Interested in Learning How To Compare IRA Custodial Fees?
We break it all down for you. Watch the following video to learn how to evaluate IRA fees before either opening or moving an IRA over to a self managed account.
[0:10] How can you find the lowest self directed IRA custodian fees? Terry explains in the video.
[0:37] Some IRA providers charge fees based on the asset value of your IRA account, which can get pricey!
[1:11] Asset-based custodians may have additional fees for other services to make sure to review the fee schedule in its entirety.
[1:34] Watch out for this hidden cost! It may look like an annual fee, but it’s a quarterly fee, so make sure you multiply by 4!
[1:55] The second type of IRA custodian charges fees on a per-asset basis and may have different prices based on what kind of investment is owned by your account.
[2:33] Sunwest Trust uses the third type of fee model: The transparent, flat fee model!
[2:53] What are some additional charges you should know about?
[3:30] Sunwest Trust charges account fees once a year. Check our IRA fee schedule.
[4:10] How do you find the cost when a custodian doesn’t show their prices on their website?
[4:40] When you open a self directed IRA account, every IRA custodian charges an application fee.
[5:02] What is one question everyone should ask a potential custodian before moving their account?
[5:32] Keep an eye out for IRA closeout fees before you decide to close or move an IRA account.
[6:06] With these evaluation tips in mind, you can better evaluate and compare self directed IRA custodian fees!
Navigating IRA Custodial Fee Schedules
When it comes to choosing a custodian for your IRA account, it is natural to want the best custodian at the best price. Understand, however, there is a myriad of costs and fees to evaluate before selecting the right custodian for your specific situation.
Self directed IRA custodians charge for fees in three differing ways:
- Total asset value in your IRA
- Per-asset basis
- Flat fee
IRA custodial fees are not the same as sales commissions or transaction fees. If you’re looking for a way to lower your expenses and you feel comfortable selecting your own funds, choose a no-load account. No-load accounts are free from sales commissions, so you’ll pay only the custodial fee. —Emily Beach, B.A.
3 IRA Custodian Pricing Structures Reviewed
Are you in the market for the lowest possible IRA custodian fees? This IRA custodian fee comparison should shed some light on the nuances on the various pricing methods offered within the industry.
1. Asset Value Fee – The cost of custodian fees for a Self Directed IRA
We are not a fan of this pricing structure. The asset value fee model is based on the value of the assets held in a self-directed IRA. Most custodians place holdings into categories based on their value and then charge a fee for each group. There are typically four or five categories of fee amounts, i.e., $0-$50,000 = X amount of fees and $51,000-$100,000 = Y amount of fees.
2. Per Asset Basis – A Comparison of IRA Asset Fees
Per Asset Basis pricing model is based on the number of assets held in your IRA, and the charge is usually made per asset, e.g., $25/asset per year. Some custodians may also charge differently depending on the type of asset held in the account so make sure you are aware.
The custodian may have a fee for real estate assets that is different from the fee to hold precious metals or interest in an LLC. The Per Asset model s is not a bad way to charge fees; in fact, neither of the fee models are based on the asset value. The key is to be aware of the complete fee schedule before you pick one custodian over another.
3. Flat Fee – A Typical IRA Custodian Fee
With the Flat Fee model, there is just an annual flat fee billed to the account holder, no matter the size or amount of assets held within your IRA. The Flat Fee model is the model we employ and our big fans. Whether your IRA account holds assets that value $30,000 or $1,000,000, one piece of real estate or multiple LLCs, the IRA fee remains the same! At Sunwest, we have a yearly flat fee and it is charged in advance each year.
Are IRA Custodial Fees Tax Deductible? – Know The IRA Rules
It’s tempting to think because your fees are for an account that’s making you money you can deduct all of them on your tax return. However, that is not necessarily the case! When the fees are used to gain taxable income, they are tax-deductible and are filed as miscellaneous itemized deductions on your tax return.
However, IRA fees need to be paid with non-IRA funds (taxed dollars) to make them tax deductible. With that in mind, nothing charged to your account and paid for with your assets, or cash held within your account are tax-deductible, because the custodian fees, in this case, would have been paid for with tax-deferred dollars.
Certain IRA administrative fees, whether or not you’re currently taking distributions, are deductible, but they have to be paid by the account owner’s non-IRA funds. – George Saenz
Other IRA Custodian Fees You Should Know
It is wise to be aware of any additional fees you may have overlooked. Often, we see what we want to see and skip the other charges that will be tacked on later.
IRA Transaction fees. The custodian, or the bank, or both charge a fee for completing a transaction and wiring the money. [At Sunwest Trust, our transaction fees are $25 per transaction on outgoing transactions only. We do not charge for incoming monies.]
IRA Service fees. Determine if the fees are charged annually, bi-annually, or quarterly. Small fees can quickly accumulate when they are being charged up to four times a year.
IRA Setup fee. The IRA set up fee ranges typically ranges between $35 – $50.
Account Research Fees. Caveat Emptor – Research fees are an unscrupulous way to hide more charges and pad the invoice so of speak.
Account Closeout fees. Most IRA custodians have closeout fees. Keep these fees in mind if you think you will close your account or transfer your account to another custodian in the future.
The fee structure of self-directed IRA custodians can vary dramatically. For example, some charge higher setup fees and lower revolving fees; some charge fees based on the IRA’s value; some charge fees based on the number and type of assets owned by the IRA; some charge fees when the IRA pays an expense, receives income, and/or custodian action is required in any way; and some even charge fees for “research” and account termination. – Warren L. Baker, J.D., LL.M.
Do Your Homework!
