I want to max out my IRA and I am investing in a mutual fund with 5% front-load fee.

Does that mean that I can contribute $5,500 max for IRA but have real IRA balance $5,500 less $275 = $5,225 as a result?

Or, can contribute $5,789 so my after fee balance becomes $5,500?

Our financial adviser said that first case is how it works, but he was not able to point me to any IRS documentation confirming it.

  • 2
    Can I start with "Don't invest in mutual funds with front-load fees"? I think your advisor is right - this is effectively a cost to your IRA, so it counts against the limit; the only thing I could imagine would be if you were allowed to pay the front-load fee out of pocket (out of normally taxed income), but I think that's identical (or close enough) to just contributing $5500 then contributing after-tax another $289. – Joe Mar 2 '15 at 19:21
  • I asked a similar question here. – Craig W Mar 2 '15 at 19:51
  • Actually, I don't seem to have enough points to mark it as a duplicate, do you mind doing that? Feel free to add your answer too so I can accept it. – alexandroid Mar 2 '15 at 20:24

Thanks to Craig W for pointing out to similar question with the links.

From IRS Publication 590-A (2014 tax year):

Brokers' commissions. Brokers' commissions paid in connection with your traditional IRA are subject to the contribution limit.


Brokers' commissions. These commissions are part of your IRA contribution and, as such, are deductible subject to the limits.

I wish they did not count them toward contributions. I'd rather deduct net IRA contribution than commissions in this case...

Note that first quote talks specifically about Traditional IRA and does not say anything about Roth IRA. I might post a separate question about Roth.

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