Can You Name a Trust as a Beneficiary of an IRA?

Individual retirement accounts (IRAs) offer a tax-advantaged way to invest for retirement. When opening an IRA, one question you’ll need to answer is who should be the beneficiary. You could name your spouse or another relative, but it’s also possible to list a trust as beneficiary of IRA assets.

A trust is a legal arrangement used in estate planning that allows an individual called a
trustee to manage assets for one or more beneficiaries, according to the specific wishes of the person who creates the trust.

There are advantages and disadvantages to naming a trust as the beneficiary of an IRA. It’s helpful to understand the implications of this process when developing your estate plan.

Key Points

•   Naming a trust as an IRA beneficiary allows the account holder to control when and how IRA assets are distributed after they’re gone.

•   IRA assets can be left to a trust in order to provide financially for those dependent on care, such as minors or special needs individuals.

•   When an IRA is left to a trust instead of a spouse, that spouse will not be able to claim or roll those assets into their own IRA, as they would if they were the beneficiary.

•   IRA assets held in a trust must be distributed within five years if the IRA owner died before starting to take required minimum distributions (RMDs).

•   A trust that qualifies as a see-through trust, which passes assets to beneficiaries through the trust, may be able to bypass certain distribution requirements.

How an IRA Is Inherited

The way IRAs work is that the account holder makes contributions to the IRA to help save for retirement. Those under age 50 may contribute up to $7,000 annually in 2024 and 2025, while those 50 and up may contribute up to $8,000 annually. The account holder names one or more beneficiaries to inherit the IRA. After the account holder’s death, IRA beneficiaries must take distributions from the account — known as required minimum distributions (RMDs) — and pay any required taxes due on those distributions, in accordance with Internal Revenue Service (IRS) rules.

You can select one or more beneficiaries when you open an IRA and then update your beneficiaries at any time. For example, you could make a change to your beneficiary designation if you get married or divorced and wish to name or remove your spouse.

Types of Designated IRA Beneficiaries

A designated IRA beneficiary, similar to a 401(k) beneficiary, is the individual who will inherit the IRA account, as chosen by the account owner. A designated IRA beneficiary must be a person.

There are two primary categories of designated beneficiaries: Spouse and non-spouse. Non-spouse designated beneficiaries to an IRA can include:

•   Children

•   Parents or other family members

The IRS recognizes a separate category of designated beneficiaries, referred to as eligible designated beneficiaries (EDBs). This term is used to describe beneficiaries who benefit from special treatment regarding inherited IRA distributions under the SECURE Act, which went into effect in 2020. The following individuals qualify for EDB status:

•   Spouses and minor children of the deceased IRA owner

•   Disabled or chronically ill individuals

•   Individuals who are not more than 10 years younger than the IRA owner

Eligible designated beneficiaries can space out required minimum distributions from an inherited IRA over their lifetime. Ordinarily, non-spouse beneficiaries who inherit an IRA are required to withdraw all of the assets from the account within 10 years, under the rules of the SECURE ACT.

Non-Designated Beneficiaries

Non-designated beneficiaries are entities that inherit an IRA or another retirement account. Examples of non-designated beneficiaries include:

•   Estates

•   Charities

•   Trusts

Non-designated beneficiaries must withdraw IRA assets within five years of the account owner’s death if the owner died before they were required to start taking RMDs at age 72 before 2023, and at age 73 beginning in 2023.

However, if the account owner died after they started taking out RMDs, the payout rule applies. According to this rule, the beneficiary (in this case, the trust) must take out the assets over what would have been the account owner’s life expectancy if they had not died.

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Benefits to Naming a Trust as an IRA Beneficiary

So, can a trust be the beneficiary of an IRA? Yes. But should a trust be the beneficiary of an IRA? That answer is largely determined by the specifics of your situation. Here are some of the advantages of naming a trust as beneficiary to an IRA.

Control

Assets held in a trust are managed by a trustee who is bound by a fiduciary duty, meaning that they must act in the best interest of their client. During your lifetime you may act as your own trustee, with someone else succeeding you at your death. Any trustee you name is required to adhere to your wishes, as specified in the trust document.

That means you can have a say in what happens to IRA assets after you’re gone. That’s one of the chief benefits to a trust. If you were to name an individual as IRA beneficiary, on the other hand, they could do whatever they like with the money.

Special Situations

Trusts can be used to manage assets on behalf of minor children or special needs children/adults. You may set up a trust for the purpose of providing financially for a family member or another individual who is dependent on you for their care.

Setting up an IRA financial trust ensures that their needs will continue to be met after you’re gone. You can leave specific instructions for your trustee and any successor trustees you name on how the trust assets should be used to fund the care for these individuals.

Disadvantages to a Trust IRA Beneficiary

Naming a trust as the beneficiary of an IRA doesn’t always make sense, however. You may lose more than you benefit by choosing a trust as beneficiary vs. an individual. Here are some of the drawbacks to carefully consider.

Distribution Rules

Non-person IRA beneficiaries, including trusts, must fully distribute assets within five years of the account owner’s death if the owner had not yet begun taking required minimum distributions, or if the account is a Roth IRA. If the account owner died after they started taking out RMDs, however, the beneficiary must take out the assets over what would have been the account owner’s life expectancy if they had not died.

The only exception to these rules is if a trust qualifies as a see-through trust (learn more about that below).

