invest Archives | Page 5 of 180

Q: What Are the Money Purchase Pension Plan Contribution Limits?

Each money purchase plan determines its own contribution limits are, though they can’t exceed maximum limits set by the IRS. For example, an employer’s plan may specify that they must contribute 5% or 10% of each employee’s pay into that employee’s MPPP plan account.

Q: Is final salary pension for life?

A final salary pension is a defined benefit plan. Final salary pensions can be paid as a lump sum or as a lifetime annuity, meaning you get paid for the remainder of your life.

Dec

2024

What Is a Money Purchase Pension Plan (MPPP)? How Is It Different From a 401(k)?

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

A money purchase pension plan or MPPP is an employer-sponsored retirement plan that requires employers to contribute money on behalf of employees each year. The plan itself defines the amount the employer must contribute. Employees may also have the option to make contributions from their pay.

Money purchase pension plans have some similarities to more commonly used retirement plans such as 401(k)s, pension plans, and corporate profit sharing plans. If you have access to a MPPP plan at work, it’s important to understand how it works and where it might fit into your overall retirement strategy.

What Is a Money Purchase Pension Plan?

Money purchase pension plans are a type of defined contribution plan. That means they don’t guarantee a set benefit amount at retirement. Instead, these retirement plans allow employers and/or employees to contribute money up to annual contribution limits.

Like other retirement accounts, participants can make withdrawals when they reach their retirement age. In the meantime, the account value can increase or decrease based on investment gains or losses.

Money purchase pension plans require the employer to make predetermined fixed contributions to the plan on behalf of all eligible employees. The company must make these contributions on an annual basis as long as the plan is maintained.

Contributions to a money purchase plan grow on a tax-deferred basis. Employees do not have to make contributions to the plan, but they may be allowed to do so, depending on the plan. The IRS does allow for loans from money purchase plans but it does not permit in-service withdrawals.

💡 Quick Tip: Before opening an investment account, know your investment objectives, time horizon, and risk tolerance. These fundamentals will help keep your strategy on track and with the aim of meeting your goals.

What Are the Money Purchase Pension Plan Contribution Limits?

Each money purchase plan determines what its own contribution limits are, though the amount can’t exceed maximum limits set by the IRS. For example, an employer’s plan may specify that they must contribute 5% or 10% of each employee’s pay into that employee’s MPPP plan account.

Annual money purchase plan contribution limits are similar to SEP IRA contribution limits. For 2023, the maximum contribution allowed is the lesser of:

• 25% of the employee’s compensation, OR

• $66,000

The IRS routinely adjusts the contribution limits for money purchase pension plans and other qualified retirement accounts based on inflation. The amount of money an employee will have in their money purchase plan upon retirement depends on the amount that their employer contributed on their behalf, the amount the employee contributed, and how their investments performed during their working years. Your account balance may be one factor in determining when you can retire.

Rules for money purchase plan distributions are the same as other qualified plans, in that you can begin withdrawing money penalty-free starting at age 59 ½. If you take out money before that, you may owe an early withdrawal penalty.

Like a pension plan, money purchase pension plans must offer the option to receive distributions as a lifetime annuity. Money purchase plans can also offer other distribution options, including a lump sum. Participants do not pay taxes on their accounts until they begin making withdrawals.

The Pros and Cons of Money Purchase Pension Plans

Money purchase pension plans have some benefits, but there are also some drawbacks that participants should keep in mind.

Pros of Money Purchase Plans

Here are some of the advantages for employees and employers who have a money purchase plan.

• Tax benefits. For employers, contributions made on behalf of their workers are tax deductible. Contributions grow tax-free for employees, allowing them to put off taxes on investment growth until they begin withdrawing the money.

• Loan access. Employees may be able to take loans against their account balances if the plan permits it.

• Potential for large balances. Given the relatively high contribution limits, employees may be able to accumulate account balances higher than they would with a 401(k) retirement plan, depending on their pay and the percentage their employer contributes on their behalf.

• Reliable income in retirement. When employees retire and begin drawing down their account, the regular monthly payments through a lifetime annuity can help with budgeting and planning.

Disadvantages of Money Purchase Pension Plan

Most of the disadvantages associated with money purchase pension plans impact employers rather than employees.

• Expensive to maintain. The administrative and overhead costs of maintaining a money purchase plan can be higher than those associated with other types of defined contribution plans.

• Heavy financial burden. Since contributions in a money purchase plan are required (unlike the optional employer contributions to a 401(k)), a company could run into issues in years when cash flow is lower.

• Employees may not be able to contribute. Depending on the terms of a plan, employees may not be able to make contributions to the plan. However, if the employer offers both a money purchase plan and a 401(k), employees could still defer part of their salary for retirement.

💡 Quick Tip: Want to lower your taxable income? Start saving for retirement with a traditional IRA. The money you save each year is tax deductible (and you don’t owe any taxes until you withdraw the funds, usually in retirement).

Money Purchase Pension Plan vs 401(k)

The main differences between a pension vs 401(k) have to do with their funding and the way the distributions work. In a money purchase plan, the employer provides the funding with optional employee contribution.

With a 401(k), employees fund accounts with elective salary deferrals and option employer contributions. For both types of plans, the employer may implement a vesting schedule that determines when the employee can keep all of the employer’s contributions if they leave the company. Employee contributions always vest immediately.

The total annual contribution limits (including both employer and employee contributions) for these defined contribution plans are the same, at $66,000 for 2023. But 401(k) plans allow for catch-up contributions made by employees aged 50 or older. For 2023, the total employee contribution limit is $22,500 with an extra catch-up contribution of $7,500.

Both plans may or may not allow for loans, and it’s possible to roll amounts held in a money purchase pension plan or a 401(k) over into a new qualified plan or an Individual Retirement Account (IRA) if you change jobs or retire.

Employees may also be able to take hardship withdrawals from a 401(k) if they meet certain conditions, but the IRS does not allow hardship withdrawals from a money purchase pension plan.

