There might not be a better way to save for retirement than by opening an IRA. Roth and traditional IRAs offer all the advantages of other retirement accounts like 401(K)s, with more freedom to pick the investments you want to own in your portfolio. But where you open an account affects everything, from what you can invest in, and how much you pay in fees and commissions. Let's take a look at how two popular brokers, TradeStation and E*Trade, compare for IRA accounts.
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Commission prices by investment
Prices matter, but how much they matter depends on how frequently you trade. Both TradeStation and E*Trade allow their clients to trade popular securities for less than $10 per transaction, and offer ample ways to save.
Data source: Company websites.
Both brokers offer volume-based discounts, with E*Trade slashing commissions to $7.99 for investors who make more than 150 trades per quarter. TradeStation's discounts begin at 50 trades per month under its fixed-commission schedule and can go as low as $4.99 per trade for traders in its most active tier.
We'd caution that standard prices aren't everything, however. Some trades qualify for commission-free pricing, and many brokers offer free trades and extra cash just for opening a new account. Learn more about special offers for IRAs to see if you qualify for any extras, bonuses, or freebies.
Fee-free mutual funds and commission-free ETFs
One way brokers differ is in mutual fund selection. Notably, TradeStation and E*Trade have a huge selection of mutual funds, but when it comes to fee-free mutual funds and commission-free exchange-traded funds (ETFs), E*Trade has the clear edge.
Data source:Barron's, company websites and representatives.
Realistically, selection isn't everything. Having 10,000 bad mutual funds isn't as good as having just 10 "good" mutual funds. With that in mind, investors should see if their favorite funds make a broker's list, and if there's an option to invest without paying a transaction fee, load, or commission.
Notably, although TradeStation doesn't have any commission-free choices, its mutual fund transaction fees are about $5.00 lower under its standard pricing structure. Thus, if it isn't available for free at E*Trade, TradeStation would be the lower-priced broker through which to buy a fund.
Minimum deposit requirement for IRA accounts
When it comes to account minimums, these brokers couldn't be more different. TradeStation actually increases its standard $5,000 minimum deposit requirement to $5,500 for IRA accounts. E*Trade waives its $500 minimum for standard accounts to offer no-minimum IRAs.
TradeStation and E*Trade both offer the ability to trade on the go with mobile applications. Image Source: Getty Images.
International stocks and ADRs
If you like investing all around the world, the brokerage you choose could ultimately have a big impact on how you can invest. TradeStation and E*Trade customers are limited to mutual funds, ETFs, and individual stocks that have a ticker you can trade domestically. Neither company currently offers the ability to send a trade to the London or Tokyo exchanges, for example.
Data source: company websites and representatives.
Mobile app reviews
Virtually every broker now offers a mobile app that enables their clients to check their accounts and place trades from anywhere around the world. Here's how each broker's users and customers rated their mobile trading apps, as of Feb. 9, 2017.
Data source: relevant app stores.
Fees on IRA accounts
Keep on the lookout for common fees before you open an account. Some brokers charge annual maintenance fees just for having an IRA account, while others have inactivity fees that are assessed when clients fail to meet certain trading minimums over a specified period.
TradeStation charges an annual IRA account fee of $35. In addition, it charges a monthly minimum activity fee of $99.95 if you do not maintain a balance of at least $100,000, or do not meet minimum trading requirements. Minimum monthly trading requirements include meeting one of the following: 10 round-turn futures and/or futures options contracts, 50 options contracts traded, or 5,000 shares traded.
E*Trade doesn't charge a maintenance or inactivity fee.
TradeStation vs. E*Trade for traditional or Roth IRAs
Depending on how you invest, either broker could be the better place for your IRA. On one hand, TradeStation has two commission structures with deep discounts for high-volume traders, but it doesn't offer as many fee-free funds, and its inactivity fees may turn off savers with smaller IRA accounts. E*Trade offers a laundry list of commission-free funds and doesn't charge maintenance or inactivity fees on Roth and traditional IRAs, but rapid traders may pay more in commissions with its fixed-rate commission prices.
The truth is that every broker caters to a particular subset of the market, and for that reason, there isn't a perfect brokerage for every type of investor. It's all about how a broker's pricing and capabilities fit within the specific needs of your portfolio.
To be clear, The Motley Fool does not endorse any particular brokerage, but we can help you find one that's a good fit for you. VisitFool.com's IRA Centerto compare several brokers all on one page, and see if you qualify for any special offers for opening a new account.
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