Feb
27
2024
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Margin Calls: Defined and Explained

By | Growing Wealth, invest, Investing | Comments Off on Margin Calls: Defined and Explained

A margin call is when an investor is required to add cash or sell investments to maintain a certain level of equity in a margin account if the value of the account decreases too much.

Margin trading — when an investor borrows money from a brokerage firm to enhance trades — is a risky endeavor. Placing bets with borrowed funds can boost gains but can also supercharge losses. Brokers require traders to keep a minimum balance in their margin accounts for this reason.

If the margin account dips below a certain threshold, this is when the brokerage firm will issue a margin call. A margin call is one of several risks associated with margin trading.

Margin calls are designed to protect both the brokerage and the client from bigger losses. Here’s a closer look at how margin calls work, as well as how to avoid or cover a margin call

Key Points

•   A margin call occurs when an investor must contribute cash or sell investments to uphold a specific equity level in their margin account.

•   Margin trading involves borrowing money from a brokerage firm to enhance trades, but it comes with risks.

•   If the equity in a margin account falls below the maintenance margin, a margin call is issued by the brokerage firm.

•   Margin calls are designed to protect both the brokerage and the client from bigger losses.

•   To cover a margin call, investors can deposit cash or securities into the margin account or sell securities to meet the requirements.

What Is a Margin Call?

A margin call is when a brokerage firm demands that an investor add cash or equity into their margin account because it has dipped below the required amount. The margin call usually follows a loss in the value of investments bought with borrowed money from a brokerage, known as margin debt.

A house call, sometimes called a maintenance call, is a type of margin call. A brokerage firm will issue the house call when the market value of assets in a trader’s margin account falls below the required maintenance margin — the minimum amount of equity a trader must hold in their margin account.

If the investor fails to honor the margin call, meaning they do not add cash or equity into their account, the brokerage can sell the investor’s assets without notice to cover the shortfall in the account. This entails a high level of responsibility and potential risk, which is why margin trading is primarily for experienced investors, not for investing beginners.

💡 Quick Tip: How do you decide if a certain trading platform or app is right for you? Ideally, the investment platform you choose offers the features that you need for your investment goals or strategy, e.g., an easy-to-use interface, data analysis, educational tools.

How Do Margin Calls Work?

When the equity in an investor’s margin account falls below the maintenance margin, a brokerage firm will issue a margin call. Maintenance margins requirements differ from broker to broker.

Additionally, regulatory bodies like the Federal Reserve and FINRA have rules for account minimums that all firms and investors must follow to limit risk and leverage.

Regulation T

The Federal Reserve Board’s Regulation T states that the initial margin level should be at least 50% of the market value of all securities in the margin account. The minimum equity amount must be valued at 50% or more of the margin account’s total value. For example, a $10,000 trade would require an investor to use $5,000 of their own cash for the transaction.

Recommended: Regulation T (Reg T): All You Need to Know

FINRA

The Financial Industry Regulatory Authority (FINRA) requires that investors have a maintenance margin level of at least 25% of the market value of all securities in the account after they purchase on margin. For example, in a $10,000 trade, the investor must maintain $2,500 in their margin account. If the investment value dips below $2,500, the investor would be subject to a margin call.

Example of Margin Call

Here is how a margin trade works. Suppose an investor wants to buy 200 shares of a stock at $50 each for an investment that totals $10,000. He or she puts up $5,000 while the brokerage firm lends the remaining $5,000.

FINRA rules and the broker require that the investor hold 25% of the total stock value in his or her account at all times — this is the maintenance requirement. So the investor would need to maintain $2,500 in his or her brokerage account. The investor currently achieves this since there’s $5,000 from the initial investment.

If the stock’s shares fall to $30 each, the value of the investment drops to $6,000. The broker would then take $4,000 from the investor’s account, leaving just $1,000. That would be below the $1,500 required, or 25% of the total $6,000 value in the account.

That would trigger a margin call of $500, or the difference between the $1,000 left in the account and the $1,500 required to maintain the margin account. Normally, a broker will allow two to five days for the investors to cover the margin call. In addition, the investor would also owe interest on the original loan amount of $5,000.

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Margin Call Formula

Here’s how to calculate a margin call:

Margin call amount = (Value of investments multiplied by the percentage margin requirement) minus (Amount of investor equity left in margin account)

Here’s the formula using the hypothetical investor example above:

$500 = ($6000 x 0.25%) – ($1,000)

Investors can also calculate the share price at which he or she would be required to post additional funds.

Margin call price = Initial purchase price times (1-borrowed percentage/1-margin requirement percentage)

Again, here’s the formula using the hypothetical case above:

$33.33 / share = $50 x (1-0.50/1-0.25)

💡 Quick Tip: When you trade using a margin account, you’re using leverage — i.e. borrowed funds that increase your purchasing power. Remember that whatever you borrow you must repay, with interest.

2 Steps to Cover a Margin Call

When investors receive a margin call, there are only two options:

1.    They can deposit cash into the margin account so that the level of funds is back above the maintenance margin requirement. Investors can also deposit securities that aren’t margined.

2.    Investors can also sell the securities that are margined in order to meet requirements.

In a worst case scenario, the broker can sell off securities to cover the debt.

How Long Do I Have to Cover a Margin Call?

Brokerage firms are not required to give investors a set amount of time. As mentioned in the example above, a brokerage firm normally gives customers two to five days to meet a margin call. However, the time given to provide additional funds can differ from broker to broker.