By comparison, designated non-spouse beneficiaries generally have a 10-year window in which to withdraw IRA assets. Spousal beneficiaries can treat the IRA as their own and roll it over to their retirement account, which may minimize their tax liability.

Loss of Spousal Benefits

Naming a trust as IRA beneficiary when you have a living spouse takes away some of the tax benefits that are typically afforded to spouses when inheriting retirement accounts.

Most importantly, they don’t have the option to treat the IRA as their own. That could increase their tax obligation when receiving trust assets, leaving them with less inherited wealth to fund their retirement.

Rules for Trusts Inheriting IRAs

The SECURE Act introduced rules for trusts that inherit IRAs, including the five-year requirement for distributions. The rules says that non-designated beneficiaries must withdraw IRA assets within five years of the account owner’s death if the owner died before they were required to start taking out RMDs at age 72 before 2023, and at age 73 beginning in 2023.

If the account owner died after they started taking out RMDs, the beneficiary must take out the assets over what would have been the account owner’s life expectancy if they had not died.

Trusts may be able to bypass these requirements if they qualify as see-through entities, meaning they pass retirement assets to beneficiaries. With see-through trusts, the RMDs that must be taken are calculated based on the age of the beneficiary.

Here are the rules for see-through trusts.

•   Trusts must be valid according to the laws of the state in which they’re created.

•   The trust must become irrevocable, meaning it can’t be changed, when the account owner passes away.

•   Trust beneficiaries must be readily identifiable.

•   A copy of the trust must be provided to the custodian by October 31 in the year following the account owner’s death.5

These are the most current rules as of 2024. New legislation or updates to existing legislation can change inherited IRA rules.

Process for Updating IRA Beneficiary

The process for updating IRA beneficiaries is usually determined by the brokerage or bank that holds your IRA. If you need to make an update, you’ll need to contact your IRA custodian for the next steps.

Typically, you’ll fill out a beneficiary change form and share some information about the new beneficiary. If you’re updating your IRA beneficiary to a trust you’ll likely need to share the trust’s tax identification number as well as the trustee’s name and contact information.

Keep in mind that if you have an irrevocable trust you may not be able to make the change. Talking to an estate planning attorney or financial advisor can help you better understand what changes you can or cannot make.

The Takeaway

If you’re considering a trust as part of your estate plan and you also have an IRA, think about your specific situation and objectives. Putting an IRA in a trust could make sense if you have a special family situation or you want some say in how the assets are to be used after your death. On the other hand, it’s important to weigh the tax consequences your heirs might face.

If you don’t yet have an IRA but you’d like to set one up and begin making IRA contributions, it’s easy to open a retirement account online.

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.

FAQs

Who pays the taxes if a trust is the beneficiary of an IRA?

When a trust retains income from an inherited IRA, the trust pays tax on that income. If IRA assets are passed on to the trust beneficiaries, then the beneficiaries pay the tax.

Can a trust be the beneficiary of Roth IRAs and traditional IRAs?

A trust can be the beneficiary of a traditional or Roth IRA. It’s possible for someone to have both types of IRAs and name a trust as beneficiary to one or both of them.

Do IRAs with beneficiaries go through probate?

Probate is a legal process in which a deceased person’s assets are inventoried, outstanding debts are paid, and remaining assets are then passed on to their heirs. Generally speaking, retirement accounts with designated beneficiaries are not subject to probate.


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.

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.

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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child with magnifying glass

Custodial Roth IRA: How to Open a Roth IRA For Kids

A Roth IRA can be a retirement savings tool for children as well as adults. Funded with after-tax dollars, a Roth IRA grows tax-free, so account holders won’t need to pay taxes when they withdraw money in retirement as long as the account has been open for at least five years. Plus, the money in a Roth IRA will have many decades to grow if you open it when your child is young.

And while a Roth IRA has an early distribution penalty, that penalty is generally waived for certain expenses, such as paying for qualified college expenses, if your child needs to access those funds. That flexibility can make a Roth IRA appealing.

Can you open a Roth IRA for a child? Yes! A Roth IRA for kids, called a Custodial Roth IRA, can be opened by a parent, grandparent, or other adult for a child of any age, as long as the child earns income (more on that later).

Here’s everything you need to know about a Roth IRA for kids.

🛈 Currently, SoFi does not offer custodial banking or investment products.

What Is a Roth IRA for Kids?

A Roth IRA for kids, also known as a custodial Roth IRA, is an IRA opened by an adult (usually a parent), who manages the account until the child gets full control of it, which is at age 18 or 21 in most states.

A custodial Roth IRA for kids generally operates in the same way a Roth IRA for adults does. The account holder contributes after-tax dollars toward their retirement savings and the money grows tax-free in the account.

In order to open and contribute to a Roth IRA, your child must have earned income.

Who’s Eligible for a Roth IRA for Kids?

A child of any age can have a Roth IRA for kids. However, to be eligible, a child must have an earned income. Earned income can include the compensation earned from jobs like babysitting, dog walking, or working for an employer.

Custodial Roth IRA Rules

In addition to the standard rules for a Roth IRA, there are specific rules for custodial Roth IRAs. These rules include:

No Minimum Age Limit

A child of any age can have a custodial Roth IRA as long as he or she has earned income.

A Child Must Have Earned Income

In order to open a custodial Roth IRA, a child must have earned income. The IRS generally defines earned income as taxable income, wages, and tips. This can also include self-employment, such as yard work or babysitting. Cash gifts given to a child do not count as earned income.

