Should You Open a Roth IRA at a Bank? - NerdWallet (2024)

FAQs

Is it better to open a Roth IRA with a bank? ›

A Roth IRA offers many benefits to retirement savers, and one of the best places to get this tax-advantaged account is at an online brokerage or robo-advisor. Although a Roth IRA requires the account holder to pay taxes on the money going in, it allows any contributions and earnings to be withdrawn tax-free.

Should I Open an IRA at a Bank or Brokerage Firm? Whichever you're comfortable with, but you'll have more investment options—and higher potential earnings—at a brokerage firm. Banks tend to offer minimal, low-yield investment options, such as savings accounts and certificates of deposit (CDs).

Earnings can't be withdrawn tax-free until age 59½ and the account is at least 5 years old. Diversification in retirement, so all of your accounts aren't tax-deferred. The maximum contribution is relatively low compared with a 401(k). You'll probably need other accounts to save enough for retirement.

In our analysis, the best Roth IRAs overall are Fidelity and Charles Schwab Intelligent Portfolios. However, all of our picks stand out for their low costs and large selection of retirement investments.

Select a provider to open your Roth IRA

For people who want to pick their own investments, opening a Roth IRA at an online broker makes a lot of sense. At the best brokers, you'll find a large list of low-cost investments to choose from, including index funds and exchange-traded funds.

High earners who exceed annual income limits set by the Internal Revenue Service (IRS) can't make direct contributions to a Roth individual retirement account (Roth IRA). However, you can take advantage of a loophole to get around the limit and reap the tax benefits that Roth IRAs offer.

The main difference between a Roth IRA and a traditional IRA is how and when you get a tax break. Contributions to traditional IRAs are tax-deductible, but withdrawals in retirement are taxable as income. In comparison, contributions to Roth IRAs are not tax-deductible, but the withdrawals in retirement are tax-free.

Brokerage accounts don't provide a tax shield the way that traditional and Roth IRAs do. Dividends, interest and gains are all taxable in a brokerage account even if you don't withdraw the money. So, it's important to choose more tax-efficient investments.

Investment IRAs are not FDIC-insured, are not bank guaranteed and have the potential to lose value.

Where is the safest place to put an IRA? ›

The safest place to put your retirement funds is in low-risk investments and savings options with guaranteed growth. Low-risk investments and savings options include fixed annuities, savings accounts, CDs, treasury securities, and money market accounts. Of these, fixed annuities usually provide the best interest rates.

You can easily open a Roth IRA online or with a J.P. Morgan Advisor. Once you fill out an application and are approved, you're ready to start making contributions (if eligible) and investing in mutual funds, bonds, stocks and exchange-traded funds (ETFs). Just click here to get started.

You're never too old to fund a Roth IRA. The earlier you start a Roth IRA, the longer you have to save and take advantage of compound interest. Even when you're close to retirement or already in retirement, opening this special retirement savings vehicle can still make sense under some circ*mstances.

Yes. You can put your Roth IRA money in a variety of investments, and some of those investments may lose value, especially in the short term.

The Roth IRA annual contribution limit is $7,000 in 2024 ($8,000 if age 50 or older). If you open a Roth IRA and fund it with $7,000 each year for 10 years, and your investments earn 6% annually, you may end up with more than $92,000 by the end of the decade.

If you're building a Roth IRA to save for retirement, you'll want to design a portfolio using a long-term, buy-and-hold approach. A strong portfolio will be diversified across different asset classes, such as stocks and bonds, and across market sectors.

IRAs typically don't come with account setup fees, but you'll likely have to pay transaction and advisory fees when applicable, as well as fund expense ratio fees which cover operational costs. Before funding an IRA, you need to understand the contribution limits and tax implications.