Self-Directed IRA Fees - ExpoIRA Blog

How much does a self-directed IRA cost?

As you assess potential self-directed IRA custodians, you will observe that the fees for self-directed IRAs differ among firms. Generally, the fee structure is distinct from what you would be typically charged for a retirement account at a traditional brokerage or firm. This distinction arises from the specific recordkeeping and maintenance obligations that are exclusive to self-directed account custodians.

What are some factors to consider when trying to understand the fees charged by a custodian for a self-directed IRA?

What are the Different Self-Directed IRA Fees?

The following are the types of fees you might come across.

Account set-up/application fee – This one-time fee is charged when you open your account.
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.
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.
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.

In certain cases, it is possible to avoid some of these fees. For instance, choosing to receive electronic statements instead of paper statements could help you avoid a fee for the latter.

In order to ensure transparency, it is essential for all fees to be clearly stated. This can be achieved by the account custodian providing a custodial agreement and a fee schedule, which should clearly outline the services and responsibilities of the firm, as well as the relevant fees. This way, you will not be caught off guard by unexpected charges in the future.

What You Should Expect in Exchange for a Maintenance Fee

As you compare custodian fees, also conduct research on the firms to ensure that you are obtaining the best value for the price. Furthermore, take into account the services provided by a custodian in exchange for the self-directed IRA maintenance fee.

Custodial Account Maintenance

In order to keep an IRA, it is necessary for it to be held by an IRA trustee or custodian as mandated by the law. Due to the distinct characteristics of a self-directed IRA, the custodian has the responsibility of performing recordkeeping tasks that are not obligatory for traditional IRA providers.

In order to remain compliant, the custodian must also handle various tax forms related to IRAs, such as a 5498 or 1099-R, on behalf of the client, in addition to other responsibilities.

Online Access

Online account management capabilities are offered by certain custodians in order to allow account holders to digitally direct investments, initiate transfers, request bill payments, collect rents from tenants, and accurately document all transactions and investments. This ability brings convenience and helps to decrease transaction time, which is important for the success of real estate and other transactions.

Another aspect to take into account is whether the custodian allows convenient online access to conventional investments, like mutual funds, in case you decide to invest in them. Seamless access to such assets is not offered by all custodians.

Single Point of Contact for Transactions

When you begin with a self-directed IRA, personalized service can be of significance.

The representatives employed by your custodian may not be financial advisors, but they possess extensive knowledge in self-directed investing enabling them to guide you through the procedure and assist in handling any necessary paperwork.

How to Compare Self-Directed IRA Custodian Fees

Self-directed individual retirement arrangements offer the option to invest your tax-deferred retirement savings in various types of investments. However, similar to other IRAs, you are not permitted to directly hold your own funds. Instead, a custodian, who acts as a third party, must keep your money separate from you. Self-directed IRA custodians are companies that provide services for managing your account and charge various fees for these services. These fees may consist of setup fees, value-based account management fees, transaction fees, and closure fees.

Step 1

Get a fee disclosure from any self-directed IRA company that you are considering. If you cannot find it on their website, call them and ask that one be sent to you.

Step 2

Compare the initial account set-up fees between companies. These are one-time fees that you pay when you open the account.

Step 3

Compare the annual account maintenance or account administration fees. These fees are usually tied either to the number of assets in your account or to the total value of your account. If a company quotes the fees on a quarterly basis, multiply them by four to annualize them so that you can compare them on the same basis as other firms’ annual fees. When you do this comparison, you will need to project how much money or how many assets you will have in your self-directed IRA. In most cases, as your account grows, your fees will usually also go up.

Step 4

Analyze each provider’s additional fees. You can expect to be charged for just about anything that most IRA custodians do for you. These charges include fees for sending statements, fees for sending checks to pay bills related to properties in your self-directed IRA, fees to add investments to your account and fees for additional services or research. If you plan to hold precious metals in your self-directed IRA, compare the costs for storage of the physical gold, silver or other metal, as well.

Step 5

Compare the cost of closing the account or withdrawing funds from it step by step. Some providers charge a termination fee based on the account’s size, while others charge a fixed fee.