Investing beyond Trump Account S&P 500 fund: How to increase the odds for a child's lifetime wealth
Here's what's trending across the USA right now:
Now that Trump accounts have made their debut, many parents are wondering how to invest in them appropriately. They should also be wondering how to save elsewhere for their children to increase the odds of lifelong financial security.
Adding to this, More than seven million American children have been signed up for the tax-deferred accounts, allowing families, friends and employers to contribute $5,000 for a child that's under age 18. The goal of these accounts is to jump-start retirement savings, and they are designed to make sure the money stays in the market over the long-term. Once the child turns 18, any withdrawals before age 59½ are generally subject to income taxes and a 10% penalty , though distributions for higher education expenses are among the penalty exceptions .
Meanwhile, But it would be a mistake for families to rely on Trump accounts alone. Robert Raimondo, co-founder and chief development officer at Brookwood Investment Group in Phoenix, Arizona, says these new accounts are best thought of as "a complement" to the planning families are already doing, or should be thinking about.
Notably, To set up children for financial success, within Trump accounts and outside of them, financial advisors suggest some key portfolio construction moves.
As per the latest buzz, For starters, there is at least one important decision to be made with a Trump Account in the months ahead.
In further updates, All contributions to Trump Accounts are being allocated to a default fund to start: the State Street SPDR Portfolio S&P 500 ETF ( SPYM ). Four additional ETFs will be available in the coming months, according to a press rollout from the Treasury Department.
On top of that, "Treasury will announce when investment election functionality becomes available and will provide instructions for responsible parties wishing to change their account's investment allocation," according to the press rollout. A Treasury Department spokesperson declined to provide more specific guidance by press time when asked by CNBC.
There are a few things to consider when it comes to the four additional options. All are U.S.-equities based and all have similar expense ratios and performance to the SPDR S&P 500 ETF. One fund, iShares Core S&P 500 ETF ( IVV ), also tracks the S&P 500 index, but has a slightly higher expense ratio than the default fund, 0.03% versus 0.02% — though both are extremely low to begin with.
Source: CNBC