, this brokerage is rather special.” But, a newbie investor would see the same fact and thing very little of it because he or she doesn’t have the investing experience to appreciate it.
How We Ranked The Best IRA Accounts?
If a brokerage has a successful portfolio, then it means they have not made any big or repetitive mistakes in the recent past. That is all it means, and it is important that you understand that fact.
Some say that a successful portfolio means that the brokerage or company is great at selecting and building successful investments, but that is not true. They are using the same tools that every other brokerage or investment firm uses, which is historic data and industry knowledge.
Some say that success means that the brokerage or company has good administrators and good managers. That is partially true, but it is more about the mistakes they didn’t make rather than the things they did right. Nevertheless, it may be fair to concede that a brokerage or investment company with a successful portfolio has good administrators and good managers who are able to hold back a tidal wave of failure; people who are able to avoid disasters when they are on the horizon.
What Does All This Have To Do With How We Ranked The IRA Providers?
It means we didn’t select them based on how successful their portfolio (investments selection) is. We didn’t select the best IRA accounts based on how much money their customers have made. We selected the best IRA accounts based on these factors:
- The quality of the overall service
- The user experience
- How easy to process was
- How much control you are given
- The type of investor the provider suits
- The choices an investor is given
- How intelligently chosen their investing options are
- How much help an investor is given
- The name and reputation of the company/brokerage
- How difficult it is to find their fees
- How many nasty surprises are hidden in their small print
- Risk transparency and/or their openness regarding risk
It took us a very long time to get all the details and information required to make a fair decision on which are the best IRA accounts. All the details on this article have all been fact checked, so it is a good place to start if you are looking for an IRA account. If you feel that we have left out an IRA provider and you feel it deserves a place on our Best IRA accounts list, then leave a comment and let us know.
On a personal note, I have tried to separate opinion and cold-hard facts in this article by using personal notes, so keep an eye out for them dotted around this article. The fact-finding process for this “Best IRA accounts” article took a very long time because the whole IRA-provider industry is very complex when you scratch the surface.
What Is An IRA?
IRA stands for Individual Retirement Account. There are traditional IRAs, which is what this article mostly deals with, and there are Roth IRAs, which many of the companies on this article are also willing to offer.
IRAs are a good way of saving for your future (usually for your retirement) because they have tax advantages. You should be eligible for an IRA, but here is a link to the Wells Fargo eligibility tool so you may check.
A traditional IRA may provide a deduction for your contributions to it, and even though you have to pay tax on your earnings (the interest it accrues), you may defer your taxes on your investment earnings until the money is withdrawn.
An IRA should allow you to choose from a range of different investments such as:
- Savings Plans
- Exchange-Traded Funds (ETFs)
- Mutual Funds
On a personal note, I like bonds, especially government and blue chip bonds. They are the safest type of investment in my opinion, and even though their earnings are small, I always figure that I should play more conservatively with my retirement funds. I play more dangerously with may regular monthly investments when in put money in penny stocks with the hopes one of them will skyrocket and I can retire tomorrow.
Best IRA Accounts Winner – An IRA Account That Suits Anybody Of Any Age
Let us first consider how an IRA may be better than your typical 401K if you get one with Betterment. In my opinion, it is best to have both a 401K and an IRA, but here are the reasons why an IRA with Betterment may be better than a 401K.
- You get a portfolio of low-cost index funds
- The portfolio is globally diversified
- You may have your IRA rebalanced to help make your retirement goals
- Their fees are typically lower than some 401K providers
- Get personalized advice based on your retirement goals
- There are tax-smart services that exist to help you build your portfolio value
- Your portfolio is designed to take on your optimal level of risk
The Different Plans You May Have With Betterment
There is the Digital plan, which is the basic plan. There is the Plus plan, and the Premium plan. You have to open up an account with a certain plan, and you are given the option of an IRA. When you open up an account with Betterment, you are given these investment account options:
- IRA Accounts
- Roth IRA Accounts
- SEP IRA Accounts
- Taxable Accounts
- 401k Plans
- Trust Accounts
The amount you are looking to invest and your minimum balance will determine your account fees. The fees you pay are taken from your total balance, but it is nothing to worry about since their annual fee percentages are a fraction of the interest you are going to earn. In addition, there is no standing/fixed fee, which means if your account has nothing in it–then you are not charged a fee.
