Best IRA Accounts for May 2024

An individual retirement account, often referred to simply as an IRA, is a type of investment account designed to help U.S. workers save money for retirement. There are some major tax advantages to investing in an IRA, but there are also some drawbacks to be aware of.

With that in mind, here's a quick guide to our favorite places to open an IRA, and some of the most important information you should keep in mind as you start your IRA investment journey.

3 Featured Picks From Our Best IRA Accounts

There are a lot of options to compare, even on this page. It can be overwhelming! If you're looking for a place to start, here are some IRA accounts our experts recommend and why they like them:

• Robinhood: Great IRA brokerage app
• SoFi Active Investing: Exceptional broker for one membership ecosystem
• Fidelity: Well-rounded brokerage for beginning and advanced investors

How to pick an IRA

As you're comparing IRA brokerages, here are a few features to look for:

• Investment options: IRA providers typically let you invest in stocks and index funds, but some don't offer mutual funds, options, or other forms of investments such as cryptocurrencies.
• In-person consultation: Some brokers will provide face-to-face retirement planning through extensive branch networks. If this is important to you, check to see if the broker has a branch nearby.
• Low commission and trading fees: Virtually all brokers have stopped charging commissions for basic stock and ETF investing. But if you're interested in mutual funds or options, it's important to understand how much you might be charged for these.
• Retirement planning resources: If your goal is to save for retirement, make sure the IRA provider is committed to helping you get there. This could mean having a library fully stacked with retirement guides. Or it could mean having wealth-planning tools, like calculators, that can help you stay on track.

How to open an IRA account

Each provider will have slightly different steps for opening your IRA account.

First, you'll be asked for some personal information, such as:

• Address
• Phone number
• Social Security number
• Date of birth
• Employment information

Next, you'll want to decide how to add funds to your IRA. Some options include:

• Linking a bank account
• Rolling over a 401(k) or similar retirement plan
• Transferring funds from another IRA account
• Wiring money
• Mailing a check

At this point, you just choose your investments and your IRA account is open.

Minimum to open an IRA

Some brokers require a minimum initial investment to open an IRA. This is more common if you're opting for a professionally managed IRA or want to put your IRA into a robo-advisor. Most of the brokers on our list don't have IRA account minimums.

Most brokers that offer a self-directed IRA have no minimum deposit requirement, so you can get started with as little as a few dollars. If you're opening an account with a small initial investment, look for a brokerage with zero or low fees. You'll likely also want a broker that lets you purchase fractional shares or ETFs so you can buy into stocks even if you can't afford a full share.

IRA contribution limits 2024

The IRA contribution limit changes annually based on inflation, and also changes based on your age. These can be found at the IRS website.

For 2024, you can contribute:

• $7,000 if you are under 50
• $8,000 if you are 50 or over at the end of the calendar year

It's also important to mention that IRA contributions and the ability to deduct them on your tax return can be limited based on your income and employment situation. If you're looking for more information, it's best to reference the official IRS website for the most up-to-date details.

What investments are allowed in an IRA?

Most investments are allowed in an IRA.

For example, you can invest in any of these in an IRA account:

• Annuities
• Bonds
• CDs
• Certain cryptocurrencies
• ETFs
• Money market accounts (and funds)
• Mutual funds
• Real estate
• REITs
• Stocks
• Treasury bills

That said, there are certain investments that aren't allowed in any IRA, such as collectibles (like stamps or artwork) or real estate that you benefit directly from, like a primary residence or rental property. Plus, some brokers don't offer all of these types of investments.

Can you lose money in an IRA?

Yes, you can lose some or all of your money in an IRA. But if you invest conservatively in blue-chip stocks (those offered by strong, established businesses), ETFs, and mutual funds, the chance of losing all of your money can be greatly diminished.

Here are three ways that IRAs can lose money:

• Securities that lose value: This is the most common way to lose money in an IRA account. For example, you could invest in a stock whose company goes bankrupt, thus making your shares worthless.
• Market conditions: Your IRA account can also fluctuate due to market conditions, performing well when the economy is strong and poor when it goes through downturns and hiccups.
• Early withdrawals: You can also lose money through early withdrawal penalties. This might happen if you withdraw funds before you reach 59 1/2. While some early withdrawals may be allowed (such as for financial hardships), most will incur an additional income tax of 10% of the amount you withdraw.

How to withdraw from an IRA

If you've reached age 59 1/2, you can access money in your IRA penalty free. Most brokers and banks will give you plenty of ways to receive your money, such as electronic funds transfers, wire transfers, and paper checks.

However, if you're younger than 59 1/2, withdrawing money from your IRA can be expensive and cumbersome.

Here's what to keep an eye out for:

• For traditional and SEP IRAs, you'll pay a 10% penalty on the amount you withdraw, plus federal and state taxes at your regular tax rate. This penalty doesn't apply if you have a qualifying exception, like those listed above.
• With Roth IRAs, your cost depends on what you want to withdraw.
  • You're allowed to withdraw your contributions penalty free at any time.
  • As far as your earnings or growth goes, you'll have had the Roth IRA for five years and have reached 59 1/2 before you can withdraw these penalty free. If one or both of those conditions aren't met, you'll pay a 10% penalty on your withdrawal, plus taxes.

What is an IRA?

An individual retirement account (IRA) is an investment account that provides tax benefits, like deferred taxes on investment growth, for retirement savings. These accounts are offered by brokers and banks and come with annual contribution limits.

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