When you think about investing in a Self-Directed IRA, you will have a lot of questions. And many of those questions are rightly focused on your investing future. You might think about how you can maximize your investments with the right type of IRA. You might be thinking about what the future will look like in thirty years. You might be wondering about distributions during retirement, and which accounts offer you the most flexibility for that.
But there is something else that people need to be aware of, and that is the fee structure of your Self-Directed IRA administration firm. If you choose a firm that expands its fees as your accounts grow, you will find that it can eat into your returns. And after all, were not returns the point the entire time? Here is how to tell when a Self-Directed IRA administration firm is working for you with the right fee structure in place.
How Other Self-Directed IRA Custodian Fees Might Work
Let us get one thing clear: when you use a Self-Directed IRA, you do have to work with a custodian who administrates the IRA. This ensures that you have everything you need for the proper caretaking of the IRA. But the question becomes, how do you pay the custodian?
The typical fee structure might work like this. As you own more assets within a Self-Directed IRA, they might feel that their work gets more complicated. As such, they then raise your fees according to the number of assets you own within a IRA. As the account grows, your fees do, too. And this is a problem. After all, growth is the point of a IRA. If the fees grow with you, then are you really experiencing the flexibility that you originally sought by turning to a Self-Directed IRA?
How American IRA’s Fee Structure Works
American IRA works on a flat annual fee for your Self-Directed IRA. That means that even as your account grows, your administration fee stays the same. As a percentage of your overall assets, that means that the fees grow smaller over time, because your assets continue to grow while the fees remain the same. This puts more of your own money in your own hands, which helps you invest with confidence as you build toward retirement.
This is a basic way to tell the difference between a client-centric IRA fee structure and a custodian-centric structure. You, as the client, do best when you choose the former. But that only works when you identify the best possible Self-Directed IRA administration firm for your needs. Fortunately, that is not too difficult, either.
Choosing the Right Self-Directed IRA Administration Firm
Ask to look at the fee structure for any Self-Directed IRA administration firm you are considering. This will give you an immediate insight into how they approach their work. Are they focused on your success, or do they want to get more money?
But fee structure is just one way to weigh different custodians against each other. You will also want to look at the reputation of your potential administration firms. Do they feature people in leadership who have been working with Self-Directed IRAs for a long time? Do they demonstrate expertise in their area? Or are they staffed by mostly new hires, many of whom have little experience in working with a Self-Directed IRA?