Roth IRA Fidelity Review: Best Retirement Account for Several Reasons

Roth IRA Fidelity Review: Best Retirement Account for Several Reasons

Roth IRA Fidelity Review

Whether you want to grow your savings or diversify your investment portfolio, a Roth IRA is a great choice that comes with long term tax benefits. Roth IRA is overall the best retirement plan available today that offers tax-free income.

Pros

  • There are no minimums or account fees to open a Roth Fidelity IRA account
  • It offers a large variety of investments choices
  • Trades are commission-free
  • High potential for tax-free withdrawals and growth upon meeting the set conditions
  • Free investment tools such as calculators, apps, and software
  • Extensive information and research data available for investors
  • Some mutual funds have no expense ratio

Cons

  • Some mutual funds are high cost and attract high transaction fees
  • The robo-advisor service charges a higher-than-average annual advisory fee for balances over $50,000 compared to other competitors
  • Fidelity Roth IRA does not provide access to cryptocurrencies, futures, forex, and other riskier assets
  • You have to invest for at least 5 years initially before making any withdrawal

Fidelity Roth IRA is an excellent choice for beginner investors or anyone looking for their first Roth IRA. It offers one of the best self-directed investment platforms, with a wide variety of investment options, and minimal trading fees. 

Features

From tax advantages, maximum contribution, and fees, here are some details that can convince you to consider a Roth IRA. 

Tax advantages: The concept behind Roth IRA is that you make contributions to this account with after-tax money. Once you turn 59½ and have been in a Roth IRA plan for five years, all distributions taken from the plan are tax-free. You can withdraw your contributions without incurring any tax or penalty expenses at any time. 

Maximum contribution: $6,000 ($7,000 if age 50 or older)

Income requirements: In 2021, the upper limits for investing are $125,000 for a single person or $198,000 for married people filing jointly.

Minimum investment: There is no minimum to open the account

Investment options: Fidelity Roth IRA is great for independent investors who want to access a wide range of investments. With Fidelity, you get access to trading stocks, bonds, options, and a vast choice of ETFs. You also get access to great mutual funds both from Fidelity and non-Fidelity.

Support & guidance: When it comes to investing, you are responsible for choosing and managing your investments. Great thing is that you can access all the tools and information that the platform provides.

For the Fidelity Roth IRA, investments are managed for you, using your goals and risk tolerance set in your digital account. You still get to access Fidelity’s information repository, as well as a Fidelity advisor whenever it’s necessary.

Fees: There is no opening cost, closing cost, or annual fee, and offers $0 commission 

Why choose Fidelity Roth IRA?

Beginner-friendly: Fidelity has invested heavily in the platform’s infrastructure to make it easy for customers to find tools and features. Fidelity provides access to a well-developed information section, which builds the confidence of customers who are new to investing.

The platform also makes investing easy through user-friendly layouts for making orders.

No minimum or recurring fees: Fidelity Roth IRA does not charge for account opening or annual fees. The account also offers low transaction fees using an order-routing technology that reduces transaction costs by seeking out price improvement.

Extensive and complete trading tools and resources as a full-service broker: Fidelity Roth IRA offers investors abundant online help and a well-versed chatbot that can respond to any customer queries.

One of the best commission structures at $4.95/trade: Fidelity Roth IRA offers one of the lowest fee structures in trading, at only $4.95 per trade for ETFs, options, and stocks. They also have many commission-free mutual funds to invest in.

Flexible investment types: Fidelity allows you to trade in virtually any type of investment available on Roth IRA.

No expense ratio for mutual funds: 4 of the mutual funds that Fidelity offers have no expense ratio. This means that you can invest in these mutual funds and manage them in your account at zero fees.

Local branches availability: Fidelity has over 140 branches in major cities across the country in case you need hands-on customer service.

Where Fidelity falls short 

Higher fees for some of the mutual funds: Of all the mutual funds available for investing in Fidelity Roth IRA, only 4 of these funds have zero-commissions. However, all other mutual funds attract a $49.95 fee per trade.