The image above shows you Betterment’s annual fee and its minimum balance. Your minimum balance is what determines your account level. If your account swells up to more than $100,000, then you are placed on the “Plus” plan. You may opt for the “Premium” plan if you are looking to invest more aggressively.
Your minimum balance is determined by the money (combined) in all your Betterment accounts. For example, you may only have $10,000 in your IRA, but you may have $91,000 in a joint account, which means your account is upgraded to the “Plus” account. The only account type that has a separate fee is the 401(k) account through Betterment For Business, which has its own fee schedule.
What Each Account Plan Offers
The Digital plan gives you automated portfolio management and it comes with tax-efficient investing features. You get advice across your investments, and their customer support is rather good.
The Plus plan gives you the benefits of the digital plan. You get additional account monitoring by the licensed team of Betterment experts. You also get a free phone call for advice from their team of licensed financial experts and CFP professionals.
The Premium plan also gives you all the benefits of the digital plan, and you also get account monitoring by the licensed team of Betterment experts. With this plan, you get unlimited phone calls with their team of licensed financial experts and CFP professionals.
On a personal note, the Premium plan gives you unlimited calls with their team of licensed financial experts and CFP professionals. I asked the research team if I could make a call and get a little free advice that I would apply to my personal investments. The team wouldn’t let me because they were very busy and maybe thought I was fooling around. But, I can’t imagine I am the first person to think of calling the Betterment team and asking for advice on other investments while pretending I was talking about the future of my IRA.
Are There Any Downsides?
There are a few points that may niggle at you. For example, they only allow electronic transfers into their accounts. They do not allow personal checks, wires, and the use of debit or credit cards. ACH electronic transfers are free, but that is the only method by which you may deposit money. Some investors may prefer to invest in asset classes that Betterment doesn’t offer, and even though their fees are low, there are lower fees out there for people who are more willing to take charge of their own investing. In addition, the company says that all portfolios are subject to fund level fees, which they explain in the terms and conditions when you sign up, but they could have made it clearer in the first place.
The Best IRA Accounts – Betterment’s Additional Features
The least lovable Betterment feature is their satisfaction guarantee. I often find such guarantees to be cheap and meaningless because it is the sort of thing that spam websites have. Nevertheless, if you are not happy, you can complain and maybe get your management fees waived for the next 90 days by quoting their satisfaction guarantee. Here are a few of their better features and functions.
Have your portfolio rebalanced as many times as required and it won’t cost you an extra penny, which is a marvelous perk for IRA investors.
The fact they rebalance your portfolio automatically for you means it is a very hands-off system, which is going to suit many IRA investors.
There Are No Transfer Fees
They only allow deposits by ACH transfers, which are electronic transfers, but there is no fee for deposits. Transferring out is also done with ACH in most cases.
There Are No Additional Trading Fees
Betterment will not charge you for additional transactions to do things such as sell or buy securities.
Fees Are Removed Automatically
There is no need for any fee-paying action on your part because it is all done for you automatically.
No Minimum Balance Or Fixed Fee
If you have nothing in your account, then you will not have to pay a fee. All portfolios are subject to different fund level fees.
Fees Are Not Charged For Amounts Above $2 Million
You are charged fees up to that amount, but any money after two million will not be subject to the Plus or Premium fees.
Member Of The Securities Investor Protection Corporation
Your money is protected up to $500,000, which is not a bad amount. It offers more protection than most regular savings accounts.
Tax Loss Harvesting
If your security has experienced a loss, then you may sell it and count it as a capital loss so that you may lower your tax bill.
You may set up your Betterment accounts so that they automatically invest your excess money from your account if you ask them to.
You are able to buy fractional shares of an EFT so that your money is working all the time, which is not something you can do if you manage your own portfolio.
On a personal note, companies such as Betterment give young investors access to services they may not be able to get, especially since some companies do not want to take younger people on as clients. Younger investors may also like the hands-off approach and may prefer to take a more active role later in life when they have more investing experience. With that said, Betterment should suit people of all ages in my opinion.
