invest Archives | Page 32 of 180

Sep

2024

Calculating an Investment’s Payback Period

By Laurel Tincher | Growing Wealth, invest, Investing, Terminology | Comments Off

Key Points

• The payback period is the estimated amount of time it will take to recoup an investment or to break even. Generally, the longer the payback period, the higher the risk.

• To calculate the payback period you divide the Initial Investment by Annual Cash Flow.

• Equity firms may calculate the payback period for potential investment in startups and other companies to ensure capital recoupment and understand risk-reward ratios.

• Downsides of using the payback period include that it does take into account the time value of money or other ways an investment might bring value.

What Is the Payback Period?

The payback period is the amount of time it will take to recoup the initial cost of an investment, or to reach its break-even point. Considering the ups and down of various market factors — e.g. the crypto winter or the impact of higher-than-usual interest rates — being able to gauge the payback period is one of the most important calculations for investors when planning investments and returns.

The payback period can help investors decide between different investments that may have a lot of similarities, as they’ll often want to choose the one that will pay back in the shortest amount of time. The longer money remains locked up in an investment without earning a return, the more time an investor must wait until they can access that cash again, and the more risk there is of losing the initial investment capital.

How to Calculate the Payback Period

The payback period is calculated by dividing the cost of the investment by the annual cash flow until the cumulative cash flow is positive, which is the payback year. Payback period is generally expressed in years.

Prior to calculating the payback period of a particular investment, one might consider what their maximum payback period would be to move forward with the investment. This will help give them some parameters to work with when making investment decisions. If the calculated payback period is less than the desired period, this may be a safer investment.

There are two easy basis payback period formulas:

Payback Period Formula (Averaging Method)

Payback Period = Initial Investment / Yearly Cash Flow

Using the averaging method, the initial amount of the investment is divided by annualized cash flows an investment is projected to generate. This works well if cash flows are predictable or expected to be consistent over time, but otherwise this method may not be very accurate.

Example of Payback Period

If a company makes an investment of $1,000,000 in new equipment which is expected to generate $250,000 in revenue per year, the calculation would be:

$1,000,000 / $250,000 = 4-year payback period

If they have another option to invest $1,000,000 into equipment which they expect to generate $280,000 in revenue per year, the calculation would be:

$1,000,000 / $280,000 = 3.57-year payback period

Since the second option has a shorter payback period, this may be a better choice for the company.

Payback Formula (Subtraction Method)

Payback Period = the last year with negative cash flow + (Amount of cash flow at the end of that year / Cash flow during the year after that year)

Using the subtraction method, one starts by subtracting individual annual cash flows from the initial investment amount, and then does the division. This method works better if cash flows vary from year to year.

Example of Payback Period Using the Subtraction Method

A company is considering making a $550,000 investment in new equipment. The expected cash flows are as follows:

Year 1 = $75,000
Year 2 = $140,000
Year 3 = $200,000
Year 4 = $110,000
Year 5 = $60,000

Calculation:

Year 0 : -$550,000
Year 1 : -$550,000 + $75,000 = -$475,000
Year 2 : -$475,000 + $140,000 = -$335,000
Year 3 : -$335,000 + $200,000 = -$135,000
Year 4 : -$135,000 + $110,000 = -$25,000
Year 5 : -$25,000 + $60,000 = $35,000

Year 4 is the last year with negative cash flow, so the payback period equation is:

4 + ($25,000 / $60,000) = 4.42

So the payback period is 4.42 years.

Other factors

Investors might also choose to add depreciation and taxes into the equation, to account for any lost value of an investment over time.

Benefits of Using the Payback Period

The payback period is simple to understand and calculate. It can provide individuals and companies with valuable insights into potential investments, and help them decide which option provides the best return on investment (ROI). It also helps with assessing the risk of different investments. Advantages include:

• Easily understandable

• Simple to calculate

• Tool for risk assessment

• Helps with comparing and choosing investment options

• Provides insights for financial planning

• Other calculations, such as net present value and internal rate of return, don’t

• look at the amount of time it takes to recoup an investment

Downsides of Using the Payback Period

Although the payback period can be a useful calculation for individuals and companies considering and comparing investments, it has some downsides. The calculation only looks at the time period up until the initial investment will be recouped. It doesn’t consider the earnings the investment will bring in after that, which may either be higher or lower, and could determine whether it makes sense as a long-term investment.

If earnings will continue to increase, a longer payback period might be acceptable. If earnings might decrease after a certain number of years, the investment may not be a good idea even if it breaks even quickly. On the other hand, an investment with a short lifespan could need replacement shortly after its payback period, making it a potentially poor investment.

The payback period doesn’t take into consideration other ways an investment might bring value, such as partnerships or brand awareness. This can result in investors overlooking the long-term benefits of the investment since they’re too focused on short-term ROI.

The payback period equation also doesn’t take into account the effects an investment might have on the rest of the company’s operations. For instance, new equipment might require a significant amount of expensive power, or might not be able to run as often as it would need to in order to reach the payback goal.

Another limitation of the payback period is that it doesn’t take the time value of money (TVM) into account. The time value of money is the idea that cash will be worth more in the future than it is worth today, due to the amount of interest that it can generate. Not only does this apply to the initial capital put into an investment, but it’s also important because as an investment generates returns, that cash can then be reinvested into something else that earns interest or income. This is another reason that a shorter payback period makes for a more attractive investment.

When Would You Use The Payback Period?

The payback period can apply to personal investments such as solar panels or property maintenance, or investments in equipment or other assets that a company might consider acquiring. Often an investment that requires a large amount of capital upfront generates steady or increasing returns over time, although there is also some risk that the returns won’t turn out as hoped or predicted.

