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Where to Open a Roth IRA (THE 5 BEST PLACES FOR BEGINNERS)

November 14, 2019
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Where is the BEST place to open a Roth IRA? After years of trying out lots and lots of different brokerages, I’ve narrowed it down to the 5 best places to open a Roth IRA.

So rather than staying up til 2AM trying to research all your options, watch this video for a rundown of the pros and cons of the 5 best platforms. They’re not in any particular order, and each platforms is very different.

You want to make sure you open your Roth IRA where it makes the most sense for YOUR specific preferences as an investor, so stay tuned for the whole video.

When you’re trying to decide where to open a Roth IRA, you can’t go wrong with VANGUARD

Although it’s not my personal favorite, I have to mention it because Vanguard is the OG of retirement investing. Practically half of all Americans have their retirement portfolios at Vanguard.

Vanguard is known for its super low-cost target date funds (TDFs). Target date funds are a special type of mutual fund 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 setup, you don’t have to do anything with it literally until you retire. It’s a perfect option for “lazy investors”, and it’s what Ramit Sethi recommends in his book “I Will Teach You To Be Rich”.

Outside of a target date fund, you’d have to create your own portfolio of stocks, bonds, and cash and adjust the asset allocations yourself over time, since as you get older you’d want to gradually move your money out of stocks (which are more volatile investments) into more stable income-producing investments like bonds.

The fees that Vanguard charges for its TDFs are a fraction of the industry average. So if you like the idea of putting your retirement plan on AUTOPILOT, then you’d probably like target date funds, in which case Vanguard would be a good place to open your Roth IRA.

That being said, Vanguard is good for buying stocks, other kinds of ETFs and mutual funds, and pretty much anything you might want to invest in. So like I said, regardless of what you want to invest in, a Vanguard Roth IRA will allow you to do all of it with minimal fees.

Another good place to open a Roth IRA is Fidelity.

I’ve used Fidelity for a really long time, and it’s my personal favorite. Like Vanguard, it’s a full-service brokerage that offers everything anyone could ever need as an investor, whether you’re a beginner or you’re more experienced.

When I first opened a Roth IRA, I was keeping it really simple and just investing in low-cost index funds. But over the years as I became more knowledgeable, I started doing more advanced strategies, like buying individual stocks, trading options, and even international stocks. And no matter what it is that I wanted to do, Fidelity offered it. So if you’re a beginner at investing, you’ll probably start with something simple like index funds, but if you ever want to branch out and do more advanced things in your IRA, 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. So when you’re deciding 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 I like about Fidelity is its low commissions. Although Vanguard and Fidelity are very similar in terms of the range of products you can invest in, but Fidelity actually offers lower commissions. For example, Vanguard charges $7 per stock trade, whereas Fidelity charges $4.95 (UPDATE: Fidelity now charges zero! Stock trading is free at Fidelity as of Oct 2019). That’s a pretty big difference, and fees & commissions are something you should always 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 like 30 seconds to get to a customer service representative at Fidelity, and they’ll hold your hand and walk you through step-by-step ANY question you have about your investments.

The third-place I recommend opening a Roth IRA is Acorns

Acorns is a really cute investing app that specifically targets millennials. The app helps you come up with the money to invest by connecting your debit card and rounding up your purchases so that you can invest with your spare change.

Whereas Fidelity and Vanguard are brokerages, Acorns is a roboadvisor. That means that Acorns will tell you what to invest in and do it all for you. If you open a Roth IRA at places like Fidelity or Vanguard, you’re the one who has to choose your investments, manage them, and decide when to sell. If you open a Roth at Acorns, you don’t have to make any decisions because Acorns does it all for you.

I’m a huge fan of Acorns for 2 reasons:

  • I know a lot of people who have hard time-saving money, but through the Acorns round-up feature, they’ve been able to save hundreds of dollars without even trying. So if you open your Roth IRA at Acorns, you’ll probably be able to keep adding a good chunk to it every year just from adding all the spare change from your purchases.
  • The second reason I like Acorns is that it’s great for beginners. Since the app makes all the investing decisions for you, it doesn’t matter if you’ve never invested before and you have no idea how the stock market works. You can get started with as little as $5, and start learning about it by watching what Acorns is investing in.

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 choose which stocks to buy, 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 you want – ranging from most conservative to most aggressive. Each portfolio is professionally-designed and backed by lots of data to optimize your returns while reducing your risk. Then once you’ve picked your portfolio, you can check out what’s going to be in it.

