6 Noteworthy IRA Account Options of 2024

As working adults, time is both our ally and our greatest enemy. If you’re not yet actively saving and investing toward your retirement today, you could set yourself up for some very lean times in your golden years.

But if you don’t yet have an individual retirement account (IRA), fear not—it's a void you can quickly fill. Let's review the importance of IRAs, the best account providers available, and how to choose an IRA.

Why do you need an IRA?

Firstly, you should know that choosing the proper IRA is a critical decision with far-reaching implications. Here are a few key points to consider:

Retirement savings

A well-chosen IRA becomes the cornerstone of your retirement savings strategy. Opting for an account that allows you to maximize contributions sets the stage for robust growth. Your contributions gain momentum through compounding, creating a substantial nest egg for your golden years. 

Conversely, an ill-suited choice may hinder savings growth, potentially leading to a less secure retirement.

Tax advantages

The choice between traditional and Roth IRAs carries significant tax implications. 

Traditional IRAs enable tax-deferred contributions, reducing your taxable income in the contribution year. This provides immediate tax benefits and positions you for potential tax advantages during retirement. 

Roth IRAs, on the other hand, offer tax-free withdrawals in retirement, presenting another set of advantages that can impact your current and future tax liabilities. 

Investment options

IRAs offer a range of investment options, sometimes adding another layer of complexity to your decision-making. Some IRAs offer various choices, including stocks, bonds, mutual funds, and exchange-traded funds (ETFs). Others may provide more limited options. 

Aligning your IRA selection with your investment goals and risk tolerance is crucial. A well-matched account ensures your portfolio can grow and diversify effectively, adapting to your evolving financial needs.

Financial goals

Your IRA choice becomes a reflection of your broader financial goals. Whether you focus on capital preservation, income generation, or aggressive wealth accumulation, the selected IRA should serve as a strategic enabler. It becomes an instrumental tool in achieving the financial future you envision, offering tailored features that support your unique objectives.

Comparison of top IRA providers

Whether looking for the best brokerage for an IRA, the best place to open an IRA, or the best Roth IRA for beginners, you have a wealth of options to choose from––some more sophisticated than others: Merrill Edge, Fidelity Go, Wealthfront, etc. 

Here are six top IRA providers to help you get started:

Composer

Composer proves to be a great option for people looking for active trade and investment in sophisticated strategies with the tax advantages of an IRA. The upcoming IRA account type, launching in January 2024, promises a user-friendly interface. Its pioneering feature allows users to actively trade within an IRA, combining tax benefits with dynamic investment strategies. 

Get started with Composer today.

Betterment

Betterment is a robo-advisor platform known for its user-friendly interface and goal-based investment strategies, catering especially to beginner and intermediate investors. It offers a variety of IRA accounts––including traditional, Roth, and SEP IRAs––and employs tax-efficient strategies like tax-loss harvesting.

However, the service comes with fees, potentially higher than DIY alternatives, and investors have limited control over individual investment choices.

Vanguard

Vanguard, a long-established investment company, is renowned for its low-cost index funds and ETFs. Investors benefit from access to a wide range of these low-cost investment vehicles, coupled with Vanguard's long-standing reputation for minimal fees.

On the flip side, the company offers limited customer support versus other full-service brokers. Also, some account minimums apply for specific services.

ETRADE

ETRADE is an online brokerage known for its appeal to a broad range of investors, from active traders to beginners. The company offers stock, options, mutual fund, and ETF trades, making it an attractive option.

However, the company may charge account fees and trading commissions, potentially making it less cost-effective for frequent traders.

AdvisorMatch

AdvisorMatch facilitates connections between investors and financial advisors, offering access to professional financial advice and personalized investment strategies. It tailors solutions to align with individual financial goals.

However, the services of financial advisors come with fees, and costs can vary depending on the advisor's particular fee structure.

Charles Schwab

Charles Schwab is a full-service brokerage firm and boasts a comprehensive range of investment options, including commission-free ETFs. It offers excellent customer service and a wealth of educational resources.

However, Charles Schwab may have account minimums and fees for specific services, such as robo-advisory.

How to open an IRA account: A step-by-step guide

Planning for retirement is an essential aspect of financial health, and opening an IRA is key. Here is a step-by-step guide on how to open an IRA:

1. Determine the type of IRA you want

Decide on the type of IRA that aligns with your financial goals. Whether a traditional IRA or a Roth IRA account, consider factors such as tax benefits, eligibility criteria, and contribution limits.

2. Choose an IRA provider

Select a reputable IRA provider offering the type of IRA you've chosen. This could be a bank, credit union, brokerage firm, or online financial institution. Evaluate factors like fees, investment options, and customer service to make an informed decision.

3. Gather required documents

Prepare your identification documents, including a valid photo ID, Social Security number (SSN), and proof of address. Depending on your circumstances, you may also need income verification documents.

4. Open the account

Visit the chosen IRA provider’s website or contact them directly to initiate the account opening process. Complete the application form, providing personal information such as your name, address, and SSN.

5. Fund your IRA

Determine the amount you wish to contribute to your IRA, keeping in mind the annual contribution limits set by the Internal Revenue Service (IRS) for your chosen IRA type. Select your funding source, whether a direct deposit from your bank account, a rollover from another retirement account, or a transfer from an employer-sponsored plan.

6. Select your investments

Decide how you want to invest your contributions within your IRA. Options may include stocks, bonds, mutual funds, ETFs, or other investment vehicles. Review the offerings of your IRA provider, and make choices aligned with your financial goals and risk tolerance.

7. Set up automatic contributions (optional)

For consistent savings, consider automating contributions to your IRA. Setting up automatic transfers ensures a steady flow of funds into your account, providing an effective strategy for building your retirement savings over time.

Frequently asked questions about IRAs

Can I have both a traditional IRA and a Roth IRA simultaneously? 

Yes, you can maintain both traditional and Roth IRAs simultaneously. However, annual contribution limits apply collectively to both accounts.

Can I roll over my 401(k) into an IRA when changing jobs? 

Yes, you can roll over your 401(k) into an IRA when changing jobs, providing greater control over investment choices and potential tax benefits.

Can I contribute to an IRA if I participate in a retirement plan at work?

Yes, you can contribute to an IRA even if you participate in a workplace retirement plan. However, income limits may affect the deductibility of contributions to a traditional IRA.

Are there penalties for early withdrawals from an IRA?

Yes, there are penalties for early withdrawals from IRAs, typically before the age of 59½. Early distributions may incur a 10% penalty in addition to regular income taxes. Some exceptions, like certain medical expenses or first-time home purchases, apply.

How much does it cost to open an IRA?

Opening an account is generally free, although some brokerages may charge various fees.

What are Roth IRA rates and the best Roth IRA investments?

Roth IRA rates, in a traditional sense, don't exist as they’re not interest-bearing accounts. Instead, the focus is on the performance of the chosen investments within your Roth IRA account.

The best Roth IRA investments vary based on individual financial goals and risk tolerance, but popular choices include low-cost index funds, ETFs, and diversified mutual funds. 

Discover the boundless possibilities of automated trading with Composer

Composer transcends traditional trading platforms, introducing a revolutionary tool that simplifies the intricacies of automated trading. Delve in without grappling with complex coding––that's the prowess of Composer. 

Head to composer.trade, and sign up for a free 14-day trial today.