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How to Fund Your Roth IRA from SoFi?

How to Fund Your Roth IRA from SoFi

SoFI Technologies Inc.(SOFI) is a fintech company that offers a plethora of financial products and services including loans, credit cards, and savings and checking accounts. The digital platform also offers services like robo-advisors that offer algorithm-driven financial planning. 

What is SoFi?

SoFi’s robo-advisor services offer management of customer portfolios of stocks, bonds, and ETFs. While the digital platform does not offer any mutual funds, there are a plethora of ETFs issued by other companies that can be used to build a SoFi Roth IRA. 

SoFi also provides discount brokerage services via SoFi Invest, which consists of three subsidiaries under the following names and focuses on services like SoFi Wealth, automated and investing advisory; SoFi Securities LLC, active investing and brokerage; and SoFi Digital Assets, cryptocurrency trading. 

SoFi, along with its subsidiaries has approximately $671.3 million assets under management(AUM). 

What is a Roth IRA?

Investors in the United States have access to a range of tax-exempt savings plans offered by financial institutions. Some of the most common options include Individual Retirement Accounts(IRAs), 401(k)s, and Roth IRAs. 

A Roth IRA is an individual retirement account that is a tax-exempt retirement plan that is funded with after-tax dollars. The main distinction between a Roth IRA and a traditional IRA is that the former is funded with after-tax dollars and is completely tax-free at the time of retirement. 

This means that contributions to a Roth IRA are not tax-exempted, as they are with traditional IRAs. However, unlike traditional IRAs where withdrawn funds are taxed based on the current tax brackets, Roth IRA investors can withdraw funds tax-free, provided they follow the withdrawal rules. 

Best Stocks for Roth IRA

Here are some of the best stocks for a Roth IRA at SoFi. 

Vanguard Total Stock Market ETF

VTI aims to track the performance of the CRSP U.S. Total Market Index, which is composed of thousands of individual stocks across the market capitalization spectrum. It represents approximately 100% of the US investable equity market. If you are looking for broad diversified exposure to the equity market, the VTI ETF is a suitable choice for you. 

The ETF has 3,761 holdings, out of which, 70.2% are large-cap stocks, 3.8% are between mid-cap and large-cap, 12.9% are mid-cap, 5.5% are between small-cap and mid-cap, and 7.6% are small-cap. 

Experts suggest that a single broad stock fund is sufficient to build a long-term portfolio for retirement. A total stock market fund like VTI is preferable to an S&P 500 index fund as it offers amazing diversification by providing exposure to small-cap, mid-cap, and even large-cap stocks. 

Keep in mind that a broad-based equity fund like VTI carries some risks but also provides solid growth opportunities to investors. However, if you have a fairly low-risk tolerance, a more income-oriented portfolio may be a better option for you. 

BNY Mellon Core Bond ETF

BKAF is an ETF that tracks the performance of the Bloomberg Barclays U.S. Aggregate Total Return Index. It is a broad-based index that gauges the investment grade, US dollar-denominated, and fixed-rate taxable bond market. This particular ETF provides exposure to the overall U.S. bonds market. 

BKAG has a 0% expense ratio and the ETF has 3,445 total holdings, out of which, 40.96% are Treasuries, 25.54% are agency fixed-rate bonds, and the remaining holdings are bonds or other debt securities by companies in the following sector: banking, consumer noncyclical, technology, communications, energy, electric, consumer cyclical, and capital goods. 

Broad-based bonds are generally less risky than equity funds but also don’t offer the same growth potential. They are suitable options for risk-averse investors and a great way for portfolio diversification

Experts suggest that the mix of bonds and stocks in a long-term portfolio should be 60/40- 60% of stocks and 40% of bonds. The proportion of stocks to bonds should reduce gradually as the investor ages. 

Final Words

A Roth IRA is a great investment vehicle for those who are looking to save a substantial nest egg for their retirement. The unique characteristic of a Roth IRA is that it is funded with after-tax dollars and any withdrawal at the time of retirement is not tax-liable. 

For investors with little time, large and diversified funds are a great option. These large diversified funds- a broad-based stock fund and a broad-based bond fund can also create a solid foundation for many investors who just don’t have the time to actively manage their investments. 

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Frequently Asked Questions(FAQs)

Q. Are SoFi Rorh IRAs insured?

Ans. Yes, Roth IRAs at SoFi are insured. SoFi Securities is a member of the Securities Investor Protection Corp, a corporation created by Congress to protect the clients of brokerage firms that are forced into bankruptcy. Any assets held in investor accounts are insured up to $500,000. 

Q. Does SoFi offer Roth IRAs?

Ans. Yes, SoFi is a digital platform that offers investors a wide range of individual retirement account options, including Roth IRAs, traditional IRAs, and Simplified Employee Pension IRAs. 

Q. What is the maximum contribution to a SoFi Roth IRA?

Ans. For tax year 2023, investors can contribute a total of $6,500 to their Roth and traditional IRA accounts. For tax year 2024, this limit has been increased to $7000. If you are over the age of 50, you can contribute an additional $1000 to both IRA accounts.