Higher pricing with robo advisor competitors: To access robo-advisor services, you pay a 0.035% per annum management fee and the minimum initial investment has to be $5,000 

With Fidelity Roth IRA, you don’t have access to options such as Forex, Crypto, and other riskier assets

Fidelity vs other investment firms

Fidelity

  • Unique feature: Availability of extensive information and resources to learn to trade
  • Commission: 0%
  • Best For: Beginners interested in different investing options

Charles Schwab

  • Unique feature: Access to a robo advising services at no extra management fee
  •  Commission: 0%
  •  Best for: Beginner and advanced traders seeking for no-minimum index funds

TD Ameritrade

  •  Unique feature: Offers a combination of platforms that allows both beginners and experienced traders to access their investments
  • Commission: 0%
  • Best for: Active investing and trading

Betterment

  • Unique feature: Traders have access to automated investing and managed portfolios through robo advising
  • Commission: 0.25%
  • Best for: automated investments that balance a portfolio over time

SoFi

  • Unique feature: Easy investing experience offered through mobile and web platforms.
  • Commission: 0%
  • Best for: Active investing

Best Roth IRA IN 2021

Fidelity Roth IRA tops the list of best Roth IRAs in 2021 for several reasons. The account offers commission-free trading for stocks, ETFs, and more than 3,400 commission-free mutual funds.

In addition to offering the best trading platform with lots of information and research on investments, investors can access a tool suite of calculators and software to help in improving their investments and achieve their retirement goals. These tools include the Fidelity Spire app and Retirement Score Calculator.

When investing in Fidelity Roth IRA, mutual funds are obviously the best investment option to take. One of Fidelity’s solid mutual funds is the Fidelity 500 Index Fund (NASDAQMUTFUND: FUSEX) which has one of the lowest expense ratios of 0.010%.

Individual stocks are the second-best Roth IRA investment. However, it’s necessary that you go for those with high growth potential, even though they may not work out as you expect. 

Other things you need to know

Is Fidelity good for Roth IRA?

The Fidelity Roth IRA ranks as the best for various reasons. First, Fidelity Roth IRA accounts have no minimum account balance or any recurring account fees. The account also offers more than 3,400 mutual funds that attract zero transaction fees and commission-free trade on ETFs and stocks. 

How much does Fidelity charge for Roth IRA?

Fidelity Roth IRA has no opening cost, closing cost or annual fee. In addition, there are no commissions for online stocks, ETFs, and options trades.

How is a Roth IRA different from traditional IRA?

A Roth IRA and Traditional IRA are both great accounts to consider for retirement investing. However, there are key differences between these two accounts that are notable.

While Roth IRA allows you to make after-tax contributions, you can make pre-tax contributions with a traditional IRA.

A Roth IRA is suitable for an investor who expects to be in a higher tax bracket at the time they start making their withdrawals. On the other hand, a traditional IRA is great for an individual who expects to remain in the same tax bracket when starting to make the withdrawals.

The only downside to a Roth IRA is that, unlike in traditional IRAs, there is a cap to the maximum contribution amount allowed.

Does Fidelity Roth IRA payout interest rates?

Fidelity Roth IRA does not pay out any interest as it is not like other traditional savings accounts that are set up in the banks. Fidelity Roth IRA is a type of investment account that holds assets and earns returns depending on how the assets perform.

Who is eligible to contribute to a Roth IRA?

For you to contribute to Roth IRA, you must have earned income. If you are married, you can make spousal contributions even if your spouse does not have earned income.

However, you cannot contribute to a Roth IRA if your income exceeds $140,000. For people under 49 years or younger, you can only contribute up to $6,000. For people above 50 years, the limit to your contributions is $7,000.

What is a Roth Conversion?

A Roth conversion involves making a withdrawal on your 401(k) and traditional IRA and converting it into a Roth. Ordinary income taxes are incurred on the withdrawal amount, but you do not incur early withdrawal penalties.

Roth conversion works for investors who want their income to grow tax-free. 

Anyone can convert their IRA assets to a Roth IRA, regardless of income or marital status.

How much should you consider converting? 

With a conversion, you pay income taxes on the conversion amount. That’s why when determining how much to convert, you have to consider how much money you have saved in non-retirement funds to pay the taxes. Fidelity also suggests converting over a number of years in amounts that will keep your income from the conversion within your current federal tax bracket or within your desired bracket. 

Conclusion

If you are just starting to plan out your retirement plan, Fidelity’s Roth IRA is the best choice for you: it does not have a minimum deposit account and it does not require account opening or maintenance fee. 

Fidelity Roth IRA investment account offers you a unique opportunity to invest in a wide variety of Fidelity investments and manage them all on your own. With the ability to invest in multiple trading options and accrue tax-free income, Fidelity Roth IRA is a great way to invest in your retirement while avoiding high tax liability that other investment options present to traders.

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