Paying expenses out of pocket in tax-advantaged accounts?

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Gamma Ray
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Paying expenses out of pocket in tax-advantaged accounts?

Post by Gamma Ray » Sat Sep 29, 2018 7:27 pm

Is it possible to pay expenses out of pocket on our IRA's so that expenses are not taken out of our contribution/growth?

harmoniousmonk
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Re: Paying expenses out of pocket in tax-advantaged accounts?

Post by harmoniousmonk » Sat Sep 29, 2018 7:34 pm

Don't know about IRAs but the invested HSA at Lively does this.

tibbitts
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Re: Paying expenses out of pocket in tax-advantaged accounts?

Post by tibbitts » Sat Sep 29, 2018 7:47 pm

Gamma Ray wrote:
Sat Sep 29, 2018 7:27 pm
Is it possible to pay expenses out of pocket on our IRA's so that expenses are not taken out of our contribution/growth?
I assume you mean the fund expense ration, so I believe the answer is no. In the past of course some accounts, like my SEP IRA, had fees, and yes I believe those could be paid directly.

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CABob
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Re: Paying expenses out of pocket in tax-advantaged accounts?

Post by CABob » Sat Sep 29, 2018 9:46 pm

Gamma Ray wrote:
Sat Sep 29, 2018 7:27 pm
Is it possible to pay expenses out of pocket on our IRA's so that expenses are not taken out of our contribution/growth?
It depends on what you mean by expenses and possibly where is the account held.
Fund expenses are taken daily from the cash balance and cannot be paid separably.
An account maintenance fee or similar charge quite likely can be paid separately but you would have to talk with whoever holds the account.
Bob

euroswiss
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Re: Paying expenses out of pocket in tax-advantaged accounts?

Post by euroswiss » Sat Sep 29, 2018 10:21 pm

Yes, account maintenance expenses such as for example for a SDIRA can be paid out of pocket

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FiveK
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Re: Paying expenses out of pocket in tax-advantaged accounts?

Post by FiveK » Sun Sep 30, 2018 2:30 pm

Gamma Ray wrote:
Sat Sep 29, 2018 7:27 pm
Is it possible to pay expenses out of pocket on our IRA's so that expenses are not taken out of our contribution/growth?
Also, if you are being charged an annual fee for the privilege of holding your normal IRA at some brokerage, note that many (e.g., Fidelity, Schwab, Vanguard) places don't charge such a fee, and probably have lower expense ratio funds than you are currently holding.

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Nate79
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Re: Paying expenses out of pocket in tax-advantaged accounts?

Post by Nate79 » Sun Sep 30, 2018 4:30 pm

Step 1: don't have expenses in your IRA. Then it makes the question moot.

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Gamma Ray
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Re: Paying expenses out of pocket in tax-advantaged accounts?

Post by Gamma Ray » Sun Sep 30, 2018 11:30 pm

I don't know how much it can impact someone's portfolio performance but even some VG funds have 0.30 - 0.45% ER. I was wondering if those could be paid by billing the investor so that expenses are not taken out of contributions. It was not clear to me how the ER's are taken out of the accounts. I guess it doesn't make big difference over the course of a year, 1M portfolio could have as much as $4500 ER?

On a traditional IRA or funds like SIMPLE IRA, there are also loads and high manage fees in other companies.

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FiveK
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Re: Paying expenses out of pocket in tax-advantaged accounts?

Post by FiveK » Sun Sep 30, 2018 11:45 pm

Gamma Ray wrote:
Sun Sep 30, 2018 11:30 pm
I don't know how much it can impact someone's portfolio performance but even some VG funds have 0.30 - 0.45% ER. I was wondering if those could be paid by billing the investor so that expenses are not taken out of contributions. It was not clear to me how the ER's are taken out of the accounts.
See Expense ratios - Bogleheads. It is not something charged on an individual basis.
I guess it doesn't make big difference over the course of a year, 1M portfolio could have as much as $4500 ER?
See The impact of investment costs | Vanguard.
On a traditional IRA or funds like SIMPLE IRA, there are also loads and high manage fees in other companies.
Which is a good reason to avoid the other companies when you have a choice, such as in a traditional IRA.

euroswiss
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Re: Paying expenses out of pocket in tax-advantaged accounts?

Post by euroswiss » Mon Oct 01, 2018 8:33 am

Nate79 wrote:
Sun Sep 30, 2018 4:30 pm
Step 1: don't have expenses in your IRA. Then it makes the question moot.
Agreed, this is definitely the way to go for a simple tIRA or Roth, but once you get to things like self-directed IRAs, then you will be faced with maintenance fees.

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House Blend
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Re: Paying expenses out of pocket in tax-advantaged accounts?

Post by House Blend » Tue Oct 02, 2018 8:04 am

Gamma Ray wrote:
Sun Sep 30, 2018 11:30 pm
I don't know how much it can impact someone's portfolio performance but even some VG funds have 0.30 - 0.45% ER. I was wondering if those could be paid by billing the investor so that expenses are not taken out of contributions. It was not clear to me how the ER's are taken out of the accounts.
In a tax-deferred IRA, you're better off with the way things are--fund expenses are withheld by the fund itself, not by the account custodian or brokerage. So in effect you are paying fund expenses with pretax money. Similar to paying for employee benefits with pretax wages.

So maybe a better pipe dream is to wish for a way to charge all of the expenses of your Roth and taxable accounts to your trad IRA and not have it count as a taxable distribution.

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Gamma Ray
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Re: Paying expenses out of pocket in tax-advantaged accounts?

Post by Gamma Ray » Mon Oct 08, 2018 3:02 pm

Thanks for the replies.

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