The top IRA providers provide an array of fee structures. Some don’t charge any upfront costs while some, like Schwab and Vanguard, charge annual custodian fees for retirement accounts.
Investment management fees must be covered from funds outside of your IRA due to strict IRS regulations that prohibit certain fees from being charged from retirement accounts. Bundled fees are approved.
1. Fees charged by custodians
Custodian fees associated with self-directed IRAs may include both flat fees and percentage of total asset values as reimbursement costs; in some instances these costs may even be tax deductible.
Schwab is well known among investors and offers Schwab Intelligent Portfolios with no management fees (though a one-time $300 setup fee will apply if your total investments surpass $5,000). Meanwhile, Betterment brings its low-cost ETFs and robo-advising expertise to a Schwab-branded IRA service offering free base service plus premium options including tax loss harvesting and rebalancing features.
Note that when transitioning your money from an employer retirement plan into an IRA, a provider could impose sales loads – upfront fees that reduce the investable assets available to you – by selecting no-load mutual funds or exchange-traded funds, which don’t levy upfront purchase charges.
2. Fees charged by online brokers
If you are considering a robo-advisor, make sure you find out if there is an account opening fee as well as what its ongoing service costs typically are. Some providers may waive these costs if a minimum amount of assets remain under management with them.
Many brokerages charge a flat fee or fixed percentage of your account value; however, some offer reduced costs. Ally offers a Roth IRA without maintenance or advisory fees and commission-free trading on US stocks, ETFs and funds – it even boasts an impressive mobile app!
Vanguard, for its part, has long championed low-cost index funds and offers over 3,000 free trades on its online trading platform – an attractive choice for passive investors who prioritize fee minimization. However, fees do matter: even fractions of percentage points could eat away at your returns – according to a CBS calculation, an American worker saving $4,000 each year with an 8 percent return over 35 years would have $522,000 saved up for retirement but just adding one half percentage point more in fees could lower that figure to $480k
3. Fees charged by mutual fund companies
Companies offering IRA accounts typically make money through transaction fees when investors buy and sell investments such as stocks and ETFs. Maintenance fees and financial advising fees may also apply; these costs could range anywhere from several dollars a month up to half a percent of your assets annually.
Robo-advisors may provide investors with more economical fees; Wealthfront charges a flat 0.25 percent to manage retirement portfolios and includes features such as tax loss harvesting and automatic rebalancing that make their service particularly desirable for investors.
Firstrade offers another attractive choice with zero trading commissions for stocks and ETFs as well as hundreds of no-transaction-fee mutual funds, making this broker ideal for investors looking to trade actively or passively.
4. Fees charged by robo-advisors
Many robo-advisors charge an advisory fee as a percentage of account value; this fee is separate from any management costs assessed by component funds in an investor’s portfolio.
Fees can add up and significantly erode an investor’s returns over time, but some robo-advisors offer services with lower fees such as Betterment which charges just 0.25 percent annually to manage an IRA account with features like automatic rebalancing and tax loss harvesting.
Wealthfront and Ally Invest offer various robo-advisory services designed to help investors build diversified retirement portfolios with low-cost ETFs and offer goal-based planning, automatic rebalancing and goal setting features among others. Ally Invest keeps costs down with an investment management fee of 0.1% as well as offering 24-hour customer service – regardless of which robo-advisor you choose, pay close attention to fees to make sure that over time you don’t end up overspending; but remember if this happens switch providers!
