Free IRA Accounts
Why pay maintenance or inactivity fees for an IRA when some brokers don’t charge them? Three big players in the free-IRA marketplace are Scottrade, E*Trade and TD Ameritrade. All have easy online account opening and maintenance facilities. Each gives you FDIC insurance up to $250,000. You must supply your Social Security number (or other tax id) and name a beneficiary when you open an IRA with any of them. Commissions and minimum initial amounts vary by broker.
With over 500 branch offices nationwide, Scottrade is the natural choice for IRA customers who want to have in-person contact with a representative. The minimum opening investment is $2,500. Commissions are $7 per online trade for stocks and ETFs, though you’ll pay $32 if you make a broker-assisted trade. If you trade options online, tack on an additional $1.25 per contract, and be ready to fork over $17 for exercises and assignments.
There is no charge for no-load, no-transaction fee (NL, NTF) mutual fund purchases, sales or exchanges. Scottrade charges $17 for transactions involving other types of mutual funds, in addition to any charges slapped on by the fund provider. Rates vary for fixed income trades depending on the instrument. For example, the commission on listed corporate bonds is $35 plus $3 per bond, with a minimum $1,000 face value and increment. With other fixed income instruments, Scottrade might charge a markup when it acts as the principal, and it might make you pay for special services. The liquidation fee for a unit investment trust is $50.
Scottrade will pay you $100 when you roll over an existing IRA from another broker and refund any transfer fees charged by your current broker. It offers a nice roster of free services when you open an account, including:
Get up to $2000 when you open new account or add funds to existing account.
- Real-time news updates
- Real-time quotes and charts
- Third-party research form Morningstar, S&P and Market Edge
- Interactive retirement calculators
- Mobile trading
- Access to extensive Knowledge Center resources
- Personal education and special events at branch offices
- Cost-basis reporting
- Access to more than 14,500 mutual funds
E*Trade has only 28 branches nationwide, so it’s geared to the strictly online user. The basic trading fee is $9.99 per transaction, though if you place more than 150 trades a month, your fee drops to $7.99. Options cost an additional $0.75 per contract. The fee for futures contracts is $2.99 and FOREX trade fees are charged through the bid-ask spread. The minimum deposit is $500. You can trade bonds for a buck each. If you perform a broker-assisted trade, you’ll have to cough up an additional $25. The margin rate for accounts with balances below $25,000 is 8.44 percent, but the rate declines stepwise to 3.89 percent for the largest accounts.
There is no cost for trading NL, NTF mutual funds. Otherwise, the fee is $19.99 plus whatever load or fee the mutual fund provider extracts. Once again, broker assistance will cost you $25. Your IRA will also have to shell out 25 bucks if you remove an excess contribution, recharacterize a contribution or take an early distribution -- that is, before age 59 1/2. E*Trade nickels and dimes you with all sorts of miscellaneous fees, for items such as outgoing account transfers, paper statements, and short-term ETF trades -- up to $19.99 if you round-trip an ETF within 30 days, even if its no-load.
E*Trade offers the same basic service roster as the one provided by Scottrade. You can access about 7,600 mutual funds, of which 1,100 are NL, NTF. They offer several high-tech trading platforms
that can be useful for the active trader. E*Trade offers a promotional inducement of $600 to open an IRA account.
Etrade Promotion Offer
Trade free for 60 days + get up to $600.
TD Ameritrade has 126 retail branches. You can place stock and ETF Internet trades with TD Ameritrade for $9.99. If you use their automated phone system, the fee skyrockets to $34.99. But, at $44.99, the fee really explodes for broker-assisted trades. If they fill an order in separate lots over two or more days, you’ll get charged for each lot. So you may want to specify all-or-none trades when dealing with TD Ameritrade. The brokerage offers some commission-free ETFs. Options require an additional $0.75 per contract, and exercises and assignments will cost you $19.99. Bonds trades cost a flat fee of $25, futures are $2.25 per contract and FOREX commissions depend upon the currency pair. TD Ameritrade doesn’t require a minimum deposit unless you are trading options or on margin, in which case the ante is $2,000.
TD Ameritrade lets you access more than 13,000 mutual funds. You don’t pay a commission unless the mutual fund is not part of the NTF universe, in which case you’ll receive a $49.99 haircut.
That’s also the amount you’ll hand over if you sell an NTF fund within 180 days. TD Ameritrade devotes a section of its website to retirement planning, but aside from a few tools, the material
is the common boilerplate you’ll find at just about any brokerage, free or not.
TD Ameritrade Promotion Offer
Trade free for 60 days + get up to $600.
This article was updated on 7/1/2015.