10 Fees Eating Up Retirement Savings:
1. Account termination fees.
2. Account maintenance fees.
3. Various account transfer fees.
4. Roth conversion fee: This is charged when a traditional IRA is converted to a Roth IRA.
5. Federal fund wire fee and overnight delivery fee.
6. “Special investment” fee: This applies to nontraditional/ non-publicly traded investments such as private placements, real estate and certain limited partnerships.
7. “Special investment” set-up fee: This also applies to non-traditional investments not publicly traded. Such fees are usually one-time only.
8. Form 990-T filing fee: For accounts holding nontraditional/ non-publicly traded investments, the custodian may need to file IRS Form 990-T to report unrelated business income.
9. Loan processing fees: Clients who take loans from retirement funds may face a processing fee.
10. Recordkeeping fee: Small business owners with solo-K/individual-K plans may be charged a recordkeeping and filing fee of several hundred dollars, if they use the services of a record keeper.
As advisors, we can’t make these fees go away, but there may be a tax-efficient way to pay them. For instance, if a client is in the “accumulation” phase of saving for retirement, it would make sense to pay any allowable fees with what’s called non-qualified money, that is, money that’s outside of the retirement accounts. This would allow more money in the account to grow tax-deferred.
By contrast, if a client is in the distribution phase of retirement, it may make sense to have these fees paid from the qualified account.
As always, I hope this article has helped you and your clients. Please contact our office if you need any assistance.