Best IRA Accounts Winner – An IRA Account That Suits Slightly More Knowledgeable Investors
Just like the other companies on this “Best IRA Accounts” article, Vanguard (VGI) allows you to open up an IRA and start saving for the future while gaining the opportunity to pay less tax. Add to your IRA with your own deposits, and allow your money to grow thanks to capital gains, interest and dividends.
Vanguard is another company that allows you to grow your nest egg without hefty fees chipping away at your earnings. Vanguard has retirement specialists that you can talk to about things such as IRAs, Roth IRAs and 401(k)s.
On the Vanguard homepage, you are reminded that if you withdraw your money from your IRA before you are 59 years and six months old, then you may have to pay ordinary income tax on your money and 10% federal penalty tax.
Vanguard Is Something Rather Special
Vanguard has no private stockholders or outside owners to answer to. VGI (Vanguard Inc) is actually a subsidiary of various mutual funds. For that reason, it is very unlikely that Vanguard will ever go bust and take all your money down with it.
It turns out that 94% of Vanguard mutual funds and EFTs performed better than their peer-group averages over the past 10 years. Their claim is quite specific for the obvious reason of making it look as good as possible while making sure it remains as true as possible,
On a personal note, the 94% claim is impressive, but I feel rotten for mentioning it because such a claim only proves that the company is good at administration to the point where they have not messed up repeatedly and in an ugly way. It only indicates that the company administrators are not screwing up on a regular basis and suggests they probably won’t make a mess of things in the near future. What it doesn’t mean is that your mutual funds or your EFTs will outperform the peer-group averages. There is no real way of knowing how your investments will work out in the future, so despite the impressive 94% claim made by VGI, I still feel rotten for mentioning it.
The Confusing Issue Of Insurance – Is Your Money Safe If Vanguard Goes Bust?
Before we start on about how great Vanguard is, there is the confusing issue of insurance. Vanguard funds are not guaranteed or insured, which means you may lose money, but that is true of most IRA investments.
Money that is held in Vanguard brokerage services is insured up to $500,000 because they have FINRA and SIPC insurance. However, funds are not insured, so is your money at risk if Vanguard goes bust?
The short answer is no. If the Vanguard brokerage happens to be holding all your money when they go bust, then you may get back as much as $500,000. If your money is invested when the Vanguard brokerage goes bust, then they cannot touch the money you invested. The image below shows the long answer from Mel Lindauer of the Diehards forum (source MyMoneyBlog).
They Offer A Broad Fund Selection
Your VGI IRA comes with a wide variety of options to choose from, which includes over 200 commission-free EFTs and mutual funds, and they have “All in one” target retirement funds. In other words, there are plenty of places to put your money that are fairly safe and cheap.
Rearrange VGI IRA and it spells VIAGRA. That is one way of getting your portfolio up.
The way Vanguard works means you may have an easy-to-rebalance and cheap portfolio by investing in as few as three funds. For example, you could invest in Vanguard Total Stock Market Index fund, the Vanguard Total Bond Market fund and the Vanguard Total International Stock Market Index fund. If you did, you would have a fairly diversified portfolio that is fairly safe; if you remember that Vanguard is unlike most brokerages because there is little-to-no chance of you losing your money if Vanguard disappeared.
Simplicity And Stability
Vanguard is one of the largest mutual fund companies in the world, and they have been around since 1975, (they brag about their established date on their website). The way that Vanguard works means that they do offer a fair amount of stability, and you may use the brokerage side of their company to create a reasonably stable portfolio fairly easily (ergo they offer simple IRA solutions). Plus, if you are looking for non-Vanguard EFTs and mutual funds, then you may buy them through the brokerage at a competitive rate. I won’t bore you with their fees and such because there are quite a few of them, but here is a list of Vanguard‘s fees and commissions if you are interested.
They brag that they have been around since 1975, but these things don’t matter. You may remember how Merry-Go-Round was the toast of Wall Street in the late 1980s, only to go bust in 1996. What about Refco that had $4 billion in its customer accounts? It operated in 14 countries and was established in 1960, but went bust in 2005.
