Best Roth IRA Accounts of July 2024
Updated June 30, 2024 at 4:01 am
Finding the right Roth IRA account can make it easier to meet your retirement goals.
Saving for retirement can be a bit of a daunting task, but when you use a retirement savings account to help protect and grow your savings, you can make the job easier. With a Roth IRA, you will contribute your post-tax income and once you retire, you can enjoy all of your earnings without having to worry about paying income tax.
There is no time like the present to start saving for retirement, but before you rush out to open a Roth IRA, you need to learn how this type of retirement savings account works and how to shop for the right one to suit your financial needs. Keep reading to learn about our top picks for the best Roth IRA accounts and to learn how to choose the right one for you.
Our Methodology Our research is designed to provide you with a comprehensive understanding of personal finance services and products that best suit your needs. To help you in the decision-making process, our expert contributors compare common preferences and potential pain points, such as affordability, accessibility, and credibility.
Our Picks for the Best Roth IRAs of 2024 - Best for Free Financial Planning: SoFi
- Best for Free-Match: Robinhood
- Best for Low Fees: Fidelity
- Best for Guidance: Merrill Edge
- Best for Robo-Advisor: Betterment
- Best Investor Education: Charles Schwab
- Best for Self-Directing: J.P. Morgan Self-Directed Investing
7 Best Roth IRAs of 2024
Best for Free Financial Planning: SoFi
SoFi
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Why We Chose It
Why we chose it: SoFi offers a range of low-cost investment options and a robo-advisor that doesn’t charge management fees. You’ll also gain free access to financial planners who can help you develop a financial plan.
Pros
- Low cost
- Active and automated IRAs available
- Free access to financial planners
Cons
- May use its own ETFs in portfolio
- Limited track record
Best for Free-Match: Robinhood
Robinhood
Vault Verified
Why We Chose It
Why we chose it: While many employers match 401(k) contribution, you’re usually on your own when it comes to funding your Roth IRA. But if you open a Roth IRA with Robinhood, you can get an extra 1% on every dollar you deposit from any account.
Pros
- Easy-to-use platform
- Free 1% contribution match with no cap
- No commission fees
Cons
- Must keep earned contributions in account for five years
- $20 minimum to invest in the portfolio Robinhood recommends to you
- Limited investment options
Best for Low Fees: Fidelity
Fidelity
Vault Verified
Why We Chose It
Why we chose it: With Fidelity, you can avoid paying fees for opening your account and commissions, all while gaining access to free planning tools.
Pros
- No account opening fees
- 24/7 customer support
- Investment management services available
Cons
- Fee-free advisory services only available for account balances of $25,000 or less
Best for Guidance Options: Merrill Edge
Merrill
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Why We Chose It
Why we chose it: You have the option to manage your Roth IRA investments with Merrill Edge for free or you can choose to pay a small fee for investment planning support. You also have the option to save on a portfolio that is being monitored and rebalanced by a team of Merrill investment professionals or can work one-on-one with an advisor for a higher fee.
Pros
- Free self-management service
- More personalized support is available
- Solid welcome bonus
Cons
- Website can be hard to navigate
- Limited investment options
Best for Robo-Advisor: Betterment
Betterment
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Why We Chose It
Why we chose it: Hands-off investors will enjoy Betterment’s retirement planning and tax-saving tools. Plus, if you have a balance of $100,000, you can gain access to on-demand support from certified financial planners.
Pros
- Automated rebalancing
- Free retirement planning tools
- Easy-to-use digital interface
Cons
- Monthly maintenance fee
- Premium plan requires balance of $100,000
Best Investor Education: Charles Schwab
Charles Schwab
Vault Verified
Why We Chose It
Why we chose it: Charles Schwab offers a large selection of funds and plenty of educational tools. Investors can even get a complimentary financial plan to help set retirement goals.
