Capitalize is here to help you navigate different IRA providers and discover which IRA account could be the best fit for you: Best Robo-Advisor IRAs, Best IRAs Providers, Best Traditional IRAs, Best Roth IRAs.
Reviewed by
Stang Gappa
Reviewed by
Stang Gappa
Updated on June 6, 2024
Learn about our Editorial Process
Robinhood doesn’t offer investment in certain types of asset classes that may be attractive to investors, such as fractional shares, and there are no physical branch locations at which to receive customer service; you must log in and request a callback or email support.
The recommended portfolio is a one-time-only event. Recurring investments are at the sole discretion of the customer. Retirement recommendations are not available to Massachusetts residents.
Charles Schwab does not offer direct investments in cryptocurrency. This probably won’t be a limitation investors looking to trade more traditional asset classes, though. Additionally, Charles Schwab offers cryptocurrency-related mutual funds and ETFs.
Additionally, its 0.45% interest rate on uninvested cash is lower than some other similar brokerages; while there are options to increase this rate, investors must opt into them.
Alto enables you to invest easily in private assets through an IRA and is subject to all restrictions associated with IRC 4975 (c)(3), and IRC 408 (e)(2)(A), which generally restricts investments in IRAs between parent-child familial relationships, in addition to investment in S-Corp stocks, and direct investments in collectibles that the IRA owner personally maintains. For now, you cannot invest in publicly traded assets like stocks and bonds.
Furthermore, Alto does not offer account types outside of IRAs – though as an IRA provider, it offers a range of IRA types.
Obviously, for those who are interested in funding their IRA accounts primarily with crypto, Bitcoin IRA is a standout. But for those who are interested in padding out their crypto IRAs with other types of assets, like stocks, bonds, or mutual funds, Bitcoin IRA may not be the first choice. Additionally, Bitcoin IRA doesn’t offer access to other types of alternative assets like venture capital or real estate. The company is focused specifically on the crypto IRA, so those looking for conventional IRAs will need to look elsewhere.
Additionally, cryptocurrency is well known for having substantial risks and unpredictable market behaviors. Given the importance of retirement funds specifically, investors should proceed with some caution and a lot of research.
As mentioned above, Ally’s trading tools could have better third-party research and educational tool integration, like advanced charting tools, to help investors make the most of their investment choices.
Also, Ally robo portfolios do not come with automatic tax loss harvesting.
A self-directed IRA is a type of retirement account that allows you to place your own trades. It’s typically used by more active investors who want more control over their portfolios. Most self-directed IRAs allow you to invest in a full range of stocks, exchange-traded funds (ETFs), and options, though option trading is generally recommended for more experienced investors.
Self-directed IRAs generally have a far wider range of investment options than what’s in employer-sponsored plans like a 401(k). This is one reason why people choose to rollover a legacy 401(k) into a self-directed IRA. It’s generally a good option for more confident investors who are comfortable building their own portfolio. If that’s not you then you’ll be better served by picking an automated rollover IRA where the portfolio is constructed and rebalance for you.
There’s not just one type of individual retirement account on the market. Regardless of which self-directed IRA custodian you choose, you’ll likely have a few different retirement accounts to pick from. Here are some of the most common—and their potential benefits.
Traditional IRAs are funded with pre-tax dollars. That means you, the acount holder, may enjoy a tax deduction in the short-term—and tax-deferred growth on your retirement funds over the long haul. The money you withdraw from a traditional IRA come retirement time is taxed as regular income, however, so a traditional IRA often works best when you plan to be in a lower income tax bracket at retirement time than you’re in today.
Roth IRAs work are basically the inverse of traditional IRAs: They’re funded with after-tax dollars, which means contributions aren’t tax-deductible. However, you do get many other benefits with a Roth IRA, including tax-free withdrawals come retirement time, so long as you follow all the rules. That can be a comforting thought for those who aren’t sure what their tax bracket will look like come retirement time, or who simply want to plan ahead for uncomplicated, tax-free retirement income.
Additionally, unlike traditional IRAs, the Roth IRA isn’t subject to required minimum distributions (RMDs). That means the original account holder is never under an obligation to take funds out of their Roth IRA during their lifetime—a feature that makes them a popular choice for those hoping to pass down wealth to their heirs. However, Roth IRAs do have additional IRS rules that don’t apply to traditional IRAs, including the five-year rule and also income eligibility cutoffs. (In 2024, to contribute the full amount to a Roth IRA, you must earn less than $146,000 as a single filer or $230,000 as a married couple filing jointly.)
SEP IRAs are designed for small business owners and self-employed people—a growing population—and can help them maximize their employees’ (or their own) retirement savings. That’s because SEP IRAs allow the employer to make contributions (rather than the employee), and increase the annual IRA contribution limits substantially as compared to regular IRAs (traditional and Roth). Case in point: In 2024, those contribution to traditional and Roth IRAs are capped at $7,000, or $8,000 for those aged 50 or over. Employers contribution to SEP IRAs can fund the account with as much as $69,000 in 2024, or up to 25% of an employee’s compensation, whichever is lower.
SIMPLE IRAs are very similar to SEP plans; they’re also created for small business owners. However, while a SEP IRA is available to any size business, SIMPLE IRAs are limited to those of up to 100 employees or less. Additionally, with a SIMPLE IRA, employees can make contributions as well as employers, who are required to make the same contribution for all eligible workers.
In the past, most self-directed IRAs charged a commission for each trade that was placed. Many providers have now cut their commissions for online stock trading to zero as a result of a price war in the industry that began in late 2019. You’ll still probably pay commissions for option trades, but that’s less relevant for most investors who are buying traditional assets like stocks and ETFs.
If you choose to invest in an ETF in your self-directed IRA, then that ETF will still have an underlying fee associated with it. That’s known as an expense ratio, and is usually expressed as an annual percentage that’s deducted automatically from your assets. Average expense ratios have also come down across the industry, and can now be as low as 0.05% per year for large ETFs.
While this isn’t explicitly a “fee” you pay, be aware that you might not earn the best interest rate on any cash you keep in your IRA. This is one way IRA providers make money from your assets that allows them to offer other services for free (like commissions). Be sure to compare the interest rate offered by different self-directed IRAs—it changes regularly.
Given how easy it is to find an IRA custodian these days that offers $0 annual fees and no required account balance or minimum initial investment, it can cost literally nothing to set up a self-directed IRA—though of course, you won’t experience any growth until you actually make a contribution and invest it.
While investing always comes with risk, it’s usually the best way to grow your money substantially enough to fund a retirement, especially when you account for inflation. For those who have some market savvy or are willing to learn, a self-directed IRA gives you the most control over your investments—and, in turn, your financial future.
There are, of course, cons to self-directed IRAs, though the specific cons will vary depending on which provider you choose. In general, self-directed IRAs do require account holders to have a bit more working knowledge of the market and to make choices when it comes to investments, whereas with a robo-advisor, for example, you simply set it and forget it (but also forego the level of control and specificity a self-directed IRA provides). Additionally, some self-directed IRAs may not allow investors to choose alternative assets for their retirement accounts, so if you’re interested in these investments, it’s best to seek out an IRA provider that specializes in alternative investments from the start.
Along with other major investments for your future like life insurance and real estate, an IRA can help secure a peaceful retirement and even make your heirs’ lives easier. A self-directed IRA gives you the most control over the fine details of your investments, allowing you to account for where every single dollar is invested.
Rolling over an old 401(k)? Capitalize can help. By keeping all your retirement assets in one place, you’ll have a better sense of what you’re working with, how it’s performing, and what changes you can make to improve it. We’ll be with you every step of the way.
