When it comes to saving for retirement, every little bit helps. Fortunately, if a little is all you can afford this year, you have more investment choices than ever, especially if you are thinking in terms of an Individual Retirement Account (IRA). An increasing number of brokerages, investment companies, banks, and online services offer IRAs, both the traditional type and the Roth version with no initial outlay: a minimum deposit of zero, in other words. (Unfortunately, you do have to go through private-sector custodians to establish an IRA now, as the government's MyRA program was discontinued in September 2018.)
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 is $6,000 or $7,000 if you're over 50 (for 2019). And part of it is niche marketing. While people of all ages can and do invest in IRAs, many are started by twentysomethings in their first jobs, making their first real money. Get 'em 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.
But, as with all things, it's important to read the fine print. These accounts may carry higher maintenance fees or trading commissions; they may also ding you with inactivity and exit fees. They may not require a certain size initial deposit but will require you to make deposits on a regular basis (say, monthly) thereafter. They 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; the other, 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; other funds require even more. (The mutual fund company, to its credit, makes this quite clear in its marketing materials.)
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. Some examples, in alphabetical order:
- E*TRADE, the discount online brokerage, offers both traditional and Roth IRAs with no account minimums.
- Fidelity Investments, the major financial services company, not only has no account minimums or fees, but it also waives minimum investment requirements on some of its mutual funds for traditional and Roth IRAs – if you sign up for regular, automatic contributions.
- 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 if you commit to automatic monthly contributions of $100.
- TD Ameritrade offers traditional and Roth IRAs with no minimum investment requirements. It frequently runs promotions, like commission-free trades for 60 days and up to a $600 cash bonus for new accounts
- TIAA-CREF has two plans with no minimum investment requirements, its Investment Solution IRA and Brokerage Services IRA.
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 $150. 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 like Betterment, sometimes called robo-advisors, 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 robo-advisor take charge of your funds. But the reality is the investment services offered by bricks-and-mortar brokerages such as Merrill use automated programs too, especially for smaller and no-minimum accounts.
The Bottom Line
IRAs were created to help the individual investor – the little guy or gal – 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 to open an account with, 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 for a regular, taxable account.