TD Ameritrade Review - Everything You Need to Know

See what we have to say about the top online broker for long-term investing

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TD Ameritrade is an Omaha-based brokerage firm and an affiliate of TD Bank. The company offers online stock trading and investing, as well as retirement planning products and services.

Who is TD Ameritrade Best For?

TD Ameritrade may be most appealing to customers who are comfortable trading and investing online. It may be suited to people who want to:

  • Open a brokerage or retirement account
  • Have access to a wide range of investment options
  • Build a portfolio with low trading fees
  • Invest for the long-term
  • Take a DIY approach to portfolio-building
  • Get professional portfolio management

Pros

  • No platform or data fees

  • Flat $6.95 fee per online equity trade

  • $0 minimum opening deposit

  • Lots of options: Standard brokerage accounts, retirement planning, education accounts, managed portfolios and specialty accounts

Cons

  • Slightly higher fees compared to some competitors

  • Managed portfolio options can be expensive

  • Multiple trading platforms (mobile, Web) can be confusing

Types of Accounts

TD Ameritrade offers the following types of accounts:

  • Standard Accounts
  • Retirement Accounts
  • Education Accounts
  • Specialty Accounts
  • Managed Portfolios

Learn more about each type of account TD Ameritrade offers below.

TD Ameritrade is currently offering commission-free trading for 60 days and up to $600 in cash for new account openings.

Standard Brokerage Accounts

Standard accounts are TD Ameritrade's most common and most flexible accounts. This is a taxable investing account, which means you'll pay capital gains tax when you sell investments at a profit.

The kinds of securities you can invest in with a standard account include:

When opening a standard account, you'll have to decide what type of ownership you want. The options are:

  • Individual
  • Joint Tenants With Rights of Survivorship
  • Tenants in Common
  • Community Property
  • Tenants by the Entireties
  • Guardianship or Conservatorship

Each account has different rules regarding what happens to the account balance if one of the account owners passes away.

Individual Accounts

An individual account is a standard account with just one owner. There's no minimum amount to open an account, but there are some special rules:

  • The electronic funding minimum is $50
  • To trade on margin or have options privileges, you'll need at least a $2,000 balance

As the account owner, you can assign a beneficiary to receive all the assets in the account when you pass away.

Joint Tenants With Rights of Survivorship

This type of account has two or more owners, who share an equal interest in the account's assets. Again, there's no minimum to fund your account but the electronic funding minimum and margin or options trading minimums are $50 and $2,000 respectively.

If one account owner dies, the other maintains a right to the entire account. This type of account might be appropriate for married couples or if you're investing with a parent or child.

Tenants In Common

A Tenants in Common account also has two owners but they don't necessarily share it equally. Instead, each person owns a specific percentage of the account.

  • Open an account with no minimum
  • $50 minimum for electronic funding
  • Options and margin trading allowed with a minimum $2,000 balance

When one account owner dies, their percentage of the account goes to their estate, not the other owner. You can't open this type of account if you're a non-resident alien.

Community Property

Community Property accounts can be owned by married couples and they follow community property laws. Essentially, the rule is that each spouse has an equal interest in the account as long as the assets in the account were acquired during the marriage.

Community Property accounts are allowed in:

  • Arizona
  • California
  • Idaho
  • Louisiana
  • New Mexico
  • Nevada
  • Texas
  • Washington
  • Wisconsin

You can also open one of these accounts if you live in Puerto Rico but again, non-resident aliens are ineligible. If the couple gets divorced or one spouse dies, the account is divvied up equally between their estates.

Tenants by the Entireties

Tenants by the Entireties accounts can be owned by two married people living in these states:

  • Arkansas
  • Arizona
  • Delaware
  • Florida
  • District of Columbia
  • Hawaii
  • Kentucky
  • Maryland
  • Massachusetts
  • Michigan
  • Mississippi
  • Missouri
  • New Jersey
  • Oklahoma
  • Pennsylvania
  • Rhode Island
  • Tennessee
  • Vermont
  • Virginia
  • Wyoming

The difference with these accounts is that if one account owner dies, the entire account becomes the property of the other owner.

Guardianship or Conservatorship

Guardianship and conservatorship accounts allow the account owner to hold assets on behalf of someone else, such as a minor child or a disabled adult. The guardian or conservator has the authority to manage the account and make investment decisions. Margin and options trading aren't available with this type of account.

Retirement Accounts

TD Ameritrade offers multiple retirement accounts to help you pursue your investment goals in a tax-advantaged way. Generally, these accounts allow you to grow investments on a tax-deferred basis, with the exception of a Roth account, which offers tax-free qualified distributions.