In addition, during volatile times in the market, which is also when margin calls are more likely to occur, a broker has the right to sell securities in a customer’s trading account shortly after issuing the margin call. Investors won’t have the right to weigh in on the price at which those securities are sold. This means investors may have to settle their accounts by the next trading day.

Tips on Avoiding Margin Calls

The best way to avoid a margin call is to avoid trading on margin or having a margin account. Trading on margin should be reserved for investors with the time and sophistication to monitor their portfolios properly and take on the risk of substantial losses. Investors who trade on margin can do a few things to avoid a margin call.

•   Understand margin trading: Investors can understand how margin trading works and know their broker’s maintenance margin requirements.

•   Track the market: Investors can monitor the volatility of the stock, bond, or whatever security they are investing in to ensure their margin account doesn’t dip below the maintenance margin.

•   Keep extra cash on hand: Investors can set aside money to fulfill the potential margin call and calculate the lowest security price at which their broker might issue a call.

•   Utilize limit orders: Investors can use order types that may help protect them from a margin call, such as a limit order.

The Takeaway

While margin trading allows investors to amplify their purchases in markets, margin calls could result in substantial losses, with the investor paying more than he or she initially invested. Margin calls occur when the level of cash in an investor’s trading account falls below a fixed level required by the brokerage firm.

Investors can then deposit cash or securities to bring the margin account back up to the required value, or they can sell securities in order to raise the cash they need.

If you’re an experienced trader and have the risk tolerance to try out trading on margin, consider enabling a SoFi margin account. With a SoFi margin account, experienced investors can take advantage of more investment opportunities, and potentially increase returns. That said, margin trading is a high-risk endeavor, and using margin loans can amplify losses as well as gains.

Get one of the most competitive margin loan rates with SoFi, 12%*

FAQ

How can you satisfy your margin call in margin trading?

A trader can satisfy a margin call by depositing cash or securities in their account or selling some securities in the margin account to pay down part of the margin loan.

How are fed and house calls different?

A fed call, or a federal call, occurs when an investor’s margin account does not have enough equity to meet the 50% equity retirement outlined in Regulation T. In contrast, a house call happens when an investor’s margin equity dips below the maintenance margin.

How much time do you have to satisfy a margin call?

It depends on the broker. In some circumstances, a broker will demand that a trader satisfy the margin call immediately. The broker will allow two to five days to meet the margin call at other times.

SoFi Invest®

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

*Borrow at 12%. Utilizing a margin loan is generally considered more appropriate for experienced investors as there are additional costs and risks associated. It is possible to lose more than your initial investment when using margin. Please see SoFi.com/wealth/assets/documents/brokerage-margin-disclosure-statement.pdf for detailed disclosure information.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Feb
27
2024
Sell-to-Open vs Sell-to-Close: How They Work

Sell-to-Open vs Sell-to-Close: How They’re Different

By | Growing Wealth, invest, Investing | Comments Off on Sell-to-Open vs Sell-to-Close: How They’re Different

Sell-to-open and sell-to-close are two of the four order types used in options trading. The other two are buy-to-open and buy-to-close. Options contracts can be created, closed out, or simply exchanged on the open market.

A sell-to-open order is an options order type in which you sell (also described as write) a new options contract.

In contrast, a sell-to-close order is an options order type in which you sell an options contract you already own. Both types of options, calls and puts, are subject to these order types.

Key Points

•   Sell-to-Open involves selling a new options contract, while Sell-to-Close involves selling an existing options contract.

•   Sell-to-Open profits from decreasing option values, while Sell-to-Close profits from options that have increased in value.

•   Sell-to-Open can increase open interest, while Sell-to-Close can decrease open interest.

•   Sell-to-Open writes a new options contract, while Sell-to-Close closes an existing options contract.

•   Sell-to-Open benefits from time decay and lower implied volatility, but can result in steep losses and be affected by increasing volatility. Sell-to-Close avoids extra commissions and slippage costs, retains extrinsic value, but limits further upside before expiration.

What Is Sell-to-Open?

A sell-to-open transaction is performed when you want to short an options contract, either a call or put option. The trade is also known as writing an option contract.

Selling a put indicates a bullish sentiment on the underlying asset, while selling a call indicates bearishness.

When trading options, and specifically writing options, you collect the premium upon sale of the option. You benefit if you are correct in your assessment of the underlying asset price movement. You also benefit from sideways price action in the underlying security, so time decay is your friend.

A sell-to-open order creates a new options contract. Writing a new options contract will increase open interest if the contract stays open until the close of that trading session, all other things being held equal.

How Does Sell-to-Open Work?

A sell-to-open order initiates a short options position. If you sell-to-open, you could be bullish or bearish on an underlying security depending on if you are short puts or calls.

Writing an option gives the buyer the right, but not the obligation, to purchase the underlying asset from you at a pre-specified price. If the buyer exercises that right, you, the seller, are obligated to sell them the security at the strike price.

An options seller benefits when the price of the option drops. The seller can secure profits by buying back the options at a lower price before expiration. Profits are also earned by the seller if the options expire worthless.

Pros and Cons of Selling-to-Open

Pros

 Cons
Time decay works in your favor A naked sale could result in steep losses
Benefits from lower implied volatility Increasing volatility hurts options sellers
Collects an upfront premium Might have to buy back at a much higher price

An Example of Selling-to-Open with 3 Outcomes

Let’s explore three possible outcomes after selling-to-open a $100 strike call option expiring in three months on XYZ stock for $5 when the underlying shares are trading at $95.

1. For a Profit

After two months, XYZ shares dropped to $90. The call option contract you sold fell from $5 per contract to $2. You decide that you want to book these gains, so you buy-to-close your short options position.

