Q&A: Shifting Roth IRA Broker Fees

Dear Liz: What can I do to stop my broker from deducting trading fees from my Roth IRA contributions, which I make monthly? Let’s say I invest $420 each month, but the broker takes $7, or $84 a year. Shouldn’t this be payable from a separate source so that I can invest the full contribution each year, thus reaping the eventual benefits of compounding the extra $84 sum over a long period of time?

Answer: As you understand, $7 per month isn’t such a small sum when you factor in how much more you’d get over time by investing that money instead of paying it to a broker. If that money remained in your account, you’d have roughly $8,500 more at the end of 30 years, assuming 7% average annual returns.

All investments have costs, of course, but minimizing those costs typically means you’ll create more wealth.

You can ask your broker if there is a way to pay the monthly fee from another account, but any commission you pay would be included in the annual amount you’re allowed to contribute. If your broker isn’t providing helpful investment advice to justify the commission, you can look into ways to invest for less, such as using a discount brokerage.

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