Pros
- No account minimum and $0 commissions
- Free access to third-party research from providers, including Morningstar®
Cons
- High fees
- $2,000 deposit required for margin and certain options privileges
Best for Self-Directing: J.P. Morgan Self-Directed Investing
J.P. Morgan
Vault Verified
Why We Chose It
Why we chose it: J.P. Morgan Self-Directed Investing Roth IRA accounts are a good fit for beginning investors who want full control of their retirement savings. The trading platform is easy to use, there is no account minimum and no commissions to pay on trades.
Pros
- Commission-free trades
- Thousands of investment options
- Solid welcome bonus
Cons
- Limited research tools
What is a Roth IRA Account and How Does it Work?
A Roth individual retirement account (IRA) is a type of investment account that helps individuals save for retirement while enjoying select tax benefits. With a Roth IRA, you make contributions to the account using after-tax dollars. This means that you pay your normal amount of income taxes on the money you choose to contribute to the Roth IRA. You won’t experience immediate tax benefits with a Roth IRA, but down the line, your earnings will all be tax-free.
On the other hand, with a traditional IRA, you don’t pay taxes on the income you contribute to the account (which saves you money in the here and now) but will need to pay income taxes on the withdrawals you make at retirement. Some people prefer to go with traditional IRAs because they expect to fall into a lower tax bracket in their retirement years and can end up paying fewer taxes.
Roth IRAs provide a lot of flexibility when it comes to investing your retirement savings and withdrawing those savings in the future. You can usually choose to invest in a handful of different assets like stocks, mutual funds and bonds.
Another benefit of a Roth IRA is you don’t have to take minimum distributions after you reach a certain age. With a traditional IRA, you have to start taking distributions at the age of 72 (as of 2023). If you choose to take distributions before the age of 59 ½, you may end up having to pay penalty fees and taxes. With a Roth, you have the option to withdraw your contributions early without running into those penalties since you already paid taxes on them but will pay a penalty tax if you withdraw earnings.
You can also choose to never withdraw your retirement savings and can leave them to a beneficiary like a spouse, child or grandchild. The good news is that your tax benefits extend to your chosen inheriters, so they won’t have to pay any income tax when they take those distributions. If building generational wealth is your goal, a Roth IRA can help you achieve that.
Roth IRA Contribution and Income Limits
As of 2024, you can only contribute $7,000 annually to a Roth IRA, but savers age 50 and older can contribute an extra $1,000 a year to their Roth IRA to help them get ready for their nearing retirement. The same $1,000 catch-up limit applies to traditional IRAs.
To qualify to contribute to a Roth IRA at all, you must make $146,000 or less if single and $161,000 or less if you are the head of your household. Married couples filing jointly have limits of $230,000 and $240,000 for heads of household. Even if you can’t contribute to your Roth IRA for certain years because your income surpasses the allowed limit, you can still continue to manage your investments and allow them to grow in the account.
Why Would You Need a Roth IRA Account?
Even if you have access to an employer-sponsored 401(k), retirement pension plan or other sort of retirement savings vessel, a Roth IRA can be a great supplement to other retirement plans. Here’s when contributing to a Roth IRA account makes the most sense.
- You plan to grow your retirement savings. Thanks to inflation, the money you set aside for retirement today won’t stretch as far once you’re ready to stop working. One way to beat inflation is to invest your money, which you can do through a Roth IRA. The hope when saving for retirement through any kind of retirement savings account that supports investment is that you will experience enough growth to surpass inflation and better support yourself during retirement.
- You don’t want to worry about taxes later in life. Because you contribute post-tax income to a Roth IRA in exchange for not having to pay taxes on earnings when you take withdrawals, you can enjoy your retirement savings without having to worry about a big tax bill during your golden years.
- You want flexibility. With a Roth IRA, you can withdraw contributions penalty-free at any time you want, thanks to the fact that you used post-tax dollars to fund the account.
- You may not need distributions right away. Unlike traditional IRAs, Roth IRAs don’t force you take make distributions at a certain age. So, if you don’t need your retirement savings, you can leave them in the Roth IRA for even longer and give your money more time to grow.