Traditional IRAs

Traditional IRAs offer tax-deductible contributions of up to $6,000 beginning in 2019, along with an additional catch-up contribution of $1,000 if you're 50 or older. You can begin taking taxable distributions from your account without a penalty at age 59 ½. Starting at age 70 ½, you must begin taking required minimum distributions from your account or face a tax penalty.

To open a traditional IRA you must:

  • Be under age 70 ½ at the end of the calendar year
  • Have earned income for the year

There's no minimum deposit to open a traditional IRA.

Roth IRAs

Roth IRAs have the same contribution limits as traditional IRAs. The difference is contributions aren't tax deductible and qualified withdrawals beginning at age 59 ½ are tax-free. There are also no required minimum distributions with these accounts.

To open a Roth IRA you must:

  • Have earned income for the year
  • Be within the IRS income limits for contributions

Like traditional IRAs, there's no minimum required to open a Roth IRA.

SEP IRAs

A SEP IRA or Simplified Employee Pension Plan is designed for small business owners and self-employed retirement savers. You can set a SEP account up for yourself or your employees. For the 2019 tax year, the contribution limit is 25 percent of employee compensation or $56,000, whichever is less.

Contributions are tax-deductible. SEP IRAs follow traditional IRA rules for withdrawals, which means distributions are taxed at your regular income tax rate and a 10 percent early withdrawal penalty applies before age 59 ½.

SIMPLE IRAs

A SIMPLE IRA (Savings Incentive Match Plan for Employees) is another type of small business retirement account. These have lower contribution limits compared to a SEP IRA — $13,000 for 2019, plus a $3,000 catch-up contribution — and they follow the same withdrawal and tax rules as traditional IRAs.

To open a SIMPLE IRA, your business must have 100 or fewer eligible employees. Employee contributions are optional but you're required to chip in something as their employer.

Solo 401(k) Plans

A solo 401(k) plan is just like a regular 401(k), except it's designed for sole proprietors who have no employees or only employ their spouses. These accounts offered tax deductible contributions of up to $56,000 for 2019, along with a catch-up contribution of $6,000 if you're 50 or older.

Rollover IRAs

If you have an old 401(k), 403(b) plan or another employer-sponsored retirement account, you can roll that over into an IRA with TD Ameritrade. There are no setup or maintenance fees and no minimum deposit you'll need to roll over.

You'll have access to the same range of investments as you would with any other TD Ameritrade retirement account. Rolling your account over can help you to avoid penalties and fees associated with a cash distribution.

Pension or Profit Plans

Pension and profit plans are tax-exempt trusts you can set up on behalf of your company or as a self-employed individual to save for retirement. These plans can be set up as either defined benefit plans, which means they pay the account beneficiary a set amount of money in retirement, or as defined contribution plans which specify how much they can contribute.

TD Ameritrade charges no maintenance fees for retirement accounts, but commission, service and exception fees may apply. As you compare accounts, you'll also want to consider the annual contribution limits for each one and the tax rules for making withdrawals.

Education Accounts

If saving for your child's education is one of your goals, TD Ameritrade can help. There are three different account types to choose from for education savings, each with different tax implications.

529 Plans

529 plans are a tax-advantaged way to save for college. All 50 states offer at least one 529 plan and you can contribute to any of them, regardless of which state you live in. There's minimum amount required to open a 529 plan and no maximum annual contribution, although you may trigger the gift tax for contributions that exceed the annual exclusion limit.

With 529 plans, withdrawals of earnings are generally tax-free when used for qualified education expenses. Non-education withdrawals trigger a tax penalty.

In terms of investment choices for 529 plans, TD Ameritrade offers age-based investment plans, static investment plans and 17 individual investment options, including:

  • Domestic equity mutual funds
  • International equity mutual funds
  • Real estate investment trusts (REITs)
  • Bond mutual funds
  • Money market funds

Currently, you can't trade stocks in a TD Ameritrade 529 account.

Coverdell Education Savings Accounts (ESAs)

A Coverdell ESA is another tax-advantaged college savings option. This account limits you to $2,000 in contributions per student annually and you can't make new contributions once your child turns 18. And, once your student reaches age 30, any remaining money in the account has to be withdrawn; otherwise, you'll pay a 50 percent tax penalty.

Custodial Savings Accounts

Custodial Uniform Gift to Minors Act (UGMA)/Uniform Transfer to Minors Act (UTMA) allow parents to save and invest on behalf of minor children. Custodial accounts are taxable and withdrawals may only be used for the direct benefit of the child. For example, you could use a custodial account to pay for college or private school expenses, but not to plan a vacation or pay for home repairs.

Specialty Accounts

Some investors may have unique needs or objectives and that's where TD Ameritrade's specialty accounts come in. These are investment accounts you can open as a business entity, such as a partnership or corporation, or as part of a trust. Trust accounts are generally used for estate planning, as a way to pass on investments to heirs in a tax-efficient way.

