E*TRADE IRA Review

Confession time: E*TRADE wasn’t my first choice for an IRA when I set up a trading account years ago. But today, thanks to a series of banking industry acquisitions and consolidations involving ShareBuilder (my original brokerage), Capital One Investing and, most recently, Morgan Stanley, I have a total of three E*TRADE accounts — a regular taxable investment account, a Roth IRA and a traditional IRA.

So far my arranged marriage to E*TRADE is working out: Picture a slo-mo soft-focus montage while I giddily trade fake money in my E*TRADE paper trading account (it’s one of the few brokers that offer this feature) and pore over the broker’s sophisticated retirement planning tool while swirling “Beautiful Mind”-style numbers float around.

But the best may be yet to come thanks to one unique IRA offering: the E*TRADE Complete IRA. This no-fee retirement account is designed specifically to help navigate money needs in the future (aka: when you’re ready to spend the money you’ve saved and invested for retirement) by streamlining the IRA withdrawal process. Sorry youngs, it’s only available to those age 59½ or older. (See more details below.)

E*TRADE IRA pros & cons

Retirement account types

E*TRADE offers the full range of IRAs customers might need. On top of the standard Roth, traditional and rollover IRAs, E*TRADE serves business owners with specialty IRAs (SIMPLE and SEP IRAs) and parents of income-earning kids (E*TRADE IRA for minors) — products not all brokers offer.

By far the most unusual offering is the E*TRADE Complete IRA. It’s essentially a hybrid IRA/bank account that streamlines withdrawals (aka “IRA distributions”) by providing easy access to your savings via a debit card, checks or electronic bill payments. This solves the problem of waiting days for settlement to get access to your cash.

E*TRADE Complete IRA has no minimum withdrawal requirements. And the broker makes it easy to report account distributions on your taxes by automatically generating IRS Form 1099-R on withdrawals. (Remember, you’ll still be on the hook for any federal and state income taxes because they are not withheld from the payments you receive.)

Good to know: The E*TRADE Complete IRA is only available to those 59½ or older, which is the age at which the IRS allows people to dip into their retirement savings without paying an early withdrawal penalty.

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

E*TRADE IRA fees

Keeping IRA fees to a minimum will help you reach your savings goals faster. E*TRADE $0 trading commissions on stocks, ETFs and mutual funds and minimal IRA account-related costs (no mutual fund early redemption fees here!) make it easy to keep more of your money invested in the market where it can grow.

That’s not to say that you won’t pay any fees in an E*TRADE IRA. All mutual funds charge a management fee, expressed as a percentage and disclosed in the fund prospectus. The exception is Fidelity ZERO index mutual funds, which I gush about at length in my Fidelity IRA review. And investors who opt to have E*TRADE help manage their IRA pay a 0.30% to 1.24% portfolio management fee depending on the level of service and customization chosen. (See more under “Managed investment options” below.)

The few fees you may encounter with an E*TRADE IRA aren’t egregious when compared to other brokers. Outgoing wire transfers cost $30. There is no charge for partial transfers out of an IRA, but a $75 full transfer-out fee applies, which I assume E*TRADE uses to dab its tears upon a customer’s departure. Broker-assisted trades cost $25. And the $2 quarterly paper statement fee is waived on retirement accounts.

Self-directed investment options

The Power E*TRADE streaming trading platform is a data-lover’s delight. For me, it’s a bit much. However, if you dig around the platform you’ll stumble across some very DIY-friendly tools to help make sense of the thousands of IRA investment options. A few of my favorites:

Paper trading: E*TRADE is one of a handful of brokers that offer paper trading, giving you a cool $100K to test your investing acumen without putting real dollars from your retirement savings at risk. It’s set up similarly to the Power E*TRADE platform, allowing you to watch in horror as your impulse purchase of GameStop shares toss and turn in near real-time (data is at a 15-minute delay). This might be my all-time favorite toy.

All-Star Mutual Funds and ETFs Lists: E*TRADE offers roughly 6,000 no-transaction-fee mutual funds (NTFs) and more than 3,000 exchange-traded funds (ETFs) — an overwhelming number of potential investments. Its All-Star Lists make the task of researching investments more manageable. The curated list of 200-plus mutual funds and roughly 150 ETFs span asset categories and include domestic large-, mid- and small-cap, international, fixed-income and sector funds and ETFs.