Here’s a side-by-side comparison of a MPPP and a 401(k):

	MPPP Plan	401(k) Plan
Funded by	Employer contributions, with employee contributions optional	Employee salary deferrals, with employer matching contributions optional
Tax status	Contributions are tax-deductible for employers, growth is tax-deferred for employees	Contributions are tax-deductible for employers and employees, growth is tax-deferred for employees
Contribution limits (2023)	Lesser of 25% of employee’s pay or $66,000	$22,500, with catch-up contributions of $7,500 for employees 50 or older
Catch-up contributions allowed	No	Yes, for employers 50 and older
Loans permitted	Yes, if the plan allows	Yes, if the plan allows
Hardship withdrawals	No	Yes, if the plan allows
Vesting	Determined by the employer	Determined by the employer

The Takeaway

Money purchase pension plans are a valuable tool for employees to reach their retirement goals. They’re similar to 401(k)s, but there are some important differences.

Whether you save for retirement in a money purchase pension plan, a 401(k), or another type of account the most important thing is to get started. The sooner you begin saving for retirement, the more time your money will have to grow through the power of compounding returns.

Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

Easily manage your retirement savings with a SoFi IRA.

FAQ

Here are answers to some additional questions you may have about money pension purchase plans.

What is a pension money purchase scheme?

A money purchase pension plan or money purchase plan is a defined contribution plan that allows employers to save money on behalf of their employees. These plans are similar to profit-sharing plans ,and companies may offer them alongside a 401(k) plan as part of an employee’s retirement benefits package.

Can I cash in my money purchase pension?

You can cash in a money purchase pension at retirement in place of receiving lifetime annuity payments. Otherwise, early withdrawals from a money purchase pension plan are typically not permitted, and if you do take money early, taxes and penalties may apply.

Is final salary pension for life?

A final salary pension is a defined benefit plan. Unlike a defined contribution plan, defined benefit plans pay out a set amount of money at retirement, typically based on your earnings and number of years of service. Final salary pensions can be paid as a lump sum or as a lifetime annuity, meaning you get paid for the remainder of your life.

About the author

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.

You may also be interested in:

What Is a Pension Plan & How Does It Work?

401(k) vs Pension Plan: Differences and Which is Better For You

Guide to Rolling Over a Pension Into an IRA

Photo credit: iStock/ferrantraite

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

SOIN0723113

Dec

2024

What Happens to My Stock in a Merger?

By Inyoung Hwang | Growing Wealth, invest, Investing | Comments Off

It’s hard to know what to expect as an investor when mergers take place and you own stocks that are in the mix. Acquisitions often lead to a loss in value for the acquiring company’s shares, while the target company often sees a lift. But that’s not always the case, and there are certainly no guarantees.

Key Points

• Mergers and acquisitions often result in varied stock price movements, typically causing the acquiring company’s shares to decline while the target company’s shares appreciate.

• Regulatory approvals, stock volatility, and executive decisions can lead to the cancellation of M&A deals, creating investment uncertainty despite most deals ultimately succeeding.

• The market reaction to M&A announcements can vary, with several scenarios affecting share prices, such as investor perceptions of deal value and potential synergies.

• Employee stock options can be impacted significantly during mergers, with employees potentially seeing their shares cashed out or exchanged for new company shares.

• While mergers can offer growth opportunities and resource access, they also carry risks of failure and may not guarantee increased shareholder value.

What Are Mergers and Acquisitions (M&A)?

Mergers and acquisitions (M&A) are corporate transactions that involve two companies combining, or one buying a majority stake in another. This can involve private companies or public companies.

A CEO might embark on an M&A transaction with the objective of finding “synergies,” which is Wall Street lingo for creating value through consolidation. Synergies are typically found by reducing costs or finding new avenues for growth by combining two companies.

Stock-for-stock mergers — when the target’s shares are converted into the buyer’s shares — are the most common type of M&A transaction. That’s why there’s often a burst of M&A activity after a prolonged bull market: Companies with high stock prices can use their shares to make pricey purchases.

For instance, in early 2020, M&A activity experienced a slowdown as the repercussions of COVID-19 took hold of the global economy. Dealmaking during the pandemic eventually came back as share prices soared and executives sought opportunities to adjust to the new business environment.

Meanwhile, in an all-cash merger, the buyer either has to spend the cash they have on hand, or raise new capital to fund the purchase of the target.

What Is a Merger of Equals?

A true merger of equals (MOEs) is rare, so most mergers are actually acquisitions. But MOEs could signal to investors that two similar, roughly equal-sized companies are uniting because there are significant tax or cost savings to be had. Investors may find that with MOEs, the premiums paid aren’t as significant.

What Is Private Equity?

Private equity (PE) firms, alternative investment funds that buy and restructure companies, also participate in M&A. They seek deals when there’s “dry powder,” or funds that have been committed by investors but aren’t yet spent.

How Do Stocks Move During Mergers?

After an M&A announcement, the most common reaction on Wall Street is for the shares of the acquiring company to fall and those of the target company to rally. That’s because the buyer typically offers a premium for the takeover in order to win over shareholders, and big company moves or decisions are a key driver of price fluctuations and how stocks work.

The rally in the target’s stock can come as a surprise, often leaving investors with the dilemma of selling them, or holding onto them after the deal is complete. The target’s shares usually trade for less than the acquisition price until the transaction closes. This is because the market is pricing in the risk of the deal falling apart.

Why Do M&A Deals Fall Through?

Deals can and do fall apart for a number of reasons. For example, deals can get scrapped because of a key regulatory disapproval, stock volatility, or simply because the CEOs changed their minds.

That would mean the money spent on investment bankers, lawyers, and consultants to put together the M&A terms would have been effectively wasted, not to mention the specter of a costly break-up fee. As a result, there can be investor skepticism towards M&A.

Different Stock Reactions to M&A

Tracking movement in the stock market is a key way to gauge how shareholders and other investors feel about a deal. Here are some different scenarios of how the market could react and influence share prices:

Buyer (acquiring company) rises alongside target (company being acquired): This is typically the best case scenario for companies and investors. It occurs when the stock market believes the deal is a smart acquisition for the buyer and that the deal’s been made at a good price.

Buyer falls significantly: The buyer’s shares may plummet if investors believe executives are overpaying for a target or if they think the target isn’t a good purchase.

