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How to Find The Right Financial Mentor

Navigating your personal finances can be a tricky business. Sometimes, a financial mentor is just what you need to get your finances on track. A financial mentor is essentially someone who can help you plan smart strategies for how to spend, save, and invest your money.

Money can get complicated and having a trusted financial mentor can bring clarity and context to your financial decisions and make things like investing and saving a little easier to manage.

Today, anyone with a website and a little bit of knowledge can claim to be an expert, so follow these steps to be sure you find a mentor whose intention is to truly help you.

Decide What You Want in a Mentor

First, take an honest look at your situation. List out your financial strengths and weaknesses, and set some goals. If you have a pretty good grasp of your personal budget but need guidance to break into the housing market, you might want to sit down with someone in your family who owns property and knows what it’s like to be a first-time house hunter.

If, on the other hand, you’ve tried—and failed—on numerous occasions to get a savings or retirement account built up, you may be in search of a money mentor who understands the vagaries of life and everyday finances.

Professionals and budding investors may want to hire a financial advisor to help put their money to work, but may not have the money to spend on one. This is where a financial mentor comes in handy.

Solidify Your Perspective

Before you begin your search in earnest, there’s one thing you may want to do, and continue to do throughout the entire process. Write down your goals and two questions to be answered about every step of the process: Will this help me meet my goal? Will this work well for my life?

This is important to not only help you remain focused but to remember that personal finance is just that—personal—and a legit mentor should always work toward your agenda, not theirs. Make it your screensaver, set a repeating reminder, or whatever method works best so the end goal stays in sight, and in mind.

Find Potential Candidates

Money mentors can come from anywhere—even your own family. Start with your circle of people, and create a list of those who have a good grasp on their finances. Look for relatives, friends or even acquaintances who successfully run small businesses or manage their debt well.

Partnering with a mentor whom you already know can not only save you money, but it also begins with a deeper level of trust. In many cases, people may also be more comfortable opening up to someone who isn’t a stranger.

If you need to reach outside your social circle, ask around for referrals. Word of mouth and personal references are typically much more reliable than a Google search, especially if you’re a beginner.

In fact, some wealth “gurus” prey on those who are inexperienced with money by selling overpriced programs that don’t offer much value, so the more you can rely on personal reputation, the better.

That said, the internet isn’t awash with predators waiting to take advantage of you. But if you head to the web, start with professional sites like LinkedIn, proceed with caution, and make ratings and reviews your friend.

When it comes to holding businesses and individuals accountable, they’re one of the greatest benefits of social media. Look for mentors who have both a high rating and a high number of reviews that sound relatable to you and your goals. (Even a comment as simple as “He was only available during work hours,” could be a negative for someone who has a day job.)

Find ‘The One’

Once you narrow your search to a few potential mentors, make a list of questions to ask them, and to ask yourself. Here are a few to get you started:

For potential mentors:

•  How long have you been a coach?

•  What’s your business specialty?

•  What’s your greatest financial success/failure?

•  Have you ever been in my situation? What did you do about it?

•  What is your availability?

•  What’s your plan to help me reach my goals?

For yourself:

•  Can I relate to this person?

•  Do they present themselves as a financial success story?

•  Do they know how to teach?

•  Are they truly listening to me?

•  Are they trying to sell me anything?

•  What’s my gut reaction?

As you evaluate your answers, remember to keep your original goal in mind and be strict, because you aren’t looking for three or four mentors that might work out. You’re looking for the start of a beneficial relationship. Once you’ve found “the one,” make the leap and ask for guidance.

Be a Good Student

During your first few meetings, work together with your mentor to set expectations and lay the groundwork. Determine a plan, how you’ll get there, and how often you’ll communicate.

And remember that as much as you expect them to be a good coach, you should be a good student. Listen closely, take good notes, and implement your mentor’s suggestions. And, if at any point you feel like your mentor has ulterior motives or doesn’t have your best interests at heart, it’s your prerogative to back out.

Turn to Tech

If your social circle is lacking in financial gurus or you don’t have the budget to hire a pro, consider tech as your teacher. There is a wealth of resources on the internet where you can learn about money. Of course, you’ll want to proceed with caution on the internet—you can’t believe everything you read, and you might want to seek out multiple sources to verify claims.

Find a reputable source that you find interesting—there’s no shortage of financial content. From blogs to podcasts, websites, and magazines, there’s something for everyone. Building a solid educational foundation can go a long way when it comes to managing your finances.

