What if there was a method to avoid paying taxes on a portion of your paycheck? How about a holding investment opportunity that pays no taxes on its growth, no matter how large it gets? A traditional individual retirement account (IRA) offers you all these and more.
If you’re asking, what is a traditional IRA account? It’s a type of account that allows you to put pre-tax money into an account for some time. The money you put into this account grows tax-free until you withdraw it at retirement.
As you read on, you’ll learn more about the best traditional IRA accounts and how they work.
11 Best Traditional IRA Options
How do I choose the best IRA? Choosing the best traditional IRA accounts starts with choosing the best traditional IRA brokerage.
Traditional IRA accounts with the best returns offer a diverse variety of investment options as well as low trading and management fees. Some of the most popular traditional IRA account brokerages are listed below.
Charles Schwab (Best Overall Option)
Charles Schwab offers outstanding stock research, a wide range of trading instruments, and financial planning services. Stock and ETF trading is free, while options trades are only $0.65 per contract at Schwab.With its regular stock trading accounts.
Miscellaneous Fees:
- All transaction fee mutual funds cost $49.95 per trade
- In addition to the broker’s standard commission, there is a $25 fee
- Schwab also costs an extra $5 for placing a trade through its automated phone system
Account Minimum: $0
Best Features:
- Zero monthly service fees
- On its StreetSmart Edge platform, there are many helpful customization options
- There are no minimums or fees on any of their three platforms
Benefits:
- A large number of funds are accessible..
- Trade stocks, options, and ETFs are available free of any commissions.
Disadvantages:
- Lack of direct trading with Cryptocurrency
- The default cash sweep rate is very low.
TD Ameritrade (Best For Mobile Traders)
TD Ameritrade is a financial services firm that provides traders with different skills and excellent customer support available 24 hours a day, 7 days a week. It also supports an excellent electronic trading platform for buying and selling financial assets.
Annual IRA Fee: $0
Miscellaneous Fees:
- No annual or inactivity fee.
- $75 full transfer; $0 partial transfer.
- $0.00 commissions.
- No platform fees, data fees, or trade minimums.
- $0 commissions
Account Minimum: $0
New Account Bonus: $600 bonus and 60 days of commission-free trades.
Best Features: For qualified clients, TD offers full investing services, including futures, FX, and bitcoin, trading.
Benefits:
- High-quality trading platforms.
- No account minimum.
- Good customer support.
- Large investment selection.
Disadvantages:
- You can only trade on US marketplaces.
- For money transfer, no credit/debit cards or electronic wallets are accepted.
E-Trade (Best For Hands-On Investing)
Through its trading platform, E*TRADE provides a wealth of investor information and tools. The software is free and available on all platforms (iOS, Apple Watch, Android, Windows, Amazon Phone, and Kindle Fire), with 24-hour customer service. By every measure, it’s a good brokerage to consider.
Annual IRA Fee: $0
Miscellaneous Fees:
- Mutual funds not on the no-fee list will cost $19.99 per transaction.
- $75 full transfer out fee; $25 partial.
- $9.99 IVR trade fee.
- $60.00 IRA closure fee.
Account Minimum: $0
New Account Bonus: Offers $100 for customers who deposit or transfer a minimum of $5,000 into their E*TRADE accounts.
Best Features:
- Offers online investing courses.
- Available for iOS and Android.
Benefits:
- A large number of investment options are available.
- Customer service is outstanding.
Disadvantages:
- It can be tough to navigate the website.
- Charges higher mutual fund commissions than some competitors.
- There are no FX markets.
SoFi (Best For Automated Investing)
SoFi is a financial technology business that focuses on digital financial services. The company’s three segments are lending, financial services, and technology. SoFi offers several retirement options, including traditional IRA accounts, Roth, and SEP 401(k) rollovers.
Annual IRA Fee: $0
Miscellaneous Fees:
- No account or management fees and very low fees on funds.
Account Minimum: $0
New Account Bonus: $50
Best Features:
- Active stock trading and a passive automated-adviser.
- Client interactions are exceptional.
Benefits:
- There are no account or trading fees.
- Trading cryptocurrencies is possible.
Disadvantages:
- Only residents of the United States are eligible.
- When actively investing, there are no stop-loss orders available.
- There is a limited track record.
Betterment (Best For Robo-Advising)
Betterment has a fantastic Retire Guide tool, and its investment features remain among the finest in the industry. They are an excellent investment tool because they have minimal costs attached and some great automated tools.
Annual IRA Fee: $0
Miscellaneous Fees:
- 0.25% management fees.
- No transaction fees.
- No account closure fees.
Account Minimum: $0
New Account Bonus: The minimum qualifying deposit to receive a cash bonus of $100 is $10,000.
Best Features:
- Betterment is one of the simplest account setup processes, and the process is mobile-friendly.
- If you have both a taxable and a non-taxable account, you’ll be able to coordinate tax plans.
- Security efficiency. Two-factor authentication is available on the website and in mobile apps.
