5 Best Online Brokerages for Your IRA

Are you ready to save for retirement, but aren't sure where to start? I've created a short list of the five best brokerages for your Individual Retirement Account (IRA). To develop my recommendations, I began by considering account minimums and investment fees.

I also examined the ease of managing the IRA, identifying firms that have excellent offerings for a wide range of investors, whether you're hands-off or deeply engaged. Specifically, I evaluated the breadth of investment choices, value of commission-free and no-transaction fee selections, simplicity and costs associated with putting the account on auto-pilot, and any investment educational content provided.

Here are my top picks.

1. TD Ameritrade

TD Ameritrade is an online brokerage well-suited to the novice investor. There are no account minimums, so you can get started with a modest amount of cash. Plus, there are no maintenance or inactivity fees, so you don't have to worry about these nibbling away at your retirement account balance.

This brokerage boasts more than 300 commission-free exchange-traded funds (ETFs), and thousands of no-load, no-transaction fee mutual funds (plus funds with loads that are waived for TD Ameritrade investors). If you choose to buy individual stocks and transaction fee funds, there is no commission fee for stock and ETF trades, while no-load mutual funds cost $49.99 per transaction.

There are vast educational resources that include videos on basic investing principles for new investors and tools to screen and evaluate investments.

2. Charles Schwab

Charles Schwab, the first brokerage firm to discount its commissions, continues to be a good deal. The company has developed its own proprietary line of ETFs and mutual funds, and created the OneSource listing of funds that are available free of trading fees. You'll find nearly 200 commission-free ETFs and more than 3,000 no-load, no-transaction fee mutual funds, including a good selection of market index funds.

You'll typically need $1,000 or more to establish an IRA with Schwab. However, this account minimum is waived if you deposit $100 or more on a monthly basis. And, you can find mutual funds with initial investments as low as $100 and ETFs priced between $40 and $100+ available free of transaction charges.

Stock and ETF trades are $8.95 per transaction when you buy individual stocks or non-commission-free ETFs. Transaction fee, no-load mutual funds will cost $76 when you purchase shares; however, selling shares is free.

There are no account management or inactivity fees, making Schwab a good choice for those who may have low balances or little activity associated with their accounts. Furthermore, Schwab has educational content and tools to help you plan and invest for retirement. These include articles, workshops, webcasts, and sessions both for do-it-yourself investors and those who wish to receive guidance on a periodic or ongoing basis.

3. E*Trade

E*Trade is an online brokerage with investment choices that include stocks, mutual funds, ETFs, and bonds. Among its offerings are more than 100 commission-free ETFs and 1,300 no-load, no-transaction fee mutual funds.

If you choose individual stocks and most ETFs, you will pay $9.99 per trade; and $19.99 on no-load mutual fund purchases and redemptions.

At E*Trade, there are no account minimums or annual fees charged on IRAs. If you're eager to learn about investing and retirement planning, you'll find plenty of educational content. And E*Trade's free retirement planning calculator generates an action plan based on your retirement savings to date, current income level and anticipated needs in retirement, and more. You can also gain access to courses and webinars that provide instruction on topics such as researching a stock.

4. Vanguard

Vanguard is best known for its low cost, commission-free, market-index mutual funds; they were the first to develop and market these for individual investors, thanks to visionary founder John Bogle.

Among the options available are Vanguard mutual funds and Vanguard ETFs linked to major stock and bond indexes, along with specialty funds representing various industry segments, investing styles (e.g., small cap growth or large cap value), and global regions. Most funds do not carry a transaction fee and their operating expenses are among the lowest in the industry.

There is no minimum to open a mutual fund account with Vanguard. However, mutual funds carry initial investment minimums, beginning at $1,000 for target date retirement funds. You'll need $3,000 to establish a brokerage account, but you can then purchase Vanguard ETFs commission-free.

If you decide to buy and sell non-Vanguard securities, you'll pay $7 for trades of individual stocks and ETFs, and $35 for transaction fee mutual funds. There are no account maintenance fees if you elect to receive electronic statements. You'll find solid educational content on the site geared toward long-term planning and construction of diversified portfolios.

5. TradeKing

TradeKing is an online brokerage firm that is inexpensive and accessible to the new investor. There is no account minimum and fees are low compared to other brokers. The firm does not offer commission-free ETFs or no-load, no-transaction fee mutual funds. However, you'll pay just $4.95 for stock and ETF trades, and $9.95 for no-load mutual funds, so your transaction costs can be readily contained.

There are no account fees, but you'll need to make at least one trade per year or keep at least $2,500 in your combined TradeKing accounts to avoid an inactivity charge. New investors will find plenty of educational resources to learn about stocks, mutual funds, ETFs, and more.

If you are looking for low minimums, low investment fees, a full range of investment choices, relative ease of managing the account, and education to guide your decisions, an IRA with one of these brokerages should fit your needs for retirement savings.

Which online brokerage do you use for your IRA and why?

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