Calculating payback periods is especially important for startup companies with limited capital that want to be sure they can recoup their money without going out of business. Companies also use the payback period to select between different investment opportunities or to help them understand the risk-reward ratio of a given investment.

Knowing the payback period is helpful if there’s a risk of a project ending in the future. For example, if a company might lose a lease or a contract, the sooner they can recoup any investments they’re making into their business the less risk they have of losing that capital.

Any particular project or investment can have a short or long payback period. A short period means the investment breaks even or gets paid back in a relatively short amount of time by the cash flow generated by the investment, whereas a long period means the investment takes longer to recoup. How investors understand that period will depend on their time horizon.

The Takeaway

You can use the payback period in your own life when making large purchase decisions and consider their opportunity cost. Understanding the way that companies calculate their payback period is also helpful to determine their financial viability and whether it makes sense for you to invest in them as part of your portfolio.

Whether you’re new to investing or already have a portfolio started, there are many tools available to help you be successful. One great online investing tool is SoFi Invest® online brokerage platform. The investing platform lets you research and track your favorite stocks and ETFs. You can easily buy and sell with just a few clicks on your phone, and view your portfolio on one simple dashboard.

You can choose from either active or automated investing. With active investing, you can hand select each individual stock or ETF you wish to add to your portfolio. Using automated investing, you can choose from groups of pre-selected stocks. There are additional tools in the app to set personal financial goals and add all your banking and investment accounts so you can see all of your information in one place.

If you have any questions or need help getting started, SoFi has a team of professional financial advisors available to help you reach your personal financial goals.

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.

You may also be interested in:

Rate of Return (RoR): Formula and Calculation Examples

NPV Formula: How to Calculate Net Present Value

Discounted Cash Flow (DCF) Explained

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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.
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Sep

2024

How Donor-Advised Funds (DAF) Work

By Rebecca Lake | invest, Investing | Comments Off

A donor-advised fund, or DAF, is a tax-advantaged vehicle for charitable giving. Individuals, families, and organizations can establish donor-advised funds to further philanthropic efforts while supporting their favorite charities.

Here’s a closer look at what a donor-advised fund is used for, the pros and cons, and how to create one.

Key Points

• Donor-advised funds (DAFs) are charitable giving accounts, administered by sponsors, that allow donors to make tax-deductible donations that can be gifted to charities at a later time.

• DAFs can be established by individuals, families, trusts, corporations, estates, and foundations.

• Contributions to DAFs may include cash, stocks, real estate, cryptocurrency, and more.

• DAFs offer flexibility in charitable giving, allowing donors to recommend how funds are used and invested.

• Potential disadvantages include lack of donor control, fees, and the irrevocability of contributions.

🛈 While SoFi does not offer Donor Advised Funds at this time, we do offer a range of online investing services.

What Is a Donor-Advised Fund?

A donor-advised fund is a separately identified fund or account that exists for the purpose of making charitable donations to eligible organizations. In effect, they’re a sort of charitable investment account. They’re important funding sources for nonprofits that rely on public support via donations or charitable giving.

Donor-advised funds may be established by:

• Individuals and families

• Trusts

• Corporations

• Estates

• Foundations

Multiple donors may contribute to a donor-advised fund, and a third party, (or, the sponsor) administers and oversees it – hence the “donor-advised” moniker. This third party is responsible for making grants to eligible charities from donated funds.

Definition and Purpose

A donor-advised fund, most simply, is a private investment account that’s used exclusively to make charitable donations.

Donor-advised funds may be established to support a variety of 501(c)3 organizations. A 501(c)3 is a tax-exempt organization, as defined by the Internal Revenue Service. Examples of organizations that are supported by donor-advised funds could include:

• Colleges and universities

• Hospitals and healthcare organizations

• Religious organizations

• Animal welfare agencies

• Humanitarian organizations

• Environmental charities

• Disaster relief organizations

Under the Internal Revenue Code (IRC), tax-exempt purposes include “charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals.”

Key Players Involved

The key players in a donor-advised fund are the sponsors, donors, and charities that receive donations. More specifically:

• Sponsors are the organizations that administer the fund.

• Donors are the individuals or entities who make contributions to the fund.

• Receiving charities are eligible nonprofits, as defined by the IRS, per the information above.

When you make contributions to a donor-advised fund, the sponsor manages them on your behalf. You can request which charitable causes to fund with your donation — though this may ultimately be decided by the sponsor — and when donations should be distributed.

Benefits of Using a Donor-Advised Fund

You might wonder why someone would establish or contribute to a donor-advised fund when they could make direct charitable contributions to an organization instead. Answering that question is easier when you consider the benefits offered by donor-advised funds, which can include tax advantages, flexible giving, and more.

Tax Advantages

A donor-advised fund offers an immediate tax deduction for contributions. The deduction applies whether you donate cash or another type of asset, including publicly-traded securities, like stocks.

You’ll need to itemize deductions on the Schedule A tax form to write off donations to donor-advisor funds. That’s one of the main things to know about charitable donations and taxes.

For 2024, the charitable deduction limit is as follows:

• Up to 60% of adjusted gross income (AGI) for cash donations

• Up to 30% of adjusted gross income (AGI) for noncash donations

Deductions reduce your taxable income for the year. Claiming deductions for donor-advised fund contributions could help push you into a lower tax bracket when it’s time to file your return.

Flexibility in Charitable Giving

Donor-advised funds allow for flexibility in deciding where your donations may go. While the sponsor has legal control over assets in the fund, donors can make recommendations on how the funds should be used.

You can make contributions at your own pace, and you can choose the recipient charities at a later time. Donor-advised funds may accept a variety of financial gifts, including cash, stock, real estate, and even noncash or alternative assets, such as cryptocurrency.

