For years, Wall Street has convinced investors that ETFs are cheap and Self-Directed IRAs are expensive. After nearly 16 years of building IRA Financial, I still don’t understand why so many people accept that argument without doing the math. Once you compare actual dollars instead of percentages, a flat-fee Self-Directed IRA can be an incredible bargain, especially for investors with a few hundred thousand dollars or more in retirement savings who want the freedom to invest in alternative assets.

Why Investors Think ETFs Are Cheap

I like ETFs. I own ETFs, and I believe low-cost ETFs can be excellent long-term investments. But investors have been conditioned to think that paying an annual percentage of their balance is somehow cheaper than paying a flat annual fee.

A recent Wall Street Journal article, “Your Cheap ETF Costs More Than You Think,” raised this issue. Many investors assume ETFs are practically free, yet some of the most widely held funds still charge annual expense ratios around 0.18% to 0.20%, and ETFs focused on alternative investments can charge considerably more. That got me thinking about a question I’ve been asking for years: why do investors consider $495 a year for a Self-Directed IRA that can invest in almost anything expensive, but consider $1,000, $2,000, or even $5,000 a year in ETF expenses reasonable?

I think the answer comes down to presentation. A percentage sounds small, and a flat dollar amount sounds expensive. Look at the actual dollars, though, and the story can be very different.

The Problem With Percentage-Based ETF Fees

Most ETFs charge an annual expense ratio based on the amount you have invested. An ETF charging 0.20% costs $200 for every $100,000 invested, which doesn’t sound like much until your savings grow. At $500,000, that same fund costs $1,000 a year. At $1 million, it’s $2,000, and at $2 million you’re paying $4,000 a year.

The ETF sponsor doesn’t have to do twice as much work because your account doubled, but the dollar amount of the fee doubles anyway. That’s what I find so striking about percentage-based fees: the more successful you become as an investor, the more you pay.

Not all ETFs are expensive. Some broad-market index ETFs charge as little as 0.03% a year, which is an excellent deal. But many popular funds charge substantially more, particularly those built around specific industries, investment strategies, private equity, private credit, and other alternatives. Over a few decades, even small percentages add up to meaningful money.

What Popular ETFs Actually Charge

Here are some real examples. Expense ratios below are as reported by the fund sponsors and fund data providers as of November 2026, and they can change.

ETF	Focus	Reported expense ratio	Annual cost on $1 million
Invesco QQQ Trust (QQQ)	Nasdaq-100 stocks	0.18%	$1,800
VanEck Alternative Asset Manager ETF (GPZ)	Public alternative asset managers	0.40%	$4,000
Palmer Square Credit Opportunities ETF (PSQO)	Credit investments	0.52%	$5,200
WisdomTree Private Credit & Alternative Income Fund (HYIN)	Private credit and alternative income	0.50% net, 4.34% total including underlying fund expenses	$5,000 net, $43,400 total
Invesco Global Listed Private Equity ETF (PSP)	Listed private equity	About 1.8%	About $18,000
ProShares Global Listed Private Equity ETF (PEX)	Listed private equity	2.75% net, 3.98% gross	$27,500 net

Some of the higher figures include indirect expenses from the underlying investments rather than fees paid directly to the ETF sponsor, so they shouldn’t all be treated as identical costs. Still, the examples make the point. Alternative asset ETFs are not always inexpensive, and investors should understand the total cost of the exposure they’re buying. On $1 million, even a 0.50% expense ratio is $5,000 a year.

How a Flat-Fee Self-Directed IRA Works

At IRA Financial, we’ve always believed investors shouldn’t pay more in annual custody fees simply because their retirement accounts become more valuable. That’s why we charge a flat $495 a year for a Self-Directed IRA, with no asset value fees and no asset purchase fees. I walk through how this compares with asset-based pricing in our post on Self-Directed IRA fee structures.