So other than choosing 1 of these 5 cookie-cutter portfolios, there’s really no other work required on your part. It doesn’t get any more streamlined than that. Acorns make it really easy for you to get the funds in your Roth IRA invested in the market as soon as possible. With Fidelity or Vanguard, there’s going to be a bit more of a learning curve.

If my 90-year old grandmother wanted to get a cell phone, I’d start her off with a flip phone, not an iPhone. An iPhone has too many features and she would just get confused. So Acorns is like the flip phone of investing – very limited options, but super simple to use. So I think if you’re just starting out, you’re going to like Acorns a lot. It will help you learn about investing and start getting more comfortable with having your money in the market, whereas a fancier platform like Fidelity or Vanguard might be harder to navigate.

Something else I like about Acorns is that you can get started with as little as $5. Thanks to a feature they offer called fractional share investing, you can invest with small amounts of money in portfolios that would otherwise require thousands of dollars. So if you don’t have a lot in your Roth IRA yet, but you just want to get started with what you have then that’s definitely another reason to check out Acorns.

Stash is also a really great place for beginners to open a Roth IRA

Like Acorns, Stash also has a round-up feature that lets you invest with your spare change. What differentiates Stash though is its themed portfolios. They make it really easy for you to build a portfolio around your passions and your values, without having to navigate through a bunch of financial jargon and technical information. So for example, if you want to invest in environmentally responsible companies, you can invest in the Clean & Green ETF (ticker: ICLN). If you want to support companies led by women, you can invest in the Women Who Lead ETF (ticker: SHE). Or if you just want to own companies that pay a lot of dividends, you can invest in the Delicious Dividends ETF (ticker: SCHD). So Stash makes it really fun and easy to choose your investments for your Roth IRA.

Another cool thing about Stash is that you can also buy fractional shares of individual stocks and ETFs, which you can’t do with Acorns. Between the two, Stash offers a lot more features and possibilities for customization than Acorns does.

So if you eventually want to pick individual stocks AND you like the idea of choosing investments that reflect your personal values, then you’ll probably like having your Roth IRA at Stash.

Betterment is another investing app, similar to Stash and Acorns.

I would say 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, which pays over 2%. This is obviously better than the rate you’ll 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 to keep track of. The reality is, you’re probably going to need more than a Roth IRA. An emergency fund, an investment account for a down payment on a house in a few years, or just to save up for your dream vacation. You can do all of that at Betterment, and even give your accounts a custom name to really remind you what you’re investing towards and keep you motivated.

Something else I like Betterment that none of the other apps have is really good projections and advice. With every new dollar that you put in they’re always updating their calculations to tell you whether you’re on track for your goals. For example, if I say that I want $100k in my Roth IRA in 30 years, the app will tell me if I’m on track or not, and if I’m off-track, how much I need to contribute weekly to get back on track.

So if you like the idea of goals-based investing and having all your financial stuff in one place, then definitely consider opening your Roth IRA at Betterment.

In Summary

If you’re a total beginner and you need a really simple, dumbed-down approach, then go with a Roth IRA at Acorns. You literally only have 5 investment portfolios to choose from, it’s a super cute easy-to-use app, and it’s a great way for absolute beginners to get started. The roundup feature for investing your spare change is also really helpful for increasing your retirement savings.

If you want something as easy-to-use as Acorns, but you’re working towards several financial goals at once and you want to have all your accounts in one place, then I recommend going with Betterment because it offers a wider range of account types.

If you like the idea of investing in themed portfolios and being able to buy fractional shares of individual stocks, then go with a Roth IRA at Stash.

And finally, if you want to open a Roth IRA on a platform that can do it ALL – whether it’s international stocks, bonds, options, etc. and has amazing customer service, then I recommend going with Fidelity or Vanguard. Although they’re a little bit harder to navigate than the other platforms, 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.

So hopefully by now, you have a pretty good idea where to open your Roth IRA. I’ve covered a lot here, but the most important thing is to get started. Just pick a platform, open your Roth IRA, do your research, and start investing. The choice of where you open your Roth IRA isn’t going to make or break your financial future!

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YouTuber, Money Expert, Educator, Traveler, Rebel, and #1 Book Nerd. My mission is to empower you with the mindset and financial know-how to create a life of TOTAL freedom.

Rose.

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Rose

YouTuber, Money Expert, Educator, Traveler, Rebel, and #1 Book Nerd. My mission is to empower you with the mindset and financial know-how to get more of what you want out of life.

The weekly email that spills all the secrets on what it really takes to create a life of total financial freedom

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