Investment Growth Potential

Donor-advised funds give donors a different avenue through which to make investments, and to provide some guidance about how money in the fund should be invested. Investment growth within a DAF is tax-free, so every additional penny your money earns can go directly to the charity or charities you prefer. Note that some DAFs may require regular distributions of funds, which can influence how long assets have to grow.

Potential Disadvantages of Donor-Advised Funds

Donor-advised funds can have drawbacks, both for donors and for the charities that receive donations through them. The main drawbacks for charities are a lack of transparency surrounding donations and potential delays, should donors choose to allow contributions to grow before funds are released. Further, donor-advised funds have been criticized as a tool that can be used by the wealthy to secure tax advantages – the IRS, in recent years, has released new regulations to mitigate that sort of potential abuse.

For donors, the disadvantages can include:

• Lack of control: While donors may make recommendations about investments or which charities should receive funds, the sponsor has the final say.

• Fees and minimums: Donor-advised funds can charge annual fees and other fees, which donors are responsible for paying. Some funds may require a minimum contribution of $1 million or more.

• No reversals: Once you contribute to a donor-advised fund the money must remain in the fund until it’s disbursed to charity. You can’t make a contribution and take it back later.

Setting Up and Contributing to a DAF

Setting up a DAF is simple enough. You need to find a sponsor, open your account, and make a contribution. Here’s more on how the process works.

Choosing a Sponsoring Organization

Several types of organizations can sponsor donor-advised funds, such as public foundations and 501(c)3 organizations associated with a brokerage.

Your goals related to charitable giving may determine which option you choose. If you’re primarily interested in funding local charities, for instance, you might select a community organization that administers a donor-advised fund. On the other hand, if you’d like to have access to a wider range of charities you might consider a DAF offered in association with a brokerage.

Opening an Account

You’ll need to complete the necessary paperwork to open your account once you’ve selected a sponsoring organization. Along with your personal information, you may need to specify, among other things:

• Which charities you’d like to support

• How you’d like contributions to be invested

• The identity of the sponsor

Once the paperwork is complete you can move on to the final step, and begin funding your account.

Contribution Types and Limits

You can decide what form your contributions to a donor-advised fund should take. The options can include, but are not limited to:

• Cash

• Stocks, bonds, and mutual funds

• Traditional IRA or 401(k) assets

• Cryptocurrency

• Real estate

• Private business interests

The fund sponsor should be able to tell you what the minimum contribution is (often around $5,000), if any, and whether there’s any upper limit on how much you can contribute annually. Keep in mind that with any contributions you make, you can only deduct them up to the limit allowed by the IRS.

Donor-Advised Fund vs. Private Foundation

A private foundation can be another vehicle for making charitable donations. Private foundations are 501(c)(3) organizations, and can be established by corporations, but they’re often used by families and wealthy individuals to fund philanthropic activity.

There are several differences to note between the two.

Donor-Advised Fund	Private Foundation
Donors make recommendations about how contributions to the fund should be invested and distributed to charities.	Donors have more control of investment decisions and how contributions are distributed.
Cash donations are deductible up to 60% of AGI; noncash donations are deductible up to 30% of AGI.	Cash donations are deductible up to 30% of AGI; noncash donations are deductible up to 20% of AGI.
No annual payout is required.	Minimum annual payout of 5% of net asset value is required.

Generally speaking, a donor-advised fund usually requires less paperwork and is less costly to establish. It’s also easier to maintain privacy, since you can keep your name as a donor confidential if you prefer. Private foundations, on the other hand, are more time- and cost-intensive to create. Privacy is limited as foundations are required to file public tax returns.

In terms of the difference between nonprofits vs. foundations, they can both be established as tax-exempt, 501(c)3 organizations. However, nonprofits and foundations may have different underlying goals, tax implications, and more.

The Takeaway

Donor-advised funds can offer an avenue for giving if you’re looking for charities to support. You’ll need to have sufficient capital to make an initial contribution but the tax advantages can be substantial. And you can still make contributions directly to qualify for a tax break if you don’t meet the minimum requirements for a DAF.

FAQ

Are donations to a donor-advised fund tax-deductible?

Donating to a donor-advised fund allows you to qualify for an immediate tax deduction. You can deduct cash donations up to 60% of your AGI, or noncash donations up to 30% of your AGI.

Can you name a successor for your donor-advised fund?

Yes, you can name a successor for your donor-advised fund. You may be prompted to do so at the time that you open your account and complete the initial paperwork. A successor essentially inherits the fund from you when you pass away.

What are the typical fees associated with a donor-advised fund?

Donor-advised funds can charge annual or administrative fees. These fees are typically assessed as a percentage of your account balance. The higher your balance, the lower the fee might be.

Photo credit: iStock/miniseries

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.

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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Sep

2024

Building a Nest Egg in 5 Steps

By AJ Smith | Growing Wealth, invest, Investing, Preparing for Retirement | Comments Off

A nest egg can help you save for future goals, such as buying a home or for your retirement. Building a nest egg is an important part of a financial strategy, as it can help you cover important costs or allow you to become financially secure.

A financial nest egg requires some planning and commitment. In general, the sooner you start building a nest egg, the better.

What Is a Nest Egg?

So what is a nest egg exactly? A financial nest egg is a large amount of money that someone saves and/or invests to meet a certain financial goal. Usually, a nest egg focuses on longer-term goals such as saving for retirement, paying for a child’s college education, or buying a home.

A nest egg could also help you handle emergency costs — such as medical bills, pricey home fixes, or car repairs. There is no one answer for what a nest egg should be used for, as it depends on each person’s unique aims and circumstances.

💡 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.

Understanding How a Nest Egg Works

There are a few things to know about how to successfully build a nest egg.