Target moves little: The target’s shares may see little change if rumors of a potential deal already sent share prices higher, causing the premium to be baked in. Alternatively, the premium being paid may be low, causing a muted market reaction.

Buyer rises, target falls: In rarer cases, a deal gets called off and the buyer’s shares rise while the target falls. This could be because investors have soured on the merger and believe that the acquiring company is getting out of a bad deal.

Target falls: If a target company needs money, a private equity firm could buy a stake at a discount. In such cases, the target company’s shares could slump.

Merger vs Acquisition Impacts on Stocks

Mergers and acquisitions are similar, and when it comes to the effect of each on stocks, the impact is generally felt in the same way, too. That is, for shareholders, there likely isn’t all that much of a difference in how a merger or an acquisition would affect the value of their shares.

The key difference mostly concerns the variance in values or sizes between the two companies. Mergers generally involve two roughly equal-sized or valued companies, meaning that the effect on share values may be rather muted.

Acquisitions tend to involve companies of different sizes or values, so you’re more likely to see a swing in share values, as discussed.

M&A Stock Impact Example

To see the effect of a merger or acquisition on a stock’s price, let’s look at a textbook example: The merger between Kraft and Heinz in 2015, which created one of the largest food companies in the world.

The two companies had multiple similarities, including their size and the industries in which they operated. And when the merger was originally announced, stock values soared. Kraft shares shot up more than 35% in March 2015 after the news hit the market.

The new company, the Kraft Heinz Company, became a single stock: Kraft Heinz Co., trading under the KHC ticker. While the stock did originally shoot way up in price, the following months saw its value taper off before rallying again and reaching a peak of nearly $100 per share in early 2017.

Since then, however, its value has fallen, and as of late 2024, is trading at around $30 per share.

How Is Employee Stock Impacted By a Merger?

Depending on the specifics, employee stock can be significantly affected by a merger. One of the most profound ways this can occur is that the new company might cancel or modify employee stock options.

But generally, if you are an employee in a company that is merging with another or being acquired, it’s likely that you will see your shares either cashed out, or exchanged for shares in the new company.

Do Mergers Create Value?

There’s long been a debate among investors and academics whether M&A actually creates value for stakeholders and shareholders. Recent research has shown that frequent acquirers do tend to add value, while bigger deals are riskier. A lot of mergers fail, costing billions.

The stock market is famously fickle, and it can take time before the market gives credit to the combined company for any cost or revenue synergies. In general, cost-saving synergies are much easier to pledge, while revenue synergies could be tougher to deliver.

Investors should also pay attention to executive changes that result from the merger. Leadership turnover can make a difference when it comes to making sure a merger adds value and two companies integrating well.

Buying a Stock Before vs After a Merger

For investors, timing the market can be tricky when it comes to deciding to buy a stock before or after a merger. The fact of the matter is that there’s no real way to know for sure what will happen when news of a merger reaches the stock markets, or what will happen after the merger goes through.

But as mentioned, some stocks do rally on the news of a merger, while others might fall. It’ll often come down to the specific companies involved, their relative sizes or values, and the overall economic environment.

Calculating Stock Price After a Merger

If you own shares in a company that’s involved in a merger, you’ll likely wonder what your shares will be worth after it’s all said and done. Unfortunately, no one can predict the future — which means there’s really no way to calculate a stock’s price after a merger goes through. If there were, you can be sure that traders would be lined up to either buy the stock before a merger in anticipation of its value going up, or short-selling the stock in order to bet against it.

What Is Merger Arbitrage?

Merger arbitrage — also known as merger arb or risk arbitrage — is a hedge-fund or private equity strategy that involves buying shares of the target company and shorting shares of the acquiring company. Returns are usually amplified through the use of leverage.

The so-called “spreads” between the takeover company and the offer value are a way to calculate the odds the market is placing on the deal successfully closing. When it comes to retail vs. institutional investors, some of the former may want to try merger arbitrage. However, there are key points to keep in mind.

First and foremost, it’s typical that most of the arbitrage opportunities will have been taken immediately after the deal gets announced. That said, mergers fall apart for all sorts of reasons. Usually, the biggest hurdle is getting regulatory approval, as regulators often reject a deal for being anticompetitive. A crash in the stock market could also make buyers back out.

What Is a Cash-Out Merger?

A cash-out merger, which is often called a “freeze-out or squeeze-out” merger, effectively freezing out certain shareholders. This is done when two entities merge, and shareholders of the target company don’t want to be a part of the acquiring company. As such, stipulations of the deal may require that shareholders of the target company sell their shares before the merger.

Essentially, they’re cashing out their shares before the merger goes through.

Pros and Cons of Mergers

Like anything, there are pros and cons to mergers. Here’s a rundown of some of the upsides and downsides of M&A activity:

Pros of Mergers

The biggest advantages of mergers, for acquiring companies, are that they potentially allow those companies to grow faster, enter new markets, and acquire new talent and resources. Merging with a new company means bringing on a big new addition, and all that comes with it.

For target companies, shareholders or owners can see a big payday as a result of a merger, and they may benefit from access to a bigger pool of resources owned by the acquiring company.

Cons of Mergers

Potential drawbacks of a merger are that they can easily fall apart (due to regulatory issues, or other problems), they can eat up massive amounts of time and resources, and that they can be risky. Remember, there’s no guarantee that a merger will create more value than it destroys, so it’s something of a roll of the dice depending on the specifics.

Mergers need to jump through a lot of hoops, too, to get approved by regulators — much like a company going through the IPO process. So, investors would do well to temper their excitement about a merger until it becomes a little more clear as to whether the process will result in a successful marriage.

Or, at the very least, have a high risk tolerance when online investing in stocks involved in a merger or acquisition.

The Takeaway

When a merger is announced, the typical reaction is for the acquiring company’s stock price to fall, while the target company’s stock price gains. But different scenarios in the market can give clues on how investors are feeling towards an M&A deal.

Mergers are risky, too, and many of them fail. For investors, the important thing to know is that M&A announcements can go either way, but they often can and do result in the creation of shareholder value for those holding stocks.

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

How do stocks work with mergers?

