What Are Typical Fees to Manage an IRA?
Fees can quickly add up when it comes to retirement savings. Even just one percentage difference in fees could significantly diminish what you have saved by retirement age.
Over the past decade, IRA account fees have significantly decreased and some may even become zero. But you should still monitor fees closely to make sure your money is well spent.
Annual Maintenance Fees
An Individual Retirement Account, or IRA, can be an excellent tool to help you save for retirement in a tax-advantaged manner that maximizes compound interest. But just like any investment account, they come with fees that could eat away at your savings over time.
Many firms that offer IRAs also make money through commission fees when you buy or sell investments within your account, and by charging an annual maintenance fee or assets under management fee that represents a percentage of total holdings managed by them.
Fees like annual maintenance or asset under management fees used to be more common, but now are increasingly less prevalent among reputable financial firms and even deep discount brokers often waive these costs altogether.
If you are transitioning from a 401(k) to an IRA, be mindful that fees can reduce the value of your savings. A recent report by The Pew Charitable Trusts shows how even minor differences in investment management costs could add up over decades into billions lost.
Before 2018, it was often advantageous to pay advisory fees related to an IRA from outside, taxable accounts so they were tax deductible (rather than having them “pulled out” from within an IRA, which would have had detrimental ramifications).
Since this deduction was abolished by the Tax Cuts and Jobs Act of 2017, investors may benefit from paying advisory fees that apply to traditional and other retirement accounts directly from their taxable accounts in order to take full advantage of tax-deferred compound growth on those assets over years or decades.
Fees associated with investing in an IRA or Roth can eat into long-term returns significantly, but by shopping around and choosing an efficient provider you can reduce fees significantly.
Fees associated with an IRA account can include brokerage commissions, 401(k) fees, mutual fund transaction fees, sales loads and management costs. When rating online brokers and robo-advisors for our reviews, NerdWallet takes these fees into consideration along with account minimums, investment choices, research functionality, mobile app functionality and other relevant criteria.
Fidelity’s IRA offerings feature no custodial fees and low-cost index investments; further, Fidelity was the first broker to reduce fees across its platform – including transfer fees, pricey wrap fees and expense ratios of its funds – so its fees are among the lowest in the industry, making Fidelity’s IRA fees one of the greatest benefits to those looking to maximize the power of compounding.
Some IRA providers charge a custodial fee to keep your account open, typically calculated based on your portfolio’s value or assets; however, certain services, like online account statements and accepting credit cards in your IRA may waive these charges altogether. Custodial fees associated with non-publicly traded investments like LLC membership units or stakes in private companies could incur even greater charges.
Custodial fees associated with an IRA cannot always be avoided, but can be reduced by shopping around for providers and finding those offering lower rates. Furthermore, when paying these fees out-of-pocket to take advantage of itemized deduction rules. To further decrease IRA management fees and achieve your financial goals more quickly speak to an Alternative IRA Counselor; they offer customized guidance and strategies to minimize costs and achieve financial security – arrange a complimentary one-on-one consultation now!