Because the fee doesn’t move, its effective rate falls as your account grows:

Account balance	Flat annual fee	Effective annual rate
$100,000	$495	About 0.50%
$250,000	$495	About 0.20%
$500,000	$495	Under 0.10%
$1,000,000	$495	Under 0.05%
$2,000,000	$495	About 0.025%

Someone with $2 million in a Self-Directed IRA pays $495 a year in custody fees, less than three-hundredths of one percent of the account. I think that’s extraordinary value given the range of investments a Self-Directed IRA can hold. Custody fees and ETF expense ratios do pay for different services, and the custody fee doesn’t replace the management fees of whatever you hold inside the IRA. But it does show how affordable administering a self-directed retirement account can be.

ETF Fees vs. a Flat-Fee Self-Directed IRA: Comparing the Numbers

The easiest way to see the difference is to compare annual costs at different balances.

Retirement balance	ETF at 0.20%	ETF at 0.50%	IRA Financial flat custody fee
$50,000	$100	$250	$495
$100,000	$200	$500	$495
$250,000	$500	$1,250	$495
$500,000	$1,000	$2,500	$495
$1,000,000	$2,000	$5,000	$495
$2,000,000	$4,000	$10,000	$495

These figures compare annual ETF investment expenses with annual IRA custody fees, which are different services. An ETF held inside a Self-Directed IRA would generally incur both. Additional investment, transaction, or account fees may apply.

At $100,000, the $495 custody fee is nearly identical to the cost of an ETF charging 0.50%. At $250,000, that ETF costs $1,250 a year, and at $1 million it costs $5,000, while the custody fee stays at $495. I’m not suggesting these fees are interchangeable, since a private equity fund or private credit investment inside a Self-Directed IRA may carry its own management fees, just like an ETF. I am suggesting that the idea that self-directed custody is inherently expensive doesn’t hold up against the numbers.

Investment Freedom Most ETFs Can’t Offer

To me, the real value of a Self-Directed IRA goes well beyond the fee. When you buy an ETF, you’re buying a product built to follow a particular index or strategy. When you open a Self-Directed IRA, you’re opening an account that can invest in a much broader range of assets.

Fidelity, Schwab, and Vanguard offer excellent access to stocks, bonds, mutual funds, and ETFs. But if you want your IRA to invest directly in a private real estate deal, a venture capital fund, a private business, or a private credit opportunity, a traditional brokerage IRA generally won’t allow it. Under the Internal Revenue Code, an IRA can invest in almost any asset that isn’t specifically prohibited, subject to the prohibited transaction rules and other tax requirements. That means a Self-Directed IRA can potentially own real estate, private equity, venture capital, hedge funds, private credit, cryptocurrency, and interests in privately held businesses, while keeping the IRA’s tax advantages. Certain investments can generate unrelated business taxable income, or UBTI, so structure matters. If real estate is your focus, our guide to real estate investing with a Self-Directed IRA covers the rules.

An Alternative Asset ETF Is Not the Same as Owning the Alternative Asset

Many investors overlook this point. Some ETFs marketed as alternative investment funds don’t give you ownership of private alternative assets at all. A listed private equity ETF may simply own shares of publicly traded firms such as Blackstone, KKR, or Apollo Global Management. Those are successful alternative asset managers, but owning their stock isn’t the same as investing in one of their private equity or private credit funds. Their share prices can move with the broader stock market even when the private investments they manage perform differently.

With a Self-Directed IRA, you may be able to invest directly in a private equity fund, venture capital fund, real estate partnership, or private credit fund, assuming you meet any investor qualification requirements. Private investments carry real risks. They can be illiquid, difficult to value, and subject to significant management fees. But for investors who understand those risks, the ability to invest directly can be extremely valuable, and a flat $495 a year for access to those opportunities seems very reasonable to me.

Why Flat Fees Fit Long-Term Alternative Investments

Many alternative investments are naturally long-term. Real estate, venture capital, private equity, and private credit often have holding periods of five, seven, or even ten years, which suits retirement savers whose time horizon is measured in decades.