• You have to have a plan. Unlike saving for short-term goals, building a nest egg takes time and you need a strategy. A common technique is to save a certain amount each month or each week.

• You need to save your savings. This may sound obvious, but in order to save money every week or month, you have to put it in a savings or investment account of some sort. If you “save” the money in your checking account, you may end up spending your savings.

• Don’t touch your nest egg. The flip side of that equation is about spending: In order for your nest egg to grow and for you to reach your savings goals by a certain age, you have to make it untouchable. When saving a nest egg, you have to keep your saved money out of reach and protect it.

How Much Money Should Be in Your Nest Egg?

There is no one correct and specific amount a nest egg should be. The amount is different for each person, depending on their needs. It also depends on what you’re using your nest egg for. If you’re using it to buy a house, for instance, you’ll likely need less than if you are using your nest egg for retirement.

As a general rule, some financial advisers suggest saving 80% of your annual income for retirement. However, the amount is different for each person, depending on the type of lifestyle they want to have in retirement. For instance, someone who wants to travel a lot may want to save 90% or more of their annual income.

A retirement calculator can help you determine if you’re on track to reach your retirement goals.

What Are Nest Eggs Used for?

As mentioned, nest eggs are often used for future financial goals, such as retirement, a child’s education, or buying a house.

A nest egg can also be used for emergency costs, such as expensive home repairs, medical bills, or car repairs.

5 Steps to Building a Nest Egg

1. Set a SMART Financial Goal

The SMART goal technique is a popular method for setting goals, including financial ones. The SMART technique calls for goals to be (S)pecific, (M)easurable, (A)chievable, (R)elevant, and (T)ime bound.

With this approach, it’s not enough just to say, “I want to learn how to build a nest egg for emergencies.” The SMART goal technique requires you to walk through each step:

• Be Specific: How much money is needed for an emergency? One rule of thumb is to save at least three months worth of living expenses, in case of a crisis like an illness or layoff. But you also approach it from another angle: Maybe you just want $1,800 in the bank for car and home repairs.

• Make it Measurable and Achievable: Once you decide on the amount that’s your target goal, you can figure out exactly how to build a nest egg that will support that goal. If you want to save money from your salary, such as $1,800, you’d set aside $200 per month for nine months — or $100 per month for 18 months. Be sure to create a roadmap that’s measurable and doable for you.

Last, keeping your goal Relevant and Time-bound is a part of the first three steps, but it also entails something further: You must keep your goal a priority. And you must stick to your timeframe in order to reach it.

For example, if you commit to saving $200 per month for nine months in order to have an emergency fund of $1,800, that means you can’t suddenly earmark that $200 for something else.

2. Create a Budget

It’s vital to have a plan in order to create a nest egg — for the simple reason that saving a larger amount of money takes time and focus. A budget is an excellent tool for helping you save the amount you need steadily over time. But a budget only works if you can live with it.

There are numerous methods to manage how you spend and save, so find one that suits you as you build up your nest egg. There’s the 50-30-20 plan, the envelope method, the zero-based budget, etc. There are also apps that can help you budget.

Fortunately, testing budgets is fairly easy. And you’ll quickly sense which methods are easiest for you.

3. Pay Off Debt

Debt can be a major roadblock in building a nest egg, especially if it’s high-interest debt. Those who are struggling to pay down debt may not be able to put as much money into savings as they would like. Prioritizing paying down debt quickly can help save money on interest and reduce financial stress. Adding debt payments into a monthly budget can be one smart way to make sure a debt repayment plan stays on track.

If you’re having trouble paying down a certain debt, like a credit card or medical bill, it might be worth calling the lender. In some cases, lenders may work with an individual to create a manageable debt repayment plan. Calling the lender before the debt is sent to a debt collector is key, as many debt collectors don’t accept payment plans.

Debt Repayment Strategies

Here are two popular debt repayment strategies that might be worth researching: the avalanche method and the snowball method.

The avalanche method focuses on paying off the debt with the highest interest rate as fast as possible, because the interest is costing you the most. This method can save the most money in the long run.

The other option is the snowball method, which can be more motivating as it focuses on paying off the smallest debt first while making minimum payments on all other debts. When one debt is paid off, you take the payment that went toward that debt and add it to the next-smallest one “snowballing” as you go.

This method can be more psychologically motivating, as it’s easier and faster to eliminate smaller debts first, but it can cost more in interest over time, especially if the larger debts have higher interest rates.

4. Make Saving Automatic

Behavioral research is pretty clear: The people who are the most successful savers don’t mess around. They put their savings on auto-pilot, by setting up automatic transfers based on their goal.

Behavior scientists have identified simple inertia as a big culprit in why we don’t save. Inertia is the human tendency to do nothing, despite having a plan to take specific actions. One of the most effective ways to get around inertia, especially when it comes to your finances, is to make savings automatic.

Set up automatic transfers to your savings account online every week, or every month. While you’re at it, set up automatic payments to the debts you owe. Don’t assume you can make progress with good intentions alone. Technology is your friend, so use it!

5. Start Investing in Your Nest Egg

The same is true of investing. Investing can be intimidating at first. Combine that with inertia, and it can be hard to get yourself off the starting block. Also, you may wonder whether it makes sense to invest your savings, when investing always comes with a possible risk of loss (in addition to potential gains).

You may want to keep short-term savings in a regular savings or money market account — or in a CD (certificate of deposit), if you want a modest rate of interest and truly don’t plan to touch that money for a certain period of time. But for longer-term savings, especially retirement, you can consider investing your money in the market. SoFi’s automated investing can help you set up a portfolio to match your goals.

You can also set up a brokerage account and start investing yourself. Whichever route you choose, be sure to make the contributions automatic. Investing your money on a regular cadence helps your money to grow because regular contributions add up.

