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Choosing the safest IRA investment depends on your risk tolerance and investment goals. Generally, low-risk investments offer lower returns, while high-risk investments offer the potential for higher returns but also come with more volatility.
Here are some of the safest IRA investments commonly found in IRAs:
- CDs: Certificates of deposit (CDs) offer a fixed interest rate for a set period, making them a safe and predictable investment.
- Treasury bills: Treasury bills are short-term government bonds that are considered very safe, as they are backed by the full faith and credit of the United States government.
- U.S. savings bonds: U.S. savings bonds are another safe investment option backed by the U.S. government. They offer a guaranteed rate of return and are exempt from state and local taxes.
- Money market funds: Money market funds invest in short-term, low-risk securities and offer a relatively stable return.
These investments are considered safe because they are backed by the government or have a low risk of default. However, they also offer lower returns than some other investments.
Here are some higher-risk IRA investments that offer the potential for higher returns:
- Mutual funds: Mutual funds are a type of investment that pools money from many investors to buy a variety of securities. They offer diversification, which can help to reduce risk.
- Exchange-traded funds (ETFs): ETFs are similar to mutual funds, but they trade on stock exchanges like individual stocks.
- Stocks: Stocks represent ownership in a company. They can be a good long-term investment, but they are also more volatile than other investments.
- Bonds: Bonds are loans that you make to a company or government. They offer a fixed interest rate and are considered less risky than stocks.
These investments can offer higher returns than low-risk investments, but they also come with more risk. It is important to carefully consider your risk tolerance and investment goals before investing in any of these assets
Here are some additional factors to consider when choosing IRA investments:
- Your age: Younger investors have more time to recover from losses, so they can afford to take on more risk. Older investors may prefer to invest in safer assets to preserve their capital.
- Your investment goals: If you are saving for retirement, you will need to invest in assets that will grow over time. If you are saving for a short-term goal, you may be able to invest in more conservative assets.
- Your risk tolerance: How much risk are you comfortable taking? If you are risk-averse, you should invest in safer assets. If you are more comfortable with risk, you can invest in riskier assets.
It is important to talk to a financial advisor before making any investment decisions. A financial advisor can help you create an investment portfolio that meets your individual needs and goals.
Frequently Asked Questions
What is the safest IRA investment for a young investor?
A young investor can afford to take on more risk, so they may want to consider investing in a diversified portfolio of stocks and bonds.
What is the safest IRA investment for an older investor?
An older investor may prefer to invest in safer assets, such as CDs, Treasury bills, or U.S. savings bonds.
What is the best IRA investment for someone who is risk-averse?
A risk-averse investor may want to consider investing in a money market fund or a short-term bond fund.
What is the best IRA investment for someone who is comfortable with risk?
A risk-tolerant investor may want to consider investing in a diversified portfolio of stocks, bonds, and other assets.
How can I find a financial advisor?
You can find a financial advisor by
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Investing for retirement through an Individual Retirement Account (IRA) is a widely accepted strategy. You’re not only saving for the future, but the U.S. government is also providing you with a sizable tax benefit. S. government. An IRA is an excellent place to start if you want to start saving for retirement quickly. You can set it up online in a matter of minutes.
Investing in the financial markets is one of the best ways to build up a nest egg, but to do so you’ll need a brokerage account or robo-advisor:
- You can select your own investments with a brokerage account, including bonds, stock funds, individual stocks, and more.
- Your portfolio will be created by a robo-advisor, who will choose the funds and allocate your assets according to your time horizon and risk tolerance.
These are some of the best IRA accounts to open, depending on whether you want to handle it yourself, have someone else handle it for you, or something in between.
Best IRA accounts to open in April 2024
When creating your IRA, these are some of the top brokers or robo-advisors to choose from.
Charles Schwab has a longstanding reputation for being investor-friendly and performs all essential brokerage tasks well. Schwab can help you with stocks, bonds, funds, and even certificates of deposit (CDs) in your IRA. Indeed, there are thousands of mutual funds available from Schwab with no transaction fees. Additionally, the broker consistently ranks among the best in the business thanks to commission-free trades and prompt customer service. Of course, you can use thinkorswim, the premier trading platform from Schwab, to increase your level of activity and place trades.
Ideal for: Investors seeking to manage their IRA either actively or passively
One of the best robo-advisors is Wealthfront, which can build your retirement portfolio according to your risk tolerance and the precise timing of your financial needs. To ensure that your allocations remain on target, Wealthfront automatically rebalances your portfolio. Additionally, even without your IRA here, you have access to a sophisticated goal-based planner and a feature-rich cash management account. The management fee is a reasonable 0. As with any other investment, you will pay for the ETFs held in your portfolio at a rate of twenty-five percent annually, or $25 for every $10,000 invested.