Depending on the specifics of the merger, investors may have their shares cashed-out, or exchanged for shares of the new company. Prices of stocks may increase or decrease, often depending on if they’re shares of the target or acquiring company.

How do you calculate a stock price after a merger?

After a merger, two companies’ stocks become one. There’s no easy way or calculation to determine a stock’s price post-merger, as no one can predict the future. But there are historical trends that can be researched involving post-merger price fluctuations that may be helpful to some investors.

Is it good to buy stock before or after a merger?

Any and every stock purchase has its risks, and buying a stock before or after a merger may be more risky than your average purchase. Nobody knows which way a price will go in the future, but if you do want some advice about buying a stock before or after a merger, it may be best to speak with a financial professional for guidance.

SoFi Invest®

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

SOIN-Q424-040

Dec

2024

Understanding a Taxable Brokerage Account vs an IRA

By Michael Flannelly | Growing Wealth, invest, Investing | No Comments

Table of Contents

What Are Taxable Brokerage Accounts?
What Is an IRA?
Taxable Brokerage Accounts vs IRA Accounts
Tax Advantages of an IRA vs Taxable Brokerage Account
Which Type of Account Is Best for Me?
Pros and Cons of Taxable Brokerage Accounts
Is it Smart to Have Both an IRA and a Taxable Brokerage Account?
FAQ

Tax-sheltered accounts like the IRA and 401(k) have long been the go-to investment accounts for retirement planning. These types of accounts offer ways to build up tax-advantaged savings for the future. However, investing in taxable brokerage accounts is another common way to build wealth for the short or long term.

The most notable difference between an IRA and a taxable brokerage account can be seen around tax season. With taxable brokerage accounts, you typically pay taxes on your capital gains and dividends each year. In contrast, tax-advantaged accounts generally only involve paying taxes when you make your contribution or withdraw your money, depending on the type of account.

Investors should know the similarities and differences between IRAs and taxable brokerage accounts. Learning the ins and outs of these accounts can help you decide which is right for you to build wealth and meet your financial goals.

Key Points

• Taxable brokerage accounts and IRAs serve different purposes, with brokerage accounts focusing on general investment and IRAs designed specifically for retirement savings.

• Taxable brokerage accounts require annual taxes on capital gains and dividends, while IRAs allow for tax-deferred growth until funds are withdrawn.

• Different types of IRAs, such as Traditional and Roth, offer unique tax advantages and rules regarding contributions and withdrawals tailored to individual financial situations.

• A combination of both account types can provide flexibility and diversification, allowing investors to meet both short-term and long-term financial goals.

• Each account type has its pros and cons, making it essential to evaluate personal financial objectives before deciding on the appropriate investment strategy.

What Are Taxable Brokerage Accounts?

Think of taxable brokerage accounts as “traditional” investment accounts — brokerage-offered investment accounts with stocks, bonds, exchange-traded funds (ETFs), and mutual funds. Investors who utilize these accounts, including online brokerage accounts, invest and trade to build short- or long-term wealth, but not necessarily for retirement.

The investments within a taxable brokerage account are subject to tax on any capital gains, dividends, or interest earned. Brokerage account holders pay taxes each year based on investment income.

It’s also important to note that tax liability can vary based on variables like the types of investments held within the brokerage account, the length of time they are held, and an individual’s tax bracket. For example, short-term capital gains, which are gains on investments held for less than a year, are taxed at the same rate as ordinary income. In contrast, long-term capital gains, which are gains on investments held for more than a year, are typically taxed at a lower rate.

Recommended: Capital Gains Tax Guide

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.

What Is an IRA?

An IRA, or individual retirement account, is an investment account designed specifically to save for retirement. Contributions to an IRA may be tax-deductible or tax-deferred, and the accounts’ investments can grow tax-free until they are withdrawn at retirement age.

There are several different types of IRAs, including Traditional IRAs, Roth IRAs, and SEP IRAs, which have different rules for contributions, taxes, and withdrawals. An IRA can be a helpful tool for saving for retirement and taking advantage of potential tax benefits.

Taxable Brokerage Accounts vs IRA Accounts

Tax-sheltered, or tax-deferred, investment accounts like IRAs differ from taxable brokerage accounts because they generally offer tax advantages and have restrictions on contributions and withdrawals. The tax advantages make them designed for long-term retirement saving and investing. Besides having money invested for retirement, the most notable benefits of IRAs are no yearly tax burden and, in some cases, tax-deductible contributions.

Here’s a breakdown of what each tax-deferred account may offer compared to a brokerage account.

Traditional IRAs vs Taxable Brokerage Accounts

The traditional IRA has no income limits; as long as someone has a taxable income, they can contribute to a traditional IRA. The gains, dividends, and interest earned in IRAs grow tax-deferred during contributing years. Contributions to a traditional IRA may be tax-deductible, though the benefits phase out if you have a high enough income.

With a few exceptions, IRA withdrawal rules say account holders will have to pay a 10% early withdrawal penalty if they take a distribution before reaching age 59 ½. Additionally, account holders are required to start making withdrawals the year they turn age 73 (if they reach age 72 after December 31, 2022) that are taxed as income.

These limitations make a traditional IRA different from a taxable brokerage account, as taxable brokerage accounts do not have withdrawal restrictions and penalties.

With a traditional IRA, as with taxable brokerage accounts, account holders will need to manage it independently or with a financial planner’s help.

A traditional IRA might be a good option for investors who think they will be in a lower tax bracket when they retire. In theory, these investors would save money on taxes by paying them in retirement compared to paying taxes now.

For 2024, account holders can contribute up to $7,000 per year (or up to $8,000 if they are age 50 or older). For 2025, the total contributions investors can make to a traditional IRA remains the same — up to $7,000 (or up to $8,000 if they are 50 and up).

Roth IRAs vs Taxable Brokerage Accounts

Like taxable brokerage accounts, Roth IRA contributions aren’t tax-deductible. Investors contribute with post-tax dollars, but that also means they won’t be subject to taxes when they withdraw funds in retirement.

