When leaving a job, many people also leave their most valuable retirement asset behind: their 401(k), which sits where it is until retirement, quietly amassing fees.
But you can — and in most cases should — take it with you, because 401(k) fees are notoriously high. You’ll likely save money and open yourself to wider range of investment options by rolling it over to an IRA.
The process is simple: See our article on 401(k)-to-IRA rollovers for full details. The toughest part, in many ways, is choosing an account provider for your IRA or Roth IRA, if you don’t already have one. That’s where we come in.
Here are NerdWallet’s picks for the best IRA providers for your 401(k) rollover.
Best IRA providers overall
These providers offer a large fund selection, high-quality customer service and minimal account fees.
- Offers more than 100 commission-free ETFs and over 2,000 no-transaction-fee mutual funds with no account minimum. See our TD Ameritrade review.
- Commission: $9.99 per trade
- Account minimum: $0
- Promotion: $100 cash bonus for new accounts over $25,000, up to $600 for accounts over $250,000
- Offers more than 200 commission-free ETFs and over 3,000 no-transaction-fee mutual funds. See our Charles Schwab review.
- Commission: $8.95 per trade
- Account minimum: $1,000; waived with auto-deposits of $100 or more
- Promotion: 500 commission-free trades for new accounts with $50,000 or more.
Both Charles Schwab and TD Ameritrade are ideal for retirement investors because of their large selections of funds that can be traded with no fees or commissions. TD Ameritrade offers over 2,000 no-transaction-fee mutual funds and over 100 commission-free ETFs; Schwab beats that with over 3,000 no-transaction-fee funds and over 200 commission-free ETFs. Schwab also waives its $1,000 minimum for customers who set up auto-deposits of $100 a month or more. Both brokers also have 24/7 customer service, as well as local offices and a wealth of online and in-branch educational resources.
Best IRA providers for the hands-off investor
Robo-advisors Betterment and Wealthfront manage your portfolio for you.
- Ideal for clients with account balances of $100,000 or more due to its low fees. See our Betterment review.
- Management fee: 0.15% to 0.35% depending on account balance
- Account minimum: $0
- Promotion: Up to six months of free management
- Manages the first $10,000 invested for free. See our Wealthfront review.
- Management fee: 0.25%
- Account minimum: $500
- Promotion: NerdWallet readers get $15,000 managed for free
Betterment and Wealthfront are robo-advisors that manage your IRA account for you. These services build a portfolio out of low-cost ETFs and automatically rebalance it as needed, for an annual management fee that is substantially lower than what a financial advisor would charge. Which is best for you? That depends largely on the balance of the 401(k) you’re rolling over. Betterment has a tiered fee structure, charging just 0.15% on balances of $100,000 or more. Wealthfront charges a flat fee of 0.25%, but waives the charge completely on the first $10,000 ($15,000 for NerdWallet readers). Here is NerdWallet’s direct comparison of Wealthfront and Betterment.
Best IRA providers for low costs
These providers offer a large selection of mutual funds and ETFs with low expense ratios.
- Offers over 3,400 no-transaction-fee mutual funds and over 85 commission-free ETFs. See our Fidelity review.
- Commission: $7.95 per trade
- Account minimum: $0 for IRAs
- Promotion: 300 commission-free trades
- Known for its low-cost index funds. See our Vanguard review.
- Commission: $7 for first 25 online trades per year; $20 for subsequent trades
- Account minimum: $0
If transaction fees and expense ratios are your primary concern — and they should at least be high on the list, as investment fees can really eat up your retirement savings — you should look to Fidelity and Vanguard (though Charles Schwab and TD Ameritrade, our top picks, are also strong contenders here, as noted above). Fidelity gives its clients access to more than 3,400 no-transaction-fee mutual funds and 85 commission-free ETFs, including a large selection of highly rated funds with expense ratios under 0.50%. Vanguard offers a smaller selection of funds that can be purchased without transaction fees or commissions (120 no-transaction-fee mutual funds and 60 commission-free ETFs) but is a pioneer when it comes to keeping investment expenses down: The company that brought investors the index fund — known for its low costs — boasts an average fund expense ratio of just 0.18%. For comparison, the typical equity mutual fund expense ratio is 0.70%.
Best IRA providers for active traders
These brokers offer low commissions, plus extensive research and strong trading platforms.
- Competitive commissions on stock trades with no account minimum or inactivity fees. See our OptionsHouse review.
- Commission: $4.95 per trade
- Account minimum: $0
- Promotion: Up to $1,000 in free trade commissions
- Competitive commissions on stock trades and no account minimum. See our TradeKing review.
- Commission: $4.95 per trade
- Account minimum: $0
- Promotion: Up to $1,000 in free trade commissions
For the most part, 401(k) plans limit you to a curated pool of investment options, primarily mutual funds. But an IRA typically allows you to trade individual stocks (and in some accounts, trade options).
That said, most retirement investors would be wise to avoid playing the market within an IRA. If you decide to dedicate a portion of your account to trading, you should pay careful attention to commissions, research and tools when comparing providers. OptionsHouse and TradeKing both offer $4.95 stock and ETF trades, alongside advanced tools, trading platforms and competitive promotional offers: Both brokers are advertising $1,000 worth of free trades with just a $5,000 qualifying deposit, which is a low deposit requirement for that level of free trades.
OptionsHouse edges out TradeKing by not requiring a minimum number of trades; at TradeKing, you’ll pay a $50 annual fee if you don’t execute at least one trade per year or maintain an account balance of $2,500. Investors should be aware that neither broker offers commission-free ETFs or no-transaction-fee mutual funds.
Best IRA providers for a 401(k) rollover
|
Broker
|
Best
for |
Highlights
|
Commiss-
ions/management fees |
Promotion
|
Account minimum
|
Start investing
|
|---|---|---|---|---|---|---|
 |
Overall
|
Commission-free:
over 100 ETFs, 2,000 funds |
$9.99
per trade |
$100 cash bonus for new accounts over $25,000, up to $600 for accounts over $250,000
|
$0
|
|
|
|
Overall
|
Commission-free:
over 200 ETFs, 3,000 funds |
$8.95
per trade |
500 commission-free trades for new accounts with $50,000 or more
|
$1,000
|
|
 |
Hands-off investors
|
Ideal for balances of $100,000+
|
0.15-0.35% of account balance
per year |
Up to 6 months free management
|
$0
|
|
|
|
Hands-off investors
|
Manages first $10,000 for free
|
0.25% of account balance
per year |
$15,000 managed free (NerdWallet readers)
|
$500
|
|
|
|
Low cost
|
Commission-free:
over 3,400 funds, 85 ETFs |
$7.95
per trade |
300 commission-free trades
|
$0 for IRAs
|
|
 |
Low cost
|
Known for low-cost index funds
|
$7
for first 25 trades/year, $20 for later trades |
n/a
|
$0
|
|
|
|
Active traders
|
Competitive commissions, no account minimum
|
$4.95
per trade |
$1,000 in free trade commissions (balance of $5,000+)
|
$0
|
|
 |
Active traders
|
Competitive commissions, no account minimum
|
$4.95
per trade |
$1,000 in free trade commissions (balance of $5,000+)
|
$0
|
Arielle O’Shea is a staff writer at NerdWallet, a personal finance website. Email: aoshea@nerdwallet.com. Twitter: @arioshea.
No comments:
Post a Comment