The purchase executes at $2. You have secured your $3 profit.

You sold the call for $5 and closed out the transaction for $2, $5 – $2 = $3 in profit.

A buy-to-close order is similar to covering a short position on a stock.

Keep in mind that the price of an option consists of both intrinsic and extrinsic value. The call option’s intrinsic value is the stock price minus the strike price. Its extrinsic value is the time value.

Options pricing can be tricky as there are many variables in the binomial option pricing model.

2. At Breakeven

If, however, XYZ shares increase modestly in the two months after the short call trade was opened, then time decay (or theta) might simply offset the rise in intrinsic value.

Let’s assume the shares rose to $100 during that time. The call option remains at $5 due to the offsetting changes in intrinsic value and time value.

You decide to close the position for $5 to breakeven.

You sold the call for $5 and closed out the transaction for $5, $5 – $5 = $0 in profit.

3. At a Loss

If the underlying stock climbs from $95 to $105 after two months, let’s assume the call option’s value jumped to $7. The decline in time value is less than the increase in intrinsic value.

You choose to buy-to-close your short call position for $7, resulting in a loss of $2 on the trade.

You sold the call for $5 and closed out the transaction for $7, $7 – $5 = $2 loss.

Finally, user-friendly options trading is here.*

Trade options with SoFi Invest on an easy-to-use, intuitively designed online platform.

*Check out the
OCC Options Disclosure Document.

What Is Sell-to-Close?

A sell-to-close is executed when you close out an existing long options position.

When you sell-to-close, the contract you were holding either ceases to exist or transfers to another party.

Open interest can stay the same or decrease after a sell-to-close order is completed.

How Does Sell-to-Close Work?

A sell-to-close order ends a long options position that was established with a buy-to-open order.

When you sell-to-close, you might have been bullish or bearish an underlying security depending on if you were long calls or puts. (These decisions can be part of options trading strategies.) A long options position has three possible outcomes:

1.    It expires worthless

2.    It is exercised

3.    It is sold before the expiration date

Pros and Cons of Selling-to-Close

Pros

 Cons
Avoids extra commissions versus selling shares in the open market after exercising There might be a commission with the options sale
Avoids possible slippage costs The option’s liquidity could be poor
Retains extrinsic value Limits further upside before expiration

An Example of Selling-to-Close with 3 Outcomes

Let’s dive into three plausible scenarios whereby you would sell-to-close.

Assume that you are holding a $100 strike call option expiring in three months on XYZ stock that you purchased for $5 when the underlying shares were $95.

1. For a Profit

After two months, XYZ shares rally to $110. Your call options jumped from $5 per contract to $12.

You decide that you want to book those gains, so you sell-to-close vs sell-to-open your long options position.

The sale executes at $12. You have secured your $7 profit.

You purchased the call for $5 and closed out the transaction for $12, $12 – $5 = $7 in profit.

2. At Breakeven

Sometimes a trading strategy does not pan out, and you just want to sell at breakeven. If XYZ shares rally only modestly in the two months after the long call trade was opened, then time decay (or theta) might simply offset the rise in intrinsic value.

Let’s say the stock inched up to $100 in that time. The call option remains at $5 due to the offsetting changes in intrinsic value and time value.

You decide to close the position for $5 to breakeven.

You purchased the call for $5 and closed out the transaction for $5, $5 – $5 = $0 in profit.

3. At a Loss

If the stock price does not rise enough, cutting your losses on your long call position can be a prudent move. If XYZ shares climb from $95 to $96 after two months, let’s assume the call option’s value declines to $2. The decline in time value is more than the increase in intrinsic value.

You choose to sell-to-close your long call position for $2, resulting in a loss of $3 on the trade.

You purchased the call for $5 and closed out the transaction for $2, $5 – $3 = $2 loss.

What Is Buying-to-Close and Buying-to-Open?

Buying-to-close ends a short options position, which could be bearish or bullish depending on if calls or puts were used.

Buying-to-open, in contrast, establishes a long put or call options position which might later be sold-to-close.

Understanding buy to open vs. buy to close is similar to the logic with sell to open vs sell to close.

The Takeaway

Selling-to-open is used when establishing a short options position, while selling-to-close is an exit transaction. The former is executed when writing an options contract, while the latter closes a long position. It is important to know the difference between sell to open vs sell to close before you start options trading.

If you’re ready to try your hand at options trading, you can set up an Active Invest account and, if qualified, trade options from the SoFi mobile app or through the web platform.

And if you have any questions, SoFi offers educational resources about options to learn more. SoFi doesn’t charge commissions, see full fee schedule here, and members have access to complimentary financial advice from a professional.

With SoFi, user-friendly options trading is finally here.

FAQ

Is it better to buy stocks at opening or closing?

It is hard to determine what time of the trading day is best to buy and sell stocks and options. In general, however, the first hour and last hour of the trading day are the busiest, so there could be more opportunities then with better market depth and liquidity. The middle of the trading day sometimes features calmer price action.

Can you always sell-to-close options?

If you bought-to-open an option, you can sell-to-close so long as there is a willing buyer. You might also consider allowing the option to expire if it will finish out of the money. A final possibility is to exercise the right to buy or sell the underlying shares.

How do you close a sell-to-open call?

You close a sell-to-open call option by buying-to-close before expiration. Bear in mind that the options might expire worthless, so you could do nothing and avoid possible commissions. Finally, the options could expire in the money which usually results in a trade of the underlying stock if the option is exercised.

