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Self-Directed IRA Custodian Fees and Costs: Definitive Guide

Self-Directed IRA Custodian Fees and Costs: Definitive Guide

Self-Directed IRA Custodian Fees and Costs: Definitive Guide

Self-directed investing is a great way to take charge of your own retirement. If you have the patience and the due diligence required, you can take the middleman out of investing and build your own retirement portfolio with a self-directed IRA.

However, while you do indeed have control over where and how you build out your investment portfolio, the IRS requires that all self-directed IRAs go through a certified IRA custodian. Though this is unnegotiable, you can choose your own IRA custodian.

However, be wary of the fees and costs that come with your selection. Here’s a breakdown of common IRA custodial fees and costs.

Self-Directed IRA Custodian Fees and Costs: Definitive Guide

What is an SDIRA Custodian?

As previously stated, if you have an SDIRA, the IRS requires all your assets and transactions to go through a certified IRA custodian. The proper certification is key, and there are many different custodians available.

Every custodian specializes in different assets. When choosing, consider how much you want to pay, the reputation, skill level, and credentials before you select a custodian. Additionally, be aware of IRA administrators acting as custodians. Only a certified custodian is qualified to handle your account.

So, as you search, aside from credentials, what should you keep in mind? You want to select a custodian that specializes in the type of assets you’re planning to invest in. It’s important to make sure they are available, well-reviewed, and are responsive. Additionally, you don’t want to pay too much, especially in fees.

What are SDIRA Custodian fees?

Depending on the custodian you select, you may incur a few different fees. Custodians can charge fees in several different ways:

  • Total asset value in your IRA
  • Per-asset basis
  • Flat fee

While these fees are common among many SDIRA custodians, not all custodians apply the same ones. In addition to the three listed above, a custodian may charge you sales commission or transaction fees. Regardless of the type, these fees are not tax-deductible since these fees are paid by money from your tax-deferred account.

Here’s a breakdown of the three basic fees.

Total Asset Value

This fee is based on the value of your assets held within your self-directed IRA. Custodians who charge this fee typically place assets into categories based on their value and charge a fee per group. Depending on the size and number of your investments, the average number of category groups is usually 4-5.

Per Asset Basis

The pricing for this fee is based on the total number of assets held in your SDIRA. A charge is applied per asset, and the price varies depending on the asset type. The price range can also depend on the custodian, so be aware that this number could fluctuate depending on who you choose.

Flat Fee

Rather than charging by asset or group, this fee is billed annually, no matter the number of assets. Whether you have 5 or 50 different assets, the fee will be the same. Of course, this price also varies by the custodian. What it comes down to is how often you’d care to pay the fee, and for what.

Self Directed IRA Free Guide

Additional Fees to Keep an Eye on

While the three basic custodial fees above are common with many IRA custodians, there are a few other hidden fees to watch out for.

You could end up paying way more than you bargained for. Make sure that the custodian you choose is transparent about their billing process. Here are other fees you should be aware of.

  • IRA Transaction Fee: The custodian or bank, or both will charge a fee for completing a transaction.
  • IRA Service Fee: This fee may be charged annually, bi-annually, or quarterly. Depending on who you go with, this is subject to change in price.
  • IRA Setup Fee: This is the cost of setting up your SDIRA with your custodian.
  • Account Research Fee: This fee is applied for research conducted on behalf of your account, which normally, you do yourself. Beware this charge.
  • Account Closure Fees: If you close or transfer your account, you may be forced to pay a fee.

As you select your custodian, perform your due diligence and avoid any unnecessary fees. So, how do you choose the best custodian for your SDIRA and is there anything you can do to avoid multiple fees?

Bypass with an LLC

If you want to avoid multiple transaction fees or want more control over your account, consider using your SDIRA to open a limited liability company. An LLC grants you, the owner, checkbook control. You can have quick and easy access to your funds, so you can act quickly on your account’s behalf.

This process cuts out the waiting. While you still must report transactions to your custodian, you can do it once and avoid waiting and multiple fees. Of course, there is room for error when handling your own funds. Be careful to follow the guidelines and avoid any penalties that may incur.

Selecting the Right Custodian

As you perform your research, keep in mind what you are looking for, and where you want to invest. Your IRA custodian should have the proper certifications, both state and federal. Be sure to clarify if the company is an “administrator” or a custodian.

Your possible candidates should be clear and upfront with their certifications, skills, processes, and billing. All costs should be clearly indicated upfront. Also, it’s important to select a custodian skilled in the assets you are investing in. Do your due diligence and get the right custodian for you.

Concluding Thoughts

Taking control of your own retirement takes time, patience, and a good IRA custodian. Before deciding, consult your financial advisor and be cautious with whom you select. Handling your own retirement shouldn’t come with a ridiculous amount of fees. Find the custodian who is right for you and build your nest egg for a comfortable future.