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Brokerage account vs. Roth IRA: How do they compare?

Key differences in contribution limits, investment options and tax advantages.

Brokerage accounts and Roth individual retirement accounts (IRAs) are two investment account options for individuals looking to grow their money.

However, these two accounts vary in terms of tax structure, contribution limits and the available investment options. Find out more about how these accounts differ to see which is right for you.

Brokerage account vs. Roth IRA: A quick comparison

Brokerage account vs. Roth IRA: Which one’s better?

Brokerage accounts and Roth IRAs are both accounts in which individuals can invest in a range of assets, but their tax structures differentiate these accounts the most.

When to consider a brokerage account.

A brokerage account may be a good option if you:

  • Maxed out your IRA contributions. Many individuals turn to a brokerage account after maxing out an IRA if they have more money to invest and want a wider range of options than their 401(k) offers.
  • Want unrestricted access to your money. Unlike Roth IRAs, which have withdrawal restrictions, brokerage account funds are accessible at any time.
  • Want to invest in assets not available in a Roth IRA. While the law allows all assets in a Roth IRA except life insurance and collectibles, some IRA providers restrict assets that may otherwise be available in a taxable brokerage account. For instance, while investments such as cryptocurrency and options are allowed in an IRA, many brokers don’t offer access to these assets. You’re more likely to get access to these assets through a brokerage account.(1)

When to consider a Roth IRA

Consider a Roth IRA if you:

  • Want to save for retirement and enjoy tax benefits. Qualified withdrawals from a Roth IRA are tax-free.
  • Have $7,000 to invest. Contribute up to $7,000 in total across all your Roth IRAs and traditional IRAs in 2024.
  • Want matching contributions. Robinhood offers IRA matches. Robinhood will match up to 3% on IRA contributions when you subscribe to Robinhood Gold or 1% when you don’t.

The similarities between a brokerage account and a Roth IRA

Brokerage accounts and Roth IRAs differ most in their tax structure, where brokerage account earnings are taxable, and Roth IRA earnings are not.

Brokerage accounts and Roth IRAs share these similarities:

  • Trading platforms. If you open an IRA with a broker, you’ll have access to the same trading platform and tools available to taxable brokerage accounts with the same broker.
  • Investment options. Invest in stocks, bonds, exchange-traded funds (ETFs), mutual funds and more in IRAs and brokerage accounts.

Brokerage account vs. Roth IRA: Where to open these accounts

Brokerage accounts and Roth IRAs are available at many banks, brokers and other financial institutions. Most brokers that offer brokerage accounts typically offer IRAs as well. The best stock trading apps offer brokerage accounts, Roth IRAs and other account types, letting you invest for different goals all under one roof.

Alternatives to brokerage accounts and Roth IRAs

While brokerage accounts and Roth IRAs are great options to trade and invest, other accounts may be more appropriate depending on your goals:

  • Traditional IRA. Consider this type of IRA if you want to save for retirement and benefit from a tax deduction in the year in which you make your contributions. Since you pay taxes on your money when you begin taking withdrawals, a traditional IRA may be a good option if you think you’ll be in a lower tax bracket at retirement. The best IRA accounts offer flexible investment options, low fees and research tools and educational resources to help you invest.
  • High-interest savings accounts. Consider a high-yield savings account if you want easy access to cash savings for an emergency fund.

Compare brokerages that offer IRA accounts

Narrow down top brokers by annual fee, stock trade fee and more to find the best for your budget and financial goals.

1 - 6 of 6
Brokerage accountRoth IRA
Where to openRegistered broker-dealersBrokers, banks or other financial institutions
Investment optionsAll assets are permitted inside a brokerage account

The broker determines available investment options

All assets are permitted inside an IRA except collectibles and life insurance

The IRA custodian determines available investment options

Income limitsNoneIndividuals filing as single and head of household.
Contribute up to $7,000 if your 2024 modified adjusted gross income (MAGI) is under $146,000; individuals with a MAGI above $146,000 can contribute a reduced amount until contributions are phased out upon reaching a MAGI of $161,000

Married couples filing jointly.
Contribute up to $7,000 each if your MAGI is under $230,000 per year; married couples with a MAGI above $230,000 can contribute a reduced amount until contributions are phased out upon reaching a MAGI of $240,000

Contribution limitsNone$7,000 for those under age 50

$8,000 for those age 50 and over

Eligibility requirementsNoneNo age requirements, but you need earned income to contribute