There Are Contribution Limits

The contribution limit for a Roth IRA in both 2024 and 2025 is $7,000 per year ($8,000 for those 50 and older), or the total of the individual’s earned income for the year, whichever is less.

In addition, a child (or an adult on behalf of a child) cannot contribute an amount greater than the child’s earned income. So if a child earned $2,000 as a lifeguard at the local swimming pool, for example, the most that can be contributed to the child’s custodial IRA that year, including contributions from parents, is $2,000.

Certain Early Withdrawals Are Allowed

In general, you can withdraw contributions from a Roth IRA at any time without penalty. Earnings typically can’t be withdrawn before age 59 ½ without penalty except in certain circumstances. Allowable exceptions include withdrawals up to certain limits to pay for qualified college expenses, cover certain medical bills, and to buy a first home.

Eventual Conversion to a Regular Roth IRA

When the child reaches the legal age in their state (typically 18 or 21, depending on the state), the custodial Roth IRA will need to be converted to a regular Roth IRA in the child’s name.

How to Open a Custodial Roth IRA for a Kid

A Roth IRA for kids can be opened by any adult, such as a parent or grandparent, for instance. While the child is a minor, the adult will have sole access to the account; once the child comes of age (the timing of which varies by state), the account will transfer over to the child.

As with any Roth IRA, investment options within the account can include stocks, bonds, and mutual funds.

A Roth IRA can be opened through a financial institution or brokerage firm. You can typically open the account online by providing some basic information about yourself and your child. Choosing the right institution and Roth IRA offering depends on the investor and their preferences, so be sure to do some research.

Benefits of Starting a Roth IRA for a Child

Flexibility in how to use the funds can be one benefit of opening a custodial Roth IRA as part of an investment plan for your child. A Roth IRA can provide flexibility not only for potential expenses in early adulthood — such as college expenses or buying a home — but can be an investment vehicle throughout your child’s lifetime.

Another benefit is that a Roth IRA typically gives you more control over investments than an education-focused 529 college savings plan, and it may allow you to create a diversified portfolio of different asset classes.

A Roth IRA is a gift that can keep growing, since investors can potentially maximize compounding returns to get the most out of their investment. Here’s how a Roth IRA may unlock the power of compounding: As an example, let’s say you open a custodial Roth IRA when the child is 10 years old, and contribute $2,000 annually. At a certain point, your child might take over contributing $2,000 annually.

Assuming a 7% rate of return, the account will be worth $928,000 by the time your child is 60 years old — even though the amount you and your child contributed would be $100,000 in total. In comparison, if that same money was put in a taxable savings account over the same time period, the total of the account would be approximately $515,764.

And unlike a traditional IRA, there is no required minimum distribution (RMD) on a Roth IRA once the account owner reaches retirement age. A Roth IRA also allows people to continue contributing throughout their lifetime, as long as they’re earning income.

Alternatives to a Roth IRA for a Kid

If you’re looking for other possible investments for your child, some options to consider include the following.

•   Savings account: A parent can open a savings account for a child, as long as the parent is a joint account holder. Savings accounts typically have low interest rates (the average rate for a savings account is 0.41% APY as of December 16, 2024), so you might want to look for a high-yield savings account instead. These accounts may have average rates of more than 3.00% APY.

•   Savings bonds: If your child doesn’t have earned income, you may want to consider savings bonds. However, savings bonds don’t offer the same potential tax advantages a Roth IRA does since you have to pay federal income tax on the bonds when they mature or you cash them. You won’t pay income taxes on Roth IRA earnings unless you take a non-qualified distribution.

•   529 plans: These plans can help you save for your child’s education. You can typically invest the money you contribute to a 529 plan and choose from a wide range of investment options. While these plans aren’t tax deductible at the federal level, your state may offer tax breaks for contributions made to them. And funds can be withdrawn tax-free for qualified education expenses. As of 2024, money left in a 529 may be rolled over to a Roth IRA for your child, although certain conditions and limits may apply.

•   UGMA/UTMA accounts: A Uniform Gifts to Minors Act (UGMA) account and a Uniform Transfers to Minors Act (UTMA) account are custodial accounts in which an adult can invest on behalf of a child. These accounts are typically used to invest in stocks, bonds, mutual funds, and so on. There are no contribution or income limits, and gifts below the annual gift threshold do not need to be reported. However, there are no tax benefits when contributions are made, and earnings are made to these accounts, and earnings are subject to taxes. When the child reaches legal age, they take over control of the account.

The Takeaway

For a child with earned income, a custodial Roth IRA may be a good way to help them prepare for their future and get started on the path to investing. A child does need to have an earned income to open a custodial Roth IRA, and contributions cannot exceed their income. If your child qualifies, a Roth IRA for kids could potentially give them years of tax-free growth on their money.

FAQ

Can you open a Roth IRA for a child if they don’t earn income?

No. A child must have earned income — which the IRS defines as wages, salaries, tips and other taxable employee compensation, as well as net earnings from self-employment — in order to open a custodial Roth IRA.

Can you open a Roth IRA for a baby?

It’s possible to open an IRA for a baby. As long as a baby earns an income — modeling baby clothes, for instance — you can open a custodial Roth IRA for them. There is no minimum age to open a custodial Roth IRA, but the child must have earned income.

Is it a good idea to open a Roth IRA for a child?

