These are the best Roth IRAs for growing your money tax-free

When researching the best way to save for your nonworking years, you likely have come across individual retirement accounts, also known as IRAs. One of the most popular types of IRAs is a Roth IRA.

A Roth IRA works much the same as a traditional IRA — you can regularly contribute to the account and watch your investments grow year over year so you have a nest egg to tap into later on — but there are some key differences that make a Roth IRA stand out, including limits on who can contribute and the ability to withdraw your earnings in retirement tax-free (see our FAQs for more details).

To determine which Roth IRAs are the best overall, CNBC Select reviewed and compared over 20 different accounts offered by national banks, investment firms, online brokers and robo-advisors. Our top Roth IRA selections require no (or low) minimum deposits, offer commission-free trading of stocks and ETFs, provide a variety of investment options and have educational resources or tools that account holders can access. Our recommendations are catered to beginner investors who are likely just starting out in their careers since Roth IRAs are the most effective retirement savings vehicles if you're in a lower tax bracket. (See our methodology for more information on how we chose the best Roth IRAs.)

• Best overall: Charles Schwab® Roth IRA
• Best for beginner investors eager to learn: Fidelity Investments Roth IRA
• Best for hands-on beginner investors: Ally Invest® Roth IRA
• Best for hands-off beginner investors: Wealthfront Roth IRA
• Best for access to a financial advisor: Betterment Roth IRA

With a Roth IRA at Charles Schwab, you can make after-tax contributions, buy and sell stocks, mutual funds, ETFs and avoid paying taxes on qualified withdrawals. There are no monthly service fees and no account minimums. To open a Roth IRA at Charles Schwab, you'll need your Social Security number, your employer's name and address, if applicable, and any date of birth for inheritance recipients.

For retirees-to-be, Schwab offers all the tools and resources to ease the transition, such as planning calculators and market insights from experts.

When opening a Roth IRA at Fidelity Investments, you can choose whether to have Fidelity pick and manage your investments (the Fidelity Go^® Roth IRA option) or to do it yourself. Either way, there's no minimum required to open your account. Newbie investors ready to dive in can rely on Fidelity's robust planning tools, support from Fidelity representatives, helpful explainer articles, personalized quizzes and even free educational webinars and events.

The Ally Invest Roth IRA allows beginner investors to dip their toes into the market in a DIY way through its Self-Directed Trading option. There's no account minimum to get started, plus no monthly maintenance fees or commission fees on stocks, ETFs or options. Ally offers plenty of articles on investing, as well as general banking and inspirational personal finance stories from real people.

Wealthfront is a popular robo-advisor that offers the option to invest for retirement in a Roth IRA through automated index investing — meaning Wealthfront will build and manage your retirement portfolio for you so you can be totally hands-off.

To do so, Wealthfront will ask questions about your financial goals, your investment preferences and questions to calculate your risk level before showing you a personalized portfolio. You have the ability to make adjustments as you'd like and can choose to have exposure to new opportunities like tech and clean energy. As time goes on, Wealthfront software will automatically rebalance your investments for you.

Betterment is another popular robo-advisor that offers a Roth IRA with multiple investment options, such as "Innovative Technology" and "Climate Impact." Plus, users can get guidance from Betterment's financial experts for a fee.

Betterment creates a retirement plan for you by estimating your future income needs and it has tools to help you figure out just how much more money you need to save. Users can set up recurring deposits into their retirement account and Betterment's technology makes sure they don't contribute beyond the annual Roth IRA limits.

Betterment will rebalance your portfolio automatically, notify you of any external accounts you may want to roll over, recommend deposit amounts to stay on track and provide automated tax-saving tools.

With both a traditional and Roth IRA, you make consistent contributions, invest those contributions in the market and watch your money grow over time.

