pocketmint

How to get a fee-free IRA at ShareBuilder

Jak and I have four IRA accounts at ShareBuilder — one Roth and one rollover for each of us. When we opened them in 2007, all ShareBuilder accounts were free to employees, so it was a no-brainer. Each employee got as many Advantage accounts as we wanted, which included up to 20 automatic investments per month, at no charge. If we wanted to sell, we had to pay the Real-Time Trade price, but since I’m the buy-and-hold type, that wasn’t an issue.

But when ShareBuilder was acquired by ING Direct at the end of last year, all the employee account benefits vanished, and we became subject to the same fees as everyone else. All of our accounts reverted to the Basic account, which charges no monthly fees, but $4 for each trade. In addition, ShareBuilder charges a $25 annual fee for each IRA. Ouch. For the size of the accounts we have (all under $10K currently), that’s a substantial percentage.

I considered moving the accounts elsewhere, but I couldn’t find any situation — including Zecco, Scottrade, and several others — that would save us nearly enough money to offset the $50 per account transfer-out fee. Also, no other brokerage has the ability to buy fractional shares, which is something that I would really miss; I like investing by dollar amount rather than by number of shares.

I’ve figured out a way, however, to get a ShareBuilder IRA for free, all transactions included. It’s not hard, but you do have to time the system.

All ShareBuilder IRAs are charged the $25 annual maintenance fee in either July or January, depending upon which half of the year you opened your account. (If you already have a ShareBuilder IRA and want to see which group you’re in, log in and go to Accounts: Overview: IRA/Roth IRA Information. For new accounts: January-June gets July billing, July-December gets January billing.) But that fee is waived if you have any account with ShareBuilder on a Standard or Advantage monthly plan for the month in question only.

• My Roth IRA gets charged in July, so yesterday I logged on and upgraded my account to the Standard pricing program. The normal cost of the Standard plan is $12/month, but ShareBuilder offers a free trial for the first month. I now have 6 free investments for July.
• Next I selected 6 ETFs that I want to purchase, with a total cost of $5000 (this year’s max Roth contribution), and set my Automatic Investment Plan to ‘On’ and ‘Invest when funds are available’.
• The next step is to move $5000 into my IRA. I’m actually going to wait until after the mid-month paycheck cycle to do that, which means that my investment should run on the following Tuesday, July 22.
• I then have just over a week to log on and change my pricing plan back to Basic before the first $12 charge posts on August 1.

That’s how you get a free Roth IRA with ShareBuilder. The downside, of course, is that you have to invest all at once; you can’t do dollar-cost averaging with weekly or monthly investments unless you want to pay the $12 fee every month. And while you can use this system with automatic payments into your account just by letting the money accumulate there until July or January rolls around, I don’t recommend it. ShareBuilder’s money market account (in which all uninvested funds are held) pays better than any other brokerage I’ve seen, but it’s still considerably lower than what you can get from a high-yield savings account. (As of this writing, BDMXX pays 1.86%, as compared to 3.0% from ING Direct and 3.5% from HSBC.)

By the way, though I am an employee of ShareBuilder, none of this is privileged information — it’s all available on the web site, though you do have to dig for it. Also, there’s always a chance that they’ll stop offering the ‘free month trial’ of the Standard pricing program, in which case your minimum fee per year is $12. But that’s still a pretty good deal, especially for a Roth where you want to keep making annual investments.

Internet shopping magic

Do you shop online?

I do. Aside from groceries, I probably make 80-90% of my purchases online. It suits me, because I am very big on product research and price comparisons and bargain-hunting, and because I usually find in-person shopping to be terribly inefficient. There are a few things it doesn’t work for — I’m afraid to buy an armchair online, because if it’s uncomfortable or poorly constructed, returning it would be next to impossible — but mostly it works just fine, and often saves me hours per week.

Currently we are remodeling our living room, and on our list of needed furniture is a coat rack. I could have spent an entire weekend day going from store to store in search of something suitable, but instead I opened two browser tabs and typed ‘coat rack’ into Amazon and Google.

Right away I found a solid wood style that I liked, listed as ‘on sale’ at coatracks.com for $80 plus $6 shipping. Now, I wasn’t going to assume that $80 was any kind of bargain just because one random site said so, but another half-hour of concerted searching convinced me that this was, in fact, the best price. The style I wanted wasn’t common, and the only other site I could find it on was charging $95.

And then, having already decided on the purchase, I worked internet magic.

Prior exploration of the site had revealed that coatracks.com was a front for a larger company called NetShops, so I googled ‘netshops coupon code’. Within two minutes I had a promotional code for $10 off a $75 purchase. (Turns out ‘coat racks coupon code’ would have worked just as well; I was being unnecessarily clever.) Typed the number in at checkout, and bang — saved ten bucks.

I do a code search every time I buy something online. When a friend had emergency surgery last month, I sent her flowers … and saved $10 with a promo code. (Which is a good thing, because the $30 arrangement was over $60 by the time all the extra fees were calculated!) I don’t always find a code, but it works more often than you might think. And it only takes a couple of minutes.

The trick, as with all coupons, is not to let them sway you into buying something you wouldn’t buy anyway. Some people are daily visitors to the coupon-code aggrecation sites and forums, but I recommend against that; better to search for something in particular when you’re ready to buy.

When I made my coat rack purchase, I got another promo code for $10 off $50 or more at netshops.com. I don’t need anything else that they sell right now, so I won’t be using it. But you can, if you want: it’s PP-5353 and expires July 7, 2008. One per household, so feel free to pass it on.