Photo credit: iStock/izusek

SoFi Invest®

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.
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Feb
27
2024
457 vs. 401(k): A Detailed Comparison

457 vs 401(k): A Detailed Comparison

By | invest, Investing, Preparing for Retirement | Comments Off on 457 vs 401(k): A Detailed Comparison

Depending on where you work, you may be able to save for retirement in a 457 plan or a 401(k). While any employer can offer a 401(k), a 457 plan is commonly associated with state and local governments and certain eligible nonprofits.

Both offer tax advantages, though they aren’t exactly the same when it comes to retirement saving. Understanding the differences between a 457 retirement plan vs. 401(k) plans can help you decide which one is best for you.

And you may not have to choose: Your employer could offer a 401(k) plan and a 457 plan as retirement savings options. If you’re able to make contributions to both plans simultaneously, you could do so up to the maximum annual contribution limits — a terrific savings advantage for individuals in organizations that offer both plans.

Key Points

•   A 457 plan and a 401(k) are retirement savings options with tax advantages.

•   Both plans have contribution limits and may offer employer matching contributions.

•   A 401(k) is governed by ERISA, while a 457 plan is not.

•   457 plans allow penalty-free withdrawals before age 59 ½ if you retire, unlike 401(k) plans.

•   457 plans have special catch-up provisions for those nearing retirement.

401(k) Plans

A 401(k) is a tax-advantaged, defined contribution plan. Specifically, it’s a type of retirement plan that’s recognized or qualified under the Employee Retirement Income Security Act (ERISA).

With a 401(k) plan, the amount of benefits you can withdraw in retirement depends on how much you contribute during your working years and how much those contributions grow over time.

Understanding 401(k) Contributions

A 401(k) is funded with pre-tax dollars, meaning that contributions reduce your taxable income in the year you make them. And withdrawals are taxed at your ordinary income tax rate in retirement.

Some employers may offer a Roth 401(k) option, which would enable you to deposit after-tax funds, and withdraw money tax-free in retirement.

401(k) Contribution Limits

The IRS determines how much you can contribute to a 401(k) each year. For 2024, the annual contribution limit is $23,000; $22,500 in 2023. Workers age 50 or older can contribute an additional $7,500 in catch-up contributions. Generally, you can’t make withdrawals from a 401(k) before age 59 ½ without incurring a tax penalty. So, if you retire at 62, you can avoid the penalty but if you retire at 52, you wouldn’t.

Employers can elect to make matching contributions to a 401(k) plan, though they’re not required to. If an employer does offer a match, it may be limited to a certain amount. For example, your employer might match 50% of contributions, up to the first 6% of your income.

401(k) Investment Options

Money you contribute to a 401(k) can be invested in mutual funds, index funds, target-date funds, and exchange-traded funds (ETFs). Your investment options are determined by the plan administrator. Each investment can carry different fees, and there may be additional fees charged by the plan itself.

The definition of retirement is generally when you leave full-time employment and live on your savings, investments, and other types of income. So remember that both traditional and Roth 401(k) accounts are subject to required minimum distribution (RMD) rules beginning at age 72. That’s something to consider when you’re thinking about your income strategy in retirement.

💡 Recommended: 5 Steps to Investing in Your 401k Savings Account

Vesting in a 401(k) Retirement Plan

A 401(k) plan is subject to IRS vesting rules. Vesting determines when the funds in the account belong to you. If you’re 100% vested in your account, then all of the money in it is yours.

Employee contributions to a 401(k) are always 100% vested. The amount of employer matching contributions you get to keep can depend on where you are on the company’s vesting schedule. Amounts that aren’t vested can be forfeited if you decide to leave your job or you retire.

Employer’s may use a cliff vesting approach in which your percentage of ownership is determined by year. In year one and two, your ownership claim is 0%. Once you reach year three and beyond, you’re 100% vested.

With graded vesting, the percentage increases gradually over time. So, you might be 20% vested after year two and 100% vested after year six.

All employees in the plan must be 100% vested by the time they reach their full retirement age, which may or may not be the same as their date of retirement. The IRS also mandates 100% vesting when a 401(k) plan is terminated.

Get a 1% IRA match on rollovers and contributions.

Double down on your retirement goals with a 1% match on every dollar you roll over and contribute to a SoFi IRA.1

1Terms and conditions apply. Roll over a minimum of $20K to receive the 1% match offer. Matches on contributions are made up to the annual limits.

457 Plans

A 457 plan is a deferred compensation plan that can be offered to state and local government employees, as well as employees of certain tax-exempt organizations. The most common version is the 457(b); the 457 (f) is a deferred compensation plan for highly paid executives. In certain ways, a 457 is very similar to a 401(k).

•   Employees can defer part of their salary into a 457 plan and those contributions are tax-deferred. Earnings on contributions are also tax-deferred.

•   A 457 plan can allow for designated Roth contributions. If you take the traditional 457 route, qualified withdrawals would be taxed at your ordinary income tax rate when you retire.

•   Since this is an employer-sponsored plan, both traditional and Roth-designated 457 accounts are subject to RMDs once you turn 72.

•   For 2023, the annual contribution limit is $22,500, and $7,500 for the catch-up amount for workers who are 50 or older.

One big difference with 457 plans is that these limits are cumulative, meaning they include both employee and employer contributions rather than allowing for separate matching contributions the way a 401(k) does.

Another interesting point of distinction for older savers: If permitted, workers can also make special catch-up contributions for employees who are in the three-year window leading up to retirement.

They can contribute the lesser of the annual contribution limit or the basic annual limit, plus the amount of the limit not used in any prior years. The second calculation is only allowed if the employee is not making regular catch-up contributions.

