Roth IRA Transaction Fees, Anyway Around Them?

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muney3
Posts: 5
Joined: Mon Feb 12, 2018 8:40 pm

Roth IRA Transaction Fees, Anyway Around Them?

Post by muney3 » Tue Feb 13, 2018 10:52 pm

Hey new investor here...

I recently opened a Roth IRA Account with TD Ameritrade. I am looking to maintain a simple 3-fund portfolio (VTSMX/VGTSX/VBMFX) but can't help but notice that each fund comes with a $49.99 transaction fee.

1. Am I crazy thinking this is relatively steep (i.e. 2.7% of total annual contribution is lost due to fees right off the bat if you purchase 1 of each fund)? Or is this just something that I need to get over and live with? Maybe I am misunderstanding something?

2. Is there any way around this fee? Perhaps any different set of index funds recommendation? Possibly opening an account with Vanguard directly would help?

3. Will making recurring/automatic fund purchases help me eliminate this fee? Frankly, I did not want to purchase all $5,500 worth of funds at once. I was hoping I could contribute little by little at different rates per my comfort level throughout the year but now I am re-thinking this...

Thanks for any advice in advance!

mpsz
Posts: 277
Joined: Sat Jan 09, 2016 7:11 pm

Re: Roth IRA Transaction Fees, Anyway Around Them?

Post by mpsz » Tue Feb 13, 2018 10:58 pm

There is nothing that says you must use Vanguard funds. The Boglehead idea is to use index funds and keep costs low, there are many vendors who offer suitable funds.

Take a look at:
viewtopic.php?t=230074

Until recently, TDA was offering VG ETFs commission-free but has since switched to slightly worse funds. IMO, they are good enough to use and better than paying $50-$150 each time you trade.

If you want to keep Vanguard funds, use the ETF version for a $6.95 commission instead... or consider switching to Vanguard brokerage. I cannot honestly recommend using Vanguard as your broker, but the funds are great.

terran
Posts: 695
Joined: Sat Jan 10, 2015 10:50 pm

Re: Roth IRA Transaction Fees, Anyway Around Them?

Post by terran » Tue Feb 13, 2018 11:04 pm

As mpsz points out TD has a number of no commission ETFs, but if you want to invest in vanguard funds, why not keep you IRA at vanguard where there are no transaction fees for their funds?

mhalley
Posts: 5924
Joined: Tue Nov 20, 2007 6:02 am

Re: Roth IRA Transaction Fees, Anyway Around Them?

Post by mhalley » Tue Feb 13, 2018 11:21 pm

Remember that the minimum for most vanguard funds is $3000, except for target retirement and star funds. If you want to hold vanguard funds, then vanguard is the best place to do so. Schwab and fidelity also offer inexpensive index funds.

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