How Much Do You Need to Open a Roth IRA?
How much money you need on hand to open a Roth IRA depends entirely on the financial institution you choose to open the account with. All financial institutions have unique minimum initial deposit requirements. Some may be as little as $1 and others may expect you to commit a few thousand dollars.
You’ll want to research a handful of financial institutions to see which one’s minimum initial deposit requirements align best with your financial situation. It’s also a good idea to pay attention to the fees each option charges. If possible, it’s best to max out the IRS contribution limit for the year to help you take full advantage of potential tax savings, but you can make smaller contributions throughout the year until you reach that amount.
How to Choose the Best Roth IRA Account For You
Once you’re ready to open a Roth IRA account, these are the factors you will want to keep in mind when shopping around for the best place to open a Roth IRA.
Investment Options
Not all Roth IRAs are created equal when it comes to investment opportunities. You will want to do some digging into what your investment options are with each account you’re considering to see what your selection is regarding stocks, bonds, mutual funds and exchange-traded funds (ETFs). If diversity is your goal (which it is for most retirement savers), it will be important to access a range of investment opportunities so you can build a balanced portfolio.
Account Management
Typically, there are three main routes you can take when it comes to managing your Roth IRA investments—self-direction, custom advisor support and robo-advisor guidance. Which option you choose depends on the level of support you require and how much you want to pay. Often, self-direction is free, robo-advisors cost a minimal fee and working with an actual financial advisor costs the most money.
Fee Structure
Unfortunately, you will need to spend a bit of money to maintain your Roth IRA. When searching for the best Roth IRA, pay close attention to how much you stand to pay for account management, trading, expense ratio, transaction, inactivity and advisor fees.
Account Features and Support
You should also take note of what account features are most important to you when choosing a Roth IRA account. For example, some financial institutions provide more educational resources, investing tools or advisory services than others. You may also want to check out some customer reviews to get an idea of how strong their customer service experience is and how easy it is to use their interface.
Roth IRA Accounts vs. Traditional IRA Accounts
‘Here’s a closer look at the key differences between Roth and traditional IRAs.
Tax Considerations
When choosing between a Roth IRA and a traditional IRA, you’ll likely weigh tax considerations. Roth IRAs require you to make contributions with post-tax income, but you get off tax-free when it comes time to withdraw your earnings. Traditional IRAs flip the script by allowing you to avoid paying taxes on the income you contribute the year you earn it but then make you pay taxes on the withdrawals in retirement.
Distribution Rules
With traditional IRAs, you have to start taking annual distributions starting at the age of 73. Roth IRAs have no age requirement, but your beneficiaries must take distributions after your death.
Income Limits
Your annual income determines which type of IRA you can contribute to. As of 2024, you can only contribute to a Roth IRA if you earn less than $146,000 and $161,000 for singles and heads of household. For married couples filing jointly, that amount rises to $230,000 and $240,000. If you make more than those amounts, you can still contribute to a traditional IRA which has no income limits.
Frequently Asked Questions
What Is the 5-Year Rule for Roth IRA?
The Roth IRA five-year rule states you can’t withdraw your earnings tax-free until it’s been a minimum of five years since you first contributed to the account. Even if you are past retirement age, this five-year rule still applies. Because most people start saving for retirement with a Roth IRA many years before they plan to actually retire, usually the five-year rule doesn’t apply.
What Is the Best Way to Invest in a Roth IRA?
Many investors find taking a diversified approach gives them peace of mind when working toward long-term goals. Not putting your eggs all in one basket makes it easier to balance out losses in one investment with growth from other investments.
Which Company Is Best for Roth IRA?
Which company is the right fit for you when it comes time to open a Roth IRA depends entirely on your needs and preferences. The goal is to choose a financial institution that offers the features you’re looking for, supports the investments you prefer and charges low fees. Fidelity, Merrill Edge and J.P. Morgan are some examples of popular financial institutions where you can open a Roth IRA.
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