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The Best Roth IRA Accounts

The 5 Best Roth IRA Accounts for 2020

Having the best Roth IRA account sets you up for future financial success. Not only will you be better prepared for retirement, but it can also be the gateway to the keystone habit of investing and saving money.

As with anything personal finance related, you need to do your research. This will help ensure you pick the right accounts for you and your personal finance goals.

That’s why we’re going to break down a few great Roth IRA accounts for you to open up in 2020. Then we’ll dig into what exactly a Roth IRA is and how you should choose one. Lets begin.

The 5 Best Roth IRA Accounts

Vanguard – Best Funds

Vanguard is the same brokerage our CEO and founder Ramit Sethi uses — and for good reason. Vanguard comes with a stellar catalog of low-cost funds to choose from, as well as great customer support. They’re also the largest mutual fund brokerage in the world. Vanguard’s history of providing great personal finance options is so good that they even have an entire community of personal finance junkies who live and breathe the teachings of Vanguard’s founder.

  • No minimums to open account
  • Low-cost mutual funds
  • Lifecycle funds typically require $1,000 minimum investment to open
  • Most other funds require a minimum $3,000 investment

Charles Schwab – Best Overall

We’re big fans of Charles Schwab here at I Will Teach. Not only do they have a great team of fiduciaries on hand to answer any investment questions you might have, but they also offer a few great lifecycle funds for investors looking for a more hands off approach. It should be noted that they do charge for things like commissions. But overall, it’s a great choice for any investor. .

  • No minimums to open account
  • No maintenance fees
  • No commissions for Schwab ETFs
  • Low-cost funds
  • Automatic investing

Betterment – Best for Hands-Off Investing

Betterment is a fantastic option if you’re looking for a painless, hands-off investing experience. They’re a robo-advisor that provides customers with features like automatic rebalancing for when your stocks and bonds start to stray from your wanted asset allocation. They’ll also let you determine your own risk tolerance to help you build a great portfolio that’ll work for you. Overall, a great choice if you’re looking for a robo-advisor.

  • No minimums to open account
  • 0.25% management fees
  • Automatic rebalancing
  • Automatic investing
  • Goal-setting tools

Fidelity – Best for Newbies

Fidelity offers an intuitive experience for anyone just getting started in investing, while providing plenty of lucrative funds and hands-on tools for those more experienced in investing too. The platform also comes with no fees for trading funds yourself, and they also host a big catalog of great ETFs. If you’re looking for a broker to help you trade, though, you might find yourself saddled with a fee to do so. Overall, it’s a great place to start if you’re new to investing.

  • No minimums to open account
  • No fees per trade
  • Great catalog of ETF options
  • 24/7 customer service

Ally Invest – Best Rates

Ally is an exclusively online bank. Though that might seem off putting for some, it’s actually a boon for anyone looking for great rates. After all, since they don’t have to worry about the overhead of physical locations and employees, they can pass the savings onto you. Ally also comes with a great host of trading tools such as their robo-advising tool so you can get a more hands off experience if you want. And with a customer support team on call 24 hours a day, they’ll answer any questions you have.

  • No minimums to open account
  • No maintenance fees
  • No physical locations
  • Low commissions
  • 24/7 customer service
  • Great digital platform

Understanding a Roth IRA

A Roth IRA invests your already-taxed income into funds such as stocks, bonds, and index funds.

When you reach retirement age (59.5 years old), you can withdraw your money tax-free and without taking a penalty.

There is a caveat to this: You can withdraw from your principal (the money you originally invested) at anytime without penalty. We highly suggest you refrain from doing that unless there’s a real emergency though.

Each year, you’re allowed to invest up to $6,000. That might not seem like a lot to you but remember that your investment compounds. That means it’s growing exponentially with each passing year. Any little bit you invest helps it grow even more.

There’s also a maximum income limit. If you earn more than $124,000 / year (as of 2020) you can’t contribute to a Roth IRA. However, if you earn more than $122,000 but less than $134,000 you can still contribute partially (Source). There’s also the backdoor IRA which allows you to contribute the full limit regardless of income. It involves a conversion from a traditional IRA account.

How to Choose The Best Roth IRA

First, watch this great video from Ramit all on how to choose the best Roth IRA.

When it comes to opening a Roth IRA, the most important thing to do is to contribute as much as you can and as early as you can. Every cent you invest will compound and worth more over time.

Other than that, there are three areas you should look towards when finding a Roth IRA:

Low open fees

When comparing between different brokers, look at how much it costs to actually open the account. Some require minimum deposits or even a flat fee you’ll have to pay in order to open it.

In fact, our CEO Ramit had an experience where a Morgan Stanley representative recommended he have a minimum balance of $50,000 to open an account!

Don’t do that. Instead, look towards discount brokerages such as Vanguard that don’t require any fees or minimum deposits to open—which is great if you’re looking to save money (which you should).

Automatic investing

This is an important tool. Automatic investing allows you to painlessly invest your money without you having to worry about it each month. This will build a financial system allowing you to save money for your future passively.

This is our bread and butter at IWT. An IRA that automatically transfers takes money out of your checking account each month and invests it in the funds you want it to go.

For more on this topic, be sure to check out our video on the topic. There’s no better time to set up your personal finance system than today.

Good features

Take a look at all the features an account offers.

Make sure you like the digital interface if you’re going to be interacting with it a lot. Do they have licensed fiduciaries on hand to give you advice if you need it? How is their customer service? Do they have great funds or maybe a robo-advisor?

Some of these features might be important to you. Some might not. It all depends on your personal finance situation. One person’s feature might be another person’s annoyance. It depends on you.

How to open a Roth IRA

No matter what you choose, you need to know how to actually open it.

Below are some steps that will help you do just that. Though this is going to differ from broker to broker, the steps will roughly remain the same.

Just make sure you have your social security number, employer address, and bank info (account number and routing number) available when you sign up, as they’ll come in handy during the application process.

  • Step 1: Go to the bank’s website.
  • Step 2: Find the Open an Account button and click on it. It’s normally at the top of the home page.
  • Step 3: Find the option to start a Roth IRA and click on it. Be careful, don’t open a regular brokerage account unless that’s what you want. A regular brokerage account gets taxed as normal.
  • Step 4: Enter your personal information (ex: name, address, birth date, employer info, social security)
  • Step 5: Set up an initial deposit by entering in your bank information. Some brokers require you to make a minimum deposit so use a separate bank account in order to deposit money into the account.
  • Step 6: Wait. The initial transfer will take anywhere from 3 to 7 days to complete. After that, you’ll get a notification via email or phone call telling you you’re ready to invest.
  • Step 7: Log into your brokerage account and start investing in funds.

There you have it. The steps you need to open a Roth IRA and start investing for your future.

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