Vesting in a 457 Retirement Plan

Vesting for a 457 plan is similar to vesting for a 401(k), but you generally can’t be vested for two full years. You’re always 100% vested in any contributions you make to the plan. The plan can define the vesting schedule for employer contributions. For example, your job may base vesting on your years of service or your age.

As with a 401(k), any unvested amounts in a 457 retirement plan are forfeited if you separate from your employer for any reason. So if you’re planning to change jobs or retire early, you’d need to calculate how much of your retirement savings you’d be entitled to walk away with, based on the plan’s vesting schedule.

457 vs 401(k): Comparing the Pros

When comparing a 457 plan vs. 401(k), it’s important to look at how each one can benefit you when saving for retirement. The main advantages of using a 457 plan or a 401(k) to save include:

•   Both offer tax-deferred growth

•   Contributions reduce taxable income

•   Employers can match contributions, giving you free money for retirement

•   Both offer generous contribution limits, with room for catch-up contributions

•   Both may offer loans and/or hardship withdrawals

Specific 457 Plan Advantages

A 457 plan offers a few more advantages over a 401(k).

Unlike 401(k) plans, which require employees to wait until age 59 ½ before making qualified withdrawals, 457 plans allow withdrawals at whatever age the employee retires. And the IRS doesn’t impose a 10% early withdrawal penalty on withdrawals made before age 59 ½ if you retire (or take a hardship distribution).

Also, independent contractors can participate in an organization’s 457 plan.

And, as noted above, 457 plans have that special catch-up provision option, for those within three years of retirement.

457 vs 401(k): Comparing the Cons

Any time you’re trying to select a retirement plan, you also have to factor in the potential downsides. In terms of the disadvantages associated with a 457 retirement plan vs. 401(k) plans, they aren’t that different. Here are some of the main cons of both of these retirement plans:

•   Vesting of employer contributions can take several years, and plans vary

•   Employer matching contributions are optional, and not every plan offers them

•   Both plans are subject to RMD rules

•   Loans and hardship withdrawals are optional

•   Both can carry high plan fees and investment options may be limited

Perhaps the biggest con with 457 plans is that employer and employee contributions are combined when applying the annual IRS limit. A 401(k) plan doesn’t have that same requirement so you could make the full annual contribution and enjoy an employer match on top of it.

457 vs 401(k): The Differences

The most obvious difference between a 401(k) vs. 457 account is who they’re meant for. If you work for a state or local government agency or an eligible nonprofit, then your employer can offer a 457 plan for retirement savings. All other employers can offer a 401(k) instead.

Aside from that, 457 plans are not governed by ERISA since they’re not qualified plans. A 457 plan also varies from a 401(k) with regard to early withdrawal penalties and the special catch-up contributions allowed for employees who are nearing retirement. Additionally, a 457 plan may require employees to prove an unforeseeable emergency in order to take a hardship distribution.

A 457 plan and a 401(k) can offer a different range of investments as well. The investments offered are determined by the plan administrator.

457 vs 401(k): The Similarities

Both 457 and 401(k) plans are subject to the same annual contribution limits, though again, the way the limit is applied to employer and employee contributions is different. With traditional 401(k) and 457 plans, contributions reduce your taxable income and withdrawals are taxed at your ordinary income tax rate. When you reach age 72, you’ll need to take RMDs unless you’re still working.

Either plan may allow you to take a loan, which you’d repay through salary deferrals. Both have vesting schedules you’d need to follow before you could claim ownership of employer matching contributions. With either type of plan you may have access to professional financial advice, which is a plus if you need help making investment decisions.

457 vs 401(k): Which Is Better?

A 457 plan isn’t necessarily better than a 401(k) and vice versa. If you have access to either of these plans at work, both could help you to get closer to your retirement savings goals.

A 401(k) has an edge when it comes to regular contributions, since employer matches don’t count against your annual contribution limit. But if you have a 457 plan, you could benefit from the special catch-up contribution provision which you don’t get with a 401(k).

If you’re planning an early retirement, a 457 plan could be better since there’s no early withdrawal penalty if you take money out before age 59 ½. But if you want to be able to stash as much money as possible in your plan, including both your contributions and employer matching contributions, a 401(k) could be better suited to the task.

Investing in Retirement With SoFi

If you’re lucky enough to work for an organization that offers both a 457 plan and a 401(k) plan, you could double up on your savings and contribute the maximum to both plans. Or, you may want to choose between them, in which case it helps to know the main points of distinction between these two, very similar plans.

Basically, a 401(k) has more stringent withdrawal rules compared with a 457, and a 457 has more flexible catch-up provisions. But a 457 can have effectively lower contribution limits, owing to the inclusion of employer contributions in the overall plan limits.

The main benefit of both plans, of course, is the tax-advantaged savings opportunity. The money you contribute reduces your taxable income, and grows tax free (you only pay taxes when you take money out).

Another strategy that can help you manage your retirement savings: Consider rolling over an old 401(k) account so you can keep track of your money in one place. SoFi makes setting up a rollover IRA pretty straightforward, and there are no rollover fees or taxes.

Help grow your nest egg with a SoFi IRA.

FAQ

What similarities do 457 and 401(k) retirement plans have?

A 457 and a 401(k) plan are both tax-advantaged, with contributions that reduce your taxable income and grow tax-deferred. Both have the same annual contribution limit and regular catch-up contribution limit for savers who are 50 or older. Either plan may allow for loans or hardship distributions. Both may offer designated Roth accounts.

What differences do 457 and 401(k) retirement plans have?

