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When researching the best way to save for your nonworking years, you likely have come across individual retirement accounts, also known as IRAs.
There are a few different types of IRA accounts and one of the most popular is a Roth IRA. It works much the same as a traditional IRA — you can regularly contribute to the account and watch your investments grow year over year so you have a nest egg to tap in retirement.
But the Roth IRA also offers a few different components that makes it different from a traditional IRA, including limits on who can contribute, the ability to withdraw your earnings in retirement tax-free and other benefits worth considering (see our FAQ for more details).
To determine which Roth IRAs are the best overall, Select reviewed and compared over 20 different accounts offered by national banks, investment firms, online brokers and robo-advisors. For the purposes of this ranking, we focused only on Roth IRAs, though the best providers often overlap with those that offer the top traditional IRAs. (Read Select's list of the best traditional IRAs.)
Our top Roth IRA selections require no (or low) minimum deposit, offer commission-free trading of stocks and ETFs, provide a variety of investment options and have educational resources or tools that accountholders can access.
Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No account minimum for active investing through Schwab One® Brokerage Account. Automated investing through Schwab Intelligent Portfolios® requires a $5,000 minimum deposit
Fees may vary depending on the investment vehicle selected. Schwab One® Brokerage Account has no account fees, $0 commission fees for stock and ETF trades, $0 transaction fees for over 4,000 mutual funds and a $0.65 fee per options contract
Robo-advisor: Schwab Intelligent Portfolios® and Schwab Intelligent Portfolios Premium™ IRA: Charles Schwab Traditional, Roth, Rollover, Inherited and Custodial IRAs; plus, a Personal Choice Retirement Account® (PCRA) Brokerage and trading: Schwab One® Brokerage Account, Brokerage Account + Specialized Platforms and Support for Trading, Schwab Global Account™ and Schwab Organization Account
Stocks, bonds, mutual funds, CDs and ETFs
Extensive retirement planning tools
Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No minimum to open a Fidelity Go account, but minimum $10 balance for robo-advisor to start investing. Minimum $25,000 balance for Fidelity Personalized Planning & Advice
Fees may vary depending on the investment vehicle selected. Zero commission fees for stock, ETF, options trades and some mutual funds; zero transaction fees for over 3,400 mutual funds; $0.65 per options contract. Fidelity Go is free for balances under $10,000 (after, $3 per month for balances between $10,000 and $49,999; 0.35% for balances over $50,000). Fidelity Personalized Planning & Advice has a 0.50% advisory fee
Limited-time $100 offer when open and fund an eligible account with promo code FIDELITY100
Robo-advisor: Fidelity Go® and Fidelity® Personalized Planning & Advice IRA: Fidelity Investments Traditional, Roth and Rollover IRAs Brokerage and trading: Fidelity Investments Trading Other: Fidelity Investments 529 College Savings; Fidelity HSA®
Stocks, bonds, ETFs, mutual funds, CDs, options and fractional shares
Extensive tools and industry-leading, in-depth research from 20-plus independent providers
Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. No account minimum for Self-Directed Trading. $100 minimum for Robo Portfolios
Fees may vary depending on the investment vehicle selected. Self-Directed Trading has zero commission fees for stock, ETF, options trades; $0.50 per options contract. Robo Portfolios have zero management fees
You may be eligible for up to $3,000 bonus cash when you open an Ally Invest Self-Directed account
Stocks, bonds, ETFs, options, mutual funds, margin account and forex trading
Offers informational articles to help users improve their understanding of investment strategies and market trends
Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. $500 minimum deposit for investment accounts
Fees may vary depending on the investment vehicle selected. Zero account, transfer, trading or commission fees (fund ratios may apply). Wealthfront annual management advisory fee is 0.25% of your account balance
Stocks, bonds, ETFs and cash. Additional asset classes to your portfolio include real estate, natural resources and dividend stocks
Offers free financial advice for college planning, retirement and homebuying
Minimum deposit and balance
Minimum deposit and balance requirements may vary depending on the investment vehicle selected. For Betterment Digital Investing, $0 minimum balance; Premium Investing requires a $100,000 minimum balance
Fees may vary depending on the investment vehicle selected. For Betterment Digital Investing, 0.25% of your fund balance as an annual account fee; Premium Investing has a 0.40% annual fee
Up to one year of free management service with a qualifying deposit within 45 days of signup. Valid only for new individual investment accounts with Betterment LLC
Stocks, bonds, ETFs and cash
Betterment RetireGuide™ helps users plan for retirement
A Roth IRA is very similar to a traditional IRA: You can make consistent contributions to your Roth, which will be invested in the market allowing the money to grow over time so you have a healthy savings when you reach retirement age.
But Roth IRAs have a few components that make them stand out from your traditional IRA. Here's what makes them unique:
- When you withdraw your contributions from a Roth IRA in retirement, those withdrawals are generally tax free (as long as your account has been open for at least five years) and they don't count as income. Withdrawals in retirement from a traditional IRA and 401(k) will be taxed as income.
- Contributions into a Roth IRA use after-tax dollars, unlike contributions to a traditional IRA or 401(k), which are not taxed. This may be a bigger hit to your finances in the short term, but your money will grow tax free.