However, income limits exist for those who can contribute to a Roth IRA account. If you make more than the income limits, then the amount of money you can contribute to a Roth IRA may be reduced, and high earners may not be able to contribute to a Roth IRA at all. For 2024, income limits start at $146,000 per year for single tax filers and $230,000 for married couples filing jointly. For 2025, income limits start at $150,000 per year for single tax filers and $236,000 for married couples filing jointly. You can use a Roth IRA calculator to help determine your contribution limit.

As with brokerage accounts, Roth IRA account holders can contribute to their accounts at any age. Investors who want to make retirement contributions can do so even after they’ve retired.

Rules around Roth IRA withdrawals are less stringent than those for a traditional IRA. Roth account holders can also begin to take the account’s growth starting at age 59 ½ with no penalty as long as the account has been open for five years.

For those eligible to contribute to a Roth IRA, these accounts make the most sense if the account holder thinks they will be in a higher tax bracket in retirement. Since account holders pay taxes on the contributions in the year they were made, it makes the most sense to pay income taxes when in a lower tax bracket.

401(k)s vs Taxable Brokerage Accounts

Similar to an IRA, 401(k) accounts are one of the most common tax-sheltered accounts. The big difference between an IRA and a 401(k) account is that the 401(k) is employer-sponsored, and employees and employers can contribute to the account.

Employees can contribute to their 401(k) up to $23,000 per year in 2024 and up to $23,500 in 2025. Employees over 50 can make additional catch-up contributions of $7,500 annually in both 2024 and 2025, and in 2025, those 60 to 63 can make a higher catch-up contribution of up to $11,250 under the SECURE 2.0 Act. Many employers offer employees 401(k) plans, some even matching contributions up to a certain percentage.

The 401(k) is one of the most common ways to build a retirement nest egg because the contributions are automatic and come out of the employee’s paycheck, so employees may not even notice the money is gone.

Tax Advantages of an IRA vs Taxable Brokerage Account

As noted above, IRAs offer several tax advantages compared to taxable brokerage accounts. Investors generally use IRAs for tax efficient investing.

Here are some of the main differences:

• Contributions to traditional IRAs may be tax-deductible: Contributions to a traditional IRA may be tax-deductible, depending on your income and whether a retirement plan at work covers you or your spouse. This means that the money you contribute to a traditional IRA can be deducted from your taxable income, potentially reducing the amount of tax you owe.

• Earnings in an IRA grow tax-free or tax-deferred: The money you earn in an IRA, including interest, dividends, and capital gains, grows tax-deferred or tax-free until you withdraw it in retirement. In a taxable brokerage account, you would have to pay taxes on any capital gains and dividends you earn each year.

• Withdrawals from traditional IRAs may be taxed at a lower rate: When you withdraw money from a traditional IRA in retirement, it is taxed as ordinary income at your marginal tax rate. However, if you are in a lower tax bracket in retirement than when you made the contributions, your withdrawals may be taxed at a lower rate.

• Contributions to a Roth IRA are not tax-deductible: Contributions to a Roth IRA are not tax-deductible, but the money you withdraw in retirement is tax-free, provided you meet specific requirements. This can be a good option if you expect to be in a higher tax bracket in retirement than you are now.

Which Type of Account Is Best for Me?

Brian Walsh, Certified Financial Planner™ at SoFi, says ultimately, you’ll have a mixture of accounts. However, what’s right for you depends on your situation. “It depends if you have access to a 401(k) and an employer match … it depends on what you’re eligible for.” Here are a few considerations that can help you assess your situation.

Think About Investing in a Traditional IRA If…

• You want to take advantage of tax-deferred contributions.

• You expect to be in a lower tax bracket in retirement.

• You’ve maxed out your 401(k) contributions and make too much to contribute to a Roth account.

Think About Investing in a Roth IRA If…

• You expect to be in a higher tax bracket in retirement.

• You want the option to pass on the account easily to your heirs.

• You’ve maxed out your traditional 401(k) and want to offset some of your future tax burden with a Roth IRA.

Think About Investing in a 401(k) If…

• Your employer offers a plan with a match program.

• You’re uncertain about your future tax liability, and your employer allows you to split contributions between a traditional 401(k) and a Roth 401(k).

• You prefer a hands-off approach to investing.

Think About Investing in a Taxable Brokerage Account If…

• You’ve maxed out all contribution limits to your 401(k) and IRAs.

• You want to invest in investments not offered in your 401(k) or IRA, like options or cryptocurrency.

• You want more control over your investments with the opportunity to withdraw funds at your leisure.

Pros and Cons of Taxable Brokerage Accounts

Here are some of advantages and disadvantages of taxable brokerage accounts:

Pros of Taxable Accounts

• Flexibility: Taxable brokerage accounts allow you to invest in a wide range of assets, such as stocks and bonds, as well as derivatives. This allows you to create a diversified portfolio that may help you meet your investment goals.

• Growth potential: Taxable brokerage accounts offer the potential for significant growth, as you can earn capital gains on your investments if they increase in value.

• No contribution limits: Unlike tax-advantaged accounts, taxable brokerage accounts have no contribution limits. This means you can contribute as much as you want to your account, subject to income limits or restrictions.

Cons of Taxable Accounts

• Taxes: One of the main disadvantages of taxable brokerage accounts is that you will be required to pay taxes on your investment income and capital gains. This can significantly reduce your overall returns.

• Lack of tax benefits: Taxable brokerage accounts do not offer the same tax benefits as tax-advantaged accounts. For example, 401(k)s and IRA contributions may be tax-deductible, while investments in taxable brokerage accounts are not.

• Potential for loss: As with any investment, there is a risk of loss in a taxable brokerage account. If your investments decline in value, you could lose some or all of your initial investment.

Is it Smart to Have Both an IRA and a Taxable Brokerage Account?

It may be a consideration to have both an IRA and a taxable brokerage account, as each type has its specific benefits and drawbacks.

An IRA can be a good option if you are looking to open a retirement account and save for retirement and want the potential tax benefits of an IRA. On the other hand, a taxable brokerage account can be a good choice if you are looking to invest for goals other than retirement or if you are not eligible for a tax deduction on your contributions to an IRA.

Having both an IRA and a taxable brokerage account can give you more flexibility and diversification in your investments, which can help you manage risk and improve your overall financial situation.