Vanguard Comes With Very Low Costs
Vanguard boasts that they offer an “average” expense ratio of 0.12%, which is pretty low. The expense ratio is the cost of owning your fund. It is no the cost of buying or redeeming your fund; they are called the sales loads. VGI becomes more attractive when you discover these features:
- Vanguard funds come with no sales loads
- Their Vanguard funds come with no commissions
- There are no service fees when you use their website services
- Having documents sent electronically is free
There may be fees if you require paperwork to be sent to you, but you can have them sent electronically for free.
If you buy Vanguard EFT shares, then you may buy them through another brokerage, but they may charge you fees. If you buy them through the Vanguard brokerage, then they are commission free.
The Vanguard “website” claims that because their expense ratio is just 0.12% that their average fund expense ratio is 81% less than the industry average. The industry average is published by Morningstar. On a personal note, could you please take that number with a pinch of salt. All the data on average fund expense ratios seem to come from Morningstar. There are no other widely available sources, which mean I cannot get a second opinion.
Best IRA Accounts – Here Are The Others That We Thought Were Worth A Mention
The two best IRA accounts mentioned in the sections above are very good choices. Our research shows that they are head and shoulders above the rest. The IRA accounts mentioned below are good, but just not as good as the ones listed above. We have not included the IRA accounts that we tried that turned out to be terrible. The ones below are good, it is just that they don’t sparkle as brightly as the two best IRA accounts mentioned above.
Get an Ally Invest account, and you may start dabbling with a few investments before you start your IRA. It is a nice place to learn about investing and give it a try at the same time. You are able to invest in an IRA from your Ally Invest brokerage account. Sadly, they charge a fee for transferring your account out of Ally. At the time of writing, the fee is $50.
Ally Invest offer some attractive prices for IRA account holders and regular investors. They charge a flat rate despite the value of the trade. Options are also reasonably priced, and their load mutual funds selling and buying costs are brilliant.
Their research tools are not impressive, but they are fine for most people. The resources and tools they have should be suitable for most IRA investors, but you should take the time to do a little independent research before making your decisions.
Be you an IRA investor or be you a frequent investor, Ally Invest gives you plenty of investment vehicles via its investment platform. For example, you can buy stocks, mutual funds, options contracts and much more.
Ally gives you plenty to do and play with. If you actually explore their online platform, there is plenty to do. In other words, there are many investment opportunities to be had if you explore their trading platform.
Ally Invest is beginner friendly. They have beginner’s guides and FAQ sections that answer many of a beginner’s questions. If you wish to start as a regular trader before you make your decision about your IRA, then try their AutoTrade function.
The trader community is fairly vibrant, and you should consider getting involved. There are plenty of research tools, but being able to discuss different issues with different traders may be very helpful.
On a personal note, I was rather impressed with how knowledgeable some of the forum members were. Some of the conversations I had were like talking to the highly qualified men and women that haunt our back offices (who we run to when we need something complex explaining).
One of the nicest things about the Charles Schwab investment platform is that they do not charge maintenance fees. Just like Ally (mentioned above), they will charge you $50 to move your IRA out of their account, but otherwise there are no maintenance or inactivity fees. I love it when companies and banks offer free investment accounts with no inactivity fees because such fees chip away at my investment earnings.
The minimum amount you need to open an account is $1000, which is not bad at all when you remember there are no inactivity fees. You may have the opening balance waived if you open up a Charles Schwab bank high yield investor checking account. I did a quick review of their high yield account in this article about joint accounts. They also waive the $1000 opening deposit if you set up a direct debit (auto-pay/repeated transfer) order that transfers over $100 every month.
Charles Schwab has some great research tools along with expert-research resources that come at no extra fee. The mobile app is also good, especially if you have a bank account with Charles Schwab because you can see your bank and your investment information from just one app.
They have professional trading platforms that Charles Schwab customers can use if their investment account balances reach a certain (albeit low) threshold. The trading platforms are called Trade Source and SmartStreet edge. Both are free to use, both have no trade minimums, and both are suitable for intermediate-to-advanced investors.
Charles Schwab has over 200 commission-free EFTs. There are also no early-redemption fees if you choose EFTs from their commission-free EFTs. Their regular EFT and stock commissions and fees are low, but there are quite a few brokers out there that can beat them.