- If you withdraw earnings you've made on investments in a Roth IRA before age 59 and a half, you'll incur a 10% early withdrawal penalty and may be subject to income tax.
- There are exceptions to the early withdrawal penalty on Roth IRAs, including taking out funds for first-time home purchases, college expenses and birth or adoption expenses.
- Your tax filing status and income level determine whether or not you can contribute to a Roth IRA: if married filing jointly, the annual income threshold is below $208,000; if single, the income threshold is below $140,000; if married filing separately and you lived with your spouse, the income threshold is below $10,000.
We dig into these differences a little bit more in the FAQs below.
Only people below a certain income level can open and contribute to a Roth IRA. This is different from traditional IRAs, where anyone can contribute regardless of how much money they earn.
Given the income limits that come with Roth IRAs, high-earners may not be eligible to open or contribute to a Roth IRA. (There is a loophole to this, however, for high-earners to make contributions indirectly through a backdoor Roth IRA.) Here are the specific income thresholds for 2021:
- Married filing jointly or qualifying widow(er): Not eligible if your modified adjusted gross income is $208,000 or more
- Single, head of household or married filing separately (and you didn't live with your spouse at any time during the year): Not eligible if your modified adjusted gross income is $140,000 or more
- Married filing separately (if you lived with your spouse at any time during the year): Not eligible if your modified adjusted gross income is $10,000 or more
When deciding how much money to deposit into your Roth IRA, you are limited to a certain amount each year.
Roth IRAs have the same contribution limits as traditional IRAs, which is the below for 2021:
- Those under age 50: Total contribution limit to both Roth and traditional IRAs of up to $6,000
- Those 50 or older: Total contribution limit to both Roth and traditional IRAs of up to $7,000
With a Roth IRA, you pay taxes on your contributions upfront so you don't have to pay them later when you withdraw money from your retirement fund (as long as your account has been open for at least five years).
This is the biggest difference from a traditional IRA, which lets you delay paying taxes until you withdraw funds later down the road. With traditional IRAs, your contributions are also tax-deductible, up to certain limits, so your contribution reduces the amount you owe in taxes each year.
A good rule of thumb when choosing between the two types of IRA accounts is to consider your tax bracket:
- Choose a Roth IRA if you expect that you'll be making more money in your later years — and thus in a higher tax bracket. It makes more sense to pay taxes today to take advantage of your current low tax rate before it goes up. Plus, since your withdrawals from Roth IRAs don't count as income and aren't taxed after 59 and a half, you can count on every dollar in your account when making withdrawals.
- Choose a traditional IRA if you expect that you'll be making less money in your later years — and thus in a lower tax bracket. In this case, it makes more sense to reduce your taxable income in the present, so in theory you'll pay less in taxes both now and in the future when your tax rate is lower.
Use an online calculator like this one from Charles Schwab to help you decide between a Roth IRA or a traditional IRA.
With a Roth IRA, you have much more flexibility when it comes to withdrawing money from your account before you reach retirement.
Withdrawing from your traditional IRA before age 59 and a half comes at a cost. You'll be taxed, in addition to incurring a 10% early withdrawal penalty fee.
But you can withdraw after-tax contributions from your Roth IRA at any age tax- and penalty-free. With earnings, it's a little different.
If you withdraw any earnings you've made on your investments in a Roth IRA before age 59 and a half, you will incur a 10% early withdrawal penalty (and may be subject to income taxes like a traditional IRA). There are some unique exceptions to this early withdrawal penalty on Roth IRAs that include first-time home purchases, college expenses and birth or adoption expenses.
To determine which Roth IRAs are the best for investors, Select analyzed and compared Roth IRAs offered by national banks, investment firms, online brokers and robo-advisors. We narrowed down our ranking by only considering those that offer commission-free trading of stocks and ETFs, as well as a variety of investment options so you can best maximize your retirement savings.
We also compared each Roth IRA on the following features:
- $0 minimum deposit: Most of the Roth IRAs on our ranking don't have minimum deposit requirements.
- Low fees: We considered each Roth IRA's fees, commission trading fees and transaction fees.
- Bonus offered: Some Roth IRAs offer promotions for new account users.
- Variety of investment options: The more diversified your portfolio, the better. We made sure our top picks offer investments in stocks, bonds, mutual finds, CDs and ETFs. Most also offer options trading.
- A hub of educational resources: We opted for Roth IRAs with an online resource hub or advice center to help you educate yourself about retirement accounts and investing.
- Ease-of-use: Whether accessing your Roth IRA via your laptop at home or on your smartphone while on the go, it's important to have an easy user experience. We noted when an investment platform excelled in usability.
- Customer support: Every Roth IRA on our list provides customer service available via telephone, email or secure online messaging.
After reviewing the above features, we sorted our recommendations by their appeal to beginner investors who are likely just starting out in their careers since Roth IRAs are the most effective retirement savings vehicles if you're in a lower tax bracket.
Your earnings on contributions to a Roth IRA depend on any associated fees, the contributions you make to your account and the fluctuations of the market.