Average IRA Account Fees
An IRA account is one of the most important tools available to save for retirement. Money inside of IRAs grows tax-deferred which means that all of your retirement investments go toward building your nest egg and not to the IRS.
There are two main types of IRA account. The basic difference between a Roth IRA and a traditional IRA (sometimes called a standard IRA or just IRA) is that with a traditional IRA, you may be able to deduct some of your contributions. You cannot deduct any contributions to a Roth IRA.
On the other hand, you pay ordinary income taxes on all funds withdrawn from a regular IRA but you withdrawals from a Roth IRA are tax-free.
Just because you don't waste money on taxes doesn't mean that high fees and expenses won't impact your retirement planning.
Annual maintenance Fees On IRA Accounts
Firms qualified to offer IRA accounts are called custodians. One of the main things that qualifies a company to be an IRA custodian is that they must report information about IRA accounts to the IRS as well as provide certain IRS forms to account holders. IRA custodians charge various fees for services that they provide. Some even charge an annual IRA maintenance fee, which is sometimes called a custodial fee.
An annual account fee for IRA accounts used to be the norm. These days, you are a sucker if you are paying any sort of annual fee for an IRA account. Numerous brokerages, mutual funds, banks, and investment firms offer free IRA accounts without charging an annual IRA fee, and it's not just deep discount brokers either.
The average annual IRA account maintenance fee is between $25 and $50 per year from the companies that still charge them. However, paying anything over zero is just plain foolish.
Brokerages like Fidelity and Schwab offer free IRA accounts to all of their customers. Almost all credit unions offer free IRA accounts, although many have a required minimum balance or minimum opening deposit amount in order to get a free IRA. Many banks also will offer IRA accounts for free if the customer meets certain requirements like having a minimum dollar amount of deposits at the bank, or having also having a checking and savings account with the bank.
For customers who have their IRA accounts held directly at the mutual fund companies they have investments with, things are a little less likely to be free. BlackRock Mutual Funds charges a $15 annual fee, and American Funds charges a $10 annual custodian fee per Social Security number. Even low-cost mutual funds leader Vanguard charges a $20 IRA maintenance fee unless have a balance of $10,000 or more or are a Voyager or Flagship member.
How-To Avoid IRA Fees
Even at financial firms that charge annual custodial fees on their IRA accounts, there are usually ways to get the IRA account for free.
Most firms waive all account maintenance fees if customers hold a minimum amount of assets with the company. Typically, this minimum is across all accounts for the whole household. That means that if you have $200,000 in a brokerage account, you meet a $50,000 minimum balance requirement even if you only have $25,000 in your IRA account.
The worst thing about these minimum balance fees is that you can only contribute a certain amount to an IRA each year, so it may not be your fault that your account size is too small. The only thing you can do is deposit other assets with the broker to meet the minimums, which is, of course, exactly what they want you to do. However, unless you already have your assets invested with that brokerage, or you want to switch some funds there anyway, shop around for a free IRA account instead. You can always transfer it to a different custodian later when it is big enough.
Typical IRA maintenance fees charged annually by custodians is updated on a periodic basis. Be sure to check directly with the online broker or bank or credit union before opening an IRA account.