Go Long: The Best IRA Investing Platforms for Self-Directed Investors

Go Long: The Best IRA Investing Platforms for Self-Directed Investors

Deciding to invest in your future is easy. Where to do it is hard. Here’s a shortlist of the best places to go long and save for retirement.

Go Long: The Best IRA Investing Platforms for Self-Directed Investors
Noah Weidner

Published Sep 23, 2022Updated Sep 23, 2022

Long Term Growth

Long Term Growth

Retirement

Retirement

Balanced Investing

Balanced Investing

They say time is money. While there’s some truth to that, the reality is that your money needs time—a dollar invested today by a 20-year-old could become worth $5.84 by retirement, but that same dollar would only become $1.48 for a 55-year-old. In short, compound interest is a powerful tool.

The summary is that you can open a Roth IRA or Traditional IRA and navigate financial markets yourself, but that means that the only person who can lose money is you.

That growth potential is why you should start investing in the stock market decades before you get to retirement row. To do so, millions of Americans lean on retirement plans offered by their employers, such as 401(K)s, 403(b)s, or SEPs. And odds are, if you’re reading this, that you’re one of the 60 million Americans already contributing to a retirement plan.

However, over a third of Americans polled by Bankrate last year said that they've never had a qualified retirement account. That means hundreds of thousands of dollars worth of lost tax savings and less time to let your money grow. There’s something you can do about that, though: you can set up an Individual Retirement Account (IRA) to begin investing in your future.

What is an IRA? 

An Individual Retirement Account (IRA) is a qualified retirement account that you can set up for investments. It’s different from employer plans or pensions like your 401(K)s because you can choose how it's managed or who it's managed by.

That added control can be powerful, but before jumping in, it might help you to know about the two most common types of IRA: the Traditional IRA and the Roth IRA. Each year, you can contribute up to $6,000 ($7,000 if you're over 50) across these two accounts—-depending on how you contribute, these accounts could boost your retirement savings.

Difference between Roth IRA and traditional IRA

A traditional IRA is a pre-tax account that reduces your taxable income when you contribute to it. This means contributions are effectively treated as a tax break now, but you’ll pay taxes on withdrawals in retirement. This is the best option for getting a tax break now or for those who plan to lower their tax rate during retirement.

A Roth IRA account is the opposite. You contribute to a Roth account with after-tax dollars, which means you’ll pay taxes on your contributions and enjoy tax-free growth. Withdrawals and income from a Roth IRA are tax-free during retirement. This option is best for people who expect their retirement tax rate to be higher.

How to set up an IRA

Maybe you have a better idea of what flavor of IRA you’d like now, but how do you get started? Thankfully, you just have to open a retirement account. Here are the best investment platforms for making your retirement plan a reality.

Best Overall: Betterment

We’ve written at length about investing in every kind of asset. As a result, we sort of speak robot here—we’ve covered robo advisor fees, the best robo investors for tax-loss harvesting, and reviewed dozens of robo advisors. Their increased prevalence in finance underlies a departure from human money managers who charge high fees and require account minimums.

That’s why Betterment is one of the best robo advisors, and arguably one of the best platforms to start investing with.

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A screenshot of Betterment’s retirement tab, which allows you to create and manage your Traditional or Roth IRA. 

Source: betterment.com

Betterment offers a low-maintenance, low-fee, high-value experience for both beginner and expert investors. The platform is versatile and customizable enough for people that want to set their risk tolerance and edit their investment strategy. That said, it’s also easy to use. If you don’t want to worry about those things, Betterment can use the information you hand it to spit out a diversified portfolio.

The company offers the most common types of individual retirement accounts: traditional IRA, Roth IRA, and SEP IRA—popular with the self-employed. However, the platform’s expansive features make it a solid financial tool for anybody looking to take control of their finances. You can connect other accounts to get your full financial picture, start an emergency fund, and set up a brokerage account for almost any goal.

The account fees? Just 0.25% management fee on balances, or about $27 per year per $10,000. In the grand scheme of things, that’s pretty good.

betterment
Betterment

4.6

Robo Advisor

Best for Index Funds: Vanguard

When you think about Vanguard, you probably know it for its mutual and index fund strategies. If you have no idea what we’re talking about, just ignore it. But, let’s just say that Vanguard has been around the block more than once.

 

Until recently, the wealth management giant was still primarily committed to the old-fashioned way of managing money (spoiler alert: with people). The company charged a management fee for access to financial advisors, which it now calls its Personal Advisor Service.

However, since the human-centric wealth management option requires $50,000 to get started, the company rolled out a robot of its own: the Vanguard Digital Advisor. It’s more or less a pretty-looking software that does all the same things as human advisors. You simply tell it a little about yourself, pick out the best investments (from a gazillion Vanguard index fund strategies), and send your Traditional or Roth IRA investments there to get your bag.

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Vanguard’s new Digital Advisor dashboard.

Source: vanguard.com

You can choose between man or machine and Traditional IRA or Roth IRA. For the self-employed, there’s also the SEP or SIMPLE IRA. Naturally, those already using Vanguard because it hosts their 401(K) might find that opening a Roth IRA and sticking to the familiarity of stock index funds and bond funds at Vanguard might be a significant draw.

And, of course, since Vanguard issues the exchange-traded funds it puts in your portfolio, that’s also a huge plus since the expense ratio is included in the company’s ~0.30% management fee.

vanguard-digital-advisor
Vanguard Digital Advisor

Robo Advisor

Best for Small Dollar Amounts: Stash

Stash is an unconventional, albeit unique, destination for your Traditional or Roth IRA accounts. Many Americans probably recognize Stash because of Auto-Stash, which rounds up purchases made on a linked debit card and deposits the remaining balance in a personal investment account.

Though Stash is very mobile-centric, it still checks a bunch of boxes and helps investors hit their investment objectives. You can make a Traditional or Roth IRA portfolio alongside a traditional brokerage account and Stash’s very own robo advisor. One of Stash's benefits is that it can automate your Traditional or Roth IRA contribution. You can start investing for retirement on stash with just five bucks.

Most people who use Stash will pay some sort of annual fee. A less premium option worth $3/mo and a more premium option worth $9/mo unlocks features including cashback and advice.

Best for Active Investors: M1 Finance

If you want to choose investments, there are a few better options than M1 Finance. M1 more closely resembles brokerage services like Robinhood and WeBull, rather than robo advisors or wealth management companies.

stash
Stash

4.3

Stock Trading

m1
M1

4.3

Robo Advisor

It's distinguished by its emphasis on the pie, which allows you to allocate “slices” in both individual stocks and exchange-traded funds. You can simply key in what percentage of your portfolio you want, and M1 will ensure your asset allocation sticks. That level of customization means more investment options and unparalleled control over your IRA investments. So yes, you can buy 100% tech stocks if you really want to YOLO.

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An example of a customized portfolio 'pie' with 'slices' indicating curated allocations.

Source: timeinthemarket.com

M1 is basically a brokerage account, which means that you'll have to manage your own investments and ‘be your own fund manager,’ it has no annual fee.

The summary is that you can open a Roth IRA or Traditional IRA and navigate financial markets yourself, which means that the only person who can lose money is you. That could be a redeemable trait for hands-on investors, especially those with an eye for the best investments, but that means the risks you take are on you.

That said, M1 has a membership for avid users and a laundry list of account fees you might want to be aware of before getting started. One to keep an eye out for is the “account inactivity fee” or “IRA termination fee,” so consider those before embracing M1's freeing investment options and the allure of seemingly infinite choices.