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By Leslie Cook
December 22, 2020
Money

The best Roth Individual Retirement Accounts (IRAs) of 2021 let workers save after-tax dollars for retirement without paying exorbitant fees. These accounts also make it easy for consumers to start investing, thanks to low minimum balance requirements and platforms that make opening an account a breeze.

If you’re thinking of opening a Roth IRA, look for a provider that offers helpful tools, low ongoing costs, and a broad selection of investment options that can help you meet your goals. However, it can be difficult to nail down a provider when so many companies offer Roth IRA accounts each year, and when they all seem to promise the world.

To make your search easier, we compared the top Roth IRAs available today based on factors like investment options, fees, and minimum investment or balance requirements. Keep reading to learn more about how we found these providers and which companies made the cut.

Important Things to Know About the Best Roth IRAs of 2021

  • Management fees and expense ratios are often the biggest determinants of your investment returns, since they chip away at your earnings year after year.
  • The best Roth IRA providers typically have a robust online presence, and they should make it easy to open your account online. Many financial companies also have their own mobile apps to help you track your investments no matter where you are.
  • Make sure you’re informed of the income requirements to contribute to a Roth IRA, which we cover in detail below.
  • In 2021, you can contribute up to $6,000 to a Roth IRA, or up to $7,000 per year if you are 50 or older.
  • Both Roth IRAs and Traditional IRAs will provide tax advantages; however, when you get to enjoy those advantages will be different. Be sure to compare both options before deciding which is best for you.

The 5 Best Roth IRA Options of 2021

The Roth IRA providers we’ve highlighted below stand out from their peers thanks to their low ongoing costs and a broad selection of investment options, as well as the ease with which you can open an account.

  • Fidelity Investments: Best Overall
  • Charles Schwab: Best Investment Options
  • Merrill Edge: Best Bonus Offer
  • E*TRADE: Best for Low Trading Fees
  • Vanguard: Best for Mutual Funds
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Best Roth IRA Reviews

The Roth IRA accounts profiled below make it easy to start investing for retirement. We should note that it’s generally not recommended to trade actively in retirement accounts. The following reviews include the most important highlights about each of the top companies, including an overview of their investment options and fee structure. Keep reading to find out which of these top accounts might work best for you.

Best Overall: Fidelity Investments

Fidelity Investments offers a smart Roth IRA option with no annual account fees and no required minimum to open an account. The company also offers tools like an IRA Contribution Calculator and ongoing consumer education articles to help prepare you for retirement, as well as an intuitive online interface that makes it easy to research and track your investments over time.

When it comes to how you can invest your money, Fidelity Investments offers a wide selection of mutual funds, stocks, bonds, exchange-traded funds (ETFs), and certificates of deposit (CDs). Note that, in addition to not charging annual account fees, Fidelity also offers $0 commissions for online U.S. stock, ETF, and option trades.

These are the main reasons Fidelity earned the top spot on our list as the best overall Roth IRA account. With no minimum account balances to open an account, no annual account fees, and a plethora of low-cost investment options to choose from, Fidelity’s Roth IRA account is hard to beat.

Summary of benefits:

  • No annual account fees to pay
  • No minimum balance requirements to open an account
  • $0 commissions for online U.S. stock, ETF, and options trades
  • A wide selection of mutual funds, stocks, bonds, ETFs, CDs and more

Best Investment Options: Charles Schwab

Charles Schwab is another online brokerage firm that makes it easy to open a Roth IRA online. There are no minimum account deposit requirements to get started, and you won’t pay any annual account maintenance fees. You also get access to retirement planning tools and resources, 24/7 phone support, and in-person help at more than 300 Charles Schwab locations nationwide.

One of Charles Schwab’s greatest strengths is in the investment options you can choose from, including mutual funds, stocks, CDs, bonds, and ETFs. Fees are also low for many investment options from Schwab, and you can trade ETFs and stocks online within your Schwab account for free. Note that you will be charged $5 per automated phone trades and $25 for broker-assisted trades.

In 2020, Charles Schwab made investing a lot more accessible to small investors with the introduction of Schwab Stock Slices. With this service, you can now invest in some of the largest companies in the U.S. without spending a fortune. You can buy a fraction, or slice, of any stock in the S&P 500 for as little as $5. Purchase a single slice or as many slices as you want up to a maximum of $50,000 per transaction. You’re not limited to investing in one company either – you can buy slices in a single company or up to 30 different companies each time you buy slices. Also, there are no commissions when you buy slices online.

Summary of benefits:

  • No minimum balance requirement to open an account
  • No annual account management fees
  • Access to stocks, CDs, bonds, ETFs and more
  • Free ETF trades online within your Schwab account
  • Stock “slices” cost as little as $5.00

Best Bonus Offer: Merrill Edge

Merrill Edge is another Roth IRA provider that received high marks in our study thanks to its low fees and investment options. Once you open an account, you can choose from a wide range of stocks, options, bonds, ETFs and well-known mutual funds.

There are no minimum deposit requirements for a self-directed Roth IRA, and you’ll get $0 account fees for online stock and ETF trades. Note that options trades carry a per-contract fee of $0.65. Additionally, some Merrill Edge self-directed Roth IRA accounts may qualify for anywhere from $100 up to $600 in bonus cash, although the number of rewards you receive will be based on your account balance, starting at a minimum of $20,000.