A 457 plan includes employer matching contributions in the annual contribution limit, whereas a 401(k) plan does not. You can withdraw money early from a 457 plan with no penalty if you’ve separated from your employer. A 457 plan may be offered to employees of state and local governments or certain nonprofits while private employers can offer 401(k) plans to employees.

Is a 457 better than a 401(k) retirement plan?

A 457 plan may be better for retirement if you plan to retire early. You can make special catch-up contributions in the three years prior to retirement and you can withdraw money early with no penalty if you leave your employer. A 401(k) plan, meanwhile, could be better if you’re hoping to maximize regular contributions and employer matching contributions.

SoFi Invest®

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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Feb
27
2024

Guide to the Average Savings in America by Age

By | Budgeting & Goals, Preparing for Retirement | Comments Off on Guide to the Average Savings in America by Age

How much does the average American have in savings? Age tends to have a lot to do with it. Generally, as people get older, they are likely to have more savings.

But what the average person has in a savings account also depends on their financial goals and personal circumstances.

If you’re looking for a benchmark of just how much you should save by a specific age, or how much you should start contributing right now, read on for average savings by age and some tips that could help.

Key Points

•   The average savings for individuals under 35 is $11,200.

•   Individuals between the ages of 35 and 44 have an average savings of $27,900.

•   Those aged 45 to 54 have an average savings of $48,200.

•   The average savings for individuals between 55 and 64 is $57,800.

•   Individuals aged 65 and older have an average savings of $60,400.

The Importance of Saving for the Future

Life can happen fast. For example, the average cost of having a new baby can run parents approximately $3,000 in out-of-pocket expenses for pregnancy and delivery. And then there’s the cost of caring for a child, which some estimates put at more than $18,000 for raising them through age 17.

And, if that baby wants to get a college degree, you’re looking at a whole new realm of savings. The cost of a college education can range from about $44,000 to well past $150,000.

There’s one other big reason to save for the future: People are living longer. According to a 2023 survey by the Employee Benefit Research Institute, only 18% of American workers are “very confident they will be able to retire comfortably.” Four in 10 workers say their lack of confidence is because they have little to no savings.


💡 Quick Tip: Did you know that opening a brokerage account typically doesn’t come with any setup costs? Often, the only requirement to open a brokerage account — aside from providing personal details — is making an initial deposit.

A Savings Shortfall

More than half of Americans can’t cover an unexpected $1,000 expense, according to Bankrate’s 2023 emergency savings report. Only 43% say they could cover it.

And 37% of all Americans don’t have enough cash in savings to cover even a $400 emergency, the Federal Reserve found in its “Economic Well-Being of U.S. Households in 2022” report.

Recommended: Try our emergency fund calculator to see how much you should save for an emergency fund.

Get a 1% IRA match on rollovers and contributions.

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1Terms and conditions apply. Roll over a minimum of $20K to receive the 1% match offer. Matches on contributions are made up to the annual limits.

Average Savings by Age in the USA

The Fed’s latest Survey of Consumer Finances shows that the typical American household has $5,300 in a savings account at a bank or credit union. But this number varies greatly by age and number of people in a household. Here’s what savings by age looks like.

Average Savings for Those 35 and Younger

Americans under the age of 35 had an average savings account balance of $11,200, according to the Fed’s survey.

This is a large age bracket that can range from those just graduating high school to recent college grads to young professionals well into a decade’s worth of work.

It’s wise to have three to six months of expenses in an emergency fund. At the very least, aiming to have $1,000 handy in a savings account for unexpected expenses is recommended.

For those who have started their careers, employer-sponsored retirement funds such as an IRA or a 401(k) can be good options to start saving for long-term retirement goals.

It makes sense to contribute at least enough to get matching funds from an employer, if that’s an option with your company’s plan. For reference, the average 401(k) savings for someone between the ages of 20 and 29 in the Fed’s survey was $10,500.

Recommended: Why You Should Start Retirement Planning in Your 20s

Average Savings by Age: 35 to 44

Americans between the ages of 35 and 44 had an average savings account balance of $27,900, according to the Federal Reserve Survey of Consumer Finances. Those in this age bracket are now well into adulthood. At this stage of life, it’s prudent to have that three-to six-months’ worth of savings in an emergency fund, to cover the cost of everything from an accident to a lost job.

This may also be the time to think about diversifying a financial portfolio and possibly investing in the stock or bond market.

And, of course, keep contributing to your 401(k). For reference, the average 401(k) savings for someone between the ages of 30 and 39 was $38,400.

Average Savings by Age: 45 to 54

People between the ages of 45 and 54 had an average savings account balance of $48,200, according to the Fed’s survey.

At this point, general financial advice dictates that a 50-year-old should have at least six times their annual salary if their intention is to retire at 67.

And by the age of 40 to 49, a person may want to have the average amount of retirement savings, which sits at $93,400.

average savings for people in their 40s

Average Savings by Age: 55 to 64

The Fed survey found that Americans between the ages of 55 and 64 had an average savings account balance of $57,800.

Since this is the time when most Americans are staring down retirement in a few years, it’s generally a good idea to boost retirement savings into high gear.

That’s because while younger people in 2023 are capped at contributing $22,500 a year to a 401(k) account, those over the age of 50 are allowed to contribute an additional $7,500.This is known as a catch-up contribution.

The average retirement savings account for a person between the ages of 50 and 59 is $160,000. It’s important to note that taking a withdrawal from such a plan before the age of 59 ½ could mean tax penalties.

average savings for people in their 50s

Average Savings by Age: 65 and Older

This is when savings really peaks for the average American. The latest Federal Reserve Survey of Consumer Finances found that Americans between the ages of 65 and 74 had an average savings account balance of $60,400.

