Once you've maximized the benefit of an employer match on a 401(k), it may be smart to open an IRA to save even more for retirement. IRAs offer more when it comes to where and how you can invest, but it all depends on where you ultimately decide to open an account. Let's look at E*Trade and Fidelity, two common brokers for IRAs, to see how they compare on important features for retirement investors.
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The truth is that picking a brokerage isn't just about finding the cheapest price on every trade. Featuring commissions that generally start at less than $10 a trade, the differences between these two brokers come down to a little more than $2 in most cases.
Data source: company websites.
Commission pricing isn't as always as clear as it may seem. Although they charge a commission for most mutual fund and ETF trades, both brokers offer thousands of funds you can trade for free. Similarly, special offers for IRAs frequently include commission-free trades and cash bonuses just for opening an account, creating an effective discount on a broker's listed trading prices.
Mutual fund selection and commission-free choices
E*Tradeand Fidelity have a wide selection for fund investors, as each offer thousands of funds that their clients can buy or sell for free. In addition, both companies have a list of commission-free ETFs that you can trade without paying the standard commission.
Data source: company websites.
Realistically, even the most diversified of fund investors will never own thousands of mutual funds, so quality is more important than quantity. Make a mental note to see if your favorite funds are available fee-free at each brokerage.
Minimum deposit requirement for IRAs
Fidelity and E*Trade are no-minimum brokers, meaning they'll open an account regardless of your initial deposit. As for making an investment, keep in mind that mutual funds often have their own minimums. For stocks and ETFs, the minimum is the price for a single share, which varies by stock and ETF.
International stocks and ADR investments
Brokers can vary wildly when it comes to international markets. Some brokers (including Fidelity) enable you to trade on markets all around the world. Most brokers (E*Trade included) only allow you to trade securities with domestic tickers.
Data source: company websites.
Depending on how you invest, this may be more or less important to you. As a general rule, it's more expensive to trade internationally, so investors can save on commissions by sticking to U.S.-listed substitutes when possible. Fidelity's international commissions vary based on the local currency and stock exchange and are generally higher than its domestic prices in an earlier table.
Mobile trading apps allow you to check up on your IRA portfolio from anywhere. Image source: Getty Images.
Mobile app reviews
Investors expect to be able to trade from anywhere, so most brokers now offer a way to do just that. Mobile apps for phones and tablets enable clients to trade from anywhere they have an internet connection. Here's how each brokers' users and customers rated their capabilities, as of Jan. 24, 2017:
Data source: relevant app stores.
IRA fees: maintenance and inactivity fees
We don't need to spend much time here. Fidelity andE*Trade are so-called no-fee IRA brokers, which means they don't have inactivity fees for low-activity accounts, nor maintenance fees just for keeping an account open.
Research and retirement planning tools
As a general rule, we tend to think that investors can benefit from having access to timely research and retirement tools to make more informed decisions. BothE*Trade and Fidelity offer a wealth of proprietary and third-party research and retirement planning tools to aid you with your portfolio.
Fidelity's third-party research includes S&P, analyst upgrades and downgrades from hundreds of research companies, and stock rating summary scores. When it comes to retirement planning, Fidelity's Income Strategy Evaluator can help you determine if your portfolio (including non-Fidelity accounts) is on track to produce enough retirement income, and suggest ways to improve your portfolio's performance.
E*Trade's third-party research providers are numerous -- S&P, Moody's, Morningstar, and Thomson Reuters, just to name a few well-known names. E*Trade's proprietary My Virtual Advisor tool can help you better allocate your investment portfolio based on your goals, risk tolerance, and financial profile.
Best for IRAs: E*Trade or Fidelity?
Depending on how you invest, either broker could be a good fit for you. On one hand, Fidelity offers access to more funds and international stocks. On the other,E*Trade offers lower commissions for funds that aren't on brokers' free lists, but its standard commission prices are otherwise higher.
They also differ when it comes to commission-free ETF selections. Fidelity's commission-free ETF list includes more "core" index funds, whereasE*Trade offers more niche strategies (dividends, hedged ETFs, and sector funds) in its lineup.
To be clear, The Motley Fool does not endorse any particular brokerage, but we can help you find one that is a good fit for you. Visit Fool.com's IRA Center to compare several leading discount brokers by commissions, investment selection, and special offers and bonuses.
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