The Takeaway

Every account — from taxable brokerage accounts to IRAs — has advantages and disadvantages, which is why some investors choose to invest in a few. The old cliche, “don’t put all your eggs in one basket,” is a solid philosophy for financial planning. Investing in several different “baskets” is one way to ensure that your money is working hard for you.

Take a step toward reaching your financial goals with SoFi Invest.

FAQ

What is the difference between an IRA and a taxable brokerage account?

An IRA is designed specifically to save for retirement. Unlike a taxable brokerage account, which is used for general investing, contributions to a traditional IRA may be tax-deductible, and the investments within the account grow tax-deferred until they are withdrawn at retirement age. There are several other types of IRAs, including Roth IRAs, which have different rules for contributions, taxes, and withdrawals.

Is it better to contribute to an IRA or a taxable brokerage account?

Whether to contribute to an IRA or a taxable brokerage account depends on your circumstances and financial goals. In general, an IRA can be a good option if you are looking to save for retirement and want the potential tax benefits of an IRA. However, if you are not eligible for a tax deduction on your contributions or looking to invest for goals other than retirement, a taxable brokerage account may be a better choice.

How is a taxable brokerage account taxed?

The investments held within a taxable brokerage account may be subject to tax on any capital gains, dividends, or interest earned. Short-term capital gains, which are gains on investments held for less than a year, are taxed at the same rate as ordinary income. Long-term capital gains, which are gains on investments held for more than a year, are typically taxed at a lower rate. Dividends and interest income earned are also subject to tax.

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.

Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.

Third Party Trademarks: Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

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.

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.

SOIN-Q424-025

Dec

2024

Buying Stocks Without a Broker

By Rebecca Lake | Growing Wealth, invest, Investing | Comments Off

Buying stocks without a broker can be done, typically through the use of a self-administered brokerage service, or one of a couple of different types of investing plans. Buying stocks may help you get started on the path to building wealth. And just like hiring professional movers can help make relocating less stressful, purchasing stocks through a broker can make the process of diversifying your portfolio easier.

That, however, can involve paying commissions and fees to trade stocks and other securities. Potential investors who are trying to curb investment costs might wonder how to buy stocks online without a broker being involved.

Key Points

• Buying stocks without a broker is possible through online brokerage accounts, dividend reinvestment plans, and direct stock purchase plans.

• Full-service brokers may offer additional services like trading advice and personalized investment strategies.

• Direct stock purchase plans allow investors to buy shares directly from the company, while dividend reinvestment plans reinvest dividends to purchase more stock.

• Online brokerage accounts often offer convenience, lower fees, and the ability to customize investment strategies.

• Each option has its pros and cons, and investors should consider their preferences and goals before choosing a method.

How Can I Buy Stocks Without a Broker?

It is possible to buy stocks without a broker. In fact, there are three alternatives to using a full-service broker: opening an online brokerage account, investing in a dividend reinvestment plan, and investing in a direct stock purchase plan. So, the short answer is yes, you can buy stocks without a broker.

But it may be useful to understand why some investors do choose to use a broker when making stock purchases.

💡 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.

Benefits of Using a Broker to Buy Stocks

As their name implies, stockbrokers can help broker trades of stocks and other securities on behalf of their clients. In return, they may earn commissions for making those trades. But that’s just one thing a full-service broker can do. A stockbroker’s role may also involve:

• Offering trading advice to clients based on their experience with the stock exchange and education.

• Giving their clients additional tips and suggestions, like what investments they should buy and sell or when it makes sense to do so.

• Building relationships with their clients to better understand and inform individual investment strategies.

A stockbroker’s salary is largely dependent on commissions, which means they’ve got to be pretty good at what they do to make a living. Investors can benefit from the education, training, and experience a stockbroker accumulates over the course of their career.

That being said, for most stockbrokers, their payment comes from your trades, which means a client has to pay their stockbroker every time they buy, sell, and trade. For some, the knowledge of a stockbroker is worth the cost of doing business. For others, the idea of DIY investing is more appealing. It all depends on personal preference.

💡 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.

How to Buy Stocks Online Without a Broker

DIY investors have several options for buying stocks without brokers online. Here’s a closer look at how each one works.

Direct Stock Purchase Plans

Direct Stock Purchase Plans (DSPPs) allow investors to purchase shares of company stock directly from the company itself. Specifically, trades are completed through a transfer agent.That means you could buy stocks without a broker, full-service or online, to complete the transaction.

DSPPs can be offered by companies that are publicly traded on a stock exchange, though not all publicly traded companies offer DSPPs. Each company can determine what minimum investment to require for initial and subsequent stock purchases.

Direct Stock Purchase Plans

Pros of Buying DSPPs

Buying DSPPs comes with its own unique set of advantages:

• Passive investing: Many DSPPs plans allow an investor to invest a set amount on some kind of recurring basis — sort of a “set it and forget it” strategy.

• Lower fees: DSPPs often charge little or no commissions or fees, once the account is set up.

• An investor might get a discount: Depending on the company a person invests in, they might be offered a slight discount, between 1% and 10%, for investing directly.

Cons of Buying DSPPs

While DSPPs have benefits, there are some drawbacks as well:

• Higher upfront costs: There is typically a cost associated with starting a DSPP account, and DSPPs typically require a $250 to $500 initial investment, with no option of purchasing fractional shares.

• It’s another account: DSPPs are held with individual corporations. So if an investor has DSPP holdings with multiple companies, each will live on the company’s individual platform.

• They’re typically long-term investments: DSPPs don’t offer the same flexibility and speed of an online broker. For that reason, they’re typically considered more appropriate for a long term investment.

Dividend Reinvestment Plans

Dividend Reinvestment Plans (DRiPs), share many similarities to DSPPs — in fact, some DSPPs offer DRiP programs. With a DRiP, investors can still buy stock directly from the publicly traded company, but they can also reinvest the dividends earned on the stock directly back into the company to purchase additional stock.

Dividend Reinvestment Plans

Pros of DRiP Programs

In addition to the benefits of DSPPs, DRiPs have a few to offer on their own if you’d like buy stock without a broker:

• Automated, compounded growth: Reinvesting dividends is not dissimilar to compound interest. DRiPs allow investors to continually reinvest and grow, without having to add funds.