However, that savings number does drop over time. According to the survey, Americans above the age of 75 had an average savings account balance of $55,600.

This underscores the importance of creating a retirement budget and sticking to it in order to have enough savings for as long as needed.

But before retirement, try to hit the average retirement savings amount for those ages 60 to 69, which was $182,100.

This chart offers an at-a-glance comparison of the average American savings by age.

Age

 Average savings
Under 35 $11,200
35-44 $27,900
45-54 $48,200
55-64 $57,800
65+ $60,400

💡 Quick Tip: How to manage potential risk factors in a self-directed investment account? Doing your research and employing strategies like dollar-cost averaging and diversification may help mitigate financial risk when trading stocks.

Median Savings by Age

Median savings is different from average savings. The median is the number in the middle of all the other numbers, meaning half the numbers are higher and half are lower. So with median savings, half the people in an age category will have saved more and half will have saved less.

These are the median savings by age, according to the latest Federal Reserve Survey of Consumer Finances:

•   Under 35: $3,240

•   35-44: $4,710

•   45-54: $5,620

•   55-64: $6,400

Savings vs Retirement Savings

What Americans have saved for emergencies, expenses, and other near-future goals is different from what they have in their retirement savings accounts, as you can see from all the information above. And it’s critical to have both types of savings at the same time.

And keep this in mind: As you get older, and closer to retirement, it’s important that your retirement savings grow even more. It’s a good idea to contribute the maximum amount allowed to your retirement accounts at this time, if you can. This is one of the ways to save for retirement.

Recommended: Average Retirement Savings By State

Saving a Little Bit More

Reaching specific savings goals doesn’t have to be complicated. It just means doing a bit of homework, strategizing, and staying diligent about personal finances.

The first step in saving more is to analyze current expenses to see what can be cut back on or cut out altogether to make more room for saving. This means creating a monthly personal budget and tracking current personal spending.

To track spending, a person could create an excel spreadsheet and list all expenditures by categories like groceries, phone bill, car expenses, housing, medical, entertainment and others over the course of a month, filling it in with every single dollar spent to see where the money is going. Or you can use an online tracker like SoFi, which allows users to connect all their accounts to one dashboard and track spending habits in real time.

After the month is up, the next step is to look back on the expenditures list. Was there anything that surprised you? Do you need all those streaming subscriptions? How about that gym membership — did it actually get used? This is the time to get a little ruthless.

After figuring out what’s left, try implementing a general financial outline like the 50/30/20 rule. This means that approximately 50% of your after-tax income goes toward essential expenses like food and rent, while 30% goes toward discretionary expenses like nights out at the movies or concerts. The last 20% belongs to savings and retirement account goals.

Next, it’s time to get creative about saving even more for the future. This can be done by putting more cash into a savings or retirement account via direct deposit right from a paycheck.

Those looking to save a few more bucks every month could also do so by getting rid of unnecessary expenses. But, instead of pocketing that cash, consider using mobile deposit to direct that cash right to savings.

Still feeling the pinch and don’t really have room to save more from a budget? Working part-time for, say, a ride-sharing company could allow you to set your own hours and earn extra income based on how much time you can dedicate to it. Other options might include freelance work in photography, writing, or other creative arts.

Saving and Investing With SoFi

Along with all these savings strategies to help put away extra money, investing for your future goals is also important to help your money grow.

For instance, you may want to consider setting up an investment account. Investing a little now could go a long way in saving for tomorrow, next year, and your life after retirement.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).


Invest with as little as $5 with a SoFi Active Investing account.

FAQ

How much should a 30 year old have in savings?

By age 30, you should have the equivalent of your annual salary saved. So if you make $60,000 a year, you should have $60,000 in savings.

How much money does an average person have in savings?

The average American has $65,100 in savings, according to a 2023 study by Northwestern Mutual.

How many Americans have $100,000 in savings?

According to one 2023 survey, only 14% of Americans have at least $100,000 in savings.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

SoFi Invest®

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

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Feb
27
2024

What Is Liquidity In Stocks?

By | Growing Wealth, invest, Investing | Comments Off on What Is Liquidity In Stocks?

Liquidity in stocks generally refers to how quickly an investment can be bought or sold and converted into cash. The easier an investment is to sell, the more liquid it is. Plus, liquid investments generally do not charge large fees when you need to access your money.

For the average investor, liquidity is an important consideration when building a portfolio, as it’s an indicator of how easy it is to access their savings. That can be important to know and understand when sizing up your overall strategy.

Key Points

•   Liquidity in stocks refers to how quickly an investment can be bought or sold and converted into cash.

•   Market liquidity refers to how quickly a stock can be turned into cash, while accounting liquidity relates to meeting financial obligations.

•   Stocks are generally considered liquid assets, but some stocks may be less liquid, especially those traded on foreign exchanges.

•   Share turnover and bid-ask spread are metrics used to assess a stock’s liquidity.

•   Liquidity risk is the risk of not finding a buyer or seller for assets, which can affect prices.

Types of Liquidity

Liquidity comes in two forms: Market liquidity and accounting liquidity. Here’s how the two are different.

Market Liquidity

Market liquidity refers to how quickly a stock can be turned into cash. High market liquidity means there’s a high supply and demand for an asset. That, in turn, makes it easy for buyers to find sellers and vice versa. As a result, transactions can be completed quickly, even when stock values are dropping.

