A Roth IRA is an individual retirement account (IRA) that allows you to withdraw money without paying taxes or penalties after age 59½ and after owning the account for five years. It is a type of tax-advantaged account that can be funded with after-tax dollars, meaning contributions are not tax-deductible, but any profits earned on investments can be withdrawn tax-free. To open a Roth IRA, you must find an institution that has received IRS approval to offer IRAs, such as banks, brokerage companies, federally insured credit unions, and savings and loan associations. When choosing a provider for your Roth IRA, it is important to consider the fees and investment options available.
Wealthfront and Betterment are two of the leading independent robo-advisors that offer a wide variety of investments in 11 asset classes with reasonable management fees. Interactive Brokers is ideal for advanced traders who need global trading and fast execution. For do-it-yourself investors, online brokers offer a variety of mutual funds with low expense ratios. SoFi's automated investing is great for beginner investors who want a zero-touch approach.
Finally, Ramsey offers trusted investment professionals who can guide you through all your retirement options. To determine which Roth IRA is best for you, start by considering your age and income. Compare the rules and tax benefits of each provider to find the one that best suits your needs. Remember that the contribution limit is for all of your IRAs combined, so if you have a Roth and a traditional account, that limit is a total for both accounts.
Additionally, if you withdraw any profit from your Roth IRA before age 59½, you will incur a 10% early withdrawal penalty (and may be subject to income tax like a traditional IRA).