Vanguard IRA Review

Vanguard? Call me No. 1 Fangirl. For years, I’ve had Vanguard Roth, SEP, and rollover IRAs. As a frugal investor seeking broadly diversified index funds, I’ve got zero complaints. This is Vanguard, founded by John C. “Jack” Bogle, creator of index funds and advocate for small investors everywhere.

But “low-cost” is no longer synonymous with “Vanguard.” Other brokers offer equally inexpensive funds and ETFs. (Heck, Fidelity has mutual funds with $0 expense ratios!) And you can always buy Vanguard’s truly stellar funds through other brokers.

Meanwhile, Vanguard’s website and tools haven’t kept up. For this review, I poked under the hood and I’m sorry to report I can’t recommend Vanguard as the best of the best for those wanting to open an IRA. That said, I’m not moving my money — Vanguard works great for my no-frills, buy-and-hold investing strategy.

Vanguard IRA pros & cons

Andrea shows you the door. The backdoor Roth, that is.

Retirement account types

Like most big brokers, Vanguard offers any flavor IRA you seek, from traditional, Roth and rollover to inherited IRAs (subject to special withdrawal rules), spousal IRAs (for a spouse who doesn’t work) and custodial IRAs (for kids who work — they must have earned income to contribute to an IRA).

» Here’s how to decide between a Roth IRA vs. a traditional IRA.

If your income is too high to contribute to a Roth IRA, you can do a Backdoor Roth at Vanguard, which simply means opening a traditional IRA and then converting that money to a Roth. And people eager to move traditional IRA money into a Roth to lock in tax-free retirement income can rest assured that Roth IRA conversions are available at Vanguard.

If you’re in business for yourself, you can open a single-person SEP IRA at Vanguard. However, if you’re looking for a retirement plan for your employees (e.g. a SIMPLE IRA or SEP IRA for multiple participants), Vanguard’s website will steer you to a different company, Ascensus. Vanguard has exited the small-business plan arena, though Ascensus offers Vanguard funds in its plans.

Account minimum: $0. You can open any Vanguard account without putting any money down. Where things get a little more challenging is if you choose to invest in mutual funds. Most of Vanguard’s mutual funds have a $3,000 minimum (it drops to $1,000 for their target-date funds). Once you’re in, you can contribute much lower amounts. There’s no such hurdle with Vanguard’s ETFs, which you can buy in fractional shares for as little as $1.

Vanguard IRA fees

IRA account fee: $25, but really $0. While Vanguard charges a $25 annual account fee, it’s easy to waive by signing up for e-delivery for statements and other paperwork. Think of the trees, people!

IRA closure and transfer-out fees: $0. Some brokers charge transfer-out fees of $50 or more (looking at you, Merrill, E*TRADE and Charles Schwab). Not so at Vanguard.

Trading fees: Buying and selling any ETFs — whether Vanguard ETFs or another company’s — is free at Vanguard. Trading Vanguard mutual funds is also free. You can even call a broker, rather than DIY-ing it online, to get help placing your trade, all for free as long as you’re trading Vanguard ETFs or mutual funds.

Vanguard also offers about 3,000 mutual funds from other companies with $0 trading fees, aka no-transaction-fee (NTF) funds. But if you want to invest in a non-Vanguard fund that isn’t on that list of 3,000 NTF funds, then you’ll pay $20 per trade if you’ve got less than $1 million in Vanguard funds. The cost drops the more money you’ve got at Vanguard. (See Vanguard’s page on commissions and fees for details on higher-value accounts.)

Keep an eye out for Vanguard’s $50 early redemption fee — you’ll face that if you sell a non-Vanguard mutual fund within 60 days of buying it. Also, be wary of broker-assisted trades: If you trade non-Vanguard ETFs or mutual funds over the phone (rather than doing it online) and your account is worth less than $1 million, then gird yourself for a $25 fee.

Self-directed investment options

Vanguard is oriented towards buy-and-hold investors. Yes, you can trade stocks and options, buy on margin, etc. Buuut… do you want to? On Vanguard’s platform? After testing Vanguard and using it personally for the past 20+ years, I wouldn't recommend it. Vanguard isn’t really for active traders. Even worse news for crypto fans: You actually can’t trade crypto at Vanguard. Not even any bitcoin ETFs here. Anyway, did you really want crypto in your IRA? I didn’t think so. (Though, if you really believe in crypto's future growth, owning it in a Roth could offer a sweet tax break.)

Managed investment options

Vanguard offers a robo advisor and financial advisor service, both with admirably low fees. All of Vanguard’s financial advisors are fiduciaries and don’t receive commissions — here at investor.com we looove that. (Terminology got you down? Here’s more about robo advisors and fiduciaries.)

