Personal Finance

Which Is Better for Opening an IRA?

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Fidelity vs. E*TRADE IRAs: The biggest differences

Officially known as individual retirement accounts, IRAs are tax-advantaged accounts that are generally available to individuals with taxable income. Fidelity and E*TRADE have similar options for IRAs. These include both self-directed and automated investing, as well as traditional IRAs, Roth IRAs, IRAs for minors, and other accounts. 

But Fidelity is the best choice when it comes to fees. Not only does it provide countless zero expense ratio index funds, it also offers lower fees for its automated and advisor-managed accounts. 

E*TRADE, on the other hand, is a better option if you’re in search of more account flexibility and features for your IRA. The brokerage’s automated account, Core Portfolios, is compatible with more IRA account types than Fidelity’s automated accounts are. Plus, E*TRADE’s Complete IRA offers unique services like easy IRA withdrawals, online bill pay and debit card access for investors who’ve reached the legal IRA withdrawal age (591/2).

Here’s a top-level look at how Fidelity and E*TRADE compare:

Fidelity and E*TRADE’s account types and features also vary. 

IRA eligibility requirements

Fidelity and E*TRADE are mostly neck and neck when it comes to IRA account types. It’s wise to note each account’s eligibility requirements before you set one up:

  • Traditional IRA: You can set up this tax-advantaged account as long as you’re at least 18 years old with taxable income. If you’re under age 50, you can invest up to $6,000 per year without paying taxes on your contributions. However, those aged 50 or older can contribute an additional $1,000 as a “catch-up” contribution. You’ll have to pay taxes on withdrawals once you reach age 591/2
  • Roth IRA: These accounts have the same eligibility requirements as traditional IRAs; the difference is that traditional IRAs utilize pre-tax contributions, and you invest in Roth IRAs with post-tax contributions. Plus, once you reach age 591/2, you can make tax-free withdrawals. 
  • IRA for Minors (available through E*TRADE): Parents and guardians must manage these accounts, and E*TRADE limits them to children under 18 with earned income. The child can contribute $6,000 or 100% of their compensation, whichever is less.
  • Roth IRA for Kids (available through Fidelity): This account is strictly for individuals under the age of 18 with employment compensation. The $6,000 maximum contribution limit still applies, but Fidelity doesn’t let you contribute more than you earn in a year. 
  • Inherited IRA: Both Fidelity and E*TRADE’s inherited IRAs are ideal for those who’ve inherited assets from deceased individuals. Though you can’t make additional contributions to the account, you can allow its funds to grow until its time to withdraw the earnings. 
  • E*TRADE Complete IRA: If you’re over the age of 591/2 and want easier access to your retirement savings, this account could be a good fit for you. You can not only make free withdrawals at any time, but you also get access to a free debit card, online bill pay, and checks.
  • SEP IRA: These IRAs are ideal choices for self-employed individuals or small businesses. Plus, you don’t have to pay taxes until you make withdrawals. Small businesses can contribute up to 25% of compensation. However, self-employed individuals can contribute up to 20% (the 2021 maximum contribution limit is $58,000).
  • SIMPLE IRA: You’re eligible for this account if you’re a small business with more than 100 employees or a self-employed individual. Employees can contribute as long as they’ve earned $5,000 in the previous two years and respect to receive, at minimum, the same amount in the current year. Those under 50 can contribute up to $13,500 in 2021, and those 50 or older can contribute $16,500.

Are Fidelity’s IRAs right for you?

Fidelity’s IRA account selection includes traditional IRAs, Roth IRAs, rollover IRAs, Roth IRAs for Kids, SEP IRAs, and SIMPLE IRAs.

Fees for Fidelity’s IRAs vary depending on whether you choose a self-directed account or an automated account. If you’re fine with managing your own IRA, you won’t have to worry about any minimums or account fees. Plus, each IRA allows for commission-free stock and ETF trading, and you can additionally utilize commission-free options trading if you have an SEP IRA or Roth IRA for Kids account.

If you’re not interested in handling the account’s investments on your own, you’ll have a couple of options: Fidelity Go and Fidelity Personalized Planning & Advice. Both accounts provide automated portfolio management for traditional and Roth IRAs, but Fidelity Personalized Planning & Advice also includes human advisor guidance.

There aren’t any minimum account size requirements with Fidelity Go, but you’ll pay $0 to $3 a month or 0.35% per year depending on your account balance (those with balances under $10,000 pay $0). Fidelity Personalized Planning & Advice, on the other hand, has a $25,000 minimum requirement and a 0.50% advisory fee.

On the investments side, Fidelity provides several inexpensive options for those looking to jumpstart their retirement savings without paying excess stock or fund trading costs. These include zero

expense ratio

index funds, 7,000+ commission-free stocks and ETFs, and thousands of no-transaction-fee funds.

You can also take advantage of 24/7 customer support, Fidelity Learning Center educational guides, and market insights

Are E*TRADE’s IRAs right for you?

E*TRADE also has a vast collection of IRAs for individuals, small businesses, and those who are self-employed. Among these are traditional IRAs, Roth IRAs, rollover IRAs, Beneficiary IRAs, E*TRADE Complete IRAs, IRAs for Minors, SEP IRAs, and SIMPLE IRAs.

Like Fidelity, each account is also free of minimums and account fees. And if you’re looking to build your account’s savings with passive funds, there definitely isn’t a shortage of mutual funds and ETFs at E*TRADE. The brokerage currently offers more than 7,000 mutual funds (4,400 of which are no-transaction-fee mutual funds), and it provides a Fund Screener and All-Star Funds list to help you find the most suitable investments for your IRA. 

If you prefer the automated investing route, E*TRADE gives you more options with its managed accounts. While Fidelity’s automated and advisor-managed accounts only allow for traditional and Roth IRAs, E*TRADE’s Core Portfolios account also accepts SEP IRAs. However, Fidelity Go is the cheaper choice.

Finally, E*TRADE also offers several resources for account holders. These include retirement planning resources, market insights, and phone and live chat/email customer support.

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