• Fee-free reinvestment, even in fractional shares: Investing the dividends comes fee-free. Investors are also usually offered the opportunity to buy fractions of a share.

Cons of DRiP Programs

DRiPs share many of the same drawbacks as DSPPs, but also have a few specific to them:

• Limited selection: Not all companies that offer DSPPs offer DRiPs, which means you’re selecting from a smaller pool.

• Dividends are still taxable: Although the cash is automatically reinvested in a DRiP, investors will still be taxed on the gains. That means they may want to have liquidity elsewhere to pay the tax.

Online Brokerage Account

Online brokerage accounts offer the convenience of being able to buy stocks online without a traditional full-service broker (and the typical traditional broker fees). Think of it as the difference between dining at a full-service restaurant versus a self-serve buffet.

After opening an account with an online brokerage,an investor can tell their broker what they want to buy, and how much of it. Then the broker completes the order.

Depending on the online broker, there may be low or no fees associated with making a trade.

Online Brokerage Accounts

Pros of Investing with an Online Broker

It might sound pretty easy, but online investing has both pros and cons. Here are a few of the advantages:

• Low fees: When it comes to online investing, people can typically expect to pay lower fees. Many online firms do not charge commissions.

• DIY investing: There’s a lot of freedom that can come with an online brokerage account. An investor gets to choose, creating a customized plan.

• On-demand investing: As long as the markets are open, an investor can ask for trades through their digital brokerage account.

Cons of Investing with an Online Broker

Depending on an investor’s personality and preferences, there may be a few drawbacks to using an online broker:

• It’s all on the investor. Online investing can give investors a lot of choice and freedom, but without the expertise of qualified financial professionals, some investors might be left to research and form a strategy on their own. For some, this might feel stressful.

• It’s for the long term. Since online investing is on-demand, a person can sell whenever they like. That can be a challenge for an investor if patience isn’t their strong suit.

The Takeaway

It’s possible to buy stocks without a full-time broker. For instance, investors can use an online brokerage account to trade stocks on their own, or invest using different types of investment plans. But there can be pros and cons to each.

While there are some advantages to using a traditional full-service broker to purchase stocks, you don’t necessarily need one in order to invest. However, if you don’t feel comfortable doing it yourself, you can speak with a financial professional for guidance.

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.

About the author

Rebecca Lake

You may also be interested in:

What Are Stocks? Types, Benefits, Risks, Explained

How to Invest in Stocks: A Beginner’s Guide

How To Know When to Buy a Stock

SoFi Invest®

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

Dec

2024

What Are Margin Rates?

By Rebecca Lake | Growing Wealth, invest, Investing | Comments Off

A margin rate is the interest rate that applies when investors trade on margin. Margin rates can vary from one brokerage to the next, and there are different factors that affect the rates brokerages charge. Many brokerages use a tiered rate schedule based on the amount of the margin loan.

Trading on margin can increase an investor’s purchasing power and potentially, their returns. Margin trading simply means investing with money borrowed from a brokerage in order to buy more shares than you might otherwise be able. While trading on margin may benefit investors by providing them with additional capital, it can also be riskier than regular online stock trading. Before opening a margin account, it helps to understand the basic margin rate definition.

Key Points

• Margin rates represent the interest charged on borrowed funds used for trading securities and can vary between different brokerages based on several factors.

• A margin account allows investors to purchase securities with borrowed money, enabling them to increase their buying power but also introducing additional risks.

• Factors influencing margin rates include the broker call rate, demand for margin loans, inflation, and the account balance maintained by the investor.

• Margin rates accrue daily and are charged monthly, meaning that the longer an investor holds a margin loan, the more interest they will pay.

• Understanding margin rates and their implications is crucial for investors, as these rates directly impact the profitability of margin trading strategies.

Understanding Margin Rates

A margin rate is an interest rate or premium that applies to margin trading accounts with a brokerage.

It helps to start with an overview of how margin accounts work to understand margin rates. Margin accounts allow investors to purchase securities using borrowed money. Investors may use margin to trade options, individual stocks, or other securities. Under Federal Reserve Board Regulation T, brokerage firms must cap the amount investors can borrow up to 50% of the securities’ purchase price. This is called the initial margin.

Investors must also meet maintenance margin requirements in their margin account. Specifically, an investor’s equity can’t fall below 25% of the current market value of the securities held in the account.

If an investor fails to meet maintenance margin guidelines, they may be subject to a margin call. A margin call is when the brokerage requires the investor to deposit more money into their margin account in order to make additional trades.

Brokerage firms charge margin rates, the same way a bank might charge interest on a mortgage or a business loan. Interest is a form of risk management, in the event that a borrower defaults.

💡 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.

How Margin Rates Work

Margin rates represent the cost of borrowing for an investor for an outstanding margin loan. Each brokerage can set the margin rate differently, it typically reflects the current broker call rate or call money rate. This is the rate that the bank charges the broker for the money used to fund investors’ margin loans.

Brokerages can establish a base rate, then add or subtract percentage points from that margin rate based on the margin balance. The higher the balance in a margin account, the lower the likely margin rate. So the more you borrow from the brokerage, the less you’ll pay in interest for it, as a percentage of the balance.

Increase your buying power with a margin loan from SoFi.

Borrow against your current investments at just 11%* and start margin trading.

*For full margin details, see terms.

Factors That Affect Margin Rate

There are a variety of factors that can determine what a brokerage charges for margin rates.

Broker Call Rate

This is the rate that brokerages pay to borrow the money used to fund margin loans. The higher this rate is, the higher the base margin rate may be.

Supply and Demand

Increased demand for margin loans could result in brokerages charging higher margin rates, both to manage risk on those loans and to reap higher profits.

Inflation and Monetary Policy

Margin rates reflect broader interest rates. If banks begin charging brokers higher interest rates, they’ll pass those on to investors.

Account Balance

Maintaining a higher balance on margin could result in a lower margin rate if the brokerage discounts rates for clients who invest more.

How Can Margin Rates Affect You?

Margin rates can determine your total net profit when trading securities on margin.

