Skip to Content

Choosing a Self-Directed IRA Service: What fees should I look for?

When you choose a self-directed IRA service, you can expect to pay more in fees than if you went with standard IRAs. Depending on the service you select, you may owe fees that pertain to owning an account. Additional costs related to the assets you choose to invest in may also apply.

Since you are given more freedom regarding the assets you invest in, additional fees may relate to your chosen investments. For example, if you’ve invested in gold, there may be maintenance fees as well as storage and insurance fees, among others. Make sure you read the terms before starting any self-directed IRA service, so you know which fees to look out for.

Additional fees that are not required by the service but by the limitations of using self-directed IRA services may come up. For instance, self-directed IRA services have limited protections in that you may invest in an asset that ultimately costs you more money without the investigating and legitimacy reviews that standard IRAs may provide. If you make a fraudulent purchase, you may inquire about steep tax penalties and self-directed IRA fees for unfit purchases. For more information on the fees to look for when choosing a self-directed IRA service, continue reading below.

Self-directed IRA Fees For Accidental IRS Rule Breaches

The IRS has strict policies regarding the investments that can be held in retirement accounts and how they are used. You may be financially liable if you accidentally break one of these rules. When you opt out of a standard IRA, you lose the vetting done to ensure that your purchase is within the IRS’s rules and regulations.

The rules become unclear when you start using alternative asset classes. Don’t be surprised if you’re hit with self-directed IRA fees and penalties from the IRS for unchecked assets and investments. A common mistake is to attempt to invest in collectibles that fail to meet the purity standards of the IRS. If you do invest, the amount spent will be deemed a withdrawal, and you will be liable for applicable tax fees and penalties from early withdrawal.

The Same Withdrawal Rules (And Tax Fees) Apply

Additional self-directed IRA fees pertain to the same withdrawal regulations that are put in place as standard IRAs. Essentially, you owe taxes on the money that has not been previously taxed, except for Roth account earnings. Withdrawals are required to follow standard minimum distribution rules as standard IRA, so once you turn 72, expect to start owing tax money through early withdrawals. If you withdraw before turning 59.5, a 10% IRS penalty will apply to you with self-directed IRA fees.

Ask Questions To Get The Most Out Of The Service

While there are many risks to consider when you choose self-directed IRA services, savvy investors can obtain higher returns and protection against downturns through increased asset diversification. If you choose a self-directed IRA service, ask a lot of questions to get the most out of the service and to avoid unnecessary self-directed IRA fees.

Jeff Campbell