Interactive Brokers IRA Review

There are two basic options for how to use your IRA once you’ve opened it. One, you could do as thousands before you have done, including yours truly: Invest in a small number of broadly diversified index mutual funds or ETFs and let that investment portfolio sit, more or less, until you’re near retirement. Or, two, you make like Roaring Kitty and actively trade in your IRA (just know that short-selling in IRAs is prohibited).

If the latter describes you, then Interactive Brokers, aka IBKR, is gonna fit you to a T. While people who fall into the set-it-and-forget-it scenario might also be happy here — IBKR’s fees are among the lowest of all major brokers — this broker is geared toward active traders. Interactive Brokers does a phenomenal job serving that audience, but that means the website and app can be complex to navigate. (Note: For this review, I used IBKR Lite, the company’s free service, not IBKR Pro.)

Interactive Brokers IRA pros & cons

Retirement account types

Interactive Brokers offers the usual IRAs, including traditional, Roth, rollover, inherited, SEP and SIMPLE. They don’t mention spousal IRAs by name, but anyone who fits the bill (aka meets the eligibility criteria, which is essentially having a spouse who brings in earned income) can open a traditional or Roth IRA and call it a spousal.

The one missing piece in Interactive Brokers’ IRA lineup is custodial accounts. If you’ve got a kid who earns money, you’d do well to help them open an IRA and start stashing money away. You’re not going to be doing that at this particular broker.

Interactive Brokers IRA fees

Hands down, Interactive Brokers tops the competition when it comes to fees. The company charges essentially two IRA fees: a $14.95 mutual fund trade fee on some mutual funds, and a $1 withdrawal fee on ACH transfers out of your account (after one free monthly withdrawal).

That’s it. There’s no account maintenance fee, no inactivity fee, no account closure fee, no transfer-out fee. Pretty impressive, IBKR.

Trading fees: Interactive Broker charges $0 for stock and ETF trades, and offers more than 4,700 U.S. mutual funds with a $0 transaction fee (a total of more than 19,000 such funds globally). For mutual funds that aren’t on that list, the transaction fee is the lesser of $14.95 or 3% of the trade’s value.

Compare that to other brokers’ mutual fund transaction fees: Fidelity’s $49.95, Charles Schwab’s $74.95, Vanguard’s $20 (all of these firms also offer no-transaction-fee mutual funds, just fyi).

Withdrawal fee: You get one free withdrawal per month but after that you’ll need to pay $1 per ACH withdrawal (that is, transferring from your Interactive Brokers account to a U.S. bank account via ACH).

Broker-assisted fee: OK, there is one more fee I should note: You’ll pay a $30 fee for calling IBKR to make a trade. But that’s very much in line with what other brokers charge. I can’t really fault IBKR on this. It’s the price we pay for $0 online trading fees.

Self-directed investment options

While Interactive Brokers has branched out from its active-trader roots to a more “everyone is welcome” vibe (for instance, you can use the web-based Client Portal for all of your account needs, without having to download a trading platform), those active-trader roots were still obvious as I went through the multi-step process to open my Interactive Brokers IRA account.

One example: At no other broker have I been nudged toward margin trading in my IRA. When I went through the Interactive Brokers account-opening process, the first choice under “configure your trading account,” said “margin trading (most common).”

You have to click the dropdown to choose a cash account (which is a more common way to hold an IRA). Many brokers do allow limited margin trading in IRAs. But at most brokers, it’s something you hunt for, rather than it being offered right upfront. (If you’re curious about margin trading in an IRA, check out our FAQ below.)

So while this may be exactly what you’re looking for, I tend to think the majority of people looking to open an IRA simply want to stash money away for retirement and watch it grow over time.

Setting aside the lengthy account-opening process, once you’ve opened your IBKR IRA, the Client Portal offers a relatively streamlined experience that, in general, is gentle on the eyes. Same goes for the mobile app.

Instant access: Bonus points to Interactive Brokers for giving me instant access to my money. I set up a transfer of $200 from my bank account to my IBKR account and IBKR let me trade it immediately.

Fractional shares: Interactive Brokers stands out among major brokers for having the largest number of investments available in fractional shares; all U.S. stocks and ETFs are available fractionally, which is super useful for people who don’t have big bucks to spend. You can buy $20 of a stock over here, $10 of an ETF over there, and pretty soon you’ve built a diversified portfolio — without ever having to worry about the actual price of the thing itself.

That said, the website and app were slightly persnickety when I tried to buy $50 worth of the Vanguard Total World Stock ETF (VT), the current price of which is about $113 per share. At first, on the app, it took me a second to find a way to enter a dollar amount lower than the share price — the drop-down “minus” button wouldn’t let me go down to $50 — but you can manually enter the specific dollar amount. And know that you need to “activate fractional quantity” (their words, not mine) in the Client Portal before you can trade fractional shares.

Client Portal Impact Dashboard: The Impact Dashboard is super cool: Interactive Brokers offers an easy way to pick causes you want to support with your investment dollars, like “consumer safety” or “ocean life,” and things you don’t want to support, e.g., “animal testing,” and then it’ll scan your portfolio to see how your investments stack up against your ideals. It even offers a list of investments you don’t yet own but might want to because they align with your values. (Impact is also available as a separate app.)

