TD Ameritrade: How Good Are Its Retirement Services (AMTD)?

TD Ameritrade (AMTD), founded in 1975 and headquartered in Omaha, Neb., has more than six million funded client accounts with $711 billion in total client assets. If you’re thinking about placing your retirement assets with TD Ameritrade, here’s what you need to know.

Product Offerings

For retirement savings, TD Ameritrade offers traditional IRAs, Roth IRAs and rollover IRAs. For small business owners, TD Ameritrade has individual 401(k)s, SEP IRAs, SIMPLE IRAs, business 401(k)s and pension or profit plans. TD Ameritrade will help you transfer your IRA from another provider or roll over your 401(k) from a former employer. For retirement income, TD Ameritrade offers variable and fixed annuities

Investment Selection

TD Ameritrade customers can invest in stocks, options, mutual funds, ETFs, futures, forex (FX), bonds and certificates of deposit (CDs). TD Ameritrade does not have its own mutual funds or ETFs, but it offers access to 13,000 mutual funds from other companies, including hundreds of no-transaction-fee funds, and more than 100 commission-free ETFs from top brands such as iShares and Vanguard, T. Rowe Price, Charles Schwab & Co. and Fidelity Investments.

TD Ameritrade does not have its own target-date funds, but it offers access to ones from other fund families, such as Vanguard, Fidelity, T. Rowe Price and Schwab. TD Ameritrade’s five Amerivest portfolios offer professionally managed, diversified portfolios of mutual funds or ETFs with different asset allocations for different levels of financial goals. 

Professional Advice

For clients who meet minimum asset thresholds, TD Ameritrade offers professional advice through its Amerivest Portfolios. Amerivest, a registered investment advisor affiliated with TD Ameritrade, will professionally manage and rebalance your portfolio of ETFs or mutual funds. In addition, AdvisorDirect connects TD Ameritrade customers with independent registered investment advisors to receive fee-based comprehensive financial planning and wealth management services, including investment, tax, retirement and estate planning advice.

Services provided by registered investment advisors must be in your best interest, not the advisor’s. (For more, see Ethical Standards You Should Expect From Financial Advisors.) Note that the new fiduciary rule requires this of all those providing retirement advice (see The Fiduciary Rule: What It Means for Investors).

Account Minimums and Investment Minimums

TD Ameritrade has no minimum deposit requirement to open an account. CDs have a minimum initial investment of $2,000, and options trades require a $2,000 minimum deposit. Investment minimums for particular mutual funds vary.

With thousands of investments to choose from, you’ll most likely find funds with minimums you can manage. For example, you could invest in a Vanguard target-date fund with a $1,000 minimum. If you want the higher level of service associated with personalized investment advice, you’ll need to have at least $25,000 in assets with TD Ameritrade. 

Fees

Online stock trades with TD Ameritrade cost $9.99 each. There is a $25 flat fee for Treasuries purchased at auction; the fee for other bonds and CDs is calculated on a net yield basis. Options trades are $9.99 plus $0.75 per contract. Futures and options on futures cost $2.25 per contract plus exchange and regulatory fees. TD Ameritrade offers more than 100 commission-free ETFs; other ETFs cost $9.99 per online trade. Broker-assisted trades have a $49.99  commission. For forex, non-commission currency pair trades are free; others depend on the currencies being traded.

You can buy and sell hundreds of no-transaction-fee mutual funds from other mutual fund companies without paying any commission. These funds have a $49.99 short-term redemption fee if you sell your holdings within 180 days of purchase. Load funds don’t have commissions, but no-load funds have a $49.99 commission. 

Amerivest-managed portfolios have an annual net advisory fee of 1% for your first $250,000 or portion thereof, 0.70% for your next $250,000 or portion thereof and 0.55% for all assets above $500,000. Finally, there is a $75 fee to transfer all assets out of your TD Ameritrade account.

Expense Ratios

Expense ratios vary by fund. The ETFs that TD Ameritrade offers without commissions have rock-bottom expense ratios of 0.05% to 0.50% for stock funds, 0.07% to 0.76% for bond funds and 0.09% to 0.83% for international funds. Because TD Ameritrade offers access to so many mutual funds and ETFs from so many providers, you’ll be able to find funds with all levels of expense ratios.

Reputation

J.D. Power’s 2015 Self-Directed Investor Satisfaction Study, which surveyed more than 3,700 investors who make investment decisions without help from a personal financial advisor, gave high ranks to TD Ameritrade across the board. The brokerage received a four out of five (with five being the highest rating) in every category: overall satisfaction, customer interaction with the company, usefulness and ease of accessing account information, trading charges and fees, information resources (research, analysis and tools) and product offerings. TD Ameritrade performed almost as well as Charles Schwab, Vanguard and Fidelity – the top performers in this survey. 

Safety

Each TD Ameritrade client has up to $152 million in asset protection under two different types of coverage. Brokerage account securities (stocks, bonds, Treasury securities, certificates of deposit, mutual funds, money market mutual funds and certain other investments) are covered by the Securities Investor Protection Corporation (SIPC), a nonprofit organization that will cover the loss of up to $500,000 in securities, including up to $250,000 in cash, if the firm goes bankrupt and your assets go missing.

TD Ameritrade also carries $149.5 million per customer in additional protection for securities and $2 million per customer in additional protection for cash, with a $500 million aggregate limit over all customers. Furthermore, any cash you hold through TD Ameritrade’s Online Cash Services is FDIC insured and can be deposited with two different banks if you need to protect more than $250,000. (For more, see Are Your Bank Deposits Insured? and Mutual Funds Are Not FDIC Insured: Here Is Why.)

In addition, because any mutual fund shares you purchase must be held by a third-party custodian, neither TD Ameritrade nor its creditors can take ownership of them if the brokerage runs into financial problems. TD Ameritrade is a member of the Financial Industry Regulatory Authority (FINRA). (For more, see FINRA: How It Protects Investors.)

If your account loses money because the market declines or you make poor investment decisions, you’re out of luck – there’s no insurance for that, no matter which brokerage holds your money. But if your account loses money because of unauthorized activity, you’ll be reimbursed under TD Ameritrade’s Asset Protection Guarantee. (For more, see Are My Investments Insured Against Loss?)

The Bottom Line

TD Ameritrade has a solid reputation for retirement services. It’s great for investors who value commission-free ETF trades, and those who are just starting out will particularly appreciate the ability to get started saving for retirement with no account-opening minimum.

With services for everyone from beginners to experienced investors, most people planning for retirement will find what they need at this brokerage. (For more, see Online Portfolio Management, DIY or Fee-Based Financial Advisor: Which Is Right for You?)