TD Ameritrade IRA Promotion For Opening Account
$0 stock/ETF trades and transfer fee refund.
Open TD Ameritrade Account
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M1 Finance Bonus For Opening IRA Account
Get up to $2,500 when you transfer account with $20K+.
Open M1 Finance Account
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Firstrade IRA Promotion
$0 fees on all mutual fund, stock, ETF, & option trades.
Open Firstrade Account
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Ally IRA Bonus
Up to $3,500 cash bonus + commission free trades for new accounts.
Open Ally Invest Account
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WeBull Offer For New Account
Grab your last chance to get a free stock up to $1,600 + acat refund.
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IRA Fees Explained
Individual retirement accounts, or IRAs, are perhaps one of the most popular types of investment accounts as they are a tax-advantaged way to save for retirement. Almost all brokers, with the exception of some of the discount players, offer IRAs. Within an IRA, the functionality is very much the same as with an individual taxable account (i.e. you can trade the same types of securities), but depending on where you open an IRA there could be additional fees, which we’ll discuss in this article, starting with an overview of types of IRAs.
Types of IRAs
There are two primary types of IRAs offered by most brokers - the Traditional and Roth IRA. The difference between them mostly comes down to when tax advantages are realized. With a Traditional IRA, your contributions are pre-tax, meaning that you don’t pay any income or payroll taxes on this money you contribute to your IRA. However, once you retire and start taking money out of your Traditional IRA you will owe income taxes on the full amount – both your contributions and capital gains.
With a Roth IRA the tax advantage comes during retirement. You still have to pay income and payroll taxes on any money you contribute to your Roth IRA; however on the flip side once you take this money out during retirement you do not owe any more taxes, not even on the capital gains. Both types of IRAs allow your money to grow faster and work harder for you because of the tax breaks, but one gives you these benefits in the present while the other offers the advantages later in life. Next, we’ll get into IRA-specific fees you may encounter.
Setup Fees
While most brokers won’t charge a setup fee, some will charge this fee simply for setting up your IRA. It is fairly easy to find a good broker that offers IRAs without setup fees (take a look at TD Ameritrade, Vanguard, or Fidelity), so we would recommend turning around if your broker tries to charge you a setup fee. Some brokers do have minimum account requirements to open an IRA, but these are fairly reasonable and can be as low as $100.
Annual IRA Fees
Some brokers charge an annual maintenance fee for having an IRA account with them, although it’s not hard to find brokers that don’t charge maintenance fees, such as Firstrade and Ameritrade for example. One broker that charges a modest $20 annual IRA fee ($25 for Simple IRAs) is Vanguard, however they make it easy for investors to avoid this fee by simply electing to receive all their account statements and communications electronically (instead of paper statements).
Inactivity Fees
As a technique to discourage investors from leaving open IRAs with small balances, some brokers will charge a modest inactivity fee to your IRA account if the balance drops below some minimum threshold, but this fee is not too common.
IRA Conversion and Transfer Fees
Most brokers will charge you a conversion fee if you rollover a 401K to an IRA or move an IRA from one broker to another. A rollover is when you change from one investment account type, such as a traditional employer 401K plan to an IRA, and some brokers will charge a fee for this service. Transferring your IRA from one broker to another almost always incurs a one-time fee from the broker you’re leaving behind (it’s $75 at Firstrade), however the good news is that most brokers will reimburse you for transfer fees incurred when switching to them.
IRA Early Withdrawal Fees
Withdrawing funds from a Traditional IRA prior to age 59 ½ will incur a 10% early redemption fee in addition to the regular income taxes you must pay, and is therefore advised against if possible to avoid. There are some unique scenarios where the 10% fee is waived, such as using the funds to pay for medical insurance after a job loss.
IRA Termination Fees
If you close an IRA, some brokers will charge you a termination fee. This fee is a flat $25 at Ally Invest for example.
IRA Promotions Disclaimer
Above IRA bonus offers for ROTH IRA, 401k Rollover IRA, SEP/SIMPLE and Traditional IRA accounts can change at any time without notice. These
incentives are available only to U.S. citizens and legal residents.
