livesoft wrote:It would be worthwhile to find a broker that does not charge commissions. There are many nowadays, so it's easy to find one. We have never paid any commissions on transactions in our Roth IRAs.
I have never heard of such a broker. The cheapest broker I've encountered is Interactivebrokers, who charges $1/trade - but then they charge an apparently non-tax-deductible "activity fee" of $10/month to compensate. The cheapest broker I've encountered without activity fees is Optionshouse, which charges $3.95/trade.
How could a broker possibly offer a free service? Is there a high min. cash balance that you don't get interest on? Otherwise I find it hard to believe that web ads could cover the brokers trading costs.
Which would be easier and take less time? Finding a no-commission broker ala livesoft or figuring out the IRS rules?
Thanks for the reference. I find the first part of that publication too abstract to understand, but further down, this highlighted part
makes it clear that taxpayers can in effect deduct commissions, but strangely, only if they add the commission to the cost basis and subtract it from sale prices. Apparently the commission cannot be a separate deduction - which specifically blows it for Roth IRA accounts. So that answers my initial question (and compels more questions).
patrickrenault wrote:Would it make sense to find a brokerage who would take commission payments from non-Roth money, while the trade itself is with Roth money?
That would be illegal. Commissions within IRAs are all yours, not deductible anywhere.
So, tread lightly on trading within IRAs.
How exactly does the law go about mandating which source commissions are paid from? What would the purpose be in such a law? Given that a separate tax deduction for commissions is not possible, there is no tax benefit from paying costs from a separate account, so why block it? Forcing investors to spend their IRA money pre-retirement only works against the governments attempt to encourage retirement accounts (the gov wants people to have private retirement accounts to keep pressure off the social security problem).
Suppose a broker offers a special deal for people with a Roth account and a non-Roth account. The broker offers buy-one-get-one-free. So you make a trade with a non-Roth account (perhaps at a higher commission), and the broker adds a free trade to your online profile. You then decide to use that free trade on your Roth account. It seems this would be an efficient way to trade without attempting to deduct a non-deductible expense. Do any brokers offer this, or something similar?