Swatting Away Pesky Ira Fees

To attract your retirement dollars, some mutual-fund companies and discount brokerages are dropping annual charges on individual retirement accounts. If you qualify for a tax-deductible IRA contribution and haven't made one for 1993, now is a good time to shop around: You have until Apr. 15 to open a new account and apply the tax benefit to your 1993 return.

Among the changes, T. Rowe Price and Vanguard recently eliminated $10 annual fees for IRAs with more than $5,000. Scudder, which formerly charged $10 a year for accounts with less than $3,000, eliminated all IRA fees. Dreyfus is waiving the $10 fee on IRAs that invest in its International Equity or Growth & Income funds.

The charges don't amount to much, especially if you're rolling over a large sum from an employee pension plan or 401(k), but they are a nuisance. "It seems to be a real hot button with a lot of retirees," says Norman Chiodras, president of Retirement Planners in Oak Brook, Ill. He advises clients not to let fees dictate their decision. Flexibility is most important in an IRA program, he says. For example, can you switch in and out of investments? Or are there other benefits, such as automatic deposit from your paycheck into an IRA?

Still, eliminating the fees is great for people who want to spread their IRAs among several fund groups, says Sheldon Jacobs, editor of the newsletter No-Load Fund Investor. Now you can have an IRA at Vanguard, start a new one at Scudder, and pay only the fund's underlying costs.

Another option is to go to a discount broker and mix funds from several families into one account. Charles Schwab started promoting a no-fee IRA for accounts larger than $10,000 in April, 1992. For accounts smaller than $10,000, Schwab charges $22 a year. For similar programs, Jack White & Co. charges $35 a year, and Quick & Reilly Group asks $25 a year.

IN THE FAMILY. The only problem with no-fee IRAs is that you still have to pay transaction fees when you trade within your account. But Schwab and Fidelity Investments have new programs in which you can trade no-load mutual funds for free if you choose a member fund family. At Fidelity, you won't pay IRA or transaction fees if you shelter more than $5,000 through its FundsNetwork.

Full-service brokerages have yet to catch on to this trend and still charge hefty annual IRA fees. Merrill Lynch and Prudential Securities, for example, both levy $35 a year. But if enough investors migrate to no-fee IRAs, maybe that will change.

                     FEE     MORE THAN:
      SCUDDER         $0     NA
      FIDELITY*      $10     $5,000
      VANGUARD       $10     $5,000
      T. ROWE
       PRICE         $10     $5,000
       SCHWAB        $22     $10,000
       LYNCH         $35     NA
      *For Fidelity mutual fund IRAs only
      NA=Not applicable
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