It may be a good idea to open a Roth IRA for a child for several reasons. A Roth IRA can help a child save up for and cover certain expenses in early adulthood, such as qualified college expenses. Also, a Roth IRA typically has higher returns than a savings account. And because kids have a low tax rate now, when contributions are made, it makes sense to open a Roth IRA, which is taxed upfront. At retirement, as long as they are at least age 59 ½, they can withdraw the money tax-free.

Can I give my child money for a Roth IRA?

Yes, you can contribute to your child’s IRA. However, annual contributions to the account cannot exceed the child’s annual earned income. Also, per IRS rules, the overall amount you can contribute to a Roth IRA is to $7,000 in 2024 for individuals under age 50, or the total annual earned income, whichever is less.

What is the disadvantage of a Roth IRA for kids?

One potential disadvantage of an IRA for kids is that your child must earn an income in order to open and contribute to an account. In addition, you can only contribute the amount the child earns. So if the child makes $500 for the year babysitting, that is the most you can contribute to their custodial Roth IRA.

Can I open a Roth IRA for my 2 year old?

As long as your 2-year-old earns an income, you can open a custodial Roth IRA for them. There is no minimum age requirement for a Roth IRA for kids.

How do I prove my child’s income for a Roth IRA?

If your child receives a W-2 or 1099 form for work they did for an employer, you can use those documents to prove your child’s income. However, if they are self-employed and do work like babysitting, dog walking or yard work to earn money, you should keep receipts or records of the type of work they did, the amount they earned, when the work was done, and who it was for, as proof of their income.

What happens to a custodial Roth IRA when the child turns 18?

Once a child is of legal age, which is typically 18 or 21, depending on your state, the IRA must be converted to a regular Roth IRA in the child’s name that they then own and manage.

Do children need to file a tax return to fund their Roth IRA?

As long as their income is below the threshold that requires them to file a tax return, children are typically not required to file a tax return just because they have a custodial IRA. However, you may want to consult with a tax professional about your specific situation.


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.

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.

SoFi Invest®

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

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

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When to Start Saving for Retirement

When Should You Start Saving for Retirement?

If you ask any financial advisor when you should start saving for retirement, their answer would likely be simple: Now, or in your 20s if possible.

It’s not always easy to prioritize investing for retirement. If you’re in your 20s or 30s, you might have student loans or other goals that seem more “immediate,” such as a down payment on a house or your child’s tuition. But starting early is important because it can allow you to save much more. In fact, setting aside a little every year starting in your 20s could mean an additional hundreds of thousands of dollars of accumulated investment earnings by retirement age.

No matter what age you are, putting away money for the future is a good idea. Read on to learn more about when to start saving for retirement and how to do it.

Key Points

•   Starting to save for retirement in your 20s is ideal, as it gives your money more time to potentially grow and benefit from compounding. Compounding occurs when any earnings received are added to your principal balance, so future earnings are calculated on this updated, larger amount.

•   Assessing personal financial situations and retirement goals is crucial when determining how much to save for retirement, regardless of age.

•   Individuals in their 30s, 40s, 50s, or 60s can still successfully start saving for retirement, with different strategies tailored to each age group.

•   Regular contributions and taking advantage of employer-sponsored plans are key steps in building a solid retirement savings strategy at any age.

This article is part of SoFi’s Retirement Planning Guide, our coverage of all the steps you need to create a successful retirement plan.


money management guide for beginners

What Is the Ideal Age to Start Saving for Retirement?

Ideally, you should start saving for retirement in your 20s, if possible. By getting started early, you could reap the benefits of compound interest. That’s when money in savings accounts earns interest, that interest is added to the principal amount in the account, and then interest is earned on the new higher amount.

Starting to save for retirement in your 20s can allow you to save much more. In fact, setting aside a little every year starting in your 20s could mean an additional hundreds of thousands of dollars of accumulated investment earnings by retirement age.

That said, if you are older than your 20s, it’s not too late to start saving for retirement. The important thing is to get started, no matter what your age.

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

The #1 Reason to Start Early: Compound Interest

If you start saving early, you could reap the benefits of compound interest.

CFP®, Brian Walsh says, “Time can either be your best friend or your worst enemy. If you start saving early, you make it a habit, and you start building now, time becomes your best friend because of compounded growth. If you delay — say 5, 10, 15 years to save — then time becomes your worst enemy because you don’t have enough time to make up for the money that you didn’t save.”

Here’s how compound interest works and why it can be so valuable: The money in a savings account, money market account, or CD (certificate of deposit) earns interest. That interest is added to the balance or principle in the account, and then interest is earned on the new higher amount.

Depending on the type of account you have, interest might accrue daily, weekly, monthly, quarterly, twice a year, or annually. The more frequently interest compounds on your savings, the greater the benefit for you.

Investments — including investments in retirement plans, such as an employee-sponsored 401(k) plan or a traditional or Roth IRA — likewise benefit from compounding returns. Over time, you can see returns on both the principal as well as the returns on your contributions. Essentially, your money can work for you and potentially grow through the years, just through the power of compound returns.

The sooner you start saving and investing, the more time compounding has to do its work.

💡 Quick Tip: If you’re opening a brokerage account for the first time, consider starting with an amount of money you’re prepared to lose. Investing always includes the risk of loss, and until you’ve gained some experience, it’s probably wise to start small.

Saving Early vs Saving Later

To understand the power of compound returns, consider this:

If you start investing $7,000 a year at age 25, by the time you reach age 67, you’d have a total of $2,129,704.66. However, if you waited until age 35 to start investing the same amount, and got the same annual return, you’d have $939,494.76.

