fees for management of roth ira

[Guest etherj]

I am in the early phases of opening a Roth IRA for my wife and myself. I have looked at several of the online companies and was wondering what type of fees I could expect to pay. For instance, one company charges a flat $12.00 per month which includes 6 free trades per month and the yearly IRA management fee is waived.

Does this sound fair? Suggestions? (I need to put funds in on a monthly basis as opposed to yearly lump sums)

[Guest jusducki]

$144/year (times two if both you and your wife have accounts) sounds very expensive to me! Yes, it sounds attractive to get six free trades/month - that's their bait. But...think about it...do you really plan on trading that often? If funding your accounts on a monthly basis (roughly at $240 for one), there's not going to be much available for buying stocks, at least initially. I recommend focusing more on the IRA Trusee fee rather than the stock trade fee. Secondly, if invested in funds or stock (versus an annuity), you may pay the annual fee directly rather than automatically deduct from your account and by doing that, the fee is deductible. I've used Ameritrade for years for both my traditional and Roth IRA and other than making a trade when new money goes in and a few periodic trades over the years, and feel whatever they charge (maybe $9 or $10) a trade has been far less in fees than if I'd paid $144/year.

[mbozek]

The fees vary depending on the co and the type of account. For example Schwab charges a $45 annual fee if the IRA has less than 100K and then charges for each trade. Vanguard charges $10 or $15 annual fee for mutual fund accounts under 50k or so. You need to shop around for the best deal for you.

[ElGuapo]

I need to put funds in on a monthly basis as opposed to yearly lump sums

Is it safe to assume, then, that you don't have a lot of investments/investment experience outside of maybe a 401(k)? If so I'd be inclined to say paying anything for the privilege of trading individual stocks is a waste of money for you.

You'd each be depositing maybe $250/mo to your Roths, not nearly enough to justify trading costs. (That $12/mo is equivalent to a 5% sales load on each deposit!) But the bigger issue is you'd have none of the diversification a mutual fund offers and, unless you plan to do a lot of research or have an uncommon gift for day trading, you could be in for a very expensive investment education.

No, take mbozek's advice and shop around, specifically for a mutual fund company or a discount brokerage that will allow you to buy funds periodically without an initial deposit minimum. In fact, for the first few years you'll probably limit your Roths to one mutual fund each. Vanguard is a good choice, but you may have to come up with $1,000 to start. I believe Fidelity now allows Roths to be opened without a fund minimum with automatic monthly investing--they even waive their normal brokerage fees if you only invest in their funds. TIAA-CREF is also well-known for allowing Roths without an initial minimum.

[Guest etherj]

Thanks for the responses. To clarify, I max out my 401k plus receive profit sharing and a match of about $4400 (all of which goes to my 401k). All in all, I end up with just over $20k/ yr into my retirement account.

I barely meet eligibility for the Roth IRA, but feel that since my wife is a stay at home mom, then the roth may be a good option. (Any other suggestions are appreciated)

I think that my question was misunderstood or I worded it poorly, but the dilemma is that I want to max out 2003 roth first, then contribute $250/ mth for each account for 2004. This way I am not slammed with $10-12 thousand all at once.

But the problem lies in the fact that each time I buy that mutual fund (once per month for each account) I will be charged a trade fee whether it be stock or fund that I buy, plus account management fee.

At any rate, I've been looking at American Funds and I think that it will turn out to be a much better deal. Maybe the key to getting the best deal is like you all said, "shop around".

[ElGuapo]

But the problem lies in the fact that each time I buy that mutual fund (once per month for each account) I will be charged a trade fee whether it be stock or fund that I buy, plus account management fee.

I see, sounds like you're not new to mutual fund investing, and the initial fund minimums won't be a problem. So you could really open Roths with any no-load mutual fund company (American, Vanguard, Fidelity, T. Rowe Price, etc.) or with a discount brokerage that has a fund supermarket available without transaction costs (Schwab, Fidelity).

In other words, if someone is telling you you'd pay a commission every month for buying more shares of a fund, you're looking in the wrong place. Commissions are for stock trades. Both Schwab and Fidelity will give you access to hundreds of funds from dozens of fund families without paying a transaction fee; they'll probably require you to hold the fund at least six months to avoid a fee on the sell, but hopefully you would do that anyway. And because the Roths would then be set up as brokerage accounts you could, if you chose, play around with individual stocks in the same account.

Good luck!

[John G]

Whoaaaa !

You are clearly talking to the wrong custodians. $144 is absolutely way too high.

You said "But the problem lies in the fact that each time I buy that mutual fund (once per month for each account) I will be charged a trade fee whether it be stock or fund that I buy, plus account management fee. "

I don't know where you are getting that information, but for many mutual funds that is 100% wrong. There are two issues to address: transaction fees and annual fees.

NO LOAD mutual funds do not charge you a transaction fee, every. You might be looking at brokerage charges for funds or perhaps loaded funds (commission based funds). In are era when there are thousands of NO LOAD options, it doesn't make a lot of sense putting your money into a system that keeps draining away your assets. You have the choice of opening a custodial account directly with a mutual fund or via a brokerage house. You need to shop around, and ask them tough questions about their fees. Almost all of the mutual funds and brokerages have websites with basic information. You can also get info from the March Consumer Report, Kiplinger Financial, Money or other investment mags.

The better mutual fund families, and many brokerages, charge a modest annual account maintenance fee. If you have other business relationships, or assets above a specific $$ amount, the annual fee is often waived. ALSO, some custodians/funds will waive fees for IRAs or Roths where you set up an automatic deposit system - like a monthly debit against your checking account. AND, you can often just flat out ask them to waive their annual fee.... the custodians that are eager for your business may say yes. If anyone tells you there annual fee is more than $25... go talk to someone else. Free sounds better, but $10 to 25 is not bad.

It sounds like making your own investment decisions is something new for you. Do some research. Then if you have questions, post them here again. There are lots of folks in your situation. We will try to help you get started on the right track.

[dh003i]

Your getting ripped off, big time. Fidelity charges $0 for a Roth IRA. Vanguard charges $10 per YEAR for each Roth with less than $5,000 (they waive that fee if you have more than $50,000 invested with them). You should move to one of them (I'd say Fidelity, due to it's massive number of options, and it's Funds Network, which allows you to invest in funds from many other fund-families without extra charges, though not in Vanguard without paying a charge).

[John G]

I noticed that Scottrade has an number of banner ads promising zero fee IRAs. I believe that they have about 140 offices around the US. I have no direct experience with them and make no recommendation, but for folks getting started there are lower cost options than the full service / high fee bank and brokerage options.