TRP IRA Closeout Fee

JimR

This caught me by surprise, it's not in the prospectus but in the custodial agreement. Not sure how I missed it, I've always moved within TRP and had the account for years. Not sure if everyone is aware of it.

Closeout Fee—a $20 fee is deducted from each IRA or ESA mutual fund account that is fully redeemed, transferred to a non-IRA or ESA, or transferred out of T. Rowe Price. The closeout fee also is deducted from SEP-IRA, Money Purchase Pension, Profit Sharing Plan, 403(b), and Individual 401(k) accounts that are closed without being transferred or rolled over to another T. Rowe Price retirement plan account. The fee is not charged to any accounts that have already been assessed the account service fee for that calendar year

hank

It's important to read the custodial agreement for IRAs (or other plans) as you point out. I too wish that stuff was in the prospectus. But often it isn't. Yes, I did notice the fee once and called them for clarification. They seem to have no problem with someone exchanging all $$ into a single fund a few days in advance; then withdrawing everything from that one fund. This would result in only one $20 fee.

Closeout fees are not uncommon among fund houses. Also, this is not to be confused with the annual IRA maintenance fee Price and others assess. That fee can be easily avoided (at Price) by opting for "paperless" records or by maintaining a balance of $50,000 with them.
Regards

AndyJ

Hank: "They seem to have no problem with someone exchanging all $$ into a single fund a few days in advance; then withdrawing everything from that one fund. This would result in only one $20 fee."

I can confirm that what Hank describes does work and results in only one fee; that's how I transferred my IRA $ out of TRP. The only thing to be aware of: consolidate into a fund that doesn't have a redemption fee, or you'll get dinged for that unless you're okay waiting out the redemption fee period in the chosen fund.

Best, AJ

hank

Reply to @AndyJ: Excellent point - which I should have mentioned. BTW - Price does a good job disclosing redemption fees. I believe every prospectus contains the full list of funds that carry the fees along with the % charged and applicable period. Couldn't ask for better disclosure in that regard.

AndyJ

Reply to @hank: Right, info in general at Price is right up there with the best of 'em. I've always liked the way they organize the fund pages on their web site, and the data they cover.

MaxBialystock

JimR: The same happened to me after pulling out of DODIX very quickly after getting in. I was very dissatisfied with the runaround I got from them, regardless of the fund's performance. Can't fight city hall, nor such extortion fees. Let's see what sort of positive influence newly-elected Senator Eliz. Warren from MA --- who will serve on the Senate banking committee--- may have, going forward...

hank

Unfortunately, fees are part of mutual fund investing. Many here have argued for ETFs, individual stocks, direct bond purchase & other options as ways to avoid these fees. Those are all fine and dandy. But, if you choose to own mutual funds, you're gonna pay fees one way or another. The real issue here is that a $20 or $30 dollar fee like the one under discussion is very conspicuous. It gets our dander up. Yet on a typical junk or EM bond fund, a management fee of .85% is viewed as reasonable - and few complain as long as the fund makes money. Now, that .85% ER amounts to $85 dollars paid in fees for every $10,000 invested. Not just one time as here, but year after year. Got 5 such funds, each with $10,000 invested? You're paying $425 in management fees out of pocket every single year. So sure, when I close-out the accounts at Price someday, that $20 fee will hurt. So does paying $75 to gas up the car, or $25 for a burger beer and fries at a local restaurant, for that matter.

Fund companies would much rather "hide" fees in their fund expenses whenever possible so as not to rile customers. Highly visible fees like this are often intended to deter certain activities. I imagine it's expensive for them to set up new accounts or to close old ones out in compliance with all the various governance regulations. With tax-sheltered plans, they have additional IRS involvement as well. It's to their advantage to minimize these occasions. ... So, read the materials - and If necessary talk to the company reps - before you sign your name or mail the check. If you can find a fairer more decent firm than T. Rowe Price or Dodge and Cox to deal with, than go for it. In my book, both are pretty darn good.