Age

Annual Return

Savings

25 8% $2,129,704.66
35 8% $939,494.76

As you can see, starting in your 20s means you may save double the amount you would have if you waited until your 30s.

Starting Retirement Savings During Different Life Stages

Retirement is often considered the single biggest expense in many peoples’ lives. Think about it: You may be living for 20 or more years with no active income.

Plus, while your parents or grandparents likely had a pension plan that kicked off right at the age of 65, that may not be the case for many workers in younger generations. Instead, the 401(k) model of retirement that’s more common these days requires employees to do their own saving.

As you get started on your savings journey, do a quick assessment of your current financial situation and goals. Be sure to factor in such considerations as:

•   Age you are now

•   Age you’d like to retire

•   Your income

•   Your expenses

•   Where you’d like to live after retirement (location and type of home)

•   The kind of lifestyle you envision in retirement (hobbies, travel, etc.)

To see where you’re heading with your savings you could use a retirement savings calculator. But here are more basics on how to get started on your retirement savings strategy, at any age.

Starting in Your 20s

Starting to save for retirement in your 20s is something you’ll later be thanking yourself for.

As discussed, the earlier you start investing, the better off you’re likely to be. No matter how much or little you start with, having a longer time horizon till retirement means you’ll be able to handle the typical ups and downs of the markets.

Plus, the sooner you start saving, the more time you’ll be able to benefit from compound returns, as noted.

Start by setting a goal: At what age would you like to retire? Based on current life expectancy, how many years do you expect to be retired? What do you imagine your retirement lifestyle will look like, and what might that cost?

Then, create a budget, if you haven’t already. Document your income, expenses, and debt. Once you do that, determine how much you can save for retirement, and start saving that amount right now.

💡 Learn more: Savings for Retirement in Your 20s

Starting in Your 30s

If your 20s have come and gone and you haven’t started investing in your retirement, your 30s is the next-best time to start. While there may be other expenses competing for your budget right now — saving for a house, planning for kids or their college educations — the truth remains that the sooner you start retirement savings, the more time they’ll have to grow.

If you’re employed full-time, one easy way to start is to open an employer-sponsored retirement savings plan, like a 401(k). We’ll get into details on that below, but one benefit to note is that your savings will come out of your paycheck each month before you get taxed on that money. Not only does this automate retirement savings, but it means after a while you won’t even miss that part of your paycheck that you never really “had” to begin with. (And yes, Future You will thank you.)

💡 Learn more: Savings for Retirement in Your 30s

Starting in Your 40s

When it comes to how much you should have saved for retirement by 40, one general guideline is to have the equivalent of your two to three times your annual salary saved in retirement money.

Once you have high-interest debt (like debt from credit cards) paid off, and have a good chunk of emergency savings set aside, take a good look at your monthly budget and figure out how to reallocate some money to start building a retirement savings fund.

Not only will regular contributions get you on a good path to savings, but one-off sources of money (from a bonus, an inheritance, or the sale of a car or other big-ticket item) are another way to help catch up on retirement savings faster.

Starting in Your 50s

In your 50s, a good ballpark goal is to have six times your annual salary in your retirement savings by the end of the decade. But don’t panic if you’re not there yet — there are a few ways you can catch up.

Specifically, the government allows individuals aged 50 and older to make “catch-up contributions” to 401(k), traditional IRA, and Roth IRA plans. That’s an additional $7,500 in 401(k) savings, and an additional $1,000 in IRA savings for 2024 and 2025. (Note that in 2025, those aged 60 to 63 may contribute an additional $11,250, instead of $7,500.)

The opportunity is there, but only you can manage your budget to make it happen. Once you’ve earmarked regular contributions to a retirement savings account, make sure to review your asset allocation on your own or with a professional. A general rule of thumb is, the closer you get to retirement age, the larger the ratio of less risky investments (like bonds or bond funds) to more volatile ones (like stocks, mutual funds, and ETFs) you should have.

Starting in Your 60s

It’s never too late to start investing, especially if you’re still working and can contribute to an employer-sponsored retirement plan that may have matching contributions. If you’re contributing to a 401(k), or a Roth or traditional IRA, don’t forget about catch-up contributions (see the information above).

In general, when you’re this close to retirement it makes sense for your investments to be largely made up of bonds, cash, or cash equivalents. Having more fixed-income securities in your portfolio helps lower the odds of suffering losses as you get closer to your target retirement date.

💡 Learn more: Savings for Retirement in Your 60s

The Takeaway

Investing in retirement and wealth accounts is a great way to jump-start saving and investing for your golden years, whether you invest $10,000 or just $100 to get started.

The first step is to open an account or use the one that’s already open. You could also increase your contribution. If you’re opening an account, you may want to consider one without fees, to help maximize your bottom line.

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

Is 20 years enough to save for retirement?

It’s never too late to start investing for retirement. If you’re just starting in your 40s, consider contributing to an employer-sponsored plan if you can, so that you can take advantage of any employer matching contributions. In addition to regular bi-weekly or monthly contributions, make every effort to deposit any “windfall” lump sums (like a bonus, inheritance, or proceeds from the sale of a car or house) into a retirement savings vehicle in an effort to catch up faster.

Is 25 too late to start saving for retirement?

