Latest news with #wealthCreation
Yahoo
2 days ago
- Business
- Yahoo
Here's how investors can target a £50k passive income in retirement with an ISA!
You'll often read that Stocks and Shares ISAs are the best way to build cash for retirement. This is thanks to the excellent long-term returns that share investing tends to provide. With a £500 monthly investment, here's how an investor could generate a healthy passive income in retirement. As I mentioned, the returns enjoyed by Stocks and Shares ISA investors can be considerable. At 9.64%, the average yearly return for the last 10 years trumps the 1.21% return that the Cash ISAs provided. That's according to price comparison website Moneyfacts. Accordingly, prioritising investment in one of these riskier products could be the most effective way to build enough wealth for a comfortable retirement. Of course, Cash ISAs can also play a vital role in wealth creation by reducing risk and providing a stable return across the economic cycle. Let's consider how someone with £500 to invest each month could make it work. How much they split between share investing and cash will involve a delicate balance between their long-term goals and their attitude to risk. In this case, let's say they prefer a 75/25 split that might deliver solid growth while also providing a safety net. If they can match the averages of the last decade, they would — after 30 years — have: £785,269 in their Stocks and Shares ISA £54,220 in their Cash ISA This would give them a combined retirement portfolio of £839,489 they could use for a passive income. With this money, they could purchase dividend shares, which should give them a steady flow of income. It would also give them a chance to continue growing their portfolio. If they bought shares yielding 6%, they'd have £50,369 to live on each year from their portfolio. Combined with the State Pension, this could give them a bountiful total retirement income. Investment trusts like the JPMorgan Global Growth & Income (LSE:JGGI) product can be great ways to build wealth with a Stocks and Shares ISA. Thise diversified approach provides a way to target capital gains and passive income in a way that effectively spreads risk. The JPMorgan vehicle's aim is to hold between 50 and 90 companies at any one time, across a spectrum of industries and regions: Through the use of gearing (borrowed funds) — which today stands at 1.85% of shareholders' capital — the trust's managers can also better capitalise on investing opportunities as they arise. Like other equity-based investment trusts, JPMorgan's product can still fall during broader stock market downturns despite its diversified approach. Its use of gearing may also present higher risk. But I think its long-term record speaks for itself. Delivering an average annualised return of 12.8% since 2015, it's proved a great way for UK investors to build wealth for retirement. The post Here's how investors can target a £50k passive income in retirement with an ISA! appeared first on The Motley Fool UK. More reading 5 Stocks For Trying To Build Wealth After 50 One Top Growth Stock from the Motley Fool Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Motley Fool UK 2025 Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
CBS News
22-05-2025
- Business
- CBS News
What to know about $1,000 "Trump accounts" for newborns included in House bill
The Trump administration wants to kickstart wealth creation for American children by creating $1,000 "Trump accounts" for babies born during President Trump's second term in office. Originally called "money account for growth and advancement," or "MAGA" savings accounts, the renamed accounts would be managed by banks or investment firms, and operate like traditional investment accounts. Here's what to know about the proposed "Trump accounts" for newborns. What are they called? House Republicans on Wednesday submitted an amendment to Mr. Trump's domestic policy bill to ditch the original "Maga" acronym and rename the accounts "Trump accounts," after the president himself. Who would get one? Every child born in the U.S. between Jan. 1, 2025 and Jan. 1, 2029 with a Social Security number, and whose parents have Social Security numbers, would be automatically enrolled in the program. The U.S. Treasury would set up and fund the accounts. Madeline Brown, senior policy associate at the Urban Institute, said automatic enrollment is a key component of the proposed pilot program, given some adults' unfamiliarity with such investment vehicles. Some of the lowest-income families, who could most benefit from the boost, "often don't know about these kinds of programs. There's a huge awareness gap," she told CBS MoneyWatch. "Automatic enrollment is fundamental to improving the likelihood that it reaches the lowest-income families," she added. What would be in a "Trump account"? The government would contribute $1,000 to every eligible child's account, which would be invested in the stock market on their behalf. Families and third parties could also contribute up to $5,000 a year to a child's account. Sam Taube, investment expert at personal finance site Nerdwallet, said the proposed "Trump accounts" are similar to programs currently offered by a number of states, but the contributions aren't as generous. For instance Colorado's First Step program awards every newborn $100 in a 529 college savings account, plus a match of $500 a year for the first five years of savings, totaling up to $2,500 in gift contributions. What could the money be spent on? Accountholders would only be approved to be spend investment funds on prescribed costs, such as a down payment on a home, education-related expenses, or starting a small business. Use of the funds to pay for unapproved expenses would subject accountholders to penalties. But broadening the scope of approved expenditures would be even more beneficial to many families, Brown noted. "When it comes to wealth building, we have to make sure the target sums that kids end up with at 18 are in line with the things we're saying you can use the money for," Brown explained. If lower-income accountholders' families can't contribute the additional $5,000 per year, the sum they would end up with as adults might not cover a down payment, for example. "There are lots of different projections around what $1,000 can grow to with different interest rates, but it's not a down payment," she said. "So unless additional contributions come from the community, the federal government or state governments, we're not likely to see these accounts grow to the sums that we're saying are qualified uses. When could the funds be withdrawn? Half of the funds could be withdrawn when a child turns 18, at which point the account's gains would be taxed at the long-term capital gains tax rate, so long as the money were spent as directed. If the funds were used for other purposes, withdrawals would be taxed as income. A 10% penalty for misspending the money could also apply. Accountholders would have access to their full balances between the ages of 25-30 for approved purposes, and after 30, would be able to withdraw the funds for any purpose. Brown said she thinks improvements could be made to the way the program is structured, particularly around how account withdrawals are taxed. She noted that the lowest-income families would be the most likely to spend the funds on unapproved expenses, and face tax penalties. Most Americans can't afford a $1,000 emergency expense, according to a January report from Bankrate, making low-earners more likely to need to tap into the funds for surprise costs. "They are the most likely to have to withdraw dollars for nonqualified expenses, and in doing so, they [would] receive a tax penalty. So there are ways to exempt emergency expenses, and that would be a fix," Brown said. Otherwise, she said, the upsides to the accounts are limited. "There are other places you can save money where you won't have that tax penalty if you withdraw the funds early," Brown said. Taube of Nerdwallet noted that the proposed accounts' tax benefits are also questionable. "Although they are advertised as tax-advantaged accounts, the way they work does not seem to be that different from how a taxable brokerage account would work," he told CBS MoneyWatch. That said, "given the state of saving for children's future expenses in this country, the accounts do seem like they could help at least somewhat," Taube said.
