When you do ordinary shopping, it’s easy to compare prices of one product against another. After all, they’re the same product. But when you’re doing something like weighing the Self-Directed IRA custodians you can use, it gets a little more complicated. You’ll learn about flat fees, variable fees, and might even feel ripped off when you learn that an IRA custodian doesn’t seem very forthright about their services and how they charge for them. With that in mind, how can you run an accurate Self-Directed IRA custodian fee comparison? Here’s what you’ll need to know.
Self-Directed IRA Custodian Fees: A Quick Primer
Before you do anything else, it helps to know the lay of the land. Self-Directed IRA custodian fees are relatively simple to understand. In exchange for handling paperwork and administration on your account, the custodian might charge you a small fee. This small fee is then either applied at a uniform rate or a variable rate. That’s where it tends to get a little more complicated.
At American IRA, for example, we charge you a flat fee for an account’s administration, no matter how large that account might get. For example, let’s say you were to buy a piece of a business within a Self-Directed IRA for $50,000. That business’s value then takes off, and the value of the account becomes worth $500,000. Should you pay more for the administration of your IRA? We don’t believe so. There’s no extra work for us if the account’s value goes up, nor does it make sense for you to pay more money as your account grows. That is, after all, the idea behind growing an account: more money in your retirement portfolio.
There are Self-Directed IRA custodians who do charge percentage fees, however, which can eat into the profits of an account. These fees can be terribly inconvenient because they’re difficult to see and account for. Just as a mutual fund’s fee can eat into your returns over time, custodian fees can diminish what you otherwise could have had in your own returns.
We at American IRA construct our fees with this basic step in mind: if you have a Self-Directed IRA, we believe that a flatter fee structure makes more sense for you as an investor.
To learn more about how American IRA structures its fees for the benefits of our clients, check out our Self-Directed IRAs fees page here.
Why Does a Flat Structure Work Better?
When another Self-Directed IRA custodian charges you based on the number of assets or the value of your account, it creates an anti-incentive. Rather than feeling encouraged to grow the size of your account (and relatively shrink the value of the fees you pay), your fees then grow with the account. We believe that clients are served better when they have a flat fee structure in place, giving them the opportunity to use their Self-Directed IRA investment freedom to the fullest.
At American IRA, we have a basic IRA fee that includes unlimited assets and unlimited account value, plus a standard amount per transaction. You can also unlock unlimited transactions with a higher flat fee, which is great for individuals who like to make a lot of investments through their Self-Directed IRA.