It’s not too late to start saving for retirement at 25. Take a look at your budget and determine the max you can contribute on a regular basis — whether through an employer-sponsored plan, an IRA, or a combination of them. Then start making contributions, and consider them as non-negotiable as rent, mortgage, or a utility bill.

Is 30 too old to start investing?

No age is too old to start investing for retirement, because the best time to start is today. The sooner you start investing, the more advantage you can take of compound returns, and potentially employer matching contributions if you open an employer-sponsored retirement plan.

Should I prioritize paying off debt over saving for retirement?

Whether you should prioritize paying off debt over saving for retirement depends on your personal situation and the type of debt you have. If your debt is the high-interest kind, such as credit card debt, for instance, it could make sense to pay off that debt first because the high interest is costing you extra money. The less you owe, the more you’ll be able to put into retirement savings.

And consider this: You may be able to pay off your debt and save simultaneously. For instance, if your employer offers a 401(k) with a match, enroll in the plan and contribute enough so that the employer match kicks in. Otherwise, you are essentially forfeiting free money. At the same time, put a dedicated amount each week or month to repaying your debt so that you continue to chip away at it. That way you will be reducing your debt and working toward saving for your retirement.


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.

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.

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

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Shares of ETFs must be bought and sold at market price, which can vary significantly from the Fund’s net asset value (NAV). Investment returns are subject to market volatility and shares may be worth more or less their original value when redeemed. The diversification of an ETF will not protect against loss. An ETF may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.

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SoFi Invest may waive all, or part of any of these fees, permanently or for a period of time, at its sole discretion for any reason. Fees are subject to change at any time. The current fee schedule will always be available in your Account Documents section of SoFi Invest.


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 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.

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.
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Do You Pay Capital Gains on Roth IRAs and IRAs?

You don’t have to pay capital gains tax on investment profits while they are held in a traditional or a Roth IRA account. In most cases, the question of taxes comes into play when you withdraw money from a traditional or Roth IRA.

Each type of IRA is subject to a different set of tax rules, and it’s essential to know how these accounts work, as the tax implications are significant now as well as in the future.

IRAs, Explained

An Individual Retirement Account (IRA) is a tax-advantaged account typically used for retirement savings. There are two main types of IRAs — traditional IRAs and Roth IRAs — and the tax advantages of each are quite distinct.

Generally speaking, all IRAs are subject to contribution limits and withdrawal rules, but Roth IRAs have strict income caps as well as other restrictions.

Contribution Limits

For tax years 2024 and 2025, the annual contribution limit for both Roth and traditional IRAs is $7,000, and $8,000 for those 50 or older.

It’s important to know that you can only contribute earned income to an IRA; earned income refers to taxable income like wages, tips, commissions. If you earn less than the contribution limit, you can only deposit up to the amount of money you made that year.

One exception is in the case of a spousal IRA, where the working spouse can contribute to an IRA on behalf of a spouse who doesn’t have earned income. Like ordinary IRAs, spousal IRAs can be traditional or Roth in style.

Traditional IRAs

All IRAs are tax advantaged in some way. When you invest in a traditional IRA, you may be able to take a tax deduction for the amount you contribute in the tax year that you make the contribution.

The contributions you make may be fully or partially tax-deductible, depending on whether you or your spouse are covered by a workplace retirement plan. If you’re not sure, you may want to check IRS.gov for details.

The money inside the account grows tax-deferred, meaning any capital appreciation of those funds is not subject to investment taxes, i.e. capital gains tax, while held in the account over time. But starting at age 59 ½ , qualified withdrawals are taxed at regular income tax rates.

If you think about it, this makes sense because you make contributions to a traditional IRA on a pre-tax basis. When you take withdrawals, you then owe income tax on the contributions and any earnings.

With some exceptions, early withdrawals from a traditional IRA prior to age 59 ½ are subject to income tax and a 10% penalty.

Recommended: IRA Tax Deduction Rules

Roth IRAs

Roth IRAs follow a different set of rules. You contribute to a Roth IRA with after-tax money. That means you won’t get a tax deduction for contributions you make in the year that you contribute.

Your contributions grow inside your Roth IRA tax-free, along with any earnings. When you reach retirement age and start to make withdrawals, you won’t owe income tax on money you withdraw because you already paid tax on the principal (i.e. your original contribution amounts) — and the earnings are not taxed on qualified withdrawals.

Get a 1% IRA match on rollovers and contributions.

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


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

What Are Capital Gains Taxes?

Capital gains refer to investment profits. In a taxable investment account you would owe capital gains tax on the profits you made from selling investments: e.g., stocks, bonds, real estate, and so on.

You don’t owe capital gains tax just for owning these assets — it only applies if you profit from selling them. Depending on how long you held an investment before you sold it, you would owe short- or long-term capital gains.

Retirement accounts, however, are subject to their own set of tax rules, and traditional and Roth IRAs each handle capital gains taxes differently.

Are Gains Taxed in Traditional IRAs?

Traditional IRA plans, as noted above, are tax-deferred, which essentially means that investment profits are not subject to capital gains tax while they remain in the account. Given this, the sale of individual investments like stocks inside an IRA is not considered a taxable event.

However, with tax-deferred accounts like traditional IRAs, you do have to pay ordinary income tax on withdrawals (meaning, you’re taxed at your marginal income rate).

So when you take withdrawals from a traditional IRA, you will owe income tax on the amount you withdraw, including any investment gains (i.e., earnings) in the account.

Are Gains Taxed in Roth IRAs?