There are also specialty trading accounts for non-profit organizations and small business, including profit sharing accounts. Again, there's no minimum deposit required to open any of these accounts.

Managed Accounts

TD Ameritrade managed portfolios are designed for investors who prefer professional guidance on their investment choices. You tell TD Ameritrade about your investment goals and risk tolerance; they make a portfolio recommendation from one of three options.

Essential Portfolios

These portfolios offer access to five goal-oriented portfolios of index ETFs, with a $5,000 minimum investment and a 0.30 percent advisory fee. The ETF portfolios offered all include socially responsible investments, which is good if you're looking for a way to give back while growing wealth. This is the simplest, lowest cost managed portfolio option TD Ameritrade offers.

Selective Portfolios

Selective Portfolios open you up to a broader range of goal-oriented portfolios composed of mutual funds or ETFs, with a $25,000 minimum and advisory fees that vary by portfolio and investment amount. Tax loss harvesting is included with Selected Portfolios. This feature helps to ensure that your investment portfolio is as tax-efficient as possible.

Personalized Portfolios

If you're looking for tailored investment advice from a dedicated financial consultant, you can get that with Personalized Portfolios. There's a caveat, however. These accounts have the highest minimum investment, at $250,000. Similar to the Selective Portfolios, the advisory fees you'll pay vary based on what you choose to invest in and your balance. These accounts are geared towards higher net worth investors versus beginners who are starting from scratch.

While other TD Ameritrade accounts can be opened online in just a few minutes, you'll need to call 800-870-9668 to speak with a Financial Consultant who can help you get started with a managed portfolio account.

Managing Your TD Ameritrade Account

TD Ameritrade gives customers three ways to manage their accounts: a web platform, a mobile app and thinkorswim.

Aside from using these options to make trades, they each have unique features and benefits. This table offers a quick comparison:

Managing Your TD Ameritrade Account
Web Platform thinkorswim Mobile App
Access the Education Center to enhance your investing knowledge; build customizable modules to track investment performance; use Social Signals to monitor investment news and trends from Twitter; get quotes instantly with SnapTicket; track capital gains and losses with GainsKeeper Elite-leve trading tools for more advanced investors, including virtual margin and IRA accounts, in-depth market analysis and a build-your-own alogithm tool; assess market entry and exit points with Options Statistics; track price movements and create covered call strategies; live-stream market updates in real time View real-time quotes and set up price alerts; access market views and third-party research; integrate the app with Facebook Messenger, Twitter, Amazon Alexa and Apple devices to amange your portfolio from platforms you use regularly; live text and screen sharing with help from a trading specialist when you need it

About TD Ameritrade

TD Ameritrade was founded in 1971 and has grown to be one of the nation's leading online trading platforms, with $5.45 billion in revenue reported for the fiscal year 2018. Toronto-Dominion Bank is TD Ameritrade's largest shareholder and the brokerage firm is currently headquartered in Omaha, Nebraska. In September 2017, TD Ameritrade acquired another online trading platform, Scottrade in St. Louis, Missouri.

While TD Ameritrade takes customer security seriously, the company does have a history of security issues. In 2007, a breach occurred which compromised the personal information of an estimated six million customers. Losses resulting from the breach were later settled in a 2011 lawsuit.

The platform has garnered stellar marks for its customer service, ease of use and range of investment options. TD Ameritrade was named the No 1. Overall Broker by Kiplinger in 2018. The platform has also earned awards for the best online broker from Investor's Business Daily, the best online platform for long-term trading from Barron's and a five-star rating from StockBrokers.com.

The Bottom Line

BENEFITS

TD Ameritrade is a solid choice for investors who want to begin investing online, with no minimum investment and no lengthy hassles to open an account. The wide variety of account types and investment options makes it easy to pursue multiple investing and savings goals, while building one or more diversified portfolios. Managed portfolios offer a professional touch for the investor who's not completely comfortable with the DIY approach to building wealth. And with multiple ways to manage your account, it's easy to stay connected to your investments and keep a finger on the pulse of the market 24/7.


DRAWBACKS

The biggest drawback associated with TD Ameritrade investing may be the cost. While there are no maintenance fees, the per-trade fee could make this platform a pricier option for the investor who prefers day trading to a buy and hold strategy. And, while managed portfolios offer access to personalized investment advice, the account minimums and advisory fees may put those out of reach for some investors. The thinkorswim trading platform may present a bit of a learning curve to investors using it for the first time. And finally, TD Ameritrade doesn't include tax loss harvesting or automatic rebalancing with standard, retirement, education or specialty accounts.