When it comes to saving for retirement, every bit helps—however little. This is why it’s good that an increasing number of brokerages, investment companies, banks, and that online services offer individual retirement accounts (IRAs), both the traditional type and the Roth version, with no initial minimum deposit.
After all, until you’ve got that account open, you can’t start putting even small amounts into it, now can you?
- Individual retirement accounts (IRAs) allow you to put away money for retirement in a tax-advantaged way.
- No-minimum IRAs are now available from a variety of financial institutions.
- No-minimum IRAs may come with certain requirements, such as regular monthly deposits.
- Automated investment services, also known as roboadvisors, can be a convenient way for beginners to start saving for retirement.
IRAs With No Minimum Deposit: Why?
Why are these financial institutions being so good to you? Part of it is pragmatic. Setting a five-figure account minimum makes no sense when the maximum a client can invest in an IRA annually, for both 2021 and 2022, is $6,000 (or $7,000 if you’re over 50).
Another part is niche marketing. While people of all ages can and do invest in IRAs, many are started by twentysomethings in their first jobs who are making their first real money. Get them while they’re young, the institution figures. Small accounts grow into bigger accounts, especially when the money grows tax-deferred in a portfolio with a long-term investment horizon.
Read the Fine Print
However, as with all things, it’s important to read the fine print. These accounts may carry higher maintenance fees or trading commissions and ding you with inactivity and exit fees. They may not require a certain size initial deposit but obligate you to make deposits on a regular basis (say, monthly) thereafter. They also may demand all transactions be done online or records kept electronically—not great if you’re the I-like-to-peruse-paper-statements type.
Also, not needing a minimum sum to open an account is not the same as not needing a minimum to invest. Yes, we know that sounds like a distinction without a difference, but one refers to the vehicle for holding assets, while the other refers to the assets themselves.
For example, Vanguard technically lets you open an IRA with an account minimum of zero. However, you need at least $1,000 to invest in its mutual funds, the Vanguard Target Retirement Funds and Vanguard STAR Fund, and other funds require even more. (The mutual fund company, to its credit, makes this quite clear in its marketing materials.)
Although you can open an IRA without a deposit, there will likely be a minimum amount you must put in before you can begin to invest in the IRA’s assets.
No-Minimum IRAs at Mutual Funds and Brokerages
Many mutual fund companies and brokerage firms require a minimum initial investment, such as $2,500 or $3,000, for most of their accounts. However, they will often waive that requirement—or offer ways to get around it—in the case of IRAs. Here are some examples, in alphabetical order:
- Fidelity Investments, the major financial services company, not only has no account minimums or fees, but also waives minimum investment requirements on some of its mutual funds for traditional and Roth IRAs.
- Merrill Edge has no minimum initial funding requirements for its retirement accounts. If investors set up an account with its parent, Bank of America, regular automatic transfers between bank and brokerage are also free and especially easy.
- Charles Schwab waives its usual $1,000 minimum for traditional and Roth IRAs.
- TD Ameritrade offers traditional and Roth IRAs with no minimum investment requirements. It frequently runs promotions, such as commission-free trades for 60 days and cash bonuses of up to $600 for new accounts.
- TIAA-CREF has no minimum investment requirements for IRAs.
No-Minimum IRAs at Banks and Credit Unions
Don’t forget your local bank or credit union or their online counterparts. Many offer IRAs with no, or very low, minimums. For example, Ally Bank offers certificates of deposit for traditional and Roth IRAs with no minimum investment requirement. If you already have an IRA, it will credit other firms’ transfer fees up to $75. PNC Bank also has no-minimum IRAs, and PenFed Credit Union offers them with minimums as low as $25.
No-Minimum IRAs at Automated Investment Services
Automated investment companies such as Betterment, sometimes called roboadvisors, can be convenient for beginners who want to start investing in an IRA. Betterment has no minimum deposit, and one of its competitors, Wealthfront, now offers first-time investors a $500 minimum deposit for low-cost index funds.
You may feel a little leery of letting a roboadvisor take charge of your funds. However, the reality is that the investment services offered by bricks-and-mortar brokerages such as Merrill use automated programs too, especially for smaller and no-minimum accounts.
Does the IRS Have a Minimum Amount for an IRA?
No. The IRS does not have any rules around minimum account balances or contributions. Plan providers, however, may.
Why Are IRA Contributions Limited Each Year?
Because retirement accounts are given special tax advantages, the IRS puts contribution caps so that wealthier individuals do not take advantage of this fact and benefit more from them than the average American.
What Are Required Minimum Distributions (RMDs) on IRAs?
Required minimum distributions (RMDs) require IRA holders age 72 or older to withdraw a certain amount from their IRAs each year. This is meant so that individuals must ultimately pay the deferred income tax liability on contributions and gains inside the retirement account.
The Bottom Line
IRAs were created to help the individual investor save for retirement. If you have any money at all to put into an IRA this year, chances are that you can find a good home for it, and with little or no mandatory outlay. If these zero-minimum accounts seem too bare-bones for you, or you already have a four-figure sum with which to open an account, explore the next step up at the above-mentioned institutions or other places. Even if a bank or brokerage does require a minimum to open an account, it’s often lower for an IRA than it would be for a regular, taxable account.