If you’re ready to take the next step, consider opening an account that offers advising or automated investing. At SoFi, we’ve launched SoFi Invest® which offers just that. With an invest account with SoFi, you gain access to human financial advisors who will work with you to set your goals and risk tolerance.

You’ll also benefit from automated investing technology, that will automatically rebalance your portfolio to stay in line with your goals and risk tolerance. And you can begin investing with as little as $1.

Another fantastic option to kickstart your savings is SoFi Money®, a cash management account, where you can save and spend in one place. With SoFi Money you can take advantage of the ease of online access with perks like photo deposits, online transfers, and excellent customer service just a touch away.

In addition to the convenience, one of the biggest benefits of SoFi Money is there are no account fees (subject to change). With SoFi Money you can know that your money is going toward your financial goals instead of going to fees.

Start saving with SoFi Money. Join today.


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.
SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.

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Financial Impact of Not Having Children

If you have kids, it’s a good thing you don’t have to come up with this money up front (although it would probably help). A child costs over $245,000 for a middle-income family to raise until age 17, according to the U.S. Department of Agriculture.

If you don’t have kids, you’re part of an increasingly large group. The number of childless Americans has been steadily increasing for decades; according to the most recent census , “The share of adults living without children has climbed 19 points since 1967 to 71.3%.”

Increasingly common living situations have also made it more difficult for younger people to start families, even if they wanted to. In 2016, the number of millennials age 25 to 35 who moved back in with their parents rose to 15%, up from 12% in 2010.

If you’re part of a couple who have decided not to have children, you may be referred to in the culture as “DINKs” (dual income/no kids). DINKs are perceived to have more time to focus on personal development (and each other) and to be able to follow their passions.

However, having no children is no guarantee of being in the green, especially when it comes to retirement savings. DINKs may not have the financial burden of raising children, but that may leave them tempted to splurge on a more lavish lifestyle.

It’s also a little-known fact that many seniors are working long beyond the typical retirement age of 65. In 2016, nearly 19% of senior citizens hadn’t retired and two-thirds were working full-time (when the person has a white collar job, the situation is more likely to be voluntary).

Here are a few proactive steps to take to help keep yourself from becoming a statistic.

Saving for Retirement is Job #1

Having no children may mean that you have less to be responsible for, but don’t forget to be responsible for yourself. One way to take care of your future self now is to save for your retirement.

Determine what income you will receive in your retirement; that includes Social Security and any annuities or pensions coming your way. Subtract that from the annual living expenses you expect to have.

If you work at a full-time job, your employer may offer a 401(k) as a benefit. This is a retirement plan and employers often match any contributions you make to the fund.

It usually allows for higher contribution rates than other investment funds (in 2019, you’ll be able to contribute $19,000), and your contribution is simply deducted from your paycheck. You fund your 401(k) with pre-tax dollars, which reduces the amount of taxable income you report to the IRS each year.

If you don’t have an employer-sponsored 401(k) at work (and even if you do), consider opening an IRA. A individual retirement account is another tax advantaged fund that allows you to invest your money over time.

If certain conditions are met, taxes can be deferred until retirement, when your tax bracket likely will be lower. Money invested into an IRA might be invested in stocks, bonds, ETFs, and mutual funds.

You’re not able to cash in any of this investment until you turn 59 ½ (happy half-birthday in advance!). If you do, you have to pay a 10% penalty, which could take a big chunk out of the money you’ve worked hard to invest.

A Roth IRA is another tax advantaged option. Qualified individuals are allowed to contribute after tax income, but earnings are not taxed when you make withdrawals after age 59 ½, when certain conditions are met.

Estate Planning

This is all about tying up the loose ends after you die, making sure that the money you leave behind goes to a spouse, relative, friend, or even a charity. What’s important is that your final wishes are carried out, legally.

Most of your final wishes can be executed through a will. It’s never too early to write one, and it typically only costs a few hundred dollars to make it happen.

If you don’t have a will, that means you will die “intestate,” and your money and property might be given away for you by a judge. A will lets you appoint an executor and empowers him or her to carry out your decisions.

The executor might sell your property, make sure your final taxes are paid, and wrap up any unresolved financial issues you’ve left behind. The job of an executor carries a lot of responsibility and can also involve court time and people contesting your will. Make sure your executor is somebody you trust, and who is working in your best interests.

A will also lets you decide who gets your money and property after you’re gone (your beneficiaries). In most cases, your investments—for instance an IRA, 401(k), and life insurance—allow you to list beneficiaries as well.

