In comparison, normal brokerage account would trigger taxable events on capital gains whenever investors rebalance through the year. Additionally, distributions made, such as dividends or coupons from fixed-income assets, are also taxed.

Additionally, the IRS allows IRA investors to withdraw assets to pay expensive life events, like higher education from an accredit institution, certain home-related costs or unreimbursed medical costs that exceed 7.5% of your gross income, without an early withdrawal penalty.

Investors can create IRA accounts with any number of online broker accounts. Moreover, users can also trade ETFs commission-free if the brokerages offer the option. [Six Popular Commission-Free ETF Trading Platforms]

For more information on investing toward retirement, visit our retirement category.

Max Chen contributed to this article.