The same principle applies to Roth IRAs, even though these are after-tax accounts: You don’t have to pay taxes on investment income or any assets that you buy or sell inside your Roth IRA.

Because you contribute to a Roth IRA with after-tax money, your money grows tax-free inside your IRA. Also, the earnings in the account grow tax-free over time and those gains are not taxed within the account.

In addition, qualified withdrawals of contributions and earnings from a Roth IRA are tax free. But remember: early or non-qualified withdrawal of earnings from a Roth IRA would be subject to taxes and a penalty (with some exceptions; for details see IRS.gov).

Roth IRA Penalties

Because you contribute to a Roth IRA with after-tax money, you can always withdraw your contributions (meaning your principal) without paying any tax or penalties.

If you wait to withdraw money from your Roth IRA until you reach age 59 ½, you can also withdraw your earnings without tax or penalties — as long as you’ve had the account for at least five years.

If you withdraw Roth IRA earnings before age 59 ½ or before you’ve held the account for five years, you may be charged a 10% early withdrawal penalty, though there are IRA withdrawal rules that may help you avoid the penalty in certain situations.

Are Gains Taxed in 401(k)s?

An IRA and a 401(k) work in a similar way when it comes to capital gains tax. Just as there are traditional and Roth IRAs, there are also traditional and “designated” Roth 401(k) plans, and they work similarly to their corresponding IRA equivalents.

So, generally speaking, you do not owe any capital gains tax on the sale of any investments held inside either type of 401(k) account.

Opening an IRA With SoFi

Most people are familiar with the basic tax advantages of using an IRA to save for retirement. Traditional IRAs are tax-deferred accounts and may provide a tax deduction in the years you make contributions. Roth IRAs are after-tax accounts that can provide tax-free income in retirement.

But the fact that you don’t have to pay capital gains tax is also worth noting. With both a traditional IRA and a Roth IRA, buying and selling stocks or other investments is not considered a taxable event. That means that you will not owe capital gains tax when you sell investments inside your IRA.

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).

Help grow your nest egg with a SoFi IRA.

FAQ

Are Roth IRAs subject to capital gains tax?

No, buying and selling stocks or other investments inside a Roth IRA is not considered a taxable event. This means that you will not owe capital gains tax for buying or selling investments inside your Roth IRA. And because contributions to Roth IRAs are made with after-tax money, you also won’t owe income tax on qualified withdrawals.

Do you have to pay taxes if you sell stocks in a Roth IRA?

Selling stocks inside a Roth IRA is not considered a taxable event. So whether you regularly buy and sell stocks inside your Roth IRA, or just have unrealized gains and losses, you won’t need to worry about capital gains tax.

What happens when you sell a stock in your Roth IRA?

Buying and selling stocks inside an IRA is not considered a taxable event. So you won’t owe capital gains tax on stock you sell, but you also won’t be able to offset gains with a loss you capture from a stock sale inside your IRA.


Photo credit: iStock/designer491

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.

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.
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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What Is the Kiddie Tax?

The kiddie tax is a tax rule designed to prevent parents from shifting investment income to their children to take advantage of lower tax rates. Introduced in 1986, it ensures that unearned income from a child’s investments, such as dividends and interest, is taxed at a higher rate once it exceeds a certain threshold.

Understanding how the kiddie tax works is important for parents of children under age 24 who may be earning money from their own savings and investments. What follows is a simple breakdown of the kiddie tax rules, including who is subject to kiddie tax and how to keep your child’s unearned income below the kiddie tax threshold.

Key Points

•   The kiddie tax prevents parents from shifting investment income to children to take advantage of lower tax rates.

•   If a child’s unearned income exceeds the kiddie tax threshold, it’s taxed at the parents’ tax rate rather than the child’s tax rate.

•   The kiddie tax threshold is $2,600 for 2024 and $2,700 for 2025.

•   Unearned income includes dividends, interest, and capital gains.

•   Tax-efficient investment strategies can help minimize the impact of the kiddie tax.

Definition and Purpose of the Kiddie Tax


The kiddie tax applies to unearned income of children under age 24 (with some exceptions). Unearned income refers to any income that is not acquired through work, and includes income received through investing, such as capital gains distributions, dividends, and interest.

Kiddie taxes were introduced in 1986 as part of the Tax Reform Act to prevent parents from transferring wealth to children as a tax loophole.2 Before the kiddie tax, wealthy families could transfer income-producing assets or make large stock gifts to their children, who were in lower tax brackets, thereby reducing their overall tax liability. The kiddie tax rule ensures that high levels of unearned income are taxed at a rate comparable to the parents’ tax rate rather than the child’s lower rate.

Who Is Subject to the Kiddie Tax?


The kiddie tax applies to children aged 18 and younger, as well as full-time students who are aged 19 to 23, whose unearned income is higher than an annually determined threshold. For 2024, the kiddie tax threshold is $2,600; for 2025, the threshold is $2,700.

If a child meets the above criteria, any unearned income that exceeds the annual threshold will be taxed at the parents’ higher marginal tax rate rather than the child’s lower rate.

An exception to this investment tax rule is a child aged 18 or a full-time student aged 19 to 23 with enough earned income (from working) to cover more than half the cost of their support. Those under 24 who file tax returns as married filing jointly or who are not required to file a tax return for the tax year (due to income below the filing threshold) are also exempt.

It’s also important to note that the kiddie tax does not apply to a child’s earned income; their wages, salaries, or tips are taxed at the child’s own tax rate.