The Power of Compounding Interest

When saving money to build a nest egg in certain savings vehicles, such as a high-yield savings account or a money market account, compound interest can be a major growth factor. Put simply, compound interest is interest that you earn on interest.

Here’s how it works: Compound interest is earned on the initial principal in a savings vehicle and the interest that accrues on that principal. So, for instance, if you have $500 in a high-yield savings account and you earn $5 interest on that amount, the $5 is added to the principal and you then earn interest on the new, bigger amount. Compound interest can help your savings grow. Use the following compound interest calculator to see this in action.

With investments, compound returns work in a similar manner. Compounding returns are the earnings you regularly receive from contributions you’ve made to an investment.

Compound returns can be achieved by any type of asset class that produces returns on both the initial amount — or the principal — as well as any profits or returns that are generated after the initial investment. Some investment types that earn compound interest are stocks and mutual funds.

💡 Quick Tip: Are self-directed brokerage accounts cost efficient? They can be, because they offer the convenience of being able to buy stocks online without using a traditional full-service broker (and the typical broker fees).

Why Having a Nest Egg Is Important

A financial nest egg can help you save for retirement and/or achieve certain financial goals, such as paying for your child’s education. By building a nest egg as early as you can, ideally starting in your 20s or 30s, and contributing to it regularly, the more time your money will have to grow and weather any market downturns. For instance, if you start investing in your nest egg at age 25, and you retire at age 65, your money will have 40 years to accumulate.

Investing in Your Nest Egg With SoFi

Like most financial decisions, building a nest egg starts with articulating goals and then creating a specific plan of action to reach them. Using a method like the SMART goal technique, it’s possible to build a nest egg for retirement, to buy a home, pay for a child’s education, or other life goals.

Because a nest egg is typically a larger amount of money than you’d save for a short-term goal, it’s wise to use some kind of budgeting system, tool, or app to help you make progress. Perhaps the most important ingredient in building a nest egg is using the power of automation. Use automatic deposits and transfers to help you save, pay off debt, and even to start investing.

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

What is a financial nest egg?

A financial nest egg is a substantial amount of money you save or invest to meet a certain financial goal. A nest egg typically focuses on future milestones, such as retirement, paying for a child’s college education, or buying a home.

How much money is a nest egg?

There is no one specific amount of money a nest egg should be. The amount is different for each person, depending on their needs and what they’re using the nest egg for. For instance, if a nest egg is for retirement, some financial advisers suggest saving at least 80% percent of your annual income.

Why is it important to have a nest egg?

A nest egg allows you to save a substantial amount of money for retirement or to pay for your child’s education, for instance. By starting to build a nest egg as early as you can, the more time your money has to grow.

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.

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

Sep

2024

How Does Non-Farm Payroll (NFP) Affect the Markets?

Nonfarm Payroll: What It Is and Its Effect On the Markets

By Brian O'Connell | Financial Independence, invest, Terminology | Comments Off

The nonfarm payroll report measures the number of jobs added or lost in the United States. The report is released by the Bureau of Labor Statistics (BLS), usually on the first Friday of every month, and is closely watched by economists, market analysts, and traders. The nonfarm payroll report can have a significant impact on financial markets. A strong or weak jobs report may lead to stock market volatility, as investors feel confident or pessimistic about the direction of the economy.

The nonfarm payroll report is just one of many economic indicators that investors can use to gauge the economy’s strength. However, market participants often pay attention because it provides a monthly snapshot of the U.S. economy’s health.

What Are Nonfarm Payrolls?

Nonfarm payrolls are a key economic indicator that measures the number of Americans employed in the United States, excluding farm workers and some other U.S. workers, including certain government employees, private household employees, and non-profit organization workers.

Also known as simply “the jobs report,” the nonfarm payrolls report looks at the jobs gained and lost during the previous month. This monthly data release provides investors with a snapshot of the health of the labor market, and the economy as a whole.

💡 Quick Tip: When you’re actively investing in stocks, it’s important to ask what types of fees you might have to pay. For example, brokers may charge a flat fee for trading stocks, or require some commission for every trade. Taking the time to manage investment costs can be beneficial over the long term.

The U.S. Nonfarm Payroll Report, Explained

The nonfarm payroll report is one of two surveys conducted by the BLS that tracks U.S. employment in a data release known as the Employment Situation report. These two surveys are:

• The Establishment Survey. This survey provides details on nonfarm payroll employment, tracking the number of job additions by industry, the average number of hours worked, and average hourly earnings. This survey is the basis for the reported total nonfarm payrolls added each month.

• The Household Survey. This survey breaks down the employment numbers on a demographic basis, studying the jobs rate by race, gender, education, and age. This survey is the basis for the monthly unemployment rate reported each month.

When Is the NFP Released?

The Bureau of Labor Statistics usually releases the nonfarm payrolls report on the first Friday of every month at 8:30 am ET. The BLS releases the Establishment Survey and Household Survey together as the Employment Situation report, which covers the labor market of the previous month.

4 Figures From the NFP Report to Pay Attention To

Investors may look at several specific figures within the jobs report to help inform their investment decisions:

1. The Unemployment Rate

The unemployment rate is critical in assessing the economic health of the U.S., and it’s a factor in the Federal Reserve’s assessment of the nation’s labor market and the potential for a future recession. A rising unemployment rate could result in economic policy adjustments – like changes in interest rates that impact stocks, both domestically and globally.

Higher-than-expected unemployment could push investors away from stocks and toward assets that they consider more safe, such as Treasuries, potentially triggering a decline in the stock market.