Benefits:
- Account creation is simple and quick.
- Portfolios transparency.
- Linkable external accounts.
Disadvantages:
- A financial planner consultation costs $199–$299 under the basic plan.
- Your portfolio is not eligible for margin lending, secured loans, or borrowing options.
Fidelity (Best For Retirement Saving)
You can manage your funds yourself with a Fidelity traditional IRA account, and there are no account fees or minimums. Fidelity investments mutual funds have an excellent track record.
Fidelity serves the vast majority of individual investors. For the average buy-and-hold investor, Fidelity’s platform provides a wide range of tools, information, and resources, as well as simple order input.
Fidelity provides high-quality research and education to its clientele. It also offers a tool with streaming real-time data and a customized trading interface for more active investors and traders. It is worth noting that Fidelity doesn’t currently provide commodities or futures options.
Annual IRA Fee: $0
Miscellaneous Fees:
- No IRA closure fees.
- More than 3,400 no-transaction-fee mutual funds.
- No base commission.
- $0.65 per contract.
Account Minimum: $0
New Account Bonus: None at this time
Best Features:
- Trading is available through Fidelity’s website and mobile apps.
- Fidelity offers a cash management account that is insured by the Federal Deposit Insurance Corporation (FDIC).
Benefits
- Commission-free stock, ETF, and options trades.
- Large selection of research providers.
- Outstanding execution of trades.
- Excellent asset screeners and research (ETF research is outstanding).
- Newsfeed that is adaptable and configurable.
Disadvantages:
- Fees and margin rates on mutual funds are extremely high.
- Account verification takes longer.
- Live chat takes a long time.
M1 Finance (Best For Beginners)
Click here to sign up with M1 Finance
M1 Finance is a hybrid of an online broker and a financial advisor. Unlike other services, they allow both self-managed and robo-directed investing. M1 Finance also offers fractional shares, margin lending, custodial accounts, and digital banking, among other services.
The investment app offers individual and joint brokerage accounts, automatic accounts, IRAs, trust accounts, and more than 80 professionally built portfolios. The program, which is available for iOS and Android, comes with an embedded debit card that offers bonuses and cashback on eligible transactions.
M1 Finance could be a good fit for investors that want to combine investing, cash management, and borrowing all in one place.
Annual IRA Fee: $0
Miscellaneous Fees:
- Inactivity fee $20.
- Outgoing account transfer fee $100.
- $100 IRA cancellation fee.
- No management fee.
- No fee for deposits and withdrawals.
Account Minimum: $100 ($500 for IRAs)
New Account Bonus: $50 bonus credit
Best Features:
- With one simple platform, you can invest, borrow, and spend.
- There are no commissions, fees for management, or transaction costs.
Benefits:
- $0 Minimum investment requirement.
- $0 Management fee.
- Uses fractional shares.
Disadvantages:
- Not a comprehensive trading and investment firm.
- Limited investment options.
- No tax-loss harvesting.
- No human advisor support.
Vanguard (Best For Long-Term Investing)
Although the Vanguard traditional IRA brokerage account is a good choice for fund investors, it lacks the trading platform that active traders require. Vanguard’s trading platform is good for placing orders, but not much else.
Given Vanguard’s long-standing focus on buy-and-hold investors rather than aggressive traders, the majority of its analysis focuses on its retirement solutions. It is however a good choice for long-term investors with low requirements.
Vanguard’s traditional IRA brokerage account allows you to invest in thousands of funds without paying a commission or a transaction charge.
Annual IRA Fee:
- You won’t be paying an annual fee if you sign up for email delivery of account statements; otherwise, you will be charged a $20 annual account fee.
Miscellaneous Fees:
- No closing fee, inactive fee, or transfer fee.
Account Minimum:
- Fund minimum starts at $1,000.
New Account Bonus: None
Best Features: Individual investors can use the broker’s education and planning tools to help them build wealth.
Benefits:
- Superb customer support.
- Large mutual fund selection.
- Commission-free stock, options, and ETF trades.
- Leader in low-cost funds.
- Helpful customer support.
Disadvantages:
- They are fundamental trading platforms only and lack analytical tools for stock trading.
- Insufficient research and data provided.
Interactive Brokers (Best For Wide Access to Global Markets)
Interactive Brokers provides institutional and expert traders with trade execution and settlement services for a wide range of electronically traded products. IBKR enables clients from all around the world to invest globally at the lowest possible cost.
Miscellaneous Fees:
- IBKR Lite has no commissions or trading fees.
Account Minimum: $100
Best Features:
- A broad array of tradable assets
- Innovative trading platform
- Minimal per-share pricing
Benefits:
- Absurdly low margin rates
- Allows traders to trade in over 135 markets in 33 countries across the world
- Customer service is excellent
Disadvantages:
- It can be difficult to browse through the website
- Accounts that are small or dormant build up a lot in fees
Wealthfront (Best For Low-Cost Portfolio Management)
Wealthfront makes it simple to increase your returns, reduce your taxes, and expand your money. Robo-advisor Wealthfront is a high-yield account that can give you 2.32 percent on your savings each year. They can create a portfolio specifically for you, or you can do it yourself.