According to E*TRADE, funds that make the All-Star list “compare favorably against their peers based on historical returns, risk, expenses, manager tenure, style consistency, and asset size.” Further research on each is just a few clicks away.

Thematic investing: To drill down even further into potential IRA investments, I like using E*TRADE’s thematic investing research. (Other brokers offer similar tools.) These are essentially pre-built screens that break down the broker’s universe of ETFs by specific sectors, niche industries, trends and other themes. This allows investors to get exposure to specialty areas. Among the 40 categories are “Hedging with gold,” “Emerging economies,” “Gamers,” “Artificial intelligence,” and a slew of ESG-focused themes like “Clean energy,” “Climate sustainability” and “Diversity, equity and inclusion.”

Prebuilt mutual fund and ETF portfolios: If you’re a DIY investor but want a hand setting up the bones of a diversified portfolio, this tool offers an instant jump start. Start by choosing from four strategies based on your risk tolerance — conservative, moderate, income or agressive — then choose how much you want to invest in the recommended portfolio. E*TRADE automatically allots the correct amount to match the target allocation and executes the buy order for $0. (Investment minimums do apply, however. More on that in a moment.)

E*TRADE’s prebuilt portfolios sound a lot like a managed investment product, right? Well, it’s not. Ongoing portfolio management is not included. Once you make the initial investment, E*TRADE does not automatically rebalance your portfolio to keep it aligned with the target asset allocation. Customers who want ongoing management must upgrade to one of E*TRADE’s Core Portfolios managed investment options and pay the associated fee. (See below for more.)

E*TRADE isn’t the only broker that offers prebuilt portfolio recommendations. I test-drove Robinhood’s portfolio reccs, but much prefer E*TRADE’s offering for two reasons: It offers the choice between an ETF or mutual fund IRA portfolio (Robinhood doesn’t offer mutual funds), and E*TRADE gives customers the option to swap similar investments for each asset class within the recommended portfolio. (Robinhood doesn’t offer any customization.)

However, those with smaller IRA balances will find Robinhood’s $20 investment minimum much easier to handle than E*TRADE’s $500 minimum initial investment in a prebuilt mutual fund portfolio and $2,500 minimum for its prebuilt ETF portfolio.

Fractional shares: Unfortunately for IRA investors with smaller balances, E*TRADE does not offer fractional shares of stocks. E*TRADE does, however, allow customers to reinvest dividends. And fund investors can set up automatic investments in $25 increments in eligible mutual funds and ETFs. Stock investors who want to inch into equity positions are better served by Fidelity or Charles Schwab, both of which offer fractional shares.

» Another E*TRADE opinion: For a deep dive into all the things the trading platform can do, check out our review of E*TRADE over on StockBrokers.com.

Managed investment options

Morgan Stanley’s acquisition of E*TRADE in 2020 expanded the managed investment options available to customers. However, there is still an electronic disconnect: Only one managed investment option — Core Portfolios — is accessible through the E*TRADE platform. Morgan Stanley’s wealth management services (including the broker’s separate suite of managed portfolios and access to financial planning) are run through Morgan Stanley’s platform. E*TRADE customers can’t even get through the door without requesting a phone call from a Morgan Stanley financial advisor. (Ugh.)

For this review, I’ll focus on E*TRADE’s Core Portfolios offering. Like all robo advisor services, Core Portfolios is a fully automated portfolio of ETFs chosen based on a questionnaire about your savings and investment goals and risk tolerance. I like that there is some flexibility to adjust a portion of your portfolio to include socially responsible investments (SRI or ESG). Investors can also opt for smart beta ETFs, which is a more active index investing option. E*TRADE also shows you value projections over different timeframes under different market conditions (no guarantees!) and makes it easy to adjust the holdings by updating your risk profile.

What’s different about Core Portfolios versus E*TRADE’s free prebuilt portfolios (highlighted under “Self-directed investment options above) is that ongoing management is included. Core Portfolios are automatically rebalanced over time, saving you the hassle of moving around your money to keep your investments aligned with the target asset allocation goal.

Of course, that comes at a cost. E*TRADE charges a 0.30% management fee annually for its Core Portfolio service. (Math moment: That’s $21 annually if you have $7,000 in your IRA; $600 in fees in a $200,000 portfolio.) The $500 minimum investment is a lot lower than the $2,500 required to invest in an E*TRADE prebuilt ETF portfolio, which puts Core Portfolios in reach of IRA investors who want a set-it-and-forget-it solution.