2. Employment Sector Activity

The nonfarm payroll report also examines employment activity in specific business sectors like construction, manufacturing, or healthcare. Any significant rise or fall in sector employment can impact financial market investment decisions on a sector-by-sector basis.

3. Average Hourly Wages

Investors may consider average hourly pay a barometer of overall U.S. economic health. Rising wages may indicate stronger consumer confidence and a more robust economy. That scenario could lead to a rising stock market. However, increased average hourly wages may also signify future inflation, which could cause investors to sell stocks as they anticipate interest rate hikes by the Federal Reserve.

4. Revisions in the Nonfarm Payroll Report

Nonfarm payroll figures, like most economic data, are dynamic in nature and change all the time. Thus, investors watch any revisions to previous nonfarm payroll reports to reevaluate their own portfolios based on changing employment numbers.

How Does NFP Affect the Markets?

Nonfarm payrolls can affect the markets in a few ways, depending on the state of the economy and financial markets.

NFP and Stock Prices

If nonfarm payrolls are unexpectedly high or low, it can give insight into the economy’s future direction. A strong jobs report may signal that the economy is improving and that companies will have increased profits, leading to higher stock prices. Conversely, a weak jobs report may signal that the economy is slowing down and that company profits may decline, resulting in lower stock prices as investors sell their positions.

NFP and Interest Rates

Moreover, nonfarm payrolls can also affect stock prices by influencing the interest rate environment. A strong jobs report may lead the Federal Reserve to raise interest rates to prevent an overheated labor market or curb inflation, leading to a decline in stock prices. Conversely, a weak jobs report may lead the Federal Reserve to keep interest rates unchanged or even lower them, creating a loose monetary policy environment that can boost stock prices.

Investors create a strategy based on how they think markets will behave in the future, so they attempt to factor their projections for jobs report numbers into the price of different types of investments. An unexpected jobs report, however, could prompt them to change their strategy. Surprise numbers can create potentially significant market movements in critical sectors like stocks, bonds, gold, and the U.S. dollar, depending on the monthly release numbers.

How to Trade the Nonfarm Payroll Report

While long-term investors typically do not need to pay attention to any single jobs report, those who take a more active investing approach may want to adjust their strategy based on new data about the economy. If you fall into the latter camp, you’ll typically want to make sure that the report is a factor you consider, though not the only factor.

You might want to look at other economic statistics and the technical and fundamental profiles of individual securities you’re planning to buy or sell. Then, you’ll want to devise a strategy that you’ll execute based on your research, your expectations about the jobs report, and whether you believe it indicates a bull or a bear market ahead.

For example, suppose you expect the nonfarm payroll report to be positive, with robust job growth. In that case, you might consider adding stocks to your portfolio, as share prices tend to rise more than other investment classes after good economic news. If you believe the nonfarm payroll report will be negative, you may consider more conservative investments like bonds or bond funds, which tend to perform better when the economy slows down.

Or, you might take a more long-term approach, taking the opportunity to buy stocks at a discount and invest while the market is down.

The Takeaway

The jobs report can be used as one of many economic indicators that investors take into account when weighing their next investment moves. The report offers a snapshot of the health of the labor market, and the economy at large. But it’s important to keep in mind that it’s only one indicator.

Markets move after nonfarm payroll reports, but long-term investors don’t have to change their portfolio after every new government data release. That said, active investors may use the jobs report as one factor in creating their investment strategy.

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.

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.

SOIN-Q324-029

Aug

2024

Guide to Spousal IRAs

By Rebecca Lake | invest, Investing, Preparing for Retirement | Comments Off

A spousal IRA gives a non-working spouse a way to build wealth for retirement, even if they don’t have earned income of their own.

Spousal IRAs can be traditional or Roth accounts. What distinguishes a spousal IRA is simply that it’s opened by an income-earning spouse in the name of a non-working or lower-earning spouse.

If you’re married and thinking about your financial plan as a couple, it’s helpful to understand spousal IRA rules and how you can use these accounts to fund your goals.

🛈 Currently, SoFi does not offer spousal IRAs to members.

What Is a Spousal IRA?

A spousal IRA is an IRA that’s funded by one spouse on behalf of another. This is a notable exception to the rule that IRAs must be funded with earned income. In this case, the working spouse can make contributions to an IRA for the non-working spouse, even if that person doesn’t have earned income.

The couple must be married, filing jointly, in order for the working spouse to be able to fund a spousal IRA.
For example, say that you’re the primary breadwinner for your family, and perhaps your spouse is a stay-at-home parent or the primary caregiver for their aging parents, and doesn’t have earned income. As long as you have taxable compensation for the year, you could open a spousal IRA and make contributions to it on your spouse’s behalf.

Saving in a spousal IRA doesn’t affect your ability to save in an IRA of your own. You can fund an IRA for yourself and an IRA for your spouse, as long as the total contributions for that year don’t exceed IRA contribution limits (more on that below), or your total earnings for the year.

How Do Spousal IRAs Work?

Spousal IRAs work much the same as investing in other IRAs, in that they make it possible to save for retirement in a tax-advantaged way. The rules for each type of IRA, traditional and Roth, also apply to spousal IRAs.

What’s different about a spousal IRA is who makes the contributions. If you were to open an IRA for yourself, you’d fund it from your taxable income. When you open an IRA for your spouse, contributions come from you, not them.

It’s also important to note that these are not joint retirement accounts. Your spouse owns the money in their IRA, even if you made contributions to it on their behalf.

Back to basics: How to Set Up an IRA: A Step-by-Step Guide

Spousal IRA Rules

The IRS sets the rules for IRAs, which also govern spousal IRAs. These rules determine who can contribute to a spousal IRA, how much you can contribute, how long you have to make those contributions, and when you can make withdrawals.

