The BEST 5 Places To Open a ROTH IRA for Beginners!

[Music] what's up guys welcome back if you're new to the channel my name is humphrey yang and i make videos here on youtube on personal finance and investing and in today's video we are actually going to go over where the best places to open a roth ira are and the reason for this video is because a few weeks ago i made a video called roth ira versus traditional ira which one is better and in that video i got a lot of comments asking me hey humphrey can you make a video on where the best place to actually open a roth ira is and so that's this video so in today's video we're going to go over where the best places to open a roth ira are and also what criteria we should be using when we're looking to open up a new roth ira account for those of you that need a refresher the roth ira is an individual retirement account where you contribute to it with after-tax dollars but your earnings and your withdrawals are all tax-free it's one of the most powerful tools in the personal finance toolkit especially for young people so that's why i always like to have my roth ira according to bankrate.com the roth ira's fantastic features also make it an ideal investment especially during tax season so a lot of what goes into choosing a roth ira account actually depends on what you want to invest in and how you want to invest in those things so before we even go into where the best place to open a roth ira is we actually need to ask ourselves one single question and that is what type of investor am i if you're the type of investor that really likes to be hands-on and active with their investing and choosing what investments that they're investing in then you're going to want to choose an online brokerage for your roth ira account on the other hand if you're someone who has a more passive or laissez-faire or basically hands-off approach to investing then what you're going to want to do is open a roth ira at something like a robo advisory a robo-advisor for those of you that don't know is basically an online platform that's driven by algorithms as your financial advisor these firms hire investment pros to basically develop a handful of diversified portfolio depending on whatever your risk tolerance is so if you're more aggressive there's going to be a portfolio just for you from that robo advisory as well as if you're more conservative then they're going to have a more safer option for your investments and what these robo advisors do is actually maintain and rebalance your portfolios for you and for a small service fee they do this whereas a human financial advisor would cost you way more in general though robo advisors are becoming way more prevalent these days and actually the performance is going to be pretty similar to just choosing your own investments but in both cases of robo advisors versus online brokerages you're going to want to pay attention to a few select criteria when choosing where to open your roth ira the first thing you want to pay attention to is that the account has no minimums to actually open the account if it actually does have a minimum then that's going to be way less flexible which is disadvantageous to you the second criteria is no commissions up until a few years ago they actually would charge you commissions for making a trade within any online brokerage but nowadays that's not really the case which is a really good thing for us it is important to note though if you do go with a roboadvisor roth ira account that they still might charge you a small management fee for having that account with that robo advisory the third criteria that i'd like to look for is the ease of use of the actual app or interface and also their access to customer support you want to make sure that the ease of use is pretty good and that the customer support is there when you need it the fourth thing i like to look for is the access of investments that the platform actually offers you now this isn't as important as it used to be because most etfs and funds can be accessed through any brokerage these days with a roboadvisor most of your options are a little bit more limited as their portfolios are mostly cookie cutter and chosen for you based on whatever your risk tolerance is so with that being said let's go over the best places to open a roth ira either for the active or the passive investor and starting off with the active investor i think the first place that everyone should look at is vanguard.com now vanguard isn't just any other brokerage they're actually the pioneers of the index fund and what vanguard is known for in the industry is actually their low cost etf fees and index fund fees according to nerd wallet the average vanguard expense ratio is actually 0.1 percent which is extremely low compared to the average in the industry which is closer to 1.05 percent opening a roth ira through vanguard is free and requires no account minimums so that's always a plus they do have amazing customer support but their interface is pretty hard to use especially if you're a beginner and that is my one only gripe with vanguard.com is that the interface even for me is hard to use at times luckily though if you are investing with vanguard you are hopefully a buy and hold for the long term type of person so you'll hopefully only have to enter in a transaction or a trade a few times and then hold for a long period of time it is really a great place for buy and hold investors it's not the best place for active day traders for example because it doesn't have as much information it's not as robust in terms of their metrics compared to other brokerages but it is the industry leader for retirement accounts and having a roth ira at vanguard you really can't go wrong there the second place that i would actually suggest to open up a roth ira is fidelity.com it's really great for beginners and they have a ton of resources for you including a full list of different financial calculators for almost every personal finance situation possible they have an easy interface as well as great customer support and the other thing they're becoming more known for is actually low cost funds they actually even offer similar index funds to vancard even at a lower fee which is quite surprising to me so they're coming after vanguard's business and they're coming on pretty strong i really think vanguard and fidelity.com are both great places to open up a roth ira especially because of all the low-cost funds they both offer the next suggestion i have for you guys is actually charles schwab.com and the reason i like this brokerage in addition to vanguard and fidelity is that it has way more robust tools when it comes to active trading you'll also get really