PortfolioAnalyst: This is a powerful tool that lets you do deep dives on your portfolio, including external accounts that you link. It’s well worth checking out if you’re curious about, for example, how diversified your portfolio is, how your returns stack up against various benchmarks, whether your portfolio matches your target asset allocation, etc. You don’t even need an Interactive Brokers account to use this tool (though you’d need to link external accounts to use it).

Managed investment options

Interactive Brokers offers about 70 themed portfolios through its Interactive Advisors affiliate. You pick a theme that appeals to you — “moderately aggressive,” “real estate,” “ethical leadership” — and hand over your money for professional money management. Almost all of the portfolios have a $100 minimum and a 0.20% management fee.

(About 20 of the themed portfolios have much higher account minimums and a 0.75% management fee. Stick with the lower-cost portfolios! Fees are our enemy, my friends.)

While these themed portfolios are fun, they do not a diversified retirement portfolio make. For that, check out Interactive Advisors’ Asset Allocation portfolio. This diversified portfolio has a $100 minimum and that sweet low 0.20% management fee. For comparison’s sake, Schwab’s robo minimum is $5,000, though its fee is $0. Vanguard’s robo minimum is $3,000 and its fee is 0.15% to 0.20%.

For the Asset Allocation portfolio, Interactive Advisors picks a portfolio of ETFs for you, and allocates your money across stocks, bonds and inflation-hedging investments. They decide what portion of your money goes to each based on your responses to a nine-question risk tolerance questionnaire. (Way more robust than, for example, SoFi’s worrisomely simplistic questionnaire.)

True to IBKR’s “active investor” ethos, you can customize your robo portfolio. There are three levers at your disposal. You can: 1. Adjust asset allocation weights, so if you want a higher proportion of your money going to, say, stocks, then have at it; 2. Add extra ETFs specializing in specific sectors and themes, such as biotech, health care or utilities (there are limits on how much of your money goes to these ETFs to ensure your portfolio stays diversified); 3. Tell IBKR to replace the ETFs it’s assigned to you with all ESG (“environmental, social, governance”) ETFs, or you can specify that some portion of your portfolio should be directed to ESG, and IBKR will pick ETFs that mirror the asset allocation it’s devised for you.

That level of customization is fairly rare in the robo advisor world. This, too, is cool: Interactive Advisors uses fractional shares of ETFs to keep your cash holdings at a low level. So unlike, say, Schwab, which holds a high percentage of its robo accounts in cash, Interactive Advisors makes sure your money is working in the market for you.

One thing you won’t find at Interactive Advisors: a live advisor to interact with to build a complete financial plan for your future. Many other brokers offer this option — check out Vanguard, Fidelity, SoFi or Schwab — though you often need a higher balance or deeper pockets to enjoy those services.

Retirement planning tools

Interactive Brokers’ powerful Retirement Planner tool has the feel of software you might enjoy access to if you hired a professional financial advisor. The results page shows your retirement outlook by year, and it breaks it out by person if you chose to add a second person to your calculations. Yes, unlike many retirement calculators, this one lets you include your spouse or significant other. That’s a huge perk for us marrieds. Well played, IBKR.

Plus, you can link external accounts to get an accurate picture of your overall financial situation. I’d love it if Interactive Brokers would include an option to let me add my other accounts manually — that is, just enter the lump sum — rather than having to commit to linking accounts.

While the depth of this retirement calculator’s results is professional-advisor-level robust, the process you go through to get to those results is… comprehensive. You’ve got to answer quite a few questions, including a couple that I found tough, like my “expected effective tax rate in retirement.” It’s an important question. I guessed. I absolutely get that planning for retirement is complex, so I commend IBKR for providing a tool that reflects that. Just know that you may need more than 5 minutes to get your retirement outlook using this tool.

Doing an IRA rollover with Interactive Brokers

True confession: I have an old 401(k) sitting at a two-jobs-ago employer, begging to be rolled over, if for no other reason than to avoid the maintenance fee. So when I went to open my Interactive Brokers account, I toyed with the idea of rolling that money over.

I can’t say Interactive Brokers inspired me to finally take this step. They have a clear form explaining the process step by step, but it’s four pages long and detailed. All of my searching in IBKR’s search engine for topics related to “help with a rollover,” while offering useful tips for how a rollover works, pushed me back to the form.

Oops. My bad…? Only when transferring money into my account did I realize there’s a much simpler IBKR rollover process: It’s the “transfer funds” option in the Client Portal. Streamlined, and clear. Do a direct transfer through the Client Portal if you want to roll money to Interactive Brokers.

That said, no matter which broker you use to open a rollover IRA, doing the actual rollover is going to take some time and effort, even if you go with a broker like, for instance, Fidelity, which offers super clear instructions and extra hand-holding. You can also check out my guide to the best rollover IRAs to learn more.

Bottom line

There is truly a lot to love about Interactive Brokers. Its IRA fees are among the lowest in the business, the robo advisor options are appealing and low-cost, and it offers powerful tools for investing and portfolio analysis. All of that said, if you want to be more of a buy-and-hold, set-it-and-forget retirement investor and you’re looking for some help with that — and there’s no shame at all in that — then be sure to compare Interactive Brokers with brokers that might offer slightly more hand-holding, such as Fidelity or Schwab.

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