Low-cost alternatives to the myRA
At Fidelity Investments, there's no minimum required to open a traditional IRA or Roth at Fidelity Investments. Investment of the assets in an IRA are subject to mutual fund minimums, but those minimums can be waived by enrolling in the automatic account-builder program with contributions of at least $200 per month.
Many discount brokers offer low-fee IRAs:
—Charles Schwab waives the $1,000 minimum for clients who agree to automatic monthly deposits of $100. There are no other fees associated with their IRAs.
—ShareBuilder charges no fees on Roths or traditional IRAs, and they waive the $25 custodial fee, too. There are no restrictions on the type of investments customers can select, including exchange-traded funds (ETFs), mutual funds, stocks or fixed-income (bond) ETFs. There is no fee for cash contributions, but the company charges its regular commission of $4 for automatic investments and $6.95 for real-time trades.
—Scottrade similarly has no setup, annual or maintenance fees—they even pay new clients up to $1,000 when they roll over an old 401(k) or IRA.
—Firstrade offers no-fee Roths and traditional IRAs, with no account service fees or minimum balance requirements.
—E-Trade's Roth also comes with no annual fees and no account minimums.
While fee-free IRA programs generally apply to both Roths and traditional IRAs, low-income savers should invest exclusively in Roths, since the tax deduction for traditional IRA contributions yields little benefit for those in the lowest tax brackets, said Ed Slott, an IRA expert with irahelp.com and author of "The Retirement Savings Time Bomb and How to Diffuse It."
Roths, of course, are funded with after-tax dollars, offering no immediate tax deduction, but the money in the account grows tax-free.
Traditional IRAs are the exact opposite. Pretax contributions can help lower your annual tax bill, but the earnings are taxed as ordinary income upon retirement.
"Why take a deduction that's essentially worthless when you could put that same investment into a Roth, where it will grow tax-free," Slott said. "The last thing you want in retirement is to have a tax bill. The Roth is the way to go."
Ted Beck, president and chief executive of the National Endowment for Financial Education, said investors should be aware that they can potentially lose money by opting to invest in equities, or stocks, through a private Roth IRA instead of opening a myRA. They may also get hit with a host of fees, including annual service fees, transaction fees and costs associated with closing the account.
Research in retirement savings shows that IRA fees are a big issue and on average are higher than 401(k) fees. Some of those fees, however, can be mitigated by selecting a no-cost or low-cost private Roth, particularly one that does not require a minimum initial deposit.
The issue of a lack of investment savvy, though, could pose just as great a risk for myRA account holders if they wait until they reach the $15,000 account maximum—in fact, they would just have much larger account balances to hand over to fee-gauging financial firms.
"A lot of people don't know what to do or where to start, so this is a very simple, costless way to get people to save without having to worry about losing their money or whether they're investing in the right thing," Slott said. "It's like training wheels."
Training wheels are meant to come off and—in the case of the myRA—maybe sooner rather than later.
—By Shelly K. Schwartz, Special to CNBC.com