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Self-Directed IRA Fees

Understanding Self-Directed IRA Fees

How much does a self-directed IRA cost?

When looking at prospective self-directed IRA custodians, you’ll discover self-directed IRA fees vary by firm. In general, you’ll notice the fee structure is different from what you may be charged for a retirement account at a traditional brokerage or firm; that’s due to the special recordkeeping and maintenance requirements that are unique to self-directed account custodians.

How do you make sense of a self-directed IRA custodian’s fees? Here are some things to look for:

What are the Different Self-Directed IRA Fees?

Here are the types of fees you may encounter:

  1. Account set-up/application fee – This one-time fee is charged when you open your account.
  2. Maintenance fee – The fee to hold and maintain your account. Some custodians charge a flat fee, while others charge based on your portfolio’s value. The custodian might charge the fee annually or quarterly.
  3. Transaction fee – Some custodians charge a fee each time your IRA makes a purchase, sells an asset, and/or pays a bill. This could become costly if you plan to make frequent investments or have a lot of expenses tied to an asset.
  4. Special fees – Other fees may apply for various additional services, such as sending a payment via wire or overnight mail, expediting a processing request, etc. You may never need some of these services, in which case the fees wouldn’t apply.

Sometimes, some of these fees can be avoided. For example, you may be able to opt into e-statements to forego a paper statement fee.

All fees should be transparent: The account custodian must provide a custodial agreement and a fee schedule that outlines the firm’s services and responsibilities, as well as applicable fees, so you’re not surprised later.

What You Should Expect in Exchange for a Maintenance Fee

In addition to comparing custodian fees, research the firms to determine if you’re getting the best value for the price. These are some of the services that a custodian may provide in exchange for the self-directed IRA maintenance fee:

custodian employee

Custodial Account Maintenance

To maintain an IRA, the law requires that it be held by an IRA trustee or custodian. Because of the unique nature of a self-directed IRA, the custodian is responsible for recordkeeping that’s not required of traditional IRA firms.

The custodian may also handle various IRA-related tax forms, such as a 5498 or 1099-R, on behalf of the client. This, along with other responsibilities, must be maintained to remain compliant.

woman on laptop

Online Access

Some custodians, such as Equity Trust, provide online account management capabilities to enable account holders to direct investments digitally, initiate transfers, request bill pays, collect rents from tenants, and properly record all transactions and investments. This provides convenience and reduces transaction time, which can be crucial to the success of real estate and other transactions.

Another factor to consider: does the custodian enable easy online access to traditional investments, such as mutual funds, if you choose to invest in those assets as well? Not all custodians provide that seamless access.

customer service rep

Single Point of Contact for Transactions

Personalized service can be important when you’re starting out with a self-directed IRA.

While not financial advisors, the representatives working for your custodian should be well-versed in self-directed investing so they can walk you through the process and help coordinate any paperwork needs.

Risks of Choosing a Smaller Provider with Lower Self-Directed IRA Fees

While it might be tempting to choose a self-directed IRA custodian based on its low cost, you may want to assess the company’s experience in the industry. Below are a couple of things to be cognizant of when researching low-cost providers.

Insufficient Support

Self-directed IRA investing is unique. Look for firms that are sufficiently staffed and have trained employees to handle the volume of transactions and complexities of self-directed IRA investments.

Lack of Investor Education and Training

Education is essential for new self-directed investors, as there are specific rules involved. A custodian should provide educational materials to help you navigate your investing. If it doesn’t, seek out a firm that can provide that support.

man on mountain

Let’s talk about your financial future.

Schedule a one-on-one session with an expert alternative investment counselor. We’re here to answer any questions, help guide you through the process, and provide more detailed information and education specific to your journey.

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