CBS News
22-05-2025
- Business
- CBS News
What to know about the $1,000 "Trump accounts" for newborns included in House bill
The Trump administration wants to kickstart wealth creation for American children by creating $1,000 "Trump accounts" for babies born during President Trump's second term in office. Originally called "money account for growth and advancement," or "MAGA" savings accounts, the renamed accounts would be managed by banks or investment firms, and operate like traditional investment accounts. Here's what to know about the proposed "Trump accounts" for newborns. What are they called? House Republicans on Wednesday submitted an amendment to Mr. Trump's domestic policy bill to ditch the original "Maga" acronym and rename the accounts "Trump accounts," after the president himself. Who would get one? Every child born in the U.S. between Jan. 1, 2025 and Jan. 1, 2029 with a Social Security number, and whose parents have Social Security numbers, would be automatically enrolled in the program. The U.S. Treasury would set up and fund the accounts. Madeline Brown, senior policy associate at the Urban Institute, said automatic enrollment is a key component of the proposed pilot program, given some adults' unfamiliarity with such investment vehicles. Some of the lowest-income families, who could most benefit from the boost, "often don't know about these kinds of programs. There's a huge awareness gap," she told CBS MoneyWatch. "Automatic enrollment is fundamental to improving the likelihood that it reaches the lowest-income families," she added. What would be in a "Trump account"? The government would contribute $1,000 to every eligible child's account, which would be invested in the stock market on their behalf. Families and third parties could also contribute up to $5,000 a year to a child's account. Sam Taube, investment expert at personal finance site Nerdwallet, said the proposed "Trump accounts" are similar to programs currently offered by a number of states, but the contributions aren't as generous. For instance Colorado's First Step program awards every newborn $100 in a 529 college savings account, plus a match of $500 a year for the first five years of savings, totaling up to $2,500 in gift contributions. What could the money be spent on? Accountholders would only be approved to be spend investment funds on prescribed costs, such as a down payment on a home, education-related expenses, or starting a small business. Use of the funds to pay for unapproved expenses would subject accountholders to penalties. But broadening the scope of approved expenditures would be even more beneficial to many families, Brown noted. "When it comes to wealth building, we have to make sure the target sums that kids end up with at 18 are in line with the things we're saying you can use the money for," Brown explained. If lower-income accountholders' families can't contribute the additional $5,000 per year, the sum they would end up with as adults might not cover a down payment, for example. "There are lots of different projections around what $1,000 can grow to with different interest rates, but it's not a down payment," she said. "So unless additional contributions come from the community, the federal government or state governments, we're not likely to see these accounts grow to the sums that we're saying are qualified uses. When could the funds be withdrawn? Half of the funds could be withdrawn when a child turns 18, at which point the account's gains would be taxed at the long-term capital gains tax rate, so long as the money were spent as directed. If the funds were used for other purposes, withdrawals would be taxed as income. A 10% penalty for misspending the money could also apply. Accountholders would have access to their full balances between the ages of 25-30 for approved purposes, and after 30, would be able to withdraw the funds for any purpose. Brown said she thinks improvements could be made to the way the program is structured, particularly around how account withdrawals are taxed. She noted that the lowest-income families would be the most likely to spend the funds on unapproved expenses, and face tax penalties. Most Americans can't afford a $1,000 emergency expense, according to a January report from Bankrate, making low-earners more likely to need to tap into the funds for surprise costs. "They are the most likely to have to withdraw dollars for nonqualified expenses, and in doing so, they [would] receive a tax penalty. So there are ways to exempt emergency expenses, and that would be a fix," Brown said. Otherwise, she said, the upsides to the accounts are limited. "There are other places you can save money where you won't have that tax penalty if you withdraw the funds early," Brown said. Taube of Nerdwallet noted that the proposed accounts' tax benefits are also questionable. "Although they are advertised as tax-advantaged accounts, the way they work does not seem to be that different from how a taxable brokerage account would work," he told CBS MoneyWatch. That said, "given the state of saving for children's future expenses in this country, the accounts do seem like they could help at least somewhat," Taube said.