Recommended: When Do You Pay Taxes on Stocks?

How the Kiddie Tax Is Calculated


The kiddie tax is calculated based on the child’s unearned income. This generally includes interest, dividends, capital gains, taxable scholarships, trust distributions, and income from gifts or inheritances. It also includes any taxable welfare or Veterans Affairs benefits distributed to a child.

Here’s how the kiddie tax rate applies for tax year 2024 (filed in 2025):

•   The first $1,300 in unearned income qualifies for the kiddie tax standard deduction and is tax-free.

•   The next $1,300 in unearned income is subject to the child’s tax rate.

•   Unearned income above $2,600 is taxed at the parents’ marginal tax rate.

The kiddie tax threshold increases for for tax year 2025 (filed in 2026):

•   The first $1,350 in unearned income is tax-free.

•   The next $1,350 in unearned income is subject to the child’s tax rate.

•   Unearned income above $2,700 is taxed at the parents’ marginal tax rate.

Marginal tax rates for parents range from 10% to 37% for the 2024 and 2025 tax years.

Recent Changes to Kiddie Tax Laws


The kiddie tax first emerged as part of the Tax Reform Act of 1986 as a way to ensure that wealthy parents could not significantly reduce tax obligations by shifting large amounts of investment income to their children. The rule stipulated that all unearned income above a certain threshold is taxed at the parent’s marginal income tax rate rather than the child’s tax rate.

In 2017, the Tax Cuts and Jobs Act made an adjustment to the kiddie tax rule effective for tax year 2018: It substituted the tax rates that apply to trusts and estates for the parents’ tax rate. However, this made the kiddie tax significantly more costly to certain families, including Gold Star children that receive survivor benefits.

In response, Congress included a provision in the Setting Every Community Up for Retirement Enhancement Act (SECURE Act), which became law in 2019, to revert the kiddie tax to the old rules, where unearned income is taxed at the parents’ marginal tax rate rather than the trust tax rates. This change was retroactive to the 2018 tax year, allowing affected taxpayers to amend prior-year returns (if desired).

Since then, no major revisions have been proposed or enacted regarding the kiddie tax, though that’s always subject to change.

Recommended: How to Calculate Stock Profit

Strategies to Minimize Kiddie Tax Liability


To reduce potential kiddie tax liability, parents can implement several tax-planning strategies:

•   Track your child’s investment income throughout the year: If their earnings or gains get close to the threshold, you may be able to sell losing stocks to trigger a capital loss. This strategy, known as tax-loss harvesting, could help offset the gains and potentially allow your child to avoid a kiddie tax hit.

•   Invest in tax-efficient accounts: Consider placing your child’s assets in tax-advantaged accounts like 529 college savings plans or Roth IRAs for kids (if they have earned income), where investment gains grow tax-free.

•   Explore municipal bonds: Interest earned from municipal bonds is generally tax-free at the federal level and may also be exempt from state and local taxes.

•   Shift investments to growth stocks: For tax-efficient investing, you might choose growth stocks that focus on appreciation rather than paying dividends. This can defer taxable income until your child sells the investment (likely at a lower tax rate).

•   Encourage earned income: The kiddie tax does not apply to a child who is age 18 to 23 if their earned income exceeds 50% of their support for the year.

Reporting Kiddie Tax on Your Tax Return


To report and pay the kiddie tax on a child’s unearned income, you can have your child file their own tax return using IRS Form 8615. Or, if your child’s gross income is less than $13,000 in 2024 (less than $13,500 in 2025), you may be able to include your child’s unearned income on your own tax return using IRS Form 8814. This simplifies tax filing but may result in a higher overall tax burden if it increases your adjusted gross income.

It can be a good idea to consult an accountant or tax professional to determine the best approach for your situation.

The Takeaway


The kiddie tax serves as an important safeguard against income shifting by taxing a child’s unearned income at their parents’ tax rate when it exceeds a certain threshold. Understanding the limits that may apply to your child’s unearned income and how the kiddie tax is calculated can help you understand their tax liabilities, as well as tax-efficient strategies that may be employed.

Determining the tax rules and obligations your family may be subject to can be complicated, however, so it can be a good idea to consult with a tax or financial advisor.

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).

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

FAQ


What types of income are subject to the kiddie tax?


The kiddie tax applies to a child’s unearned income, which includes interest, dividends, capital gains, taxable scholarships, trust distributions, and income from gifts or inheritances. It does not apply to earned income from wages, salaries, or self-employment.

If a child’s unearned income exceeds the annual threshold ($2,600 for tax year 2024; $2,700 for tax year 2025), the excess is taxed at the parents’ marginal tax rate. This prevents parents from transferring income-producing assets to children to reduce their tax liability.

Are there any exemptions to the kiddie tax?


Yes, the kiddie tax only applies to a child’s unearned income, which may include income from savings and investments above a certain threshold. Earned income from a part- or full-time job or self-employment is not subject to the kiddie tax. Other exceptions include a child with earned income totaling more than half the cost of their support or who is not required to file a return for the tax year (due to income below the filing thresholds).

At what age does the kiddie tax no longer apply?


The kiddie tax no longer applies once a child turns 19, or 25 if they are full-time students, by the end of the tax year. After that cut-off age, all income — both earned and unearned — is taxed at regular individual rates. This means that investment income will be taxed based on the child’s own tax bracket rather than their parents’ rate.


Photo credit: iStock/Morsa Images

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.

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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