Sofi Invest and Dough UTMA/UGMA Custodial Account For Minor 2021


Sofi and Dough.com custodial account opening cost and investments assets options for children.



Custodial Accounts with Sofi


Dough and Sofi Invest do not offer custodial accounts (UTMA/UGMA). As an alternative, we suggest a brokerage firm called TD Ameritrade that offers UTMA/UGMA custodial accounts as well as $0 commission on stocks, ETFs and other investment classes. There are no account fees whatsoever.


Open TD Ameritrade Account



Open TD Ameritrade Account


Is ROTH IRA Safe Overview


Retirement savers who have any concerns about the safety of a Roth or Traditional IRA should be aware of the specific protections that banks and brokerage firms provide. This article will explore such safeguards and see if an IRA is safer at a bank or broker.


Bank Traditional and Roth IRAs Safety


Roth and Traditional IRAs are governed by the same laws and have the same level of safety, generally speaking. It should be noted that the two retirement accounts have different policies, such as when withdrawals must be made and how the two accounts are taxed. Such regulations typically do not affect the safety of the accounts, and both Roth and Traditional IRAs have the same level of protection.

What does affect the safety of an IRA is the insurance defending them. Both Roth and Traditional accounts can be opened either at a bank or a brokerage house. If it is opened at a bank, the IRA is protected by the FDIC. This includes up to $250,000 of insurance. Keep in mind that this amount is the total insurance provided by the bank to the customer. So, for example, if you had $100,000 in a checking account and $300,000 in an IRA, you would not be covered for $400,000. You are eligible for a maximum of $250,000 per bank. There are strategies for increasing this maximum, although that issue is beyond the scope of this article.

Bank IRAs are typically deposited in a savings account or certificate of deposit, both of which are covered by the FDIC. Some banks offer IRAs that are money market deposit accounts. These are basically savings accounts with checking privileges. This option would be convenient for account holders who are old enough under IRS regulations to make withdrawals penalty-free.

While bank IRAs are insured by the U.S. federal government, they tend to pay fairly low rates. For example, a 3-year IRA CD at Ally Bank currently yields just 1.55%. And this rate requires a minimum deposit of at least $5,000. A 1-year IRA CD with Bank of America pays only 7 basis points per year and comes with a $2,000 opening requirement. Wells Fargo Bank requires only a $100 deposit to open an IRA savings account, but the account only earns 0.03% annually.


Brokerage Traditional and Roth IRAs Safety


A Traditional or Roth IRA opened at a brokerage firm is protected by SIPC insurance, which has a limit of $500,000. There is a $250,000 maximum on cash balances. Unlike the FDIC, SIPC is not a government agency. It was Congressionally-mandated, but it remains a private organization. It is funded by its member brokerage firms. If you open an IRA or any other account at a securities broker, you want to make sure that the firm is a member of SIPC.

Brokerage IRAs typically invest in a range of securities, such as stocks, bonds, ETFs, and mutual funds. While these assets tend to be more volatile in price, some products are available to brokerage customers that have lower risk and greater price stability. A money market mutual fund, for example, attempts and usually succeeds in keeping its price exactly at $1 per share while paying a monthly dividend. Individual short-term bonds can also be traded. They tend not to fluctuate very much in price.


Bank v. Broker, Roth v. Traditional


Withdrawals must begin from a Traditional IRA no later than age 70½. A Roth, on the other hand, does not require distributions to ever be taken. Deposits to a Traditional account receive a tax deduction (in some cases), but will be taxed at withdrawal (in all cases). Deposits into a Roth, on the other hand, are taxed before they go in, so they are tax free during retirement. This structure means that the Roth is better for people who will be in a higher tax bracket after work.

Brokers usually offer a greater variety of IRAs than banks. For example, Firstrade offers SEP and SIMPLE IRAs. These accounts are designed for small businesses and self-employed persons. TD Ameritrade clients can open a Rollover IRA where an old 401(k) plan can be converted to an IRA. TD Ameritrade also has an option where the account's assets can be managed by investment advisors for a fee. Fidelity has an Inherited IRA that is designed for people who have inherited an IRA or workplace savings plan. Investors who need something besides a Roth or Traditional would probably be better off choosing a brokerage firm rather than a bank.

While securities typically have much higher return potential than bank products, the prices of securities can fluctuate, sometimes second-by-second on the stock exchange. A bank deposit, on the other hand, is guaranteed by the government to remain rock solid. Obviously, retirement savers who are primarily concerned with safety and security would get better sleep at night if they choose a bank IRA.


Summary


ROTH Individual Retirement Accounts have different levels of safety, depending on where they're opened and what they're invested in. Knowing the basics of bank and brokerage accounts will help you avoid any pitfalls.