Miscellaneous Fees:
- They impose a 0.25 percent annual advisory fee on all total assets, which is deducted monthly.
Account Minimum: $500
Best Features:
- Outstanding Customer Service
- Account with a strong cash management system
- Cost-effective
Benefits:
- Excellent wealth-planning tools
- Sophisticated Portfolio management
Disadvantages:
- High Account Minimum
- Lack of Fractional Shares
Ellevest (Best For Goal Based Investors)
Ellevest is a female-focused robo-advisor investment platform and personal finance service. It was created to bridge the financial divide between men and women, but they accept customers of all gender identities and expressions.
Miscellaneous Fees:
- Ellevest charges a 0.5% rate on all of your assets
Account Minimum: $0
Best Features:
- Excellent for first-time investors
- Three different inexpensive service tiers
- Outstanding customer service
Benefits:
- Effortless registration
- Human advisors are available.
Disadvantages:
- IRAs are only available to those in higher tiers.
- There are less account varieties.
How Does a Traditional IRA Work?
The first step is to set up a traditional IRA account at nearly any bank or investment company that can hold investments like mutual funds, stocks, and so on. How much you invest determines how much your account grows each year.
However, remember there are limits on contributions. You can only donate $6,000 each year, but if you are over 50, you can give up to $7,000.
You can also send funds to your IRA by transferring funds from a different retirement account. When you invest in an IRA account, you will not pay taxes on your assets until you’re ready to withdraw your investments.
Keep in mind that if you make withdrawals before reaching the age of 72, you may be taxed on your income and subject to a 10% penalty. The more money you save in an IRA account, the less tax you’ll owe from your income for the year.
What Makes a Good Traditional IRA Account?
When trying to pick an IRA account, it is important to keep in mind what factors you will want to consider. Retirement planning information, access to human advisers, mobile investing options, and good customer service, are among the top characteristics of a good traditional IRA account.
The best traditional IRA account should have a wide range of investment possibilities, as well as commission-free or low-cost trading and investing. Here are some other features of the best traditional IRA accounts.
Tax Benefits
Contributions to traditional IRAs are tax-deferred until withdrawals commence. Meaning when an account owner retires, his or her tax rate lowers when compared to the time the account was first opened.
Contributing to an IRA has several advantages, including:
- Tax-free growth
- Deductions on tax
- Tax credits
Low Trading and Management Fees
The traditional IRA account allows you to start trading with $500 upwards and should provide you with cost-effective management fees. You can profit from rising and falling markets by leveraging stock prices and developing strategies in the stock options available in your traditional IRA account.
Variety of Investment Options
What can you invest in with a traditional IRA? A traditional IRA account can hold stocks, bonds, mutual funds, annuities, unit investment trusts (UITs), exchange-traded funds (ETFs), and even real estate.
It’s critical to choose safer investments as you get closer to retirement to protect the value of your savings. Treasuries in the United States are likewise considered reliable and are frequently utilized to store value during economic downturns.
How To Choose a Traditional IRA Account
The process is simple; choose a brokerage, open a traditional IRA account, make contributions, and invest your money. You must however, first open an IRA with a bank or lender with whom you are familiar.
Before you open a traditional IRA, here’s what you should know.
Choose a Brokerage With No Fees
You should consider choosing a brokerage firm that does not charge a fee. Go for a brokerage that has a large number of investments sold without commission or sales fees.
On some platforms, opening a traditional IRA account is free. Other providers, however, have account minimums, so if you have a modest amount to invest, look for a provider that will not charge you for opening a traditional IRA account with them.
Ensure the Platform is Easy to Navigate
Make sure the platform you chose is straightforward to use and that the requirements and terms of service aren’t overly complicated. This will allow you to maximize investment flexibility.
Easy Rollover IRA Process
A rollover traditional IRA account is a typical retirement account that can transfer funds from an employer-sponsored pension plan to your own. Because each broker and robot consultant has their own roll-over procedure, you’ll need to contact the institution to learn more about your new account.
Start making a plan to move funds to a self-directed IRA to have full access to your investment dollars.
Look Out for Bonuses for New Accounts
Some of the businesses that have the best traditional IRA accounts provide compelling offers to new customers. Check to see whether the brokerage you’re contemplating on choosing is willing to provide you with a bonus when you open an account with them.
Should You Open a Traditional IRA?
The best traditional IRA accounts are favorable for long-term investments that will be used in retirement. If you are not saving for retirement already, now is the best time to start saving for the future.
The major benefit of a traditional IRA account is tax-deferred growth. This means you won’t pay taxes on your untaxed earnings or contributions until you reach the age of 72 when you must begin drawing distributions.
Contact a financial advisor to help you answer the question, what are the best traditional IRA accounts?