There are other possible charges, but those already mentioned are the most common. Some IRA custodians provide ample information about their fees on their websites, but not all custodians publicly offer their IRA cost schedule like we do at Sunwest Trust. Some sites are missing fee information altogether, while companies make you submit a request for pricing.
Again, be careful while doing your due diligence, and ask good questions, like:
- Who regulates the custodian? State or Federal?
- If the financial institution is not regulated by such entities, it is likely that they are TPA (Third Party Administrators); in which case, you should ask who their custodian is, and who regulates the custodian.
- If they’re not regulated, then they’re probably not a custodian. They’re probably a third party administrator, and they have a custodian, so ask them who their custodian is and make sure you’re comfortable with their response.
- Ask about any fees that you are not sure about, including closeout fees.
- Watch out for low fees that are charged quarterly rather than the yearly.
- Make sure before you start a self directed IRA or transfer your IRA that you understand the nuances in the fee schedule.
- There are a lot of different costs to look at before you choose your IRA custodian and a home for your self managed IRA.
- IRA custodial fees may not be tax deductible. Know the rules!
- Watch out for unscrupulous, hidden custodial charges assessed to your IRA account, such as research fees.
Summary of Recommended Resources
- Wealth Counsel Top 3 Reasons To Talk To a Tax Attorney Before Forming a Self-Directed IRA or IRA LLC
- Bankrate Are investment fees tax-deductible?
- Zacks What Are IRA Custodial Fees?
Hi, my name is Terry White, CEO of Sunwest Trust, and this is Tuesday at Two. I see people searching for a lot are IRA fees, the least expensive fees for IRA custodians. I decided to go online myself and look around. I just wanted to give you some ideas of what to look or and how to view the different custodians and what their fees are.
There are, basically, three ways that custodians charge fees. Number one is they charge a fee based on the asset value of their account. You might find a particular custodian that has maybe four or five categories. They might start $0 – $50,000 as a certain fee, $51,000 to $100,000 as a certain fee. They’ll have four or five of those categories, and they’ll base their fees on that. You have to be careful because you need to look at the value of the account that you’re going to be set with that custodian and determine your fees based on that.
Now, the next thing that you need to look at with that type of custodian is that they may have some additional fees. They may charge that as a flat fee, and then they may charge a fee for other kinds of services. Be sure to look at the entire fee schedule before you just decide, “Oh, their fee started $25 a quarter.”
Many times, the other thing to be aware of is that they charge their fees not necessarily annually, but they may charge $25. You think that sounds good and then you look and say, “Oh, that’s a quarterly fee,” which would obviously then be $100 a year annual fee, and that may not be all. There may be some other fees.
The second way that I noticed custodians charge fees was some of them charge just on a per asset basis. They may say it’s $25 a year per asset and they may even have different fees depending on the type of asset you have. They may charge one fee for a piece of real estate, for instance. They may charge a different fee for precious metals. They may charge a different fee for a limited liability company.
Be careful. Determine what your account is going to have in it and how your fees are going to be affected there. Then the third way, and the way Sunwest Trust charges fees is we charge a flat fee. We charge a flat fee no matter how large your account is. If you have a $50,000 account or $1 million accounts, the fee is going to be the same. Then we charge transaction fees based on how many transactions you do.
Now, you need to look and determine how the different custodians charge those transaction fees. Just for Sunwest, we charge on outgoing transactions only. We don’t charge when money comes into your account. We only charge when it goes out.
If you, for instance, directed us to invest $10,000 in something, whether it be real estate, a limited liability company or whatever it happens to be, we will take $10,025 out of your account; we earn the $25, and the $10,000 goes to the investment. Then in our case (at least in our case), we charge our fees on an annual basis. If $225 (as of 2017 the fee is $275) is an annual fee, you get charged once a year on your anniversary date for the next year. It’s an annual fee in advance.
As I said, you have three ways of charging. You may have a tiered fee based on asset value. You may have a fee based on the number of assets in the account, or you may have a flat fee.
Now, there could be some other ways that custodians charge fees. I did some research on the other types of custodians. I just went to Google and Googled “IRA custodians, ” and I looked at the different accounts. I’ll be honest with you, some of the custodians that I found didn’t have their fees on the website. Some of them, they have you email them a request for fees because they weren’t disclosed on the website itself. Then others of them were very apparent, open with what their fees and fee schedule.
Again, just be careful and make sure you understand what you’re looking at, how the fees are charged, how often the fees are charged and what types of things the fees are for.
Every provider charges an application fee or an establishment fee or something similar. That is typically $35 to $50. Then, they charge some either quarterly or annual fee for acting as custodian for the account.
As you do your due diligence, you should always ask a few things. If you call the custodian to talk to them, ask them who regulates them. Are they regulated by a state or a federal entity? If they’re not, then they’re probably not a custodian. They’re probably a third party administrator, and they have a custodian, so ask them who their custodian is and find out who that is and make sure you’re comfortable with that. Then check these fees and make sure you understand exactly what you’re going to be paying based on the kind of account that you want to set up.
The last thing I want to mention is to keep an eye out for closeout fees. If you open an account with a particular custodian and you decide that you want to close the account out, that you want to move the account or whatever it is you want to do, most of them I have found have an account-closing fee. You need to make sure you know what that is, and make sure you’re comfortable with however much that fee is.
Hopefully, this has been something of value to you, and that it at least gives you the idea that you need to get out there and look for yourself and look at not only the basic fee but based on what you plan on investing in and how their fees would apply to what you wanted to invest in.
Thank you for watching this Tuesday at 2 PM video. I look forward to seeing you again next week for our next episode.