M1 Finance Roth IRA Review

If you don’t have a Roth IRA but qualify for one, you are throwing your money away. What’s so special about Roth IRAs? They are tax-advantaged accounts allowing you to save for retirement with after-tax dollars.

As your portfolio grows, you don’t pay capital gains taxes. As long as you wait until 59 to make withdrawals, you won’t pay taxes then either.

M1 Finance is a platform offering multiple financial accounts, including Roth IRAs. Let’s a look at their IRA offerings, so you can figure out if opening an M1 Finance Roth IRA is an appropriate choice for you.

M1 Finance Background

Founded in 2015, M1 Finance has quickly become a key player in the financial services industry. The firm offers robo-advisory services and investment accounts, as well as checking and loan accounts. More than half a million people trust M1 Finance for their banking and brokerage needs.

You can find out more about the types of accounts you can open with M1 Finance in this review.

M1 Finance is unique even among robo-advisors for not charging management fees for assets under management (AUM). This means you don’t have to pay a portion of your yearly deposits for them to manage your money.

How Does M1 Finance Make Money?

Like other robo-advisors that don’t charge management fees, M1 Finance makes money by routing orders to certain brokers, a practice known as payment for order flow. This practice used to be controversial, but anymore it’s an accepted part of the financial industry. It keeps costs low for retail investors.

If paying no fees for your brokerage account appeals to you, click here to check out current M1 Finance promotions and open an account.

Do You Qualify for a Roth IRA?

Before you open a Roth IRA account, you need to make sure you meet specific criteria. Roth IRAs aren’t for everyone. Making too much money is one reason you might not qualify for a Roth IRA.

As of 2022, if you are single, your annual salary must be under $129,000 in order to be able to maximally contribute to a Roth IRA. For salaries between $129,000 and $144,000, you can make partial contributions to a Roth. If you make more than $144,000, you cannot contribute to a Roth IRA.

For married couples, you can make up to $204,000 to be able to fully contribute to a Roth IRA. You can make partial contributions for joint incomes that are between $204,000 and $214,000. If your joint income is more than. $214,000, you cannot contribute to a Roth IRA.

What are Roth IRA Contribution Limits?

So how much can you put in your Roth IRA? You can make new contributions of up to $6,000 to your Roth IRA. That number is boosted to $7,000 when you turn 50, so you can “catch up” on your retirement savings.

If you are married, each spouse can invest up to the annual contribution limit.

What Makes M1 Finance’s IRAs Special?

Now the real question: you’re sold on opening a Roth IRA, but should you open one with M1 Finance?

For one thing, M1 Finance’s no management fee model is an advantage over most other brokerages. This can allow your investments to grow at significantly faster rates. Over time, it could make a difference of tens of thousands of dollars in terms of your retirement savings.

M1 Finance allows you to automate your portfolio building according to pre-built investment pies. You can choose the default pie M1 recommends based on your risk tolerance or you can choose from among a number of expert-chosen pies.

To read more about using M1 Finance’s automated portfolio options, check out this in-depth article, which thoroughly describes the available options.

If you don’t want to use M1 Finance’s automated portfolio option, you can also choose your own assets. This can be riskier but might make you more money if you have significant financial education and believe you can read the market. You can read here about how to choose your own assets in your M1 Finance Roth IRA.

M1 Finance Roth IRA: Concluding Thoughts

If you meet the income requirements, you definitely want to open a Roth IRA. Nothing beats the money you will save by opening this tax-advantaged retirement account. Over time, it will add to your retirement savings by a considerable amount.

As far as brokerages you can choose from, M1 Finance represents one of the best options around. They won’t charge you management fees and offer you the flexibility of allowing you to choose between building your own portfolio or from a variety of pre-built pies. Their combination of expertise, low costs, and flexibility is unmatched.

If this sounds good to you, can click here to open an M1 Finance account.