But Roth IRAs have a few components that make them stand out from your traditional IRA. Here's what makes them unique:

• When you withdraw your contributions from a Roth IRA in retirement, those withdrawals are generally tax-free (as long as your account has been open for at least five years) and they don't count as income. Withdrawals in retirement from a traditional IRA and 401(k) will be taxed as income.
• Contributions into a Roth IRA use after-tax dollars, unlike contributions to a traditional IRA or 401(k), which are not taxed. This may be a bigger hit to your finances in the short term, but your money will grow tax-free.
• If you withdraw earnings you've made on investments in a Roth IRA before age 59 and a half, you'll incur a 10% early withdrawal penalty and may be subject to income tax.
• There are exceptions to the early withdrawal penalty on Roth IRAs, including taking out funds for first-time home purchases, college expenses and birth or adoption expenses.
• Your tax filing status and income level determine whether or not you can contribute to a Roth IRA. Your contribution can be reduced as your modified adjusted gross income (MAGI) approaches the higher end of the phase-out ranges. In 2023, if married filing jointly, the phase-out range is $218,000 to $228,000; if single, the phase-out range is $138,000 to $153,000; if married filing separately and you lived with your spouse, the phase-out range is $0 to $10,000.

With a Roth IRA, you pay taxes on your contributions upfront so you don't have to pay them later when you withdraw money from your retirement fund (as long as your account has been open for at least five years).

This is the biggest difference from a traditional IRA, which lets you delay paying taxes until you withdraw funds later down the road. With traditional IRAs, your contributions are also tax-deductible, up to certain limits, so your contribution reduces the amount you owe in taxes each year.

A good rule of thumb when choosing between the two types of IRA accounts is to consider your tax bracket:

• Choose a Roth IRA if you expect that you'll be making more money in your later years — and thus in a higher tax bracket. It makes more sense to pay taxes today to take advantage of your current low tax rate before it goes up. Plus, since your withdrawals from Roth IRAs don't count as income and aren't taxed after 59 and a half, you can count on every dollar in your account when making withdrawals.
• Choose a traditional IRA if you expect that you'll be making less money in your later years — and thus in a lower tax bracket. In this case, it makes more sense to reduce your taxable income in the present, so in theory, you'll pay less in taxes both now and in the future when your tax rate is lower.

Use a Roth vs. Traditional IRA Calculator to help you decide between a Roth IRA or a traditional IRA.

Withdrawing from your traditional IRA before age 59 and a half comes at a cost. You'll be taxed, in addition to incurring a 10% early withdrawal penalty fee.

With a Roth IRA, you have much more flexibility when it comes to withdrawing money from your account before you reach retirement. You can withdraw after-tax contributions from your Roth IRA at any age tax- and penalty-free. With earnings, it's a little different. If you withdraw any earnings you've made on your investments in a Roth IRA before age 59 and a half, you will incur a 10% early withdrawal penalty (and may be subject to income taxes like a traditional IRA). There are some unique exceptions to this early withdrawal penalty on Roth IRAs that include first-time home purchases, college expenses and birth or adoption expenses.

• What is the best time to invest in a Roth IRA?
• Does it matter where I open a Roth IRA?
• Should I open a Roth IRA at a bank or brokerage?
• What type of Roth IRA should I invest in?
• What should I put my Roth IRA into?
• How much should I put in my Roth IRA per month?
• Is it smart to put money in a Roth IRA?
• How does my money grow in a Roth IRA?
• How can I grow my Roth IRA faster?
• What are the cons of a Roth IRA?
• Who should not open a Roth IRA?
• Should I put more money in 401(k) or Roth IRA?

The best time to invest period is as early as possible so your money has time to grow. When it comes to a Roth IRA, however, consider your current tax bracket now compared to what it will likely be later on. If you're in a lower tax bracket today (usually the case for young investors), take advantage of a Roth IRA where you'll pay taxes upfront on your contributions and later your withdrawals will be tax-free.

It matters where you open a Roth IRA because not all investment options are the same everywhere you go. You can find Roth IRAs at both banks and online brokers.

When deciding whether to open a Roth IRA at a bank or brokerage, consider what each offers. Although both banks and online brokers have Roth IRAs, you're likely to find more investment options through a broker and thus likely the opportunity to earn higher returns. The possibility of higher returns usually means taking on more risk, but you can do that with your retirement account when you're young since you aren't needing it any time soon.