Assume, for example, that you open a margin account. You want to purchase $10,000 worth of securities of which $5,000 is borrowed money. You take out a margin loan to purchase the stocks. Those same stocks increase in value, so your $10,000 investment ($5,000 of your own money + $5,000 margin) is now worth $15,000.

You sell the stocks and repay the $5,000 you initially borrowed. You also pay $500 in interest to the brokerage for the margin loan. Once you subtract your initial $5,000 investment, the total net profit to you is $4,500.

Now, how do margin rates affect you if your investment doesn’t pan out? Going back to the previous example, say those stocks drop in value to $6,000 rather than increasing. You sell them for that amount, then pay back the $5,000 you borrowed on margin. You also have to pay $500 in interest. If you subtract those amounts from your initial $5,000 investment, you’re now left with only $500.

Understanding margin rates — and the risks involved in margin trading — can help you decide if it’s an investment strategy worth pursuing, based on your risk tolerance and goals.

When Is Margin Rate Charged?

Margin rates are accrued daily and charged on a monthly basis. So as soon as you purchase securities on margin, the margin rate applies and begins accruing. The total amount of margin interest paid depends on how much you borrow from the brokerage, the margin rate and how long it takes you to pay the loan back.

Generally speaking, traders use margins for short-term trading purposes. Though there’s no set end date for margin loans, the longer you take to pay them off, the more interest you’ll pay in total.

How Is Margin Rate Calculated?

Unlike other loans, margin loans typically do not have a set end date. Interest charges accrue monthly. To find the annual interest rate on a margin loan, you’d multiply the margin rate by the principal amount. To find the daily rate, you’d divide that amount by 360 days.

So assume that you have a $100,000 margin loan with a 6.825% margin rate, which is a common margin rate figure at top brokerages. Your yearly interest charges would add up to $6,825. If you divide that by 360, your daily interest charge breaks down to $18.96. If you were to pay your margin loan off in 10 days, you’d pay a total of $189.60 in interest.

Determining how much you’ll pay for a margin loan is relatively easy if you know the margin rates that apply and have an idea of how long it’ll take you to pay it back. At the very least, you can figure out the daily interest charge and use that as a guide for calculating your total profits on a margin trade.

💡 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).

The Takeaway

Margin rates refer to the interest rate traders or investors pay on their margin balance – the amount of money they’ve borrowed from a broker to execute traders and buy investments. Margin rates help determine how much traders will pay to use margin, and can help inform investing decisions.

Margin trading is a more advanced investing strategy that requires some consideration of risk and an understanding of market trends. If you’re just getting started with online stock trading and investing, then you may want to get a feel for how stocks work first before opening a margin account.

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

Are margin rates yearly? Daily?

Margin rates are accrued on a daily basis, and charged by brokerages on a monthly basis. So, every day that a trader has a margin balance, they’re accruing interest in conjunction with their margin rate.

What does margin rate tell you?

The margin rate tells investors how much they’ll pay to borrow money from their brokerage if they trade on margin – or, in other words, it informs them of how much it costs to use margin.

About the author

Rebecca Lake

You may also be interested in:

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

SOIN1023006

What Is a Money Purchase Pension Plan?

What Are the Money Purchase Pension Plan Contribution Limits?

The Pros and Cons of Money Purchase Pension Plans

Pros of Money Purchase Plans

Disadvantages of Money Purchase Pension Plan

Money Purchase Pension Plan vs 401(k)

The Takeaway

FAQ

What is a pension money purchase scheme?

Can I cash in my money purchase pension?

Is final salary pension for life?

You may also be interested in:

What Are Mergers and Acquisitions (M&A)?

What Is a Merger of Equals?

What Is Private Equity?

How Do Stocks Move During Mergers?

Why Do M&A Deals Fall Through?

Different Stock Reactions to M&A

Merger vs Acquisition Impacts on Stocks

M&A Stock Impact Example

How Is Employee Stock Impacted By a Merger?

Do Mergers Create Value?

Buying a Stock Before vs After a Merger

Calculating Stock Price After a Merger

What Is Merger Arbitrage?

What Is a Cash-Out Merger?

Pros and Cons of Mergers

Pros of Mergers

Cons of Mergers

The Takeaway

FAQ

How do stocks work with mergers?

How do you calculate a stock price after a merger?

Is it good to buy stock before or after a merger?

What Are Taxable Brokerage Accounts?

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

What Is an IRA?

Taxable Brokerage Accounts vs IRA Accounts

Traditional IRAs vs Taxable Brokerage Accounts

Roth IRAs vs Taxable Brokerage Accounts

401(k)s vs Taxable Brokerage Accounts

Tax Advantages of an IRA vs Taxable Brokerage Account

Which Type of Account Is Best for Me?

Think About Investing in a Traditional IRA If…

Think About Investing in a Roth IRA If…

Think About Investing in a 401(k) If…

Think About Investing in a Taxable Brokerage Account If…

Pros and Cons of Taxable Brokerage Accounts

Pros of Taxable Accounts

Cons of Taxable Accounts

Is it Smart to Have Both an IRA and a Taxable Brokerage Account?

The Takeaway

FAQ

What is the difference between an IRA and a taxable brokerage account?

Is it better to contribute to an IRA or a taxable brokerage account?

How is a taxable brokerage account taxed?

How Can I Buy Stocks Without a Broker?

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

Access stock trading, options, alternative investments, IRAs, and more. Get started in just a few minutes.

Benefits of Using a Broker to Buy Stocks

How to Buy Stocks Online Without a Broker

Direct Stock Purchase Plans

Pros of Buying DSPPs

Cons of Buying DSPPs

Dividend Reinvestment Plans

Pros of DRiP Programs

Cons of DRiP Programs

Online Brokerage Account

Pros of Investing with an Online Broker

Cons of Investing with an Online Broker

The Takeaway

You may also be interested in:

Understanding Margin Rates

How Margin Rates Work

Increase your buying power with a margin loan from SoFi.

Borrow against your current investments at just 11%* and start margin trading.

Factors That Affect Margin Rate

Broker Call Rate

Supply and Demand

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

Student Loan
Refinancing

Personal
Loans

Online
Investments