Best Stock Brokers for IRA Account

As you have already known the 2011 tax deadline is April 17th, which means it’s not only the due date to file 2011 income taxes, but also the last day to make 2011 IRA contributions and take advantage of last year’s tax deduction, if eligible, not to mention saving for the future. So if you are considering an IRA account, Roth or Traditional, there is still plenty of time to act before the deadline.

I have written in the past about how to open an IRA account. Even though I consider myself an aggressive investor, holding more than 90% of investments in stocks, many of them in individual stocks, I don’t own any individual stock in IRA accounts. The main reason is that there’s no additional cost when buying and selling mutual fund shares. Also since an IRA account is supposed to be a place for long term investments, I’d rather use low cost index funds to invest in the broad market than trying to pick and choose which stock to buy. Though we originally had IRA accounts at Scottrade and bought a few mutual funds from different fund companies in those accounts, we have moved both our IRA accounts to Vanguard some time ago and we are now investing in Vanguard funds only. In addition to traditional mutual funds, we also added a couple of Vanguard ETFs in IRA accounts recently after it started to offer commission free ETFs to its customers.

So when it comes to where to open an IRA account, the first question I want to ask is what exactly you want to buy in the account. For us, low cost index funds are always the first choice because we want to keep investment costs low, which will have a significant impact on the overall return of the investments in the long term, and, meanwhile, get broad exposure to different asset classes. With these considerations in mind, going directly with fund companies like Vanguard became the obvious choice. When buying funds directly from the fund company, instead of through a third party like a broker, there is no additional cost associated withe the transaction. Yes, we do have ETFs, but they are essentially index funds. Plus, we don’t pay commissions when buying Vanguard ETFs from Vanguard IRA accounts.

If individual stocks or ETFs are your choice of investments in IRA accounts, then you may want to open an account with a brokerage firm, not a mutual fund company. Vanguard doesn’t charge commission only when you trade Vanguard ETFs; for other non-Vanguard ETFs, you will pay regular commissions, just like with any other brokerage account. Thus, commission charge is definitely a factor when choosing a brokerage firm for your IRA account. But that’s not all. Some brokers may charge an annual maintenance fee for IRA accounts. Following is a list of online discount brokers that offer IRA retirement accounts and fees, account minimum, and incentive for new or rollover IRA account.

Brokers for IRA Accounts

BrokerAccount
Minimum
IRA
Fee
Stock/ETF
Commission
Mutual Fund
Commission
Options
Commission
Fixed Income
Commission
Incentive
OptionsHouse$3,000*$0$3.95N/A$9.95/tradeN/A100 free
trades
ShareBuilder$0$0$4.00,
$9.95 real-time
$19.95$9.95
+$1.25/contract
N/A10 free
trades
Zecco$0$30$4.95$10.00$4.95
+$0.50/contract
$4.50/bondNo
TradeKing$0$0$4.95$14.95$4.95
+$0.50/contract
$4.95/bond,
$14.95 minimum
No
Firstrade$0$0$6.95$9.95$6.95
+$0.75/contract
Net Yield Basis250 free
trades
Scottrade$500$0$7.00$17.00$7.00
+$1.25/contract
No fee3 free
trades**
TradeMonster$2,000$0$7.50$15.00$7.50
+$0.50/contract
$15.00/trade$250 reimbursement
OptionsXpress$0$0$9.95$9.95$9.95
+$1.25/contract
$5.00/bond,
$9.95 minimum
No
E*Trade$0$0$9.99$19.99$9.99
+$0.75/contract
$1.00/bond,
minimum $10.00
Up to $600***
IRA Brokerage Account Comparison

The good news is that most brokers don’t charge annual fee for IRA accounts these days (with only one exception) and most have very low minimum initial deposit requirement as well. That makes opening an IRA account at a broker much more *affordable* especially when you consider that many mutual fund companies do have a much higher initial investment requirement (usually $500 or $1,000) for their funds. Of course, commissions apply when trading stocks or ETFs in an IRA account at a brokerage firm.

As you may know already, Vanguard isn’t the only broker which offers commission-free ETF trades. Charles Schwab, Fidelity, Scottrade, and TD Ameritrade all have their own free ETFs, though the number of ETFs that are eligible for zero commission varies at different firm. If you are considering buying ETFs for free, these firms may also be an option for your IRA account.

*Options House 100 commission-free trades: Open an Options House IRA account with $3,000 and promo code IRAFREE. Also get up to $125 reimbursement.
**Scottrade 3 commission-free trades: Open a Scottrade IRA account with promo code KGKP0724.
***E*Trade up to $500 credit: When rollover to E*Trade.

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