Big Changes Ahead for Saving for Retirement

Who says Washington can’t agree on anything?

With bipartisan support, Congress just passed and the President signed the SECURE Act, legislation that provides significant changes and incentives to further help Americans save for retirement. Most of the provisions will take effect on January 1, 2020.

So, what does this mean for your IRA and 401(k)? Among its major features, the SECURE Act:

• Removes the maximum age limit for making contributions to traditional individual retirement accounts (right now, that’s 70½).

• Makes it easier for small businesses to band together to offer 401(k) plans and offers tax credits to those firms that do.

• Raises the age to 72, up from 70½, when people need to start taking required minimum distributions from certain retirement accounts.

• Encourages annuities in 401(k) plans by eliminating companies’ fear of legal liability if the annuity provider fails or otherwise doesn’t deliver.

• Allows for younger investors to use up to $10,000 of 529 plans to pay off student debt

• Allows small businesses to participate in multi-employer 401(k) plans and receive tax credits for implementing automatic enrollment

• Lets part-time workers become eligible for retirement benefits, depending on how many hours they’ve worked in a given year.

With many Americans falling woefully short in saving for retirement, these new measures will hopefully encourage people to save more in the years ahead.

What are you waiting for? Check out Firstrade’s retirement accounts.

The Tax Benefits of Custodial Accounts For Your Kids

To start saving for your child’s education or building that nest egg with a Firstrade custodial account. Firstrade makes it easy to open and manage with no custodian income limits or minimum deposit requirements.

What exactly is a custodial account you ask?

It’s an investment account set up for a minor under the Uniform Transfers to Minors Act (UTMA) or Uniform Gifts to Minors Act (UGMA) based upon your state of residence. So unlike popular education accounts such as a 529 plan, you don’t have to be 18 years old or older to own them.

For that up-and-coming financial genius in your life, a custodial account is set up for a minor with money that is gifted to the child. The assets held in the account are owned by the minor under his or her name and social security number. And, the money can be used for any purpose, not just tuition, as long as it’s legally used for the benefit of the child.

The account is administrated by a custodian (usually a parent), who will manage the account for the minor’s benefit until he or she reaches the age of majority (18 or 21 depending on the state).

For the parent, a custodial account not only lets you manage your child’s assets, it provides a gift tax advantage (up to the maximum contribution allowed)  and the flexibility to invest in any combination of investment products. Here’s how:

• You can contribute up to $15,000 per person annually.

• The first $1,050 in earnings is tax-free, the next $1,050 of earnings is taxed at the child's tax rate, and the earnings over $2,100 is taxed at the adult's tax rate.

• You can invest in stocks, ETFs, mutual funds, bonds, and up to level 2 options trading.

• You can withdraw the money for any purpose without time restrictions, as long as it’s for the benefit of the minor.

• When the maximum allowed contribution exceeds $15,000, a gift tax could be incurred.

To enroll and learn more about a Firstrade custodial account, go here.

Investing With a Conscience: Socially Responsible ETFs Explained

We’ve talked before in previous posts about the great potential upside of Exchange-Traded Funds (ETFs) Remember, at Firstrade, all of our 2,300 ETFs are commission free and we make it easier to select the right ones for you.

In the current market, ETFs — baskets of stocks, bonds or commodities — have become increasingly valuable investment tools for self-directed investors seeking greater portfolio diversification, reduced risk, increased flexibility and tax efficiency through exchange-traded investing. Investors can choose from a wide array of funds in virtually any sector, industry or asset class.

A particular segment of the ETF market includes so-called “socially responsible” ETFs, which are becoming increasingly popular with investors interested in combining a sound investment strategy while supporting funds that adhere to social, moral or environmental standards, among others. A socially responsible ETF generally will track ethically sound companies, such as those adhering to only the highest standards of corporate governance and citizenship.

Many of these ETFs are an excellent way to invest around themes. For instance, funds may track companies that seek to advance the role of women through gender diversity or those that emphasize the protection of the planet through a commitment to reducing their carbon footprints. Additional examples of socially responsible ETFs include those tracking companies with proven reputations for supporting social causes and giving back to their communities.

