Is it Free to Open a Roth IRA?
Roth individual retirement accounts contain tax-deferred funds for your retirement. You can invest your Roth contributions in a number of different account types. Depending on how you invest the money you may or may not have to pay any fees to establish your Roth account.
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Custodian Fees
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You can create a brokerage Roth IRA holding account and hold securities such as bonds or stocks within it. However, most investment firms require you to pay a Roth IRA custodian fee just for establishing a Roth account. You normally have to pay the fee either when you start the account or after you have held the account for 12 months and on an annual basis thereafter. Some banks charge the same fee if you open a Roth savings account.
Mutual Funds
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Many investors buy mutual fund shares with their annual Roth IRA contributions. There are several classes of mutual fund shares and you can buy some shares, such as no-load shares, without having to pay a fee. However, most shares are classified as either front-end or back-end load funds. If you buy front-end load funds you pay a commission of 4 or 5 percent when you buy your shares. If you buy back-end load shares you pay nothing upfront but you do pay a sales charge when you sell your shares. You pay these fees whether you buy mutual funds with Roth money or with non-Roth money, but some funds also charge an annual Roth IRA custodian fee.
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Certificates of Deposit
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You do not have to pay a fee to set up a certificate of deposit Roth IRA account. However, your bank can charge a fee if you make a withdrawal from the account prior to the end of the CD term. Similarly, you pay no fees to establish a fixed annuity Roth account, although you do pay an interest penalty fee if you cancel the contract or withdraw funds before the end of the annuity term.
Considerations
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Annual custodian fees charged by brokerage firms, banks and mutual fund companies range from $10 to $100. Since you can buy the same securities from any brokerage firm, you should shop around for the firm that charges the lowest fees. To avoid bank custodian fees, you could invest your Roth funds at a local credit union. Unlike banks, credit unions are nonprofit entities and waive many of the service fees that are common at banks.
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