One of the most efficient ways to strengthen your retirement strategy is to open an individual retirement account (IRA). You may maximize your retirement savings by contributing just a few hundred dollars extra each month to an IRA, which can give you valuable tax benefits.

Forbes Advisor has investigated the best traditional IRA account providers for both self-directed investors who want to manage their own retirement portfolios and hands-off investors who prefer to leave the heavy lifting to others in order to help you choose the best individual retirement account for your needs.

The Method

For the purpose of determining the top conventional IRA accounts, Forbes Advisor reviewed a wide range of the best brokerage services and robo-advisors.

We thoroughly tested 21 different online brokerage systems as part of our investigation into the brokerage market. We gathered hundreds of unique data points and took into account over 100 features and variables. Fees, technology, product options, research and education, account security, and customer service were the six categories we looked at.

For our study of the robo-advisor business, Forbes Advisor collaborated with Backend Benchmarking, a reputable firm that does market research. For each robo-advisor platform, Backend Benchmarking gave us with approximately 100 data points spanning nine areas.

The pricing, client experience, portfolio performance, account minimums, accessibility of human advisers, financial planning features, size, tenure, and transparency regarding potential conflicts of interest were taken into consideration when evaluating robo-advisors.

What is an IRA

An IRA is a straightforward, tax-advantaged account made to aid in retirement savings. The majority of persons can write off all or a portion of their annual conventional IRA contributions against their taxable income. Their tax burden in the year they make contributions may be decreased as a result. Withdrawals, however, are treated as taxable income.

The needs of various retirement savers, such as non-working spouses, business owners, and individuals who like investing in alternative asset classes, can be met by a variety of IRA accounts.

• Spousal IRA. This kind of IRA gives married couples with one non-working spouse who doesn’t make money a method for that spouse to establish their own individual retirement account.
• Inherited IRA. This account, also referred to as a beneficiary IRA, is where assets from the dead person’s retirement savings are kept. A beneficiary of an inherited IRA may be anybody or anything, though spouses have the greatest options with this kind of account.
• SEP IRA SEP IRAs are advantageous for self-employed people and small business owners. A SEP IRA plan, which offers larger contribution limits than conventional IRAs, may be implemented by companies with any number of employees. SEP IRA contributions, however, are often exclusively accepted from employers.
• SIMPLE IRA. A SIMPLE IRA can be opened by companies with less than 100 employees. Unlike SEP IRAs, this form of account allows both employer and employee contributions.
• Self-Directed IRA. Most IRAs only let you invest in securities like stocks, bonds, mutual funds, ETFs, or CDs. However, a self-directed IRA enables you to invest in non-traditional assets including gold, silver, real estate, cryptocurrency, and precious metals.
• Rollover IRA. This is a typical IRA designed to hold money you’ve transferred from an employer-sponsored retirement plan, such as a 401(k) (k). A rollover IRA can be something to consider if you’re switching employment, getting ready to retire, or starting your own business.

Opening an IRA Account

Choose whether you prefer a more hands-off approach where someone else controls your account for you before opening a traditional IRA if you are an investor who prefers to handle an IRA account on your own.

It would probably be preferable to take a hands-on approach to managing your IRA if you enjoy tracking markets, trading stocks, and preparing your investing strategy. Examine the brokerage services we recommended above for self-directed investors.

IRA investments still require some attention from hands-off investors, but many are quite content to let a robo-advisor build and maintain their investment portfolio. (You could also invest in a target-date fund in a self-directed IRA account to achieve the best of both worlds, so to speak.)

Other options exist for starting an IRA and retirement savings. Although this will be expensive, you can choose to engage a financial advisor to help you design your retirement strategy. They can open an IRA and maintain the account for you. Although they typically only allow for the keeping of certificates of deposit, banks also provide IRAs (CDs).

Should You Consider Investing in an IRA?

Due to specific tax treatment, a traditional IRA has many advantages over a brokerage account.

The capital gains you make when you sell an investment at a profit and the dividends your investments get are taxed in a brokerage account based on your current income levels.

None of these tax repercussions apply to regular IRAs. Instead, you simply have to pay standard income taxes on IRA withdrawals. This significant benefit accelerates the rate of growth of your retirement savings over time.

Comparing Roth IRA’s and Traditional IRA’s

Taxes on contributions and withdrawals are primarily where a Roth IRA differs from a standard IRA.

Depending on your annual income and filing status, your contributions to a traditional IRA may be fully or partially tax deductible. Before withdrawal, contributions grow tax-deferred; after that, they are subject to regular income tax.

Contributions to a Roth IRA are made using funds on which taxes have already been paid. Contributions grow tax-free, so even when you withdraw them in retirement, you won’t incur taxes on them. You can withdraw donations (but not earnings) at any time as an added bonus.

A typical IRA can be opened and funded by anyone, regardless of income. Higher incomes cannot directly contribute to a Roth IRA due to income restrictions, but they can still use a backdoor Roth IRA to get the benefits of a Roth account.