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What is the Best Roth IRA Broker?

Every week I get at least one email from a reader asking me which broker is the “best” for their Roth IRA. The number of emails jumps exponentially after the new year and, fortunately, falls after April 15th! You have until April 15th, 2011 to decide if and how much you will contribute to your Roth IRA for 2010. If this is the first year you’re contributing to a Roth IRA, you’ll also have to pick who you want to watch over your money.

Before you decide where to put your money, you really need to decide what you want to invest in. If you want to invest it in mutual funds, you’ll be best served going with the company that runs the funds you like. The two big names in the mutual fund space are Fidelity and Vanguard. If you really like their funds, I recommend you open a mutual fund account directly with them because you will be able to buy and sell shares for free.

If individual stocks are more your thing, then you’ll want to pick a broker that offers services you like at a cost that’s affordable. Discount brokers are all the rage these days, with sub-$5 stock commissions and all the research you could ever want. My personal opinion is that as long as you can satisfy the minimum balance requirements and the fees aren’t expensive, the broker is less important. I personally like TradeKing [3] because their customer service has been rated one of the best and I’ve never had issues with it myself (I use their online chat feature all the time). They aren’t necessarily the cheapest anymore, there are a few even cheaper, but there’s a bit of an inertia effect there (I have my stocks there and I don’t trade much, so I don’t want to go through the process of moving them).

I’m about to provide you with a bunch of information from a variety of brokers but I want you to know one thing – it doesn’t matter which broker you pick. It is more important that you start contributing towards your retirement as soon as possible because each year you wait is another year you lose out on gains. Some will charge you $15 a trade, some will charge you $5, but those all pale in comparison to how much you lose if you let that decision paralyze you.

Best Roth IRA Broker Fee Comparison

IRA Broker Stock Commission Mutual Fund Commission Account Fees Min. Balance
TradeMONSTER Roth IRA [4] $7.50 $15 $0 $2000
TradeKing Roth IRA [3] $4.95 $14.95 $0 $0
OptionsXpress Roth IRA [5] $14.95 $14.95 $0 $0
E*Trade Roth IRA [6] $12.99 Up to $19.99 $0 $0
Zecco Roth IRA [7] $0/$4.50 * $10 $0 $0
Fidelity Roth IRA [8] $19.95 $0 (their funds) $0 $2500
Vanguard Roth IRA [9] $19.95 $0 (their funds) $20 $3000

* Zecco offers 10 free stock trades a month when you maintain a $25,000 balance or execute at least 25 trades a month, otherwise it’s $4.50 a trade.

Vanguard Brokerage Account

Vanguard is a special case because they have two types of accounts. They have a fund account where you can only buy and sell Vanguard funds, those fees are listed in the above table. They also have a brokerage account where you can buy stocks, bonds, ETFs, etc. The fees for both are different. Here is the full fee schedule [10] for the brokerage account. I’m not really sure why they segregate it in this way, it’s annoying, but they like to keep the two worlds apart.

If you have a Roth IRA, where do you keep it and why?