Ideal for: Investors seeking affordable, professionally managed portfolios
One of the best brokers overall, Fidelity excels in everything they do, from providing strong trading platforms for active traders to offering a wide selection of investments (thousands of mutual funds available without a transaction fee) and a policy of not charging you for every little thing. Additionally, it doesn’t hurt that the broker provides four mutual funds that are excellent choices for IRA investors because they have no management fees. High quality work is done by Fidelity, so you won’t be let down.
Ideal for: Investors seeking to engage in active trading or passive investing
Even though you could purchase its mutual funds at a different broker, Vanguard is a fantastic option for affordable mutual funds. Even though Vanguard has eliminated online trading commissions for stocks and ETFs to zero, like the majority of large brokers, it is still a fantastic choice for passive investors. Additionally, Vanguard provides more than 3,000 mutual funds fee-free. Therefore, you won’t have any trouble locating the few funds you need if those are more your style.
Ideal for: Investors seeking passive IRA management, particularly with Vanguard funds
Betterment is probably a good choice if you’re okay with having someone else manage your retirement account. For one low, flat fee of 0. 25 percent, all you have to do is add money, and this robo-advisor will handle your portfolio from beginning to end. For no additional cost, you’ll receive beneficial features like automated rebalancing and tax-loss harvesting. Additionally, if you add $100,000 or more to the account and pay a slightly higher fee, you will have access to human advisors for all of your in-depth inquiries.
Perfect for: Investors who wish to have their IRA managed by a robo-advisor or who occasionally need access to a human planner
If you’re looking for a brokerage that can help you “go anywhere,” Interactive Brokers is the place to go. They offer you plenty of access to global markets. Although you don’t have to be an active trader to open an IRA with Interactive Brokers, the company has a long history of serving serious investors. Choose the Pro platform of the brokerage, which is renowned for its excellent execution, or use the Lite platform, which offers free trades. In either case, you’ll be making an investment with one of the safest companies in the world.
Ideal for: Investors who wish to access a variety of markets and engage in active trading
With Schwab Intelligent Portfolios, a robo-advisor that manages your IRA with a customized portfolio, Schwab lends its reputation as an investor-friendly firm. There is no management fee at Schwab, and its inexpensive ETFs and highly regarded 24/7 customer service are all things you’ll appreciate. You can upgrade to the premium tier, which costs a fixed $30 per month (after a $300 one-time setup fee), if you want access to financial advisors. In either scenario, you will need to bring some cash to the robo-advisor: $5,000 for the basic service and $25,000 for the premium.
Ideal for: Those seeking affordable professional management with the possibility of unrestricted access to human advisors
You will gain from Merrill Edge’s extensive offerings, access to stock research, and first-rate customer support as a client. Additionally, Merrill is an excellent option if you anticipate requiring in-person support because parent company Bank of America provides Merrill representatives at over 2,000 branches, which is a significant competitive advantage. Another benefit is that having all of your financial affairs in one location is simply easier if you are already a customer of the bank.
Ideal for: Investors who prefer to trade either actively or passively, or who might require the assistance of a human planner
Fundrise may be a good option for you if you want to use your IRA for something unconventional. Fundrise allows you to invest in real estate with your IRA. Since real estate tends to generate cash that would otherwise be taxable, real estate may be a great fit for an IRA. Investing with Fundrise gives you access to reputable real estate investment trusts (REITs), which are well-known for distributing dividends to investors and providing a diversified real estate portfolio. Fundrise might not be for everyone because you might have to lock in your money for years. But Fundrise might be a compelling choice for investors seeking for an alternative investment, like real estate.
Ideal for: Those looking to explore and make real estate investments
In addition to providing commission-free stock and ETF trading, E-Trade is a great option for mutual funds, as it offers over 6,000 options without a transaction fee. This makes it comparable to other major brokers. Another all-in-one broker is E-Trade, which is excellent for both active traders (volume discounts on options, the Power E-Trade platform) and long-term, passive investors (third-party research).
Ideal for: Investors seeking to engage in either active or passive investing
Firstrade has a lot to offer investors who are saving for retirement, but it is also well-liked by traders due to its commission-free stock, ETF, and option trading. Firstrade allows you to open almost any kind of IRA account you desire, including SEP and SIMPLE IRAs, which aren’t offered by all brokers. Firstrade also offers thousands of mutual funds with no transaction fees. Additionally, there’s a good research offering with free Morningstar report access.
Ideal for: Investors seeking to engage in either active or passive investing
Another robo-advisor to think about is Fidelity Go, if you want to manage your portfolio more passively. For accounts under $25,000, there is no fee, or a fee of 0. 35 percent after that. You won’t have to worry about the additional fund fees that most robo-advisors charge because the portfolios are constructed using Fidelity funds, which do not impose expense ratios. Additionally, you will receive all of Fidelity’s perks, such as excellent learning materials and round-the-clock customer support.
Ideal for: Investors seeking a professionally managed, low-cost portfolio