M1 Roth IRA Review
The M1 Roth IRA is a tax-advantaged retirement savings account offered by M1 Finance. It provides a user-friendly platform for managing investments with customizable portfolios and automated tools. Contributions are made with after-tax income, and qualified withdrawals during retirement are tax-free.
Roth IRA retirement accounts are popular with long-term investors. Investing in this type of account allows you to grow your wealth tax-free. Roth IRAs have set contribution limits and income limits each year.
The limit in 2023 will be $6,000. The limit is $7,000 if you’re over 50.
Roth IRA accounts are now available for free through a variety of investing apps. A Roth IRA account with M1 Finance requires just $500 to open.
It’s no secret that many people are skeptical about M1 Finance's Roth IRA. M1, although a newer platform, already holds over $2 billion in assets, making it a dominant player.
This article provides a detailed look at M1's Roth IRA.
What is M1 Finance?
The M1 Finance platform is a blend of a broker and a robo-advisor, giving you total control over your investments (like a broker) while automating the entire process (like a robo-advisor).
Furthermore, you'll have access to a number of basic tools and pre-prepared portfolios of funds and stocks that you can invest in. You’ll also gain access to a basic cash management account. A perfect blend of personalization and automation, it is free to use and easy to use. However, it’s not an advisory service.
In other words, M1 is a great tool for investors who want to manage their own finances, but not necessarily for those who are looking for financial advice.There’s no investment advice included in this app- it expects you to provide it yourself. The platform is used by almost 1 million clients and has over $5 billion in assets under management (AUM).
This robo-advisor is favorite among many investors because it allows you to choose investments you prefer or create your own, with automatic contributions and regular rebalancing. Besides offering free banking, spending, and borrowing features, it also offers powerful financial tools—all at no cost.
With M1 Finance, you can customize and control your finances to your exact specifications without paying for the service you receive.
Is M1 Finance Safe?
The Securities Investor Protection Corporation, or SIPC, insures M1 Finance.
It protects both your portfolio securities and your brokerage account cash.
There’s no guarantee that your stocks won't lose value if SIPC is involved. That risk is on you as an investor. As long as your brokerage is a member of SIPC, your assets are protected if your brokerage goes bankrupt or can't pay you money from your account.
Lincoln Savings Bank, which is FDIC-insured, provides the M1 Spend checking accounts.
Bank deposits are insured by the Federal Deposit Insurance Corporation.Thus, the FDIC will pay for your M1 Spend account in the event Lincoln Savings Bank fails or your account is compromised.
What is a Roth IRA?
Roth IRAs are individual retirement accounts (IRAs) that allow you to withdraw money tax-free after age 5912, as long as you have held the account for five years. You can also withdraw Roth funds without paying a penalty if you’re buying a home, paying for college, or adopting a child.
Unlike traditional IRAs, Roth accounts are funded with after-tax money, so you can withdraw your contributions after meeting certain criteria without being taxed.
Roth IRAs are beneficial for those expecting to be in a higher tax bracket as they age or retire, since withdrawals aren’t taxable, unlike traditional IRAs or 401(k)s.
M1 Roth IRA Review
Among the services offered by M1 Finance are individual and joint brokerage accounts; traditional, Roth, and SEP IRAs; trust accounts; checking accounts; and lines of credit.
You can contribute to a Roth IRA through M1 Finance after-tax, which can grow tax-free.
Stocks, EFTs, and low-cost index products can be used to diversify your portfolio and increase its value over time.
The returns on these investments are great over the long term. With M1 Finance, you can open a Roth IRA fee-free.
The funds that go into Roth IRAs are often after-tax dollars, so any withdrawals on the investments can’t our brokerbe tax deductible. Fees aren’t associated with any M1 Finance account, as they are with all other accounts. Aside from this, M1 finance Roth IRAs are easy to manage and give owners complete control over their portfolios. The paperwork involved is minimal, and there is little interference in the process.
What Can I Invest?
With M1’s Roth IRA account, you can invest in:
Custom pies (stocks, ETFs): As a self-directed investor, you can build your own M1 Finance pie using any stocks or ETFs you choose, as long as they trade on the NASDAQ or NYSE. Retirement accounts are no longer boring. The Roth IRA allows you to invest in exciting growth stocks like Amazon and Netflix. As you add stocks and ETFs to your M1 Finance pie, each one becomes a slice. The percentage of each slice can range from 1% to 100%. Your custom pie can contain up to 100 stocks or ETFs. With fractional shares, it does not matter what the stock or ETF share price is.
Expert pies (pre-built portfolios): Expertly crafted pies from industry leading financial experts are available at M1 Finance. These prebuilt portfolios aren’t subject to any asset management fees, like other investing platforms out there. There are a variety of portfolios on M1 Finance, ranging from a basic stock and bond allocation to a hedge fund-like portfolio modeled after popular investors like Warren Buffett.