Imagine an investor uses $250,000 from a self-directed Roth IRA to invest in a venture capital fund, and over ten years that investment grows to $1 million. If the custodian charged 0.50% of asset value, the custody fee would eventually reach $5,000 a year. With a flat-fee custodian, it stays at $495 no matter how much the investment appreciates. The investor may still pay fund-level fees, but the custody fee isn’t climbing just because the investment succeeded.

That’s how I believe retirement custody fees should work. Investors take the risk and put their retirement savings to work. If they make a successful investment, I don’t see why their custodian should automatically collect more.

You Don’t Have to Choose Between ETFs and Alternative Assets

One of the biggest misconceptions about Self-Directed IRAs is that they’re only for people who want alternatives. For many Americans, I believe the best strategy combines traditional investments with alternative assets. I personally like holding stocks and ETFs while also investing in private businesses, real estate, and private credit.

That’s one reason we’ve expanded IRA Financial’s capabilities. Through our brokerage integration, eligible clients can trade U.S. exchange-listed stocks and ETFs for a $100 annual add-on while keeping access to alternative investments in the same self-directed account. An investor might put part of a Roth IRA into a low-cost S&P 500 ETF, part into a private real estate fund, and part into a venture capital opportunity, without opening three separate retirement accounts. ETF expense ratios and alternative fund expenses still apply, but the custody fee doesn’t rise with account value.

Why a Roth IRA Makes the Opportunity Even More Attractive

As a tax attorney, I always look at the tax side, and holding alternatives in a Roth IRA can be especially powerful. Qualified Roth IRA distributions are generally tax-free once you reach age 59½ and satisfy the five-year requirement, which I explain in detail in our post on the Roth IRA five-year rule.

Say you invest $100,000 from a self-directed Roth IRA into a private business that eventually grows to $1 million. If the investment is properly structured and the distribution requirements are met, that appreciation could potentially come out tax-free, subject to any UBTI exposure. And with a flat-fee Self-Directed IRA, the custody fee doesn’t increase as the investment grows from $100,000 to $1 million.

Is a Self-Directed IRA Right for Everyone?

No, and I want to be clear about that. I’m not suggesting everyone should open a Self-Directed IRA or that every ETF is expensive. If someone has $25,000 in retirement savings and only wants an S&P 500 ETF charging 0.03%, that fund costs just $7.50 a year, and a traditional brokerage IRA is likely the cheaper option. It would be hard to argue a $495 custody fee makes sense in that situation.

The calculation changes when investors want alternative assets, particularly as their balances grow. For someone with $250,000, $500,000, or $1 million in retirement savings, a $495 flat fee is a small percentage of the account, and the access to private equity, venture capital, real estate, private credit, and cryptocurrency makes the value even stronger.

Choosing the right custodian matters. Some Self-Directed IRA providers charge fees based on account value, per-asset fees, transaction fees, or other administrative charges, and those add up. Look for transparent pricing, real retirement tax expertise, and the investment flexibility you need. Our roundup of the best Self-Directed IRA companies of 2026 compares how providers price their accounts.

Final Thoughts

Many investors see a $495 annual fee and question the cost, yet they’re comfortable owning ETFs that charge 0.20%, 0.40%, 0.50%, or more every year. On $1 million, those expense ratios can mean thousands of dollars annually. The fees aren’t directly interchangeable, and a Self-Directed IRA investor still has to weigh the expenses of the underlying investments, but the numbers show how affordable flat-fee custody can be for investors with substantial savings.

I’m not against ETFs. Low-cost ETFs should remain an important part of many retirement portfolios. But I believe Americans deserve the opportunity to invest beyond Wall Street, and they shouldn’t pay rising custody fees simply because they become more successful investors. The next time someone tells you a $495 Self-Directed IRA is expensive but a 0.50% ETF is cheap, ask how much money is invested and what investment choices actually matter to you. Once you look at the real dollars, a flat-fee Self-Directed IRA may turn out to be one of the best bargains in retirement investing.

This content is for educational purposes only and does not constitute legal, tax, or investment advice. Consult a qualified professional before making any investment decisions.