Accounting Liquidity

Accounting liquidity is related to an individual’s or company’s ability to meet their financial obligations, such as regular bills or debt payments.

For an individual, being liquid means they have enough cash or marketable assets (such as stocks) on hand to meet their obligations.

Companies measure liquidity slightly differently by comparing current assets and debt. In addition to cash and marketable assets, current assets also include inventories and accounts receivable, the money customers owe on credit for goods or services they’ve purchased.

Investors may pay attention to company liquidity if they are researching that company’s stock as a potential buy. Companies with higher liquidity may be in better shape than those in risk of defaulting on their debt.

💡 Quick Tip: Before opening any investment account, consider what level of risk you are comfortable with. If you’re not sure, start with more conservative investments, and then adjust your portfolio as you learn more.

Get up to $1,000 in stock when you fund a new Active Invest account.*

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How Liquid Are Different Assets?

An investor’s financial portfolio may be made up of a number of different assets of varying liquidities, including cash, stocks, bonds, real estate, and savings vehicles like certificates of deposit (CDs). Cash is the most liquid asset; there is nothing an investor needs to do to convert it into spendable currency.

On the other hand, an investment property is an example of a relatively illiquid asset, as it might take a long time for an investor to sell it should they need access to their money.

CDs are also relatively illiquid assets because they require investors to tie up their money for a preset period of time in exchange for higher interest rates than those available in regular savings accounts. Individuals who need their money early may have to pay hefty fines to access it.

Stocks generally fall on the relatively liquid side of the liquidity spectrum. Stocks that are easy to buy and sell and said to be highly liquid. Stocks with low liquidity may be tougher to sell, and investors may take a bigger financial hit as they seek buyers.

What Is Liquidity Risk?

Liquidity risk is the risk that an individual won’t be able to find a buyer or seller for assets they wish to trade during a given period of time, which can lead to adverse effects on the price. Liquidity risk is higher for complex investments or investment vehicles like CDs that may charge penalties to liquidate or access funds early.

Are Stocks a Liquid Asset?

For the most part, stocks that are traded on a public exchange are considered liquid assets. Some stocks, like those traded on foreign exchanges, may be less liquid as it takes more time to execute a trade.

Generally speaking, when an individual wishes to execute a trade, they use a brokerage account to issue a buy or sell order. The broker then helps match the individual with other buyers and sellers hoping to take the opposite action.

This process can take a little bit of time. Most stock trades settle within a two-day period. A stock trade executed on a Wednesday would typically settle on Friday. Settlement is the official transfer of stocks from a seller’s account to the buyer’s account, and cash from the buyer to the seller.

Because it can take some time for trades to be executed, there can be a difference in price between when an individual places an order and when that order is fulfilled.

How to Calculate a Stock’s Liquidity

One way to figure out a stock’s liquidity is by looking at a metric known as share turnover. This financial ratio compares the volume of shares traded and the number of outstanding shares. A stock’s volume is the number of shares that have been bought or sold over a given period. Outstanding shares refer to all of the shares held by a company’s shareholders.

Higher share turnover indicates high liquidity; investors have an easier time buying and selling. Investors might want to pay close attention to low share turnover, as this can indicate they may have a difficult time selling shares if they need to.

Another measure of a stock’s liquidity is the bid-ask spread. Bid price is the price an individual is willing to pay at a given point in time. The ask price is the price at which a buyer is willing to sell. The bid-ask spread is the difference between the two.

For highly liquid assets, the bid-ask spread tends to be pretty small — as little as a penny. This indicates that buyers and sellers are generally in agreement over what the price of a stock should be. However, as bid-ask spread grows, it is an indication that a stock is increasingly illiquid.

A wide spread can also indicate that a trade may be much more expensive to execute. For example, there may not be enough trade volume to execute an entire order at one price. If prices are rising, an order can become increasingly pricey.

💡 Quick Tip: How to manage potential risk factors in a self directed investment account? Doing your research and employing strategies like dollar-cost averaging and diversification may help mitigate financial risk when trading stocks.

Examples of Liquid Stocks

The most liquid stocks tend to be those that receive the most interest from investors. The large companies that are tracked by the S&P 500 Index.

Why Stock Liquidity Is Important for Investors

The relative liquidity provided by stocks can be a boon to investors. Stocks help provide the growth needed for investors to meet their savings goals. They are also relatively easy to buy and sell on the market, allowing investors to access their savings quickly when they need it.

The Takeaway

Liquidity is a measure of the ability to turn assets into cash without losing value. So it’s an important metric for investors to pay attention to as they construct their portfolios. But liquidity is just one of many factors to consider when investing.

Investors may want to know how liquid their holdings are so that they can choose the appropriate mix of investments that align with their risk tolerance. It may be comforting to some to know that they can sell investments with relative ease, rather than have their money tied up for the long-term.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.

FAQ

What is good liquidity for a stock?

Good liquidity for a stock refers to an investor’s ability to sell the stock in exchange for cash. If a stock is liquid, then it should be relatively easy to sell. If a stock is illiquid, or has bad liquidity, it may be more difficult.

What is a “Liquidity Ratio?”

A liquidity ratio is a financial ratio that can help an investor determine a company’s ability to pay off its debt obligations, particularly in the short-term. There are several liquidity ratios that can be utilized.

Is a higher liquidity better?

Generally, yes, a higher liquidity is better for investors, as it can signal that a company is performing well, and that its stock is in demand. It can also be easier for an investor to sell that stock in exchange for cash.

Photo credit: iStock/insta_photos

SoFi Invest®

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Claw Promotion: Customer must fund their Active Invest account with at least $25 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

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