Personal Finance

Interactive Brokers IRA: Review of Commissions, Fees, and Funds

It can be smart to open an IRA to start saving for retirement. IRAs offer all the tax benefits of a 401(k) plan, but with more flexibility on what you can invest in. Below, we'll take a look at how a popular brokerage, Interactive Brokers , stacks up on features that are particularly important for IRA savers.

Commission prices by investment

Like its peers, Interactive Brokers is helping to drive the price of trading stocks, mutual funds, and ETFs toward zero. Its cut-rate commission schedule enables investors to pay as little as $1 to make each trade.

Stocks and ETFs Stock Options Mutual Funds
$0.005 per share ($1.00 minimum per trade) $0.25 to $0.70 per contract ($1.00 minimum per trade) $14.95 per purchase

Data source: company website.

Importantly, the prices above reflect Interactive Brokers' "fixed" commission schedule. High volume traders (300,000 shares traded each month) would benefit from its lower-priced tiered commission schedule.

Its commission prices come with one small asterisk. Accounts with balances of less than $100,000 must generate $10 in commissions each month or pay a minimum activity fee. If you pay just $4 in commissions in one month, you would be assessed an activity fee of $6 to arrive at $10 in total commissions and fees. You can avoid this fee by generating at least $10 in commissions or maintaining a balance of at least $100,000.

Mutual fund selection and commission-free choices

Not all brokerages are created equally in the fund department. Some brokerages provide long lists of fund choices, including no-transaction-fee mutual funds, and commission-free ETFs that can help you reduce your cost on every trade.

Total Mutual Funds No-Load Funds No-Transaction-Fee Funds Commission-Free ETFs
More than 8,200 More than 5,200 2,900 41 (Global X, Cambria, ETF Securities, and more)

Data source: company.

With more than 8,200 mutual funds to choose from, fund investors should find plenty of fund investments they like inside an Interactive Brokers IRA. Importantly, it offers more than 5,200 mutual funds that do not carry a load, while nearly 3,000 are classified as no-transaction-fee funds.

No-transaction-fee funds can be bought and sold completely free -- these funds do not incur the standard $14.95 fee per transaction.

Minimum deposit requirement for IRAs

Interactive Brokers requires a minimum deposit of $5,000 to open an IRA account through its service. As other brokers offer no- or low-minimum accounts, this may be a turn off for investors who are just getting started.

Interactive Brokers' minimum deposit requirement for IRAs may put it out of reach of investors who want to start small. Image source: Getty Images.

International stocks and ADR investments

Interactive Brokers is one of just a handful of discount brokerages that offer broad access to invest in foreign companies.

Type of Investment Availability
American depositary receipts (ADRs) Yes
Stocks traded on international stock markets Yes (100+ markets)
Mutual funds and ETFs of foreign stocks Yes

Data source: company.

Where most brokerages limit their investors to ADRs, which are basically foreign stocks that are listed on U.S. exchanges, Interactive Brokers enables you to trade all over the world. The brokerage offers electronic trading in more than 100 global markets, so if you want to buy a company listed on the London Stock Exchange or the Korea Stock Exchange, you can do just that. Keep in mind that trades on foreign stock exchanges have differing commission schedules and typically cost more than a domestic stock trade.

Mobile app

Interactive Brokers makes it easy to trade from anywhere with mobile apps for iOS and Android devices. Here's how its users and customers rated its apps, as of Jan. 17, 2017.

Apple App Store Google Play
2.0 stars 4.0 stars

Data source: relevant app stores.

IRA account fees

Interactive Brokers recently eliminated service fees on its clients' IRAs. The company does not charge a fee just for having an account.

Research tools

Clients of Interactive Brokers get access to a full suite of research tools that include analyst ratings history for individual stocks, news from the wires, and a curated list of top headlines in finance every single trading day, among other features.

One feature that may be particularly valuable for retirement investors is the brokerage's mutual fund/ETF replicator tool. Simply type in the ticker for a mutual fund or ETF, and the tool will find similar funds that have lower expense ratios, which can potentially save you thousands of dollars over your investing timeline.

Is Interactive Brokers Right for You?

Interactive Brokers offers some of the lowest commissions on each trade, a vast mutual fund selection, and some cool research capabilities that retirement investors should enjoy. That said, investors who are just starting out might be turned off by a higher minimum deposit, as well as its minimum activity fee, which might not fit the needs of lower-volume investors.

To be clear: The Motley Fool does not endorse any particular brokerage, but we can help you find one that is a good fit for you. Visit Fool.com's IRA Center to see how several leading brokerages compare on key features all on one page!

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The author(s) may have a position in any stocks mentioned.

Jordan Wathen owns shares of Interactive Brokers. The Motley Fool recommends Interactive Brokers. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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