The type of Roth IRA you should invest in is one that offers low fees and/or commissions, a variety of investment options to choose from, as well as tools to help you plan your retirement. The top picks on this list do just that.

The investments that you should put your Roth IRA into are those that are likely to really grow over time, thus offering long-term investment returns: S&P 500 index funds, target-date funds and dividend stock funds.

How much you should put in your Roth IRA each month can be determined by considering the standard 2023 Roth IRA annual contribution limits:

• Those under age 50: total contribution limit of up to $6,500
• Those age 50 or older: total contribution limit of up to $7,500

This shakes out to $541.67 each month if you're under age 50 and $625 each month if you're age 50 or older.

It's smart to put your money in a Roth IRA if you have a long time horizon until retirement or if you're in a lower tax bracket today than you plan to be in retirement.

Your money grows in a Roth IRA by your contributions into the account and by the power of compound interest, which essentially pays interest on top of interest. Even when you aren't making contributions, the investments in your Roth IRA earn dividends or interest that get added to your balance. That interest earns more interest and so on.

You can grow your Roth IRA faster by maximizing your contributions each year. To make sure your Roth IRA grows in general (not necessarily faster), diversify your Roth IRA investments and pick investments in growth stocks. These come with higher risk yet have the potential to give you a higher return over a long period of time.

The cons of a Roth IRA include income limits of who can contribute (though there's a workaround), not ideal if you're in a lower tax bracket come retirement, delayed tax break, low annual contribution limit and contributions are not tax-deductible.

Those who should not open a Roth IRA include people whose retirement is right around the corner or those who think they'll be in a lower tax bracket in retirement.

Given the income limits that come with Roth IRAs, high-earners may not be eligible to open or contribute to a Roth IRA. There is a loophole to this, however, for high-earners to make contributions indirectly through a backdoor Roth IRA.

When deciding whether to put more money in your 401(k) or a Roth IRA, consider first if your employer offers a 401(k) match. If so, we'd recommend first contributing enough to your 401(k) to meet that match, which is essentially free money, and then putting extra funds into a Roth IRA to diversify your retirement savings. Keep in mind that financial experts generally recommend saving 10% to 15% of your income for retirement (and this includes any 401(k) employer match).

Everyone has to find a way to save for their retirement years, and a Roth IRA offers an easy way to do so, especially for younger folks who are in a lower tax bracket today than they will be later on and who have a long time until they reach those "Golden Years."

To determine which Roth IRAs are the best for those looking to save for retirement, CNBC Select analyzed and compared Roth IRAs offered by national banks, investment firms, online brokers and robo-advisors. We narrowed down our ranking by only considering those that offer commission-free trading of stocks and ETFs, as well as a variety of investment options so you can best maximize your retirement savings.

We also compared each Roth IRA on the following features:

• $0 minimum deposit: Most of the Roth IRAs on our ranking don't have minimum deposit requirements.
• Low fees: We considered each Roth IRA's fees, commission trading fees and transaction fees.
• Bonus offered: Some Roth IRAs offer promotions for new account users.
• Variety of investment options: The more diversified your portfolio, the better. We made sure our top picks offer investments in stocks, bonds, mutual finds, CDs and ETFs. Most also offer options trading.
• A hub of educational resources: We opted for Roth IRAs with an online resource hub or advice center to help you educate yourself about retirement accounts and investing.
• Ease-of-use: Whether accessing your Roth IRA via your laptop at home or on your smartphone while on the go, it's important to have an easy user experience. We noted when an investment platform excelled in usability.
• Customer support: Every Roth IRA on our list provides customer service available via telephone, email or secure online messaging.

After reviewing the above features, we sorted our recommendations by their appeal to beginner investors who are likely just starting out in their careers since Roth IRAs are the most effective retirement savings vehicles if you're in a lower tax bracket today than you'll be in retirement. For the purposes of this ranking, we focused only on Roth IRAs, though the best providers often overlap with those that offer the top traditional IRAs — read our list of the best traditional IRAs here.

Your earnings on contributions to a Roth IRA depend on any associated fees, the contributions you make to your account and the fluctuations of the market.

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