What you will surely not find in any socially responsible ETFs are “sin stocks” including those in gambling, tobacco, alcohol and gun industries that socially responsible investors believe are “bad” for society.

So, if you’re interested in socially responsible ETFs, do your homework to learn about socially responsible investing. Think about your values, and the kind of causes or social programs you would want to support. But keep in mind that you are still investing your hard-earned money so pay attention, do your research and be sure to think about diversification in your investing strategy as well.

Regardless of how you chose to invest, remember that Firstrade customers have access to more than 2,300 ETFs, including several of the leading socially responsible ETFs.

The U.S. ETF industry recently hit a milestone, recording nearly $4 trillion in assets, according to data on ETF.com. ETFs are widely expected to continue their growth in popularity, making Firstrade’s no-cost trading even more attractive and timely for investors.

Want to choose the right ETF for you? Check out our thousands of free ETFs, and start commision-free trading here.

Manage, Invest and Spend Your Money All From One Account.

Cash management accounts are becoming increasingly popular, particularly on the international scene. So, what is a CMA?

If you conduct most or all of your banking online, you’re likely familiar with the kinds of features that a CMA has to offer. Basically, it’s a cash account that combines services and benefits that are similar to checking, debit card and investment accounts under one product.

Often, CMAs are able to offer low or no fees thanks to the low overhead of online-only services and assistance. Who needs to come face-to-face with a teller anymore anyway?

In this fast-paced world, a Firstrade Cash Management Account provides you the flexibility to trade, access and spend your money all in one account. Your cash will be in the same account as your trading funds, so you won’t miss any market opportunities when it comes to trading wherever you are.

For the international market, our product is easily accessible since there is only a $100 minimum. You can trade U.S. stocks commission-free. Our CMA has no maintenance, annual or application fees. And, you get our global ATM card for international use and convenience.

How else can you benefit?

• You will have no liability for unauthorized transactions if you promptly report the loss or theft of your card and report any unauthorized transactions.

• You’re covered with free travel safety insurance if you purchase tickets through our registered travel office.

• You can speak with a Firstrade Cash Management Account specialist to learn how to set up your account, activate features and more.

To learn more about a cash management account at Firstrade, go here.

Let’s Have More Babies?!?

A recent Barron’s article by Jack Hough, “Bet on a Baby Bounce,”(link) presents an intriguing (and somewhat tongue in cheek) argument that the economy will do better if millennials simply decide to have more babies. Sounds reasonable, right?

He cites Bank of America data that while overall births have declined in nine out of the last 10 years, births have risen modestly by 0.9% among women between the ages of 35 and 39. Children born to women between 40-44 have increased as well. Hough reasons that “couples are waiting to have kids, but they haven’t quite forgotten how.”

Hough even cheekily suggests that the growth of streaming services such as Netflix and the upcoming launch of Disney and Apple services may lead to a surprise uptick in baby births. “All that couch time could drive a year-over-year expansion in funny business. That’s just science,” he surmises.

More seriously, Hough contends that the longer millennials wait to have children, the more disposable income they’ll have to spend on their children and this will benefit the many companies that serve the baby market and help spark the overall economy. He further maintains that fertility rates, not just in the U.S. but in other countries, can be important economic drivers, with population growth playing a major role in economic gains.

When thinking about your own investment strategies, reviewing data and indexes are of course important, but don’t forget to follow cultural changes as well, particularly among millennials.

Hough’s conclusion: let’s have more babies and millennials should lead the way:

“Let’s start pressing millennials to have more kids. Don’t be afraid to tap strangers on the shoulder on line at Chipotle. Also, Congress should expand the Federal Reserve’s mandate to include spicing up national romance. Don’t laugh: Chairman Jerome Powell is one of six kids, and he has three of his own. That guy knows a thing or two about getting the economy going.”

So, get busy millennials, it’s your patriotic duty!

Your thoughts?