When it comes to low-fee managed investment options, I prefer Schwab’s Intelligent Portfolios (no management fee, but there’s a $5,000 minimum) or Fidelity Go (free management on balances under $25,000, 0.35% on higher amounts).

Retirement planning tools

Dear editor: I blame E*TRADE’s retirement planning calculator for missing my filing deadline. It’s both highly addictive, and hella hard to find after you click away. (For future reference, follow these breadcrumbs: Click on “Markets & Ideas” then “Planning Tools” in the sub-nav and finally “Plan for Retirement.”)

Editor's note: A likely story. I'm watching you.

E*TRADE’s retirement planning calculator shows whether your current savings and investments are adequate to fund your golden years and lets you adjust the inputs to see how to make up for any shortfalls. It’s complex (awesome for getting the most accurate calculations) but blessedly has built-in shortcuts to let you do things like updating your spending needs or pulling in other E*TRADE accounts.

If you’ve spent any time with other retirement calculators, you’ll appreciate that E*TRADE lets you include other sources of income (from rental property, side hustles, annuities, etc.) in its calculations. And lastly, it lets you play with the numbers by adjusting your retirement age, income needs, and current savings rate to calculate a “Play Zone Scenario” that quashes any dreams you I have about jetting off to live a carefree life in an Italian palazzo starting next week.

Doing an IRA rollover with E*TRADE

Doing an IRA rollover shouldn’t be difficult. E*TRADE plots out the basic steps on how to do it: 1. Open an E*TRADE rollover IRA, 2. Contact your former retirement plan administrator and fill out the required paperwork and ask them to mail the check with your account number to E*TRADE, 3. Choose investments.

Given the ease with which I was able to transfer a ton of ETFs from two IRAs at another brokerage into a new E*TRADE IRA last year — a slightly different but similar transaction to a 401(k) rollover — I can’t knock the broker too hard for providing just basic instructions. Still, it’s a far cry from the rollover gold standard set by Fidelity. Fido anticipates any potential roadblock customers might encounter, and provides every form of hand-holding, from links to necessary forms, lists of questions to ask, multiple transfer options, and the option to have a rollover specialist hop on a call with your old plan provider.

However, I do appreciate E*TRADE’s rollover tool, which asks a series of six questions and shows you what you can do with your retirement plan, including choices that don’t generate business for the broker (like transfer assets to your current employer’s plan, leave assets in your previous employer’s plan).

Bottom line

E*TRADE always struck me as a stock trader platform, and it’s served me and my “fun money” investments well for years. Only after I transferred two IRAs to E*TRADE did I start to really explore its offerings for retirement investors (and finally stumble upon its fantastic retirement calculator).

In my view, there are three types of retirement savers E*TRADE serves well: DIY investors, because the depth and functionality of the Power E*TRADE platform is top-notch. And semi-DIYers who can get a quick start setting up a diversified IRA using E*TRADE’s prebuilt portfolios and skipping management fees by rebalancing on your own. And last, retirees who are ready to draw income from their IRA; that nifty E*TRADE Complete IRA really streamlines withdrawals.

E*TRADE’s focus is still squarely aimed at equity investors. (You’ll need to jump to the Morgan Stanley side of the biz for financial planning help.) However, for the portion of retirement money I’m comfortable managing on my own, I’m definitely sticking with E*TRADE until I age into eligibility for its Complete IRA.

FAQs

What is the 2024 IRA contribution limit for E*TRADE IRA?

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.

Is E*TRADE FDIC-insured?

Because E*TRADE is not a bank, it is not FDIC-insured. However, you still have coverage in case the broker fails: Investment accounts like IRAs are protected by insurance from the Securities Investor Protection Corporation, or SIPC. This coverage provides up to $500,000 of protection for securities and cash in your account. ($250,000 of it applies to the cash portion.)

E*TRADE’s parent company, Morgan Stanley Smith Barney, does operate a private bank which carries FDIC coverage. E*TRADE customers who have cash balances swept into Morgan Stanley partner banks are eligible for expanded additional FDIC coverage up to $1.9 million in uninvested cash per client.

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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