Income limits apply

Who can contributeAnyoneAnyone with earned income, so long as their income doesn’t exceed a certain threshold
Tax advantagesNoneEarnings grow tax-free

Qualified withdrawals are tax-free

Withdrawal restrictionsNoneWithdrawals of earnings before age 59.5 from a Roth IRA you’ve held less than five years will incur taxes and penalties (exceptions apply)

Withdrawals of earnings after age 59.5 from a Roth IRA you’ve had more than five years will be subject to taxes but not penalties

Required minimum distributions (RMDs)NoneNone
FDIC insuranceBrokerage accounts that contain bank deposits such as certificates of deposit (CDs), savings accounts or money market accounts are insured up to $250,000Roth IRAs that contain bank deposits such as CDs, savings accounts or money market accounts are insured up to $250,000
SIPC insuranceSIPC insures cash and securities up to $500,000 at SIPC-member brokersSIPC insures cash and securities up to $500,000 at SIPC-member brokers
Pros
  • Flexible investment options
  • No contribution or income limits
  • No withdrawal restrictions
  • No RMDs
  • Tax-free growth and qualified distributions are tax-free
  • No RMDs
  • Withdraw contributions at any time without tax or penalty
  • Flexible investment options
Cons
  • No tax advantages
  • Any income or earnings are taxed when realized
  • Must hold account for five years to withdraw funds penalty-free
  • Can’t contribute above a certain income
  • Contribution maximums limit how much you can invest annually
Learn more about Roth IRAs
Name Product Minimum deposit Annual fee Retirement account types
SoFi IRA
Finder Score: 4.2 / 5: ★★★★★
SoFi IRA
$0
$0 per month
Roth, Traditional, SEP, Rollover
Trade stocks, options, ETFs, mutual funds and alternative asset funds, with no-cost financial advice and a no-cost robo-advisor.
JP Morgan Personal Advisors
Finder Score: 3.3 / 5: ★★★★★
JP Morgan Personal Advisors
$25,000
0.6% on balances of $25,000 to $249,999

0.5% on balances of $250,000 to $1,000,000

0.4% on balances of $1,000,000+
Roth, Traditional
Ongoing access to an advisory team with personalized, expert-built portfolios. Provider terms & conditions apply
Robinhood Retirement
Finder Score: 4.4 / 5: ★★★★★
Robinhood Retirement
$0
0%
Roth, Traditional, Rollover
Boost your retirement savings with 1% in matching funds on every dollar contributed, transferred or rolled over to a Robinhood IRA.
Vanguard IRA
Finder Score: 4 / 5: ★★★★★
Vanguard IRA
$0
0.3%
Roth, Traditional, SEP, Spousal, Rollover
Save for retirement with Vanguard's commission-free stocks, ETFs and 160+ no-transaction-fee mutual funds.
Interactive Brokers IRA
Finder Score: 4.5 / 5: ★★★★★
Interactive Brokers IRA
$0
N/A
Roth, Traditional, SEP, Rollover
Choose from 6 IRA account options, with access to stocks, ETFs , futures, currencies and more.
Acorns Later
Finder Score: 4.2 / 5: ★★★★★
Acorns Later
$0
$3 per month
Roth, Traditional, SEP
Automatic ETF investing with as little as $5. Annual fee of $3, $5 or $9 per month depending on subscription.
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Paid non-client promotion. Finder does not invest money with providers on this page. If a brand is a referral partner, we're paid when you click or tap through to, open an account with or provide your contact information to the provider. Partnerships are not a recommendation for you to invest with any one company. Learn more about how we make money.

Finder is not an adviser or brokerage service. Information on this page is for educational purposes only and not a recommendation to invest with any one company, trade specific stocks or fund specific investments. All editorial opinions are our own.

Frequently asked questions

Is it better to withdraw from an IRA or a brokerage account?

Withdraw Roth IRA contributions at any time tax- and penalty-free since you already paid taxes on this money. However, withdrawing earnings before age 59.5 may trigger a 10% early withdrawal penalty. Meanwhile, withdraw money from a brokerage account at any time without penalty. However, you will have to pay capital gains tax on realized gains.

What is the biggest disadvantage of a brokerage account?

The biggest disadvantage of a brokerage account may be its lack of tax advantages.

Are brokerage accounts worth it?

Brokerage accounts may be worth it if you want to invest outside your retirement savings or have more money to invest than what’s allowable in an IRA each year.

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