IRA INVESTMENT ADVISORY FEES: HOW TO PAY THESE

If you pay investment advisory fees for your IRA, this one's for you..........

First, investment advisory fees for your taxable (non ira) account have not been deductible since 2017. But what about fees for your retirement accounts?

Should you pay fees from your IRA (pre-tax dollars) or from your taxable account? Investors in higher tax brackets may find using pre-tax dollars from their IRA is better. An investor in a lower tax bracket with a long-time horizon may prefer to pay the fee outside the IRA. Both investors will most likely find it is preferable to use dollars from a taxable account to pay the investment management fee for a Roth IRA, even though the fee is not deductible. It is better to pay with after-tax dollars from a taxable account rather than using future-tax-free-growth dollars from a Roth IRA.

Finally, if you choose to pay fees with pre-tax dollars from an IRA, make sure the retirement account is only paying the fees attributable to managing the IRA account itself. Paying a fee from an IRA for expenses attributed to a taxable account or a Roth IRA would be considered a taxable distribution, and could also be subject to early withdrawal penalties.

Just as a side, when I say fees for taxable accounts are not deductible, that just refers to deductions on your IRS return. Many states still continue to allow deductions on their state tax returns, so continue to report these to me when I prepare the annual income tax returns.

If you have questions, please let me know.