The three main places to open a Roth IRA
You can open a Roth IRA at a bank, a brokerage firm, or a robo-advisor platform. Each handles your money differently and charges different fees. The choice depends on what you plan to invest in and how much hands-on management you want to do.
Banks offer Roth IRAs that hold cash or certificates of deposit (CDs). Your money is insured by the FDIC up to $250,000. The tradeoff is that bank accounts typically earn very low interest — often under 1% per year. Banks are the simplest choice if you want no investment risk and don't mind slow growth.
Brokerages let you buy stocks, bonds, mutual funds, and exchange-traded funds (ETFs) inside a Roth IRA. They charge per-trade fees, annual account fees, or both, depending on the firm. Brokerages give you more control over what you own but require you to make your own investment decisions or pay extra for advice.
Robo-advisors are automated investment platforms that build and manage a portfolio for you based on your age and risk tolerance. They typically charge 0.25% to 0.50% of your account balance per year. Robo-advisors are a middle ground: less control than a brokerage, more growth potential than a bank, and lower fees than hiring a human advisor.
Key Takeaways
- Banks offer safety and simplicity but very low returns; brokerages offer control and growth potential but require you to make investment choices; robo-advisors offer automatic management at a moderate cost.
- Your choice should depend on whether you want to pick individual investments, how much time you have to manage the account, and how much you are willing to pay in fees.
- Many large financial institutions offer all three options, so you can open a Roth IRA at the same place you bank or invest already.
- The account itself is free to open at most providers; fees come from what you hold inside it or how often you trade.
Banks: Safety and low fees, but minimal growth
Opening a Roth IRA at a bank means your money sits in a savings account or CD. You will not pick individual stocks or funds. Instead, the bank pays you interest on your balance. That interest is typically 0.01% to 5.00% per year, depending on the bank and current market rates. Your money is protected by FDIC insurance, so you cannot lose it.
Banks charge little or nothing to hold a Roth IRA. Some have no monthly fee. Others charge $5 to $15 per year if your balance falls below a minimum (often $1,000 to $10,000). A few charge nothing at all.
A bank Roth IRA makes sense if you are very risk-averse, already have money in other investments, or plan to contribute small amounts over time. The downside is that your money grows slowly. Over 30 years, $6,500 per year in a bank account earning 4% interest will grow to roughly $850,000. The same amount in a stock-heavy portfolio earning 7% historically grows to roughly $1.4 million. That difference matters.
Brokerages: Control and growth, but you choose what to buy
A brokerage is a firm that lets you buy and sell investments. Opening a Roth IRA at a brokerage means you can hold stocks, bonds, mutual funds, ETFs, and sometimes other assets inside the account. You decide what to buy and when to sell. The brokerage simply holds the account and executes your trades.
Brokerage fees vary widely. Many large brokerages (Fidelity, Vanguard, Charles Schwab, E-Trade) charge zero per trade for stocks and ETFs. Some charge $0 to open the account and $0 per year to maintain it. Others charge $25 to $50 per year if your balance is below a certain amount. A few still charge per-trade fees of $5 to $10, though this is less common now.
The real cost at a brokerage is often hidden in the funds themselves. Mutual funds and ETFs charge expense ratios — annual fees that come out of your returns. A low-cost index fund might charge 0.03% per year. An actively managed mutual fund might charge 0.50% to 1.50% per year. Over decades, that difference compounds significantly.
A brokerage Roth IRA works well if you want to build a diversified portfolio of low-cost index funds or ETFs, or if you enjoy researching and picking individual stocks. It requires more knowledge and time than a bank or robo-advisor, but gives you the most control and often the lowest total costs if you choose funds wisely.
Robo-advisors: Automatic management at a moderate cost
A robo-advisor is a digital platform that builds and manages a portfolio for you automatically. You answer questions about your age, income, risk tolerance, and time horizon. The platform then creates a mix of stocks and bonds tailored to your answers and rebalances it periodically without you having to do anything.
Robo-advisors typically charge 0.25% to 0.50% of your account balance per year. Some charge nothing if your balance is below a certain amount or if you meet other conditions. A few charge a flat fee of $1 to $5 per month instead. On a $50,000 account, a 0.40% fee costs $200 per year.
