/ Ask Terry Questions / Fees associated with self-directed IRA vs advisor directed IRA

Fees associated with self-directed IRA vs advisor directed IRA

By Terry Savage on January 08, 2018 | Investments

Hi Terry, Happy New Year! Im looking into transferring my current self directed IRA, which previously was under a broker with a large banking institution (and Ive already paid the commissions to initially get into my funds and currently dont have any ongoing fees). Since the change in government regulations regarding IRAs, the question I am struggling with is weather to keep my portfolio as is in a self directed IRA or go with previous broker into his own private portfolio with a 1.17% annual fee for me and a 1.35% annual fee on my husbands portforlio. Not sure if this fee % is a good one and if it makes sense to now pay annually for management when I paid initial fees and am still in those funds which previously were bought by this same broker but under a bank portfolio group of funds. I am not an investment guru and prob would not have any ideas as to when and how to manage my own IRA other than leave it as is. Can you offer any insight to justify no annual costs vs these annual percentage fees we would be incurring?

Terry Says

Whew -- this is why I spend time answering questions on my blog.  Honestly I have no idea why you would pay ANY fees for advice on an IRA!  You can roll your IRA to Vanguard or Fidelity and get advice on which funds to choose at NO cost, (assuming an account worth $50,000) AND you will pay the lowest annual fund management fees.  (I'm quite sure that if you ask your broker how much you pay in UNDERLYING FUND MANAGEMENT FEES each year, you are paying a small fortune!)  At Fidelity or Vanguard or T. Rowe Price, these fees should be less than a quarter of one percent annually!  And those large broker annual fees can add up -- or rather subtract down -- out of your retirement account over the long run!Do not be deterred by the fact that you already paid commissions to get into the funds years ago.  that should be considered "sunk costs."  As noted above, you will not pay any fees to get into new, low-cost funds at these fund companies.  AND, they will handle the entire rollover for you so nothing will become taxable.  Selling the old funds inside your IRA is not a "taxable event" because they are inside a tax-deferred account.  You'd want to get out of them anyway and start fresh, with lower cost funds.I'm glad you wrote because so many people feel "trapped" into high cost retirement advice when it is truly not necessary!  At the very least, find a "fee-only" financial advisor who will help with your overall financial plan on a "fiduciary" basis -- putting your interests first.  Go to www.feeonly.org. to search for one. 

money

ASK TERRY

a personal
finance question