Eligibility

Married couples who file a joint tax return are eligible to open a spousal IRA for the non-working spouse. As long as one spouse has taxable compensation and, in the case of a Roth IRA, they meet income restrictions, they can open an IRA on behalf of the other spouse.

Taxable compensation includes money earned from working, such as wages, salaries, tips, or bonuses. Generally, any amount included in your income is taxable and must be reported on your tax return unless it’s excluded by law.

That said, a traditional IRA does not have income requirements; a Roth IRA does.

Maximum Annual Contributions

One of the most common IRA questions is how much you can contribute each year. Spousal IRAs have the same contribution limits as ordinary traditional or Roth IRAs. These limits include annual contribution limits, income caps for Roth IRAs, and catch-up contributions for savers 50 or older.

For tax-year 2024, you can contribute up to $7,000 to a traditional or Roth IRA; if you’re 50 or older you can add another $1,000 (the catch-up contribution) for a total maximum of $8,000.

Remember, you can fund a spousal contribution as well as your own IRA up to the limit each year, assuming you’re eligible. That means for the 2024 tax year, a 35-year-old couple could save up to $14,000 in an individual and a spousal IRA.

A 50-year-old couple can take advantage of the catch-up provision and save up to $16,000.

Contribution Limits for Traditional and Roth IRAs

There are a couple of rules regarding contribution limits; these apply to ordinary IRAs and spousal IRAs alike.

• First, the total contributions you can make to an individual IRA and/or spousal IRA cannot exceed the total taxable compensation you report on your joint tax return for the year.

• If neither spouse is covered by a workplace retirement account, contributions to a traditional spousal IRA would be deductible. If one spouse is covered by a workplace retirement account, please go to IRS.gov for details on how to calculate the amount of your contribution that would be deductible, if any.

There is an additional restriction when it comes to Roth IRAs. Whether you can make the full contribution to a spousal Roth IRA depends on your modified adjusted gross income (MAGI).

• Married couples filing jointly can contribute the maximum amount to a spousal Roth IRA for tax year 2024 if their MAGI is less than $230,000.

• They can contribute a partial amount if their income is between $230,000 and $240,000.

• If a couple’s income is $240,000 or higher, they are not eligible to contribute to a Roth or spousal Roth IRA.

Contribution Deadlines

The annual deadline for making an IRA contribution for yourself or a spouse is the same as the federal tax filing deadline. For example, the federal tax deadline for the 2024 tax year is April 15, 2025. You’d have until then to open and fund a spousal IRA for the 2024 tax year.

Filing a tax extension does not allow you to extend the time frame for making IRA contributions.

Withdrawal Rules

Spousal IRAs follow the same withdrawal rules as other IRAs. How withdrawals are taxed depends on the type of IRA and when withdrawals are made.

Here are a few key spousal IRA withdrawal rules to know:

• Qualified withdrawals from a traditional spousal IRA are subject to ordinary income tax.

• Early withdrawals made before age 59 ½ may be subject to a 10% early withdrawal penalty, unless an exception applies (see IRS rules).

• Spouses who have a traditional IRA must begin taking required minimum distributions (RMDs) at age 72, or 73 if they turned 72 after Dec. 31, 2022. Roth IRAs are not subject to RMDs, unless it’s an inherited Roth IRA.

• Roth IRA distributions are tax-free after age 59 ½, as long as the account has been open for five years, and original Roth contributions (i.e., your principal) can always be withdrawn tax free.

• A tax penalty may apply to the earnings portion of Roth IRA withdrawals from accounts that are less than five years old.

Whether it makes more sense to open a traditional or Roth IRA for a spouse can depend on where you are taxwise now, and where you expect to be in retirement.

Deducting contributions may help reduce your taxable income, which is a good reason to consider a traditional IRA. On the other hand, you might prefer a Roth IRA if you anticipate being in a higher tax bracket when you retire, as tax-free withdrawals would be desirable in that instance.

Pros and Cons of Spousal IRAs

Spousal IRAs can help married couples to get ahead with saving for retirement and planning long-term goals, but there are limitations to keep in mind.

Pros of Spousal IRAs

• Non-working spouses can save for retirement even if they don’t have income.

• Because they’re filing jointly, couples would mutually benefit from the associated tax breaks of traditional or Roth spousal IRAs.

• Spousal IRAs can add to your total retirement savings if you’re also saving in a 401(k) or similar plan at work.

• The non-working spouse can decide when to withdraw money from their IRA, since they’re the account owner.

Cons of Spousal IRAs

• Couples must file a joint return to contribute to a spousal IRA, which could be a drawback if you typically file separately.

• Deductions to a spousal IRA may be limited, depending on your income and whether you’re covered by a retirement plan at work.

• Income restrictions can limit your ability to contribute to a spousal Roth IRA.

• Should you decide to divorce, that may raise questions about who should get to keep spousal IRA assets (although the spousal IRA itself is owned by the non-working spouse).

Spousal IRAs, Traditional IRAs, Roth IRAs

Because you can open a spousal IRA that’s either a traditional or a Roth style IRA, it helps to see the terms of each. Remember, spouses have some flexibility when it comes to IRAs, because the working spouse can have their own IRA and also open a spousal IRA for their non-working spouse. To recap:

• Each spouse can open a traditional IRA

• If eligible, each spouse can open a Roth IRA

• One spouse can open a Roth IRA while the other opens a traditional IRA.

Bear in mind that the terms detailed below apply to each spouse’s IRA.

