Best Brokers for Individual Retirement Accounts (IRAs)

Brandon Reinkensmeyer

Published by Brandon Reinkensmeyer

Wednesday, September 28th, 2016

When it comes to retirement, choosing the right online broker for self-directed trading is very important for long term success. A retirement is your nest egg for the future, and whether it be a Traditional IRA, Roth IRA, or even a SEP IRA, this broker guide will help you choose the best broker for your individual retirement account.

When it comes to selecting a broker, we always recommend choosing one that does not charge any miscellaneous IRA fees: a yearly maintenance fee, a fee for opening the IRA to begin with, and no fee for closure should you decide to move your money elsewhere.

The following brokers are our recommendations as the best brokers for retirement accounts. None of the below brokers charges any yearly fees associated with client retirement accounts. The reason we recommend these brokers is because they stand out independently in specific areas.

5 Tips for Selecting a Great Broker for Your IRA

Before opening your new retirement account with an online broker, consider these five tips for success:

1. Make sure to choose a broker with no IRA fees. This includes a yearly fee for simply having the account, any fees for opening an account, and there should be no charge for closing the account down the road. None of the brokers we recommend above charge these types of fees, so no need to worry. If anything you should take advantage of the current offers and get a bonus for opening a new account.

2. Understand the difference between retirement account types. Should you go with a traditional IRA or a Roth? With a Traditional IRA all contributions are tax free with withdrawals being taxed, as opposed to a Roth IRA, where contributions are taxed up front and thus are tax-free in the end. A more detailed breakdown of differences is below.

3. Choose an online broker that is right for YOU. Online brokers come in many different shapes and sizes, so choosing the right one is important because after all, this is for your retirement! Alongside reviewing the above broker recommendations, consider reading our 2016 Broker Survey and navigating through our full Online Broker Reviews here on the site.

4. Start your retirement account early to maximize returns. The younger you are when you open and begin contributing to your IRA, the longer your portfolio has to grow each year without being taxed. This allows returns to compound over time, offering you a major benefit over any non-retirement brokerage account.

5. Understand how to roll over your 401k to an IRA: To rollover any retirement account, click to open an account with broker you decide, select retirement account and IRA under type, and complete the application. From there, contact your 401k provider to let them know you are doing a roll over then fund your new IRA broker account online. Make sure to take your time with the application process and there should be no problems.

Retirement Account Types

Traditional IRA: A Traditional Individual Retirement Account (Traditional IRA) presents both tax advantages and investment opportunities for qualified individuals. With a Traditional IRA, contributions are tax deductible meaning you do not pay any taxes on new funds you add in each year. Furthermore, all earnings over the course of the account's life are tax-deferred until you start withdrawing for retirement. With a Traditional IRA, you can contribute up to $5,500 per year under the age of 50, and $6,500 per year if 50 or older. However, any withdrawals before the age of 59 and a half are subject to a early distribution penalty of 10%. See this Wikipedia page for more information.

Roth IRA: With a Roth IRA, rather than granting a tax break for contributions along the way, the tax break is granted on the money withdrawn during retirement. Contributions allowed per year is the lesser of one's taxable compensation or $5,500 per year under age 50 with $6,500 per year over 50. For example, if a single 40 year old has a taxable income of $3,000 for the year, then he can only contribute $3,000 and not $5,000. Unlike Traditional IRAs, with a Roth IRA funds may be withdrawn at any time pending the "seasoning period" (currently five years) has passed. See this Wikipedia page for more information.

SEP IRA: A SEP IRA, Simplified Employee Pension Individual Retirement Arrangement, is a traditional IRA modified to be used by business owners for themselves and for employee contributions. Employers can contribute up to 25% of the employee's wages to any employee's SEP-IRA account. Contributions are capped at $49,000 per year and are tax free, with distributions during retirement being taxed. The mentality for any Traditional IRA or SEP IRA over a Roth IRA is that during retirement, income levels will be much lower thus the tax bracket in which one is taxed is lower, saving money overall.

401(k): A 401(k) is a type of retirement account oferred to American workers. From its wikipedia page, "The 401(k) emerged as an alternative to the traditional retirement pension, which was paid by employers. Employer contributions with the 401(k) can vary, but in general the 401(k) had the effect of shifting the burden for retirement savings to workers themselves. In 2011, about 60% of American households nearing retirement age had 401(k)-type accounts." When an employee leaves their company they have one of several options: leave the funds in the plan, roll over the funds into a new employer's plan, withdraw the funds, or roll over the funds into an IRA.

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1 Fidelity Investments Logo

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2 Charles Schwab Logo

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3 TD Ameritrade Logo

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4 Merrill Edge Logo

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5 E*TRADE Logo

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6 Scottrade Logo

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All pricing data was obtained from a published web site as of 2/20/2017 and is believed to be accurate, but is not guaranteed. The staff is constantly working with its online broker representatives to obtain the latest pricing data. If you believe any data listed above is inaccurate, please contact us using the link at the bottom of this page. For stock trade rates, advertised pricing is for a standard order size of 500 shares of stock priced at $30 per share. For options orders, an options regulatory fee per contract may apply.

TD Ameritrade, Inc. and are separate, unaffiliated companies and are not responsible for each other’s services and products. Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading privileges subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options. Offer valid for one new Individual, Joint or IRA TD Ameritrade account opened by 9/30/2018 and funded within 60 calendar days of account opening with $3,000 or more. To receive $100 bonus, account must be funded with $25,000-$99,999. To receive $300 bonus, account must be funded with $100,000-$249,999. To receive $600 bonus, account must be funded with $250,000 or more. Offer is not valid on tax-exempt trusts, 401k accounts, Keogh plans, Profit Sharing Plan, or Money Purchase Plan. Offer is not transferable and not valid with internal transfers, accounts managed by TD Ameritrade Investment Management, LLC, TD Ameritrade Institutional accounts, and current TD Ameritrade accounts or with other offers. Qualified commission-free Internet equity, ETF or options orders will be limited to a maximum of 250 and must execute within 90 calendar days of account funding. No credit will be given for unexecuted trades. Contract, exercise, and assignment fees still apply. Limit one offer per client. Account value of the qualifying account must remain equal to, or greater than, the value after the net deposit was made (minus any losses due to trading or market volatility or margin debit balances) for 12 months, or TD Ameritrade may charge the account for the cost of the offer at its sole discretion. TD Ameritrade reserves the right to restrict or revoke this offer at any time. This is not an offer or solicitation in any jurisdiction where we are not authorized to do business. Please allow 3-5 business days for any cash deposits to post to account. Taxes related to TD Ameritrade offers are your responsibility. Retail values totaling $600 or more during the calendar year will be included in your consolidated Form 1099. Please consult a legal or tax advisor for the most recent changes to the U.S. tax code and for rollover eligibility rules. (Offer Code 264) TD Ameritrade Inc., member FINRA/SIPC. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2017 TD Ameritrade.