TDFS (target date funds): Among the products M1 Finance offers is a target date fund, also known as a TDF. When you get closer to retirement, the asset allocation changes. M1 Finance does everything for you once you tell them the date of your desired retirement (for example, 2055). Portfolios become more conservative as you get closer to retirement.
M1 Roth IRA Account Minimum Deposit
M1 Finance requires a $500 minimum deposit to open a Roth IRA. This is the absolute minimum, but you can contribute as much as $6,000 for the year (or $7,000 if you’re 50 or older). M1’s competitors like TD Ameritrade and Fidelity charge the same Roth IRA account minimum.
M1 Roth IRA account vs Competitor
| M1 Finance | TD Ameritrade | Fidelity | |
|---|---|---|---|
| Account minimum | $500 | $0 | $0 |
| Management Fee | $0 | $0 | $0 |
| Stock and ETF Fee | $0 | $0 | $0 |
Is M1 Roth IRA Free?
You can open a Roth IRA with M1 Finance for just $500 with no fees. While others might follow suit eventually, M1 Finance is currently the only brokerage account that offers free retirement accounts. Fees and trading commissions are often charged by these other brokerages.
Investing with M1 Finance is free of charge and there is no commission on trades placed on the platform.
M1 makes money in several different ways:
M1 Borrow interest payments.
Earned interest from lending securities to short sellers.
Earning interest on uninvested cash.
M1 Plus debit card annual fee.
Order flow direction payment.
Summary
In a nutshell, M1 Finance has once again changed the game.
M1 is currently the only brokerage offering free retirement accounts that include such a large range of features that investors cherish. The portfolio level dividend reinvestment makes this platform a favorite among dividend investors. Fee-free Roth IRAs are popular among retirement investors, and expert funds (including target date funds) complement these accounts.
Investing in a Roth IRA at any age is a smart decision. The money you invest with M1 Finance stays invested. It's not necessary to pay brokerage fees, and your money won't sit on the sidelines idle if you're having difficulty purchasing whole shares.
You won't be charged any unnecessary fees. Roth IRAs offered by M1 Finance are just as good as those offered by other companies.
However, getting started with retirement investing is the most important thing. Opening an account and putting your money to work is what matters, regardless of whether you use M1 Finance or another Roth IRA provider.
FAQs
Is a Roth IRA or 401k better?
The answer depends on your preferences and needs. 401(k) Roths allow employers to match contributions and have higher contribution limits. However, you can receive higher returns on your investments with a Roth IRA, and you can withdraw your money earlier if you want to.
How much should I put in my Roth IRA monthly?
Using a dollar-cost-averaging approach, you would contribute $500 to your Roth IRA every month since the maximum annual contribution is $6,000 for a Roth IRA. Those 50 and older have a $7,000 limit, which translates into $583 a month.
Is M1 Finance good for long term investing?
Yes. It’s nearly impossible to find a better investment platform for long-term investors than M1 Finance. It may not be appropriate for some advanced use-cases, but aside from those few scenarios, it is a powerful and unique investment platform. This is one of the best investment platforms for smaller accounts, even if it's the only one you use.
Does M1 Finance have custodial Roth IRA?
Yes. A brokerage account, a Roth IRA, a SEP IRA, a custodial account (M1 Plus only), and a trust account are all supported by M1. IRAs require a minimum opening deposit of $500 ($100 for regular accounts). Investing can begin once you have selected your account and entered your banking information.
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Team that worked on the article
Mikhail Vnuchkov joined Traders Union as an author in 2020. He began his professional career as a journalist-observer at a small online financial publication, where he covered global economic events and discussed their impact on the segment of financial investment, including investor income. With five years of experience in finance, Mikhail joined Traders Union team, where he is in charge of forming the pool of latest news for traders, who trade stocks, cryptocurrencies, Forex instruments and fixed income.
The area of responsibility of Mikhail includes covering the news of currency and stock markets, fact checking, updating and editing the content published on the Traders Union website. He successfully analyzes complex financial issues and explains their meaning in simple and understandable language for ordinary people. Mikhail generates content that provides full contact with the readers.
Mikhail’s motto: Learn something new and share your experience – never stop!
Bruce Powers is an expert trader and technical analyst with over 20 years of experience in Forex, commodities, ETFs, cryptocurrencies and other assets. He is an active trader, technical and fundamental analyst, media commentator, educator and a writer. As an author for Traders Union, he contributes his deep analytical skills, expertise and understanding of the global economy and financial markets to provide market analysis and insights. Powers is also a frequent guest on business TV news shows.
Mirjan Hipolito is a journalist and news editor at Traders Union. She is an expert crypto writer with five years of experience in the financial markets. Her specialties are daily market news, price predictions, and Initial Coin Offerings (ICO). Mirjan is a cryptocurrency and stock trader. This deep understanding of the finance sector allows her to create informative and engaging content that helps readers easily navigate the complexities of the crypto world.