great education and training for newer investors as well as very competitive rates on etfs and mutual funds there are no account minimums or fees for opening up a roth ira at charles schwab which is also why i think it is a really good choice their interface and customer support are also very top notch and it makes for a great place to open up a roth ira especially because they also have a robo advisory feature now the robo advisor has no management fee which is actually an advantage it has over traditional robo advisors however you do need to have five thousand dollars minimum invested in their robo advisory for you to be eligible for that service so i still view schwab as a do-it-yourself brokerage only with a robo-advisor feature which is a little bit nice it gives you a little bit more options and flexibility when you're trying to figure out where to open up your roth ira and if you want to have that robo advisor feature in the future and you're not too sure if you want to be an active trader for a long time or you want to be more passive then schwab is a pretty good choice because it offers the best of both worlds but now let's talk about the two robo advisors i really like especially for you passive hands-off investors the first is wealthfront which is somewhat new not really though it's been around for quite some time and it is quite reputable and basically what they are is a advisor that requires about 500 minimum to invest and as a result they'll take about 0.25 of your assets under management as a fee now a typical human advisor is going to take about one percent of your assets under management so 0.25 from wealthfront isn't that bad let's take a 10 000 account balance for example over the course of a year a human financial advisor would take about a hundred dollars versus wealthfront will take 25 dollars that point two five percent goes a long way they automatically rebalance your portfolio for you and do something called tax loss harvesting and what tax loss harvesting is according to wealthfront is basically when your etf in your wealthfront portfolio declines in value what they do is they sell that etf at a loss to offset any of the gains that you might have which will help you overall lower your tax bill basically they're optimizing your tax situation for you and you don't even have to do anything about it which is pretty great the other thing i really like about wealthfront is that it's basically a one-stop shop for all types of financial activities you could open up your roth ira there you can do some of your banking there and they have their own cash account and debit card and you can also do retirement planning there which i really like the next robo advisor on the list that i think is a great place to open up a roth ira ad is actually using the acorns app i actually did a review on the acorns app on this channel and that's one of my better performing videos because i guess a lot of people are interested in the acorns app and it is actually a pretty good app to get started with your finances acorns has something called their later account which basically is their retirement account and that's where you can open up a roth ira the account only has a five dollar minimum which is extremely low i mean compare that to wealthfront's 500 minimum it's 1 100 of that which is pretty great but on the flip side they actually charge you three dollars a month for using their service so to basically make acorns later account more worth it than a wealthfront account you would actually have to have a balance of at least 14 600 and that's basically the break-even point where point two five percent in wealth front is equal to three dollars a month in acorns the one benefit of acorns though is that it's extremely easy to use it's mobile friendly and it basically is great for beginners especially if you're already using their acorn save feature so my take on it is this is that if you aren't saving then saving a little bit is better than not saving anything at all and acorn still really makes it really easy to one save and then open up a roth ira right within the app itself now within the app itself you're going to have to choose your risk tolerance and basically it'll invest in pre-selected portfolios for you so you don't have a ton of flexibility in what you actually want to invest in but acorns later is basically choosing for you what to invest in in your roth ira so if you aren't investing at all for retirement and acorns later sounds like a fun way to actually get into retirement investing then it could be a really good fit for you so one thing i forgot to mention is that you can have multiple roth iras across all of these platforms if you really wanted to give each a try just know that the yearly contribution limit across all of your roth iras is six thousand dollars if you're under the age of 50 in the year 2020 and over six thousand i think it's seven thousand dollars over the age of 50 in the year 2020. so i hope that this video was helpful and that you learned what the best five places to open up a roth ira are i'm sure there are some that i missed so if you do have your roth ira and other brokerages or other places that i should check out leave me a comment below and i'll be sure to check it out and reply to you i hope this video was helpful and always thank you for watching if you'd like to see more videos from me make sure to press the like button and subscribe to my channel and also tick the notification bell because then you'll get notified whenever i drop a video feel free to follow me on instagram my handle there is humphrey talks so if you're ever just bored scrolling your phone and looking at instagram you can come by my profile and say hi if you'd like some free stocks from weeble valued up to fourteen hundred dollars when you deposit a hundred dollars you can use the link in my description below for that lastly thank you to all my patreon supporters i'm glad that you guys are all watching me and still here and i'm going to be posting a lot more in the future so i will see you guys in future videos and thank you for being here today peace

Channel: Humphrey Yang

Views: 144,147

Keywords: where to open a roth ira, roth ira, best places to open a roth ira, roth ira vanguard, types of retirement accounts explained, investing for beginners index funds, investing for beginners fidelity, how to build wealth as a teenager, what is the benefit of a roth ira, vanguard roth ira, wealthfront, acorns app, acorns, fidelity, charles schwab, schwab, where to open roth ira account, where to open a roth ira online, where to get roth ira, roth ira brokerage account

Id: PI3zGXPgXX4

Length: 10min 56sec (656 seconds)

Published: Fri Nov 20 2020