As part of your retirement savings strategy, rolling over your workplace retirement account to an IRA may protect its potential growth; however, be wary of any associated fees.
Direct rollover is your best bet — this process moves your distribution directly into your new account without incurring fees or fees for account management, such as an online broker without account fees that offers low-cost investments or robo-advisors that manage money at a fraction of human advisor costs.
IRA Provider Fees
When rolling over a retirement account, you have several options when it comes to liquidating assets and transferring cash or securities in kind. Liquidating may incur fees such as commissions or deferred sales charges while transferring securities in kind does not. Which method suits your needs best will depend on how long you plan to hold onto your new IRA and what its total costs will be.
Direct rollover allows you to ask the plan administrator of your former employer to send your distribution directly into a new IRA provider. Simply follow the instructions on the form to complete it successfully.
As it can erode the value of your retirement savings over time, IRA provider fees must be carefully considered. Particularly for investors, any differences in fees between an IRA and a 401(k) could significantly diminish long-term returns.
IRA Custodian Fees
Custodian fees are associated with investing your IRA with a specific custodian, and are an unavoidable expense as only certified institutions are authorized to manage and report IRA investments to the IRS. Self-directed IRA custodian fees depend on how active your account is as well as activities like record keeping and paperwork that take place within it.
Most IRA providers impose a custodial fee, as well as fees related to opening and closing an IRA account. All these costs can add up and have an impact on your overall return.
If at all possible, direct rollover should be preferred to avoid these fees; otherwise have your old plan send its payment directly to your new IRA custodian instead of you directly – some providers waive fees if preferred customers choose online statements over paper ones.
IRA Transfer Fees
Fees associated with an IRA rollover process can be an added financial strain, but there are strategies available to reduce them. When selecting an IRA provider, consider those with low or no rollover fees as well as fees that suit your investing goals and preferences.
Transfer fees for individual retirement accounts (IRAs) may differ widely between financial institutions, as they usually cover administrative costs associated with processing paperwork, managing account data and maintaining compliance with regulatory standards.
A number of factors impact IRA transfer fees. For instance, when moving funds from an active 401(k) account with investments to an IRA with similar investments, liquidating those assets before rolling over your money increases transfer fees considerably compared to when cash transfers take place between accounts directly. The same principle holds true when moving from retirement accounts into employer plans.
IRA Investment Fees
Individuals can reduce their investment fees by consolidating retirement accounts, selecting lower-cost investments and selecting an IRA provider with low fees. Online brokers, for instance, typically don’t charge account fees and often offer a range of low-cost investments at competitive prices; larger accounts may even qualify for annual maintenance fee waivers from them! Furthermore, there are robo-advisors offering customized investing services at significantly reduced costs than traditional financial advisors.
Individuals also have the option of conducting an indirect rollover. Here, a plan administrator will send out a check to cover your balance but withhold 20% as tax protection; depositing this money within 60 days in their new IRA to avoid incurring income tax and penalties. Fees can significantly diminish future returns so it’s essential for individuals to understand who and how they are being charged for investments.
