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When it comes to retirement, choosing the right online broker for self-directed trading is very important for long-term success. A retirement account is your nest egg for the future, and whether it is a Traditional IRA, Roth IRA, or even a SEP IRA, this broker guide will help you choose the best broker for your retirement account.
In the process of selecting a broker, we recommend choosing one that does not charge any miscellaneous IRA fees: a yearly maintenance fee, a fee for opening the IRA, or a fee for closure should you decide to move your money elsewhere.
Best IRA Accounts for 2019
Here are the top five online brokers for IRA retirement accounts, based on over 80 variables.
- Charles Schwab - Best for IRA accounts overall
- Fidelity - Great all-around retirement experience
- Merrill Edge - Best rewards program
- TD Ameritrade - Technology leader
- E*TRADE - Balanced offering
Best for IRA accounts overall - Open Account
Current Offer: $4.95 online equity trades + $0.65 per options contract.
For those seeking access to low costs, excellent research, quality trade tools, and professional planning for the future, Charles Schwab will not disappoint. Read full review
Great all-around retirement experience - Open Account
Exclusive Offer: Get 300 commission-free trades and 2 years to use them.
From industry-leading research to excellent trading tools, mobile apps, and retirement services, Fidelity defines “value” and provides investors with everything they need to succeed, and more. Read full review
Best rewards program - Open Account
Current Offer: Invest in a new account and get up to $600.
Merrill Edge offers investors an excellent rewards program and a well-rounded package worth being a customer for, especially Bank of America clients. Read full review
Technology leader - Open Account
Exclusive Offer: Trade free for 90 days + get up to $600 cash.
The extra cost of trading with TD Ameritrade is worth every cent – the brokerage delivers fantastic platforms, research, mobile apps, education, and customer service. This outstanding all-round experience makes TD Ameritrade our No. 1 overall broker in 2019. Read full review
How to select an IRA account
Before opening your new retirement account, consider these five tips for success:
1. Be sure to choose a broker with no IRA fees. Fees may include an annual fee for simply having the account, a fee for opening the account, or a fee for closing it. None of the brokers we recommend, 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, while withdrawals are 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 set out 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 best online brokers guide 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 will grow without being taxed. Saving at a young age allows returns to compound over time, offering you a significant benefit over any non-retirement brokerage account.
5. Understand how to roll over your 401k to an IRA: To roll over any retirement account, click to open an account with the broker you decide on, select retirement account and IRA under type, and complete the application. From there, follow the instructions provided, including contacting your 401k provider to let them know you are doing a rollover, then fund your new IRA broker account online. Be sure to take your time with the application process.
Retirement account types
Traditional IRA: A Traditional Individual Retirement Account (Traditional IRA) presents both tax advantages and investment opportunities. With a Traditional IRA, contributions are tax deductible, meaning you do not pay any taxes on funds contributed 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 $6,000 per year under the age of 50, and $7,000 per year if 50 or older. However, any withdrawals before the age of 59 and a half are subject to an early distribution penalty of 10%. See this Wikipedia page for more information.
Roth IRA: With a Roth IRA, contributions are all post tax, which means withdrawals during retirement are tax-free. Contribution limits are the same as IRAs. However, Roth IRAs are not available to everyone. Instead, higher income earners are locked out of using this retirement instrument. Unlike Traditional IRAs, with a Roth IRA funds may be withdrawn at any time after a "seasoning period" (currently five years). 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. Contributions are capped at $56,000 per year in 2019 and are tax deferred, like a Traditional IRA, meaning distributions during retirement are taxed. The rationale for taking out a Traditional IRA or SEP IRA instead of a Roth IRA is that during retirement, income levels will be much lower than they are currently; thus, the effective tax bracket is lower, saving money overall.
401(k): A 401(k) is a type of retirement account American employers offer their workers. As a tax-deferred investment account, employees can contribute up to $18,500 pre-tax every year in 2019. Withdrawals are taxed during retirement. 401ks often include incentives from employers to contribute, with the most common being contribution matching (the US average is 2.7%). Different variations of profit sharing can also be incorporated, although they are less common. When an employee leaves his or her current company or retires, he/she is required to roll over the funds into a new employer's plan or roll over the funds into an IRA. See this Wikipedia page for more information.
Best IRA Accounts 2019 (Summary)
|Online Broker||Best For||Minimum Deposit||Commissions||IRA Account Rating|
|Charles Schwab||Best for IRA accounts overall||$0||$4.95||5 Stars|
|Fidelity||Great all-around retirement experience||$0||$4.95||5 Stars|
|Merrill Edge||Best rewards program||$0||$6.95||5 Stars|
|TD Ameritrade||Technology leader||$0||$6.95||4.5 Stars|
|E*TRADE||Balanced offering||$500||$6.95||4.5 Stars|