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Where is the best place to open a Roth IRA? Rather than staying up till 2:00 A.M. trying to research all your options read this article for a run down of the pros and cons of the five best platforms.
When you’re trying to decide where to open your Roth IRA you really can’t go wrong with Vanguard. Vanguard is the OG of retirement investing. Practically half of all Americans have their retirement portfolios at Vanguard, for good reason. Vanguard is known for its super low-cost target-date funds. Target-date funds are a special type of mutual funds that puts your retirement investing on autopilot. They gradually adjust your asset allocation as you get closer to retirement age. So, once you do the initial set-up and you buy into the fund, you don’t have to do anything with it, literally, until you retire. Target-date funds are a perfect option for lazy investors. Outside of a Target-date fund you would have to create your own portfolio of stocks, bonds, cash, and adjust the asset allocations yourself over time. Since, as you get older you would want to gradually move your money out of stocks which are more volatile into more stable income producing investments like bonds. Obviously, this takes some skill, so, buying into a Target-date fund completely eliminates the need for you todo that, because the fund will do it for you. If you like the idea of putting your retirement on autopilot, then you would probably like Target-date funds. In which case, Vanguard, would be a great place to open your Roth- IRA. That being said Vanguard is also good for buying individual stocks, other kinds of ETFS, and Mutual Funds, and pretty much anything you may want to invest in.
Another good place to open a Roth IRA is Fidelity! Like Vanguard, it is a full service brokerage, that offers anything anyone could ever need as an investor. Whether you are a beginner, or you are more experienced. If you are a beginner at investing you’ll probably start with something simple like index funds. If you ever want to branch out as you grow and learn as an investor then the last thing you want to do is have to move your IRA elsewhere, because your current brokerage doesn’t offer those things. That’s just a big headache. When you’re deciding on where to open your Roth IRA. You want to think about how you’re going to grow as an investor, and choose a platform that will grow with you. Something else that I like about Fidelity is that it is low commissions and low fees. Although Vanguard and Fidelity are very similar in terms of products you can invest in, and they are both great for index funds and target-date funds. Fidelity actually offers lower commissions for a lot of things. For example, Vanguard charges $7 per stock trade whereas Fidelity charges $4.95. That’s a pretty big difference, and fees and commissions are really something you should consider before you open your Roth IRA anywhere. Last, but not least, if you open a Roth IRA at Fidelity you’ll also get really good customer service. You don’t have to go through endless automated telephone menus and whatnot just to talk to a real person. It’s never taken me more than 30 seconds to get to a customer service representative at Fidelity. They’ll hold your hand and walk you through step by step with any question you have about your account. Whether it is how to place your first trade or how to rollover your 401k or how to do anything. In summary, Fidelity and Vanguard are very comparable. However, Fidelity does offer the lower fees and lower commissions.
The third place I recommend opening a Roth IRA is Acorns. I know a lot of people who have a hard time saving money, but through the Acorns round-up feature they’ve been able to save hundreds of dollars without even trying. The app helps you come up with money to invest by connecting your debit card and rounding up your purchases. So, that you can invest with your spare change. If you open your Roth IRA with Acorns you’ll probably be able to keep adding a good chunk to your retirement savings just from the spare change round-up feature. Acorns is great for beginners whereas Fidelity and Vanguard are brokerages. Acorns is a robo-advisor, that means that Acorns will tell you what to invest in and do it all for you. For example, when you open your Roth IRA at Acorns, one of the first questions they’ll ask you is, “Which of their 5 portfolios you want to invest in?”. You don’t have to know which stocks to buy and you don’t have to know what’s going on in the stock market right now. All you have to do is pick which portfolio that you want, ranging from most conservative to most aggressive. Once you’ve picked your portfolio you can check out what’s gonna be in it. Each portfolio is professionally designed and backed by lots of data to optimize your returns while reducing your risk. Other than choosing one of these five cookie-cutter portfolios, there’s no other work required on your part to set up your Roth IRA at Acorns. It doesn’t get anymore streamlined than that. Acorns makes it really easy for you to get the funds in your Roth IRA invested in the market as soon as possible, with zero knowledge. With Fidelity or Vanguard there’s gonna be a little more of a learning curve. If my 90 year old grandmother wanted to get a cellphone I’d start her off with a flip phone, not an iPhone. An iPhone has too many features and she would get confused. Acorns is like the flip phone of investing. Limited options, but super simple to use for beginners.
Stash is another investing app, and it’s a little bit different from Acorns, but it’s a great place for beginners to open your Roth IRA. Like Acorns Stash has around-up feature that allows you to invest with your spare change. What differentiates Stash from Acorns, is its themed portfolios. They have investment options like “Clean and Green”, a collection of companies that are advancing things like clean energy and solar and wind power. They have things like “Do the Right Thing” fund, a collection of companies that Stash has gathered into and ETF. Companies that make a positive impact on society and environment. Basically, all their investments are organized by themes. It’s not hidden under some obscure financial jargon terminology that you’re going to have to look up. It is just stuff like “Robots Sitting” that’s pretty much investing companies that are doing robotics. This make sit really easy for you to build a portfolio around your passions and your values without having to navigate through a bunch of obscure financial jargon and technical information. You can also buy fractional shares of individual stock and ETFs which you cannot do with Acorns.
Next is Betterment, another investing app similar to Stash and Acorns in that it is a robo-advisor. I would say that Betterment is not as simple and easy to use as Acorns or Stash, but it offers better advice and a wider range of account options. In addition to Roth IRAs, Betterment also offers a lot of other account types such as Traditional IRAs, SEP IRAs, Joint Accounts, Trust Accounts, 401k Rollovers as well as fully taxable non retirement investment accounts. Betterment also offers an awesome savings account called the Smart Saver Account, this pays over 2%, that’s obviously better than the rate you’d get at pretty much any bank right now. So, with betterment you can keep your savings and your investments in one place which is always nice, because that’s one less username and password that you have to keep track of. The reality is that you’re probably gonna need more than a Roth IRA, you’re gonna need an emergency fund in an investment account to save up for a down payment on a house in a few years or just to save up for your dream vacation. Everyone needs multiple accounts for various purposes. So, rather than having all these different accounts at all these different places, you can have all of those in one place at Betterment, because of the wide range of account options it offers. You can even give your accounts a custom name to really remind you what you’re investing toward and keep you motivated. If you like the idea of goals-based investing and having all you financial stuff in one place, then definitely consider opening your Roth IRA at Betterment.
In summary, if you are a total beginner and you just need a really simple dumbed down approach, then go with a Roth IRA at Acorns. Now, if you want something as easy to use as Acorns but you’re looking for something a little more robust and you’re working toward several financial goals at once and you like the idea of having all your accounts in one place, I recommend going with betterment. If you like the idea of investing in themed portfolios and being able to buy fractional shares of individual stocks, and investing according to your passions and values, then go with a Roth IRA at Stash. Finally, if you want to open a Roth IRA on a platform that can do it all, whether it’s international stocks, bonds, options and has amazing customer service, then I recommend going with Fidelity or Vanguard. Although, they are a little bit harder to navigate for the beginner if you can get over the learning curve and you feel confident enough to research your own investments, then you’ll definitely appreciate a more advanced option like Fidelity or Vanguard.
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