If there were no fees in the world, investing would be a lot simpler. But the truth is, fees are part of the landscape. Even in the modern day and age, where low-fee index funds are offered by brokerages across the world, there are still going to be fees that investors have to consider as they put money away for retirement. That’s also true in the world of Self-Directed IRAs, where the fees do more: they can help a custodian provide the administrative services that the Self-Directed IRA holder needs to keep their paperwork in line.
But what do investors need to know about these fees, and how do Self-Directed IRA administration firms typically structure these fees? Let’s explore.
How Many Self-Directed IRA Administrators Charge Fees?
First, let us look at the typical setup, as you can see with Self-Directed IRA administrators across the country. For many Self-Directed IRA administration firms, the idea is to use a sliding scale of fees. That means the more you own within Self-Directed IRAs, the more you can expect to pay. If you use a Real Estate IRA, for example, and expand from one to two assets within that IRA, your Self-Directed IRA administrator could potentially charge you more.
We think this is a problem. At American IRA, we charge flat fees: a setup for the account, and then a basic Self-Directed IRA fee on an annual basis, with an additional fee per transaction. With an unlimited account fee, you can use a flat fee to eliminate these transaction fees altogether, unlocking “unlimited transactions” and unlimited assets in the account.
This means that it’s possible for your Self-Directed IRA administration fees to remain stable even while your assets increase in value, or while you add new assets to the account. If your retirement account grows in value over time, that means that the ratio of expenses to the value of the account actually declines over time. While the fees associated with maintaining the account can remain flat, the account can continue to grow and grow as much as their value will determine. This is highly incentivizing for an investor who wants to maximize their potential wealth growth with a Self-Directed IRA.
Why Do Things This Way?
At American IRA, we do things this way because it’s best for the client. Remember: we are not financial advisors. We do not make investment recommendations, and we do not make more money if you buy particular assets. Instead, what we do is offer the best possible services on administrating the account. That means handling the paperwork for transactions, for example. It does not always make sense for us to charge more and more money simply because you are taking on more assets within an account, or because the value of the account went up. Is not that your goal?
Making Sense of Self-Directed IRA Fees
To some, the idea that you have to pay a third party for administration like this is not always intuitive. But what you are paying for is the use of a Self-Directed IRA administration firm. That, in turn, means you can use a Self-Directed IRA with more confidence. And with a Self-Directed IRA, you can unlock all sorts of potential avenues for wealth growth over time. That can mean turning to real estate, precious metals, tax liens, LLCs, and more. In other words, you get more freedom and more control with a retirement account that you self-direct. It helps to have an administration firm in your corner who can help with some of the nitty-gritty details of paperwork.