Vanguard Digital Advisor: This robo-advisor requires a $3,000 minimum, and the fee is 0.15% to 0.20% of assets managed (the first three months are free) — one of the lowest fees among major brokers. Access to a human advisor isn’t included. If you’ve got $25,000 to invest, then $50 a year is the max you’ll pay for the peace of mind that comes with handing over your money to someone else to invest. That’s the cost for an ultra-low-cost all-index portfolio; access to actively managed funds will cost slightly more. There’s an ESG option, too. Keep in mind that robo-advisor fees are for investment management; every investment in your portfolio will also have its own underlying expenses. But this is Vanguard, so those underlying expenses are going to be very, very low.

Vanguard Personal Advisor: This advisor service has a $50,000 minimum and a fee of about 0.30% of assets managed. You get access to financial planning with an advisor, but it’s a group of advisors — not one advisor dedicated to you.

Both of the above services include automated tax-loss harvesting, but only with Vanguard’s two higher-minimum offerings — Personal Advisor Select (minimum: $500,000; fee: 0.30%) and Wealth Management (minimum: $5 million; fee: 0.30%) — do you get a dedicated financial advisor and “tax-efficient retirement strategy.” Wealth Management also offers family legacy planning and other services.

Retirement planning tools

Vanguard offers a slew of quick, easy-on-the-eyes articles and videos to answer your questions about retirement planning and investing. You may need to retire to find time to go through all of the content.

I found it easier to use the website, rather than the mobile app, to find articles and videos. Still, the app is great for checking account balances and making simple transactions. In other words, it’s perfectly fine for an average buy-and-hold investor. For example, it took three easy steps to contribute to my Roth IRA using Vanguard’s app. The app made it easy to pick between contributing for 2023 or 2024, and showed me how much wiggle room I had before hitting the annual maximum.

Vanguard’s retirement planning tools are a mixed bag — some are better than others:

Retirement calculator: I’m not a big fan of the Vanguard retirement calculator. Just one of my beefs: The wording is the opposite of confidence-inspiring. The results say, “You may have $X” and “You could have $Y.” Why so hesitant, Vanguard? Do you not trust your own calculations? Give me a yes or no, thumbs up or down, thankyouverymuch.

Retirement expenses worksheet: Vanguard’s retirement expenses worksheet is basic but easy to use. What I like is: There is one! This worksheet cements the fact that how much you’ll need to save is directly tied to how much you’ll spend. Estimating expenses is a great way to get the retirement-planning party started. Sadly, you can’t take this party with you; the worksheet lives only on the Vanguard website.

Inherited IRA RMD calculator: Inherited an IRA? Run, don’t walk, to Vanguard’s inherited IRA RMD calculator to figure how much money you need to withdraw each year. This is important. Because IRS. You don’t have to be a customer to use this calculator. (Big plus: You can save a PDF of the results.)

Doing an IRA rollover with Vanguard

The hardest part about rolling over your old 401(k) to a Vanguard IRA might be finding the instructions. Once you find the page (on the main page for personal investors, scroll to footer, click “rollovers”), the process is easy and you can do it all online, at least on the Vanguard end. You may have to call the provider who currently has your 401(k) or other plan.

True to its DIY ethos, Vanguard’s online rollover tool is aimed at you doing this yourself. And you absolutely can — the instructions are clear. But if you want handholding, consider Fidelity or Charles Schwab, both of which prominently post phone numbers to connect with a human being for help.

There’s no Vanguard fee for rolling money into Vanguard. But Vanguard doesn’t reimburse for fees the other provider (the one you’re leaving) may charge you. Kudos to Robinhood and others who do reimburse for those fees.

Bottom line

Any DIY investor who loves a good deal — low-cost, highly diversified index mutual funds and ETFs — is likely to love Vanguard as much as I do, not least because of Vanguard’s longstanding ethos of bringing costs down for everyday investors. If you want help investing, their robo advisor is a good deal, too. But if you’re an active trader, or you’re someone who anticipates needing extensive access to customer service or top-notch planning tools, Fidelity or Schwab might be better for you.

FAQs

What is the 2024 IRA contribution limit for Vanguard?

The 2024 IRA contribution limit is $7,000 if you’re under age 50, and $8,000 for those 50 and older. The limit is set by the IRS and applies to the total annual amount of new money an investor is allowed to contribute to an IRA at any broker. If you invest in both a traditional and a Roth IRA in the same year, the total of your combined contributions still may not exceed that $7,000/$8,000 limit. (IRA rollovers aren't subject to these contribution limits.) See “What is an IRA?” for more on IRA contribution and withdrawal rules for 2024.