	Spousal IRA	Traditional IRA	Roth IRA
Who Can Contribute	Spouses may contribute to a traditional or Roth spousal IRA, if eligible. Roth spousal IRA eligibility is determined by filing status and income (see column at right).	Anyone with taxable compensation.	Eligibility to contribute determined by tax status and income. Married couples filing jointly must earn less than $240,000 to contribute to a Roth.
2024 Annual Contribution Limits	$7,000; $8,000 for those 50 and up (note that each spouse can have an IRA and contribute up to the annual limit)	$7,000; $8,000 for those 50 and up	$7,000; $8,000 for those 50 and up.
Tax-Deductible Contributions	Yes, for traditional spousal IRAs*	Yes*	No
Withdrawals	Withdrawal rules for both types of spousal IRAs are the same as for ordinary IRAs (see columns at right).	Qualified distributions are taxed as ordinary income. Taxes and a penalty apply to withdrawals made before age 59 ½ , unless an exception applies, per IRS.gov.	Original contributions can be withdrawn tax free at any time (but not earnings). Distributions of earnings are tax free at 59 ½ as long as the account has been open for 5 years.
Required Minimum Distributions	Yes, for traditional spousal IRAs. RMDs begin at age 72**	Yes, RMDs begin at age 72**	RMD rules don’t apply to Roth IRAs.

* Deduction may be limited, depending on your income and whether you or your spouse are covered by a workplace retirement plan.
** You must take withdrawals from a traditional IRA once you reach 72 (or 73, if you turn 72 in 2023 or later).

Dive deeper: Roth IRA vs. Traditional IRA: Which IRA is the right choice for you?

Creating a Spousal IRA

Opening a spousal IRA is similar to opening any other type of IRA. Here’s what the process involves:

• Find a brokerage. You’ll first need to find a brokerage that offers IRAs; most will offer spousal IRAs. When comparing brokerages, pay attention to the investment options offered and the fees you’ll pay.

• Open the account. To open a spousal IRA, you’ll need to set it up in the non-working spouse’s name. Some of the information you’ll need to provide includes the non-working spouse’s name, date of birth, and Social Security number. Be sure to check eligibility rules.

• Fund the IRA. If you normally max out your IRA early in the year, you could do the same with a spousal IRA. Or you might prefer to space out contributions with monthly, automated deposits. Be sure to contribute within eligible limits.

• Choose your investments. Once the spousal IRA is open, you’ll need to decide how to invest the money you’re contributing. You may do this with your spouse or allow them complete freedom to decide how they wish to invest.

As long as you file a joint tax return, you can open a spousal IRA and fund it. It doesn’t necessarily matter whether the money comes from your bank account, your spouse’s, or a joint account you share. If you’re setting up a spousal IRA, you can continue contributing to your own account and to your workplace retirement plan if you have one.

The Takeaway

Spousal IRAs can make it easier for couples to map out their financial futures even if one spouse doesn’t work. The sooner you get started with retirement saving, the more time your money has to grow through compounding returns.

FAQ

What are the rules for a spousal IRA?

Spousal IRA rules allow a spouse with taxable compensation to make contributions to an IRA on behalf of a non-working spouse. The non-working spouse owns the spousal IRA and can decide how and when to withdraw the money. Spousal IRA withdrawals are subject to the same withdrawal rules as traditional or Roth IRAs, depending on which type of account has been established.

Is a spousal IRA a good idea?

A spousal IRA could be a good idea for married couples who want to ensure that they’re investing as much money as possible for retirement on a tax-advantaged basis. In theory, a working spouse can fund their own IRA as well as a spousal IRA, and contribute up to the maximum amount for each.

Can I contribute to my spouse’s traditional IRA if they don’t work?

Yes, that’s the idea behind the spousal IRA option. When a wife or husband doesn’t have taxable income, the other spouse can make contributions to a spousal traditional IRA or Roth IRA for them. The contributing spouse must have taxable compensation, and the amount they contribute each year can’t exceed their annual income amount or IRA contribution limits.

Photo credit: iStock/andreswd

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.

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.

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.

Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.

SOIN0223002

What Is the Payback Period?

How to Calculate the Payback Period

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Payback Period Formula (Averaging Method)

Example of Payback Period

Payback Formula (Subtraction Method)

Example of Payback Period Using the Subtraction Method

Other factors

Benefits of Using the Payback Period

Downsides of Using the Payback Period

When Would You Use The Payback Period?

The Takeaway

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Setting Up and Contributing to a DAF

Choosing a Sponsoring Organization

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How Much Money Should Be in Your Nest Egg?

What Are Nest Eggs Used for?

5 Steps to Building a Nest Egg

1. Set a SMART Financial Goal

2. Create a Budget

3. Pay Off Debt

Debt Repayment Strategies

4. Make Saving Automatic

5. Start Investing in Your Nest Egg

The Power of Compounding Interest

Why Having a Nest Egg Is Important

Investing in Your Nest Egg With SoFi

FAQ

What is a financial nest egg?

How much money is a nest egg?

Why is it important to have a nest egg?

What Are Nonfarm Payrolls?

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The U.S. Nonfarm Payroll Report, Explained

When Is the NFP Released?

4 Figures From the NFP Report to Pay Attention To

1. The Unemployment Rate

2. Employment Sector Activity

3. Average Hourly Wages

4. Revisions in the Nonfarm Payroll Report

How Does NFP Affect the Markets?

NFP and Stock Prices

NFP and Interest Rates

How to Trade the Nonfarm Payroll Report

The Takeaway

What Is a Spousal IRA?

How Do Spousal IRAs Work?

Spousal IRA Rules

Eligibility

Maximum Annual Contributions

Contribution Limits for Traditional and Roth IRAs

Contribution Deadlines

Withdrawal Rules

Pros and Cons of Spousal IRAs

Pros of Spousal IRAs

Cons of Spousal IRAs

Spousal IRAs, Traditional IRAs, Roth IRAs

Creating a Spousal IRA

The Takeaway

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