On the topic of fees, Charles Schwab does have some very high fees for things such as mutual funds. Selling is free, but purchasing fees are some of the highest in the industry. It is also advisable that you do not borrow money from Charles Schwab if you are an investor because their interest rates are very high.
There is a robo element to the Charles Schwab investment account. They call it their intelligent portfolio function. You set the parameters by which it operates, and it will do things such as re-balance your portfolio for you. It was built to compete with brokers such as Betterment.
Charles Schwab customer service gets a mention because it is above average, and that is not a common boast for any form of brokerage or investment firm. Many customer service departments are only friendly when you have money to invest, but the customer service department for Charles Schwab is efficient and friendly no matter what your question or concern.
You may have heard of E-Trade because they do quite a bit of advertising. Plus, they offer numerous financial services, which mean their customer base is a little larger than the average IRA account provider.
They have a nice set of tools for beginners, and they have a professional set of tools that gives you all the usual functions such as real-time quote and interactive charts, but it also centralizes your investments, it has customizable watch lists, and they extend trading hours for pro tool users too.
E-Trade has a user-friendly education center for newbies, and you are able to seek advice from a broker. You may also set up a managed portfolio if you wish to take a step back from your investing and keep a hands-off approach for a while.
People who have an IRA with E-Trade are unlikely to gain access to their lower trading rates that they offer for frequent traders. Despite the fact that E-Trade is known as a discount brokerage, you will find that their fees are slightly higher than most of their online-only competitors.
Online managed or adaptive portfolio tools are available for use by people who have a traditional IRA with E-Trade. Another benefit is that they allow you to withdraw your assets penalty free if you are buying a home for the first time. You may also withdraw without paying extra fees if you are using the money for major medical expenses or you are using it for qualified higher education costs.
There are no maintenance fees for having your IRA and there is no account minimum balance, but you will still have to pay service fees, brokerage commissions and fund expenses. If you are rolling over your IRA from a former employer’s plan, then they offer a fair amount of help to make it happen.
On a personal note, I feel I have purposefully undersold E-Trade a little because I am tired of reading other reviewers hype them up. E-Trade is a good place to have an IRA account, and it deserves it place on our best IRA accounts list, but its commissions and fees are just a tiny bit too much for me to fall in love with them the way others have.
Conclusion – Don’t Believe Everything You Read And Remember Your IRA Is Just One Wealth Building Tool
I say that you shouldn’t believe everything you read because we have read some diabolical nonsense while researching different IRA accounts and trying them out. Of all the money products we have reviewed, I have to say that this article took the longest to test, research and write. It took so long because fact checking took us an epic amount of time.
Brokers and IRA account providers seem to be able to get away with blurring facts. They say how their funds haven’t decreased in value, but in the small print it says something like “In the period between May 2015 and December 2015.” Despite the fact that it is more difficult for brokers and IRA providers to outright lie, they are able to skew the truth in their favor and still get away with it.
In addition, if you are a regular echeck.org reader, you will know there are plenty of ways to build wealth, from growing raspberry bushes in your garden to investing in blue chip companies. Remember that your IRA is a good and tax-friendly investment option, but it shouldn’t be your one-and-only method of wealth building. Pay it all due attention, and make sure it is safe, but don’t rely on it as your primary method of wealth building.
I don’t want this to sound like financial advice in its legal sense (that was my disclaimer), but remember that you are only able to invest around $5500 per year into your IRA, so consider prioritizing some other investments. For example, if you have less than $5500 in spare cash every year, then maybe diversify your investment strategy where part of your money is invested in something that pays off a little sooner. Maybe put $1000 in your IRA, and invest the rest of your money into something that will improve your near-future earning power, be it CD with a high interest rate, or be it a qualification that allows you to get a promotion at work. If you have more than $5500 in your yearly wealth-building budget, then feel free to take full advantage of your IRA and all its tax benefits.
A Quick List Of Other Companies That Offer Good IRA Accounts
It is always a good idea to shop around and do your research before you make any sort of financial investment. The IRA providers listed above are the ones we think are the very best of the best. However, you should shop around and do a little research before you commit. With that in mind, here is a list of other IRA providers that are doing well and currently have a large (and reasonably happy) group of customers.
The list below features IRA providers that we tested and they were okay but not great. We haven’t included links to the IRA providers that we thought were terrible.