Trivial Question Regarding Roth

[Guest augustineregal@yahoo.com]

I feel silly asking this question, as it's a quibble over an insignificant amount. But here goes.

I'm about to max out my Roth for 2007. As I just started it recently, I was hit with an annual small account fee of $10--this was deducted from my account by selling the appropriate share amount. My question: Can I make up this fee deduction with my next contribution? Or would doing so mean that I contributed $10 over the yearly limit?

I know this is a trivial matter. But maxing my Roth gives me a warm fuzzy feeling. Silly as it seems, it would really irritate me if I fell $10 short simply because I didn't know the proper procedure.

By the way, I've read IRS Publication 590 from cover to cover. (For those who haven't yet done so but are considering it, my advice is to wait for the movie.) Couldn't find an answer to my question. I'd call the IRS, but I didn't want to listen to the giggling that would doubtless greet my question.

Regal 56

[Bird]

I think from what you described putting more in would be an overcontribution.

Some (most? all?) custodians will give you the opportunity to add $10 (or whatever) to the initial deposit as a direct payment of the fee, i.e. it never goes in the account and doesn't count as a contribution. Ditto for annual fees, if applicable. But I think you've described a contribution and subsequent fee withdrawal. You could try to call the custodian and ask if they would re-characterize $10 of the original contribution as a direct fee payment.

[Appleby]

I agree with Bird that the repayment of the fee to the Roth IRA would be treated as part of your Roth IRA contribution.

For the next time the annual fee is due, you can pay it to Roth IRA before it is charged to the account. This would not be considered a reimbursement, and therefore not considered part of your Roth IRA contribution.

If your custodian provides you with advance notification of the due date for the fee, they may also provide instructions on how you can pay the fee out of pocket-but this out of pocket payment must occur by the due date…

[Guest augustineregal@yahoo.com]

Thanks to both of you for your replies. Fortunately this won't happen again, as in the future I'll have enough to avoid triggering the small account fee. It does slightly tick me off that I'll be $10 short of the max for this year. But the today the Indians went two up on the Yankees, so it's all good.

Regal 56

[John G]

All replies above were on target.

If you have substantial assets with this custodian (even non-IRA accounts) you can sometimes ask for them to waive the annual fee. Even if you don't, it doesn't hurt to ask. Some folks will waive fees, but you have to ask.

Custodians (especially brokerages) don't go out of their way to disclose what they will do on fees, but here is an example. I merged (rolled over) two IRAs into a third account. I was dinged for $50 and $70. But, the recipient IRA custodian (Schwab) reimbursed me for both amounts. They could not add it to the IRA, but they credited a different account we had. This seems to be a fairly common practive, just not advertised.

If I had been on my toes, I might have been able to pay the termination fees directly. After almost three decades of building IRAs (and more recently Roths), I am past the annual fee business... but I understand how annoying they can be. Sort of like those parking tickets which I despise.

I grew up a Yankees fan. But since I live in Colorado, I will have my fun rooting for the "amazing" guys here. I think they have now won 15 of 16.