Can I roll over a 401(k) to a Vanguard IRA?

Yes, you absolutely can roll a 401(k) to a Vanguard IRA. Here’s the two-step process:

1. Open an IRA at Vanguard. If you’re rolling over a traditional 401(k) or similar workplace plan, then you should open a traditional rollover IRA. If you’ve got a Roth 401(k), then open a Roth IRA. If your old workplace plan is a combination of pre-tax and after-tax money (that is, it’s a traditional 401(k) with a Roth option), then you need to open two separate IRA accounts. (A word to the wise: Rolling a traditional 401(k) to a Roth IRA has big tax implications.)
2. Contact your old workplace plan and ask what information they need from you to do a direct, trustee-to-trustee transfer to your new IRA. You want to make sure the rollover is direct so as to avoid tax headaches down the road.

Can I take money out of a Vanguard IRA?

Your Vanguard IRA account is yours and yours alone, which means you can take money out of it anytime you like. But there are retirement account rules that might — and probably should — give you pause:

• If you withdraw money from a traditional IRA before you’re 59½ years old, you’ll likely owe income tax plus a 10% early withdrawal penalty on the amount you withdraw. Here’s the IRS on withdrawals from traditional IRAs.
• If you withdraw your investment earnings from a Roth IRA before you’re 59½, you’ll likely owe income tax plus a 10% early withdrawal penalty on the amount you withdraw.

There are some exceptions to the 10% early withdrawal penalty (see this IRS table). Also, keep in mind that a sweet perk of Roth IRAs is that, if you really need the money, you can always withdraw your contributions — the money you put into the account — any time at all, no tax and no penalty. Just remember to leave investment earnings sitting there till you retire.

What is the minimum investment amount for a Vanguard IRA?

The minimum investment amount for a Vanguard IRA is $0. That is, you can open a Vanguard IRA without putting any money in it upfront.

But that’s not quite the whole story. After you open your IRA, presumably you’ll want to put money into it and hopefully you’ll want to invest that money. (An IRA is an account type; it’s not an investment.) If you choose to invest in a Vanguard mutual fund, you’ll need to pony up $3,000 as an initial investment (you can contribute lower amounts after that). Vanguard target-date funds, however, have an initial investment minimum of $1,000.

Methodology

Our mission at investor.com is to provide Americans with in-depth, unbiased reviews of financial products and services, based on our personal, hands-on testing and data collection. Our ratings are based on this research and on our in-house experts’ deep authority in the field. Brokers and other financial service providers cannot pay for preferential treatment. See more about why readers can trust our analyses.

Our research team conducts thorough testing on a wide range of features, products, services, and tools for U.S. investors. We personally test all available trading platforms and tools for each broker and evaluate them based on multiple variables. All research, writing and data collection at investor.com is done by humans, for humans. Read our generative AI policy here.

For this review of individual retirement accounts, we thoroughly examined all retirement-related accounts and services available to U.S. customers at the broker in question and looked for features important to long-term savers, such as types of accounts available, fees and planning tools. Each broker’s IRA offerings are given a rating on a five-star scale based on this data collection and individual evaluation. Accuracy is of the utmost importance to investor.com, and our data is checked on a rolling basis year-round.

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About the Editorial Team

Andrea Coombes

Andrea Coombes has 20+ years of experience helping people reach their financial goals. Her personal finance articles have appeared in the Wall Street Journal, USA Today, MarketWatch, Forbes, and other publications, and she's shared her expertise on CBS, NPR, "Marketplace," and more. She's been a financial coach and certified consumer credit counselor, and is working on becoming a Certified Financial Planner. She knows that owning pets isn't necessarily the best financial decision; her dog and two cats would argue this point.

Carolyn Kimball

Carolyn Kimball is Managing Editor for Reink Media Group and the lead editor for content on investor.com. Carolyn has more than 20 years of writing and editing experience at major media outlets including NerdWallet, the Los Angeles Times and the San Jose Mercury News. She specializes in coverage of personal financial products and services, wielding her editing skills to clarify complex (some might say befuddling) topics to help consumers make informed decisions about their money.

Blain Reinkensmeyer

Blain Reinkensmeyer has 20 years of trading experience with over 2,500 trades placed during that time. He heads research for all U.S.-based brokerages on StockBrokers.com and is respected by executives as the leading expert covering the online broker industry. Blain’s insights have been featured in the New York Times, Wall Street Journal, Forbes, and the Chicago Tribune, among other media outlets.