Summary of benefits:

  • No minimum balance requirements for self-directed Roth IRA accounts
  • A wide range of stocks, options, bonds, ETFs and well-known mutual funds,
  • $0 online equity and ETF trades
  • Up to $600 in bonus cash for opening a Roth IRA account

Best for Low Trading Fees: E*TRADE

E*TRADE made our list of best Roth IRA accounts thanks to its low trading fees, which can be especially attractive to active investors. With a Roth IRA from E*TRADE, you’ll pay $0 commissions for online stock, ETF, and options trades. Fees for mutual funds can vary, but E*TRADE does have access to over 4,500 mutual funds with no loads and no transaction fees. Options start at $0.50 per contract, and futures are $1.50 per contract.

There are no minimum account balance requirements for this account either, and E*TRADE’s online trading platform makes it easy to access live market data and analysis.

Summary of benefits:

  • No minimum balance requirements
  • $0 commissions for online stock, ETF, and options trades
  • Access to over 4,500 no-load mutual funds with no transaction fees
  • Access to live market data and analysis using E*TRADE’s online platform

Low Expense Ratios: Vanguard Review

Vanguard offers more than 200 commission-free mutual funds and ETFs to choose from, and with a history of zero to low fees, Vanguard could be the right option for you.

The expense ratios on Vanguard funds are 0.10%, among the lowest in the industry, meaning you’re not going to have high fees eating into your profits. The company’s mutual funds also have no sales loads, no sales commissions, and no account service fees if you choose to receive your account documents electronically. You can also choose how to pick your investments – you can select targeted funds with a diversity of investments, pick and choose different funds to create a custom portfolio, or get expert help from one of Vanguard’s agents. You can even import funds from other brokers to make all your accounts easily manageable in one place.

Summary of Benefits:

  • Low expense ratios and fees
  • Large selections of mutual funds, ETFs and other investment options
  • No sales loads or commissions
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How We Found the Best Roth IRA Accounts

There are numerous financial companies that offer Roth IRA accounts, but they’re not all the best. The providers that made our list came out ahead of the pack based on these important factors:

Low Minimum Deposit Requirements

We chose only Roth IRA accounts with reasonable minimum account opening requirements (or no minimum account balance requirement) for this list. This factor is crucial, since many consumers may not have $1,000 or more to get started and need to invest small sums of money at first. Accounts with reasonable minimum deposit requirements lower the barrier to entry and make it considerably easier for new investors to get into the game.

Low Fees

We also looked for Roth IRA providers that offered no account management fees, had a good variety of no-load mutual funds and had low expense ratios. These fees can directly chip away at your investment returns without providing you with any real benefit, so you’re better off not paying them for a self-directed account.

Access to Low-Cost Investment Options

All of the Roth IRA accounts that made our list let you choose from a broad range of investment options, many of which can be traded without any fees. We gave preference to providers that offered their own selection of no-fee investment options, whether that includes ETFs or mutual funds.

Account Management Options

Finally, we definitely gave preference to Roth IRA accounts that offer helpful online account management options. This includes not only investing tools and resources, but also access to a mobile app that lets you manage and oversee your accounts on the go. A few of the Roth IRA providers on our list also offer local branches where consumers can get in-person help, and we consider that a major plus.

A Better Understanding of Roth IRA Accounts

Unlike tax-deferred retirement accounts like a traditional 401(k) or IRA, Roth IRA accounts require you to contribute after-tax dollars. While this means you’ll take a tax hit on amounts you invest now, Roth IRA accounts have a trick up their sleeve. With a Roth IRA, your money will grow tax-free until you’re ready to take distributions after age 59 ½. Once you do begin taking distributions from your account, you won’t pay income taxes on your withdrawn funds.

For that reason, many consumers who qualify for a Roth IRA account contribute regularly in order to hedge their bets on what their future tax situation may look like. A Roth IRA account that lets you pay taxes now could be a really good deal later if you believe you’ll be in a higher tax bracket in retirement. However, it should be noted that you may owe taxes and penalties if you want to withdraw earnings before age 59 ½ and before you’ve held the Roth for five years.

You can withdraw your contributions to a Roth at any time and any age, tax and penalty-free; however, you may have to pay taxes and penalties if you want to withdraw any earnings your contributions have made in the stock market — that will depend on how old you are, how old the Roth is, and how you’re using the money.

Another benefit of Roth IRA accounts is that, unlike many traditional retirement accounts that force you to begin taking distributions at age 72, Roth IRAs don’t have required minimum distributions (RMDs) unless you’re not the original account owner. This means you can leave your money in your account to grow tax-free longer, and perhaps lean more heavily on other retirement accounts you have first.

Roth IRA Contribution and Income Limits

You have to meet specific income requirements to contribute to a Roth IRA, and you’ll also face a maximum contribution limit that varies based on your age.

Roth IRA Contribution Limits

Roth IRA contribution limits are the same for 2021 as they were for 2020, with consumers who earn a taxable income allowed to contribute up to $6,000 across their IRA accounts. For workers ages 50 and older, an additional $1,000 can be contributed for a total of $7,000 per year.

Roth IRA Income Limits

Keep in mind that not everyone can contribute to a Roth IRA — at least not the full amount. In 2021, married couples filing jointly with a modified adjustable gross income (MAGI) below $198,000 can contribute the full amount to a Roth IRA. For couples with incomes between $198,000 and $207,999, the contribution maximum is lowered, while no contributions are allowed at incomes of $208,000 or above.

Single filers or married couples filing separately with a MAGI below $125,000 can contribute the maximum to a Roth IRA in 2021. For incomes between $125,000 and $139,999, contribution limits are lowered, while no contributions are allowed at incomes of $140,000 and above.

Summary: Best Roth IRA Accounts of 2021

Roth IRA Account “Best Of” Category
Fidelity Investments Best Overall
Charles Schwab Best Investment Options
Merrill Edge Best Bonus Offer
E*TRADE Best for Low Trading Fees
Vanguard Best for Mutual Funds

 

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