The advantage is simplicity and hands-off management. You do not need to pick funds or rebalance. The disadvantage is that you have less control over exactly what you own, and the annual fee reduces your returns compared to a low-cost brokerage where you manage your own index fund portfolio.
Robo-advisors work well if you want professional-grade portfolio management but do not want to pay for a human advisor or learn to invest yourself. They are also good if you have a moderate amount to invest ($5,000 to $100,000) and want to set it and forget it.
Comparing fees and features across provider types
| Provider Type | Account Fee | Investment Fee | Total Annual Cost on $50,000 | Best For |
|---|---|---|---|---|
| Bank | $0–$15/year | None (low interest) | $0–$15 | Safety and simplicity |
| Brokerage (low-cost index funds) | $0–$50/year | 0.03%–0.20% | $15–$100 | Control and low cost |
| Brokerage (actively managed funds) | $0–$50/year | 0.50%–1.50% | $250–$800 | Professional stock picking |
| Robo-advisor | $0–$60/year | 0.25%–0.50% | $125–$310 | Automatic management |
How to decide: Questions to ask yourself
Start by asking: How much time do I want to spend managing this account? If the answer is none, a robo-advisor or bank is better than a brokerage. If you enjoy research and have time to learn, a brokerage with low-cost index funds is often the cheapest long-term option.
Next, ask: How much money do I have to invest? If you have less than $1,000, a robo-advisor's minimum balance might exclude you, and a brokerage's per-trade fees might eat into your returns. A bank or a brokerage with no minimums is better. If you have $50,000 or more, the annual percentage fees at a robo-advisor start to add up, and a brokerage becomes more attractive.
Finally, ask: What is my risk tolerance? If you cannot stomach seeing your balance drop 20% in a bad market year, a bank is safer. If you can handle volatility and have 20+ years until retirement, a brokerage or robo-advisor invested in stocks will likely grow your money faster.
Many people open accounts at more than one type of provider. For example, you might keep an emergency fund in a bank Roth IRA and a long-term growth portfolio at a brokerage. There is no rule against this, and it can make sense if different parts of your money have different goals.
Large financial institutions that offer all three options
If you already bank or invest somewhere, you may be able to open a Roth IRA there without starting over. Fidelity, Vanguard, Charles Schwab, and Merrill Edge all offer bank accounts, brokerage accounts, and robo-advisor services under one roof. This can simplify your finances and make it easier to move money between accounts.
Smaller banks and brokerages typically specialize in one type. A local credit union might offer only bank Roth IRAs. An online brokerage like Interactive Brokers might offer only brokerage accounts. Betterment and Wealthfront are robo-advisors only. Knowing what each provider does helps you narrow your search.
Before opening an account anywhere, check the provider's website for the current account fees, minimum balance requirements, and what investments are available. These details change, and what was true last year may not be true now.
Frequently Asked Questions
Can I move my Roth IRA from one provider to another later?
Yes. You can transfer your Roth IRA to a different bank, brokerage, or robo-advisor without paying taxes or penalties. The process is called a trustee-to-trustee transfer. It usually takes one to two weeks. You fill out a form at the new provider, and they handle the move. Some providers charge a transfer fee of $25 to $100, but many waive it if your balance is large enough.
What if I want to start with a bank but switch to a brokerage later?
You can do this. Open the brokerage account, then transfer your bank balance to it. Your contribution room and earnings history stay the same. The only thing that changes is where your money sits and what you can invest in. No taxes or penalties apply.
Do I need a lot of money to open a Roth IRA?
No. Most banks and brokerages let you open a Roth IRA with $0 and start contributing as soon as you have money. Some robo-advisors require a minimum of $500 to $1,000 before they will invest your money, but you can still open the account and wait. Check the specific provider's rules before opening.
Is my money safe at a brokerage or robo-advisor?
Brokerages and robo-advisors are not FDIC-insured like banks, but they are regulated by the SEC and FINRA. Your cash and investments are held in your name and are protected if the firm goes out of business. However, if you own stocks or funds that lose value, that loss is real — it is not insured. The account structure is safe; the investments themselves carry market risk.
Can I have a Roth IRA at more than one place?
Yes, but your total contributions across all accounts cannot exceed the annual limit ($7,000 in 2024 for most people, $8,000 if you are 50 or older). If you open accounts at two brokerages and contribute $4,000 to each, you have hit your limit. The IRS tracks your total contributions, not your number of accounts.