Assume You May Need Elder Care

Without children, there may be fewer people around to take care of you when you’re older. That may mean planning for residence in an elder care or assisted living facility. And that includes the cost of living there, and it’s usually rather costly.

“A lot of people have this sense that it’s all going to work out (but) have never gone through the exercise of really understanding what the numbers look like,” Sally Brandon of Rebalance IRA told USA Today.

Surprisingly, only about 3% of senior citizens live in nursing homes, according to the last U.S. Census in 2010. Rather than move to a nursing home or assisted living, many seniors choose in-home care support. Hopefully you can too, but better safe (and prepared) than sorry.

Plan for the Death of a Spouse

This may be an unpleasant thing to even think about, but planning for your worst-case-scenario is a must for your future financial planning. First, you’ll want to consider solid life insurance policies. In addition to life, you may wish to consider medical and disability insurance as well, in the event that your spouse becomes ill, injured, or disabled.

Life insurance can provide your family with financial help in the event of your passing, while medical insurance can help if you are no longer able to contribute financially to your family because of a disability or injury.

Plan for Your Pets

Find an animal lover, or a lover of your particular pet, to take care of them after you’re gone. The idea is to make the transition as easy and as non-traumatic as possible for your pet, and to avoid the last resort of an animal shelter.

Naming a caretaker in your will may not necessarily obligate that person to take care of your pet. You may want to make a written agreement with the caretaker, and start a small trust for the care and feeding of your pet.

Saving For Retirement

Ready to start saving for retirement? You can open up an investment account with SoFi Invest. Or if you have an old 401(k) or IRA accounts you can roll them over into a SoFi Invest account. There are no management fees and all SoFi members have access to speak one-on-one with a SoFi financial planner.

They can help you map out a definite and clear financial plan. With SoFi Invest, you can get the navigation assistance you’ll need to stick with your financial goals.

Learn more about SoFi Invest today!


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.
SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.

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How To Choose A Bank: 6 Things To Consider

Unless you’re the type to hide money under your mattress, at some point you’re going to deal with a bank. In fact, banks are so central to our lives, even wizards have them. (Gringotts , anyone?) But whether you’re a wizard, a goblin, or an ordinary muggle, at some point you’re going to have to answer this question: how to choose a bank?

The Federal Deposit Insurance Corporation (FDIC) insures more than 5,500 banks in the United States. So how do you narrow it down to the one bank that’s right for you? Options include everything from traditional brick-and-mortar banks to online-only, worldwide banks that operate via an app.

All these choices can make finding the right bank stressful. You encounter a host of numbers, jargon, promises, and marketing that all seem great, but what’s in the fine print? Are you really getting the most work out of your money, or the highest interest rate, or a fee-free ATM experience?

Although these days choosing a bank takes more research than in years past, it can be relatively easy to make solid comparisons based on a few universal questions. A good first step is to make yourself a comparison chart. Then use process of elimination to find your perfect financial institution. Just remember—personal finance is a personal choice.

So while it’s certainly smart to take friends’ suggestions into consideration, the final choice should be the one that is all about you and your needs… not just what has a good marketing gimmick. Here’s what you need to consider when choosing a bank.

Bank Fees

We listed fees first, because the amount of extra money your bank keeps for itself can make or break a hard won balanced budget. The obvious fees are ATM charges, yearly maintenance fees, and overdraft protection, and they can add up quickly.

The average overdraft fee is currently around $30, and while they’re a good way to avoid negative balances, they can cost you hundreds of dollars if you fall behind.

Returned deposits, foreign transactions, low balances, lost cards, and sometimes even interacting with a human can also incur fees. Be sure to read through the terms and conditions carefully so you aren’t unpleasantly surprised. You may just want to choose an account that’s fee-free instead.

Interest Rates

While some lenders might still offer the traditional—and very low—0.01% interest rates on savings accounts, it doesn’t mean you’re stuck with that.

Especially with online-only banking where overhead is much less than traditional brick-and-mortar banks, customers are able to enjoy upwards of 1% annual percentage rates (APRs) on not only savings accounts, but checking accounts, too sometimes.

And while some banks require balance thresholds to get high interest rates, others have no minimum, which means you don’t have to be originally wealthy in order to take advantage of higher rates.

Location

Take a mental inventory of how you do your banking. Do you need to visit branches or use ATMs frequently? If so, one deciding factor could be which bank has locations closest to you. This is also important for avoiding ATM fees, so check into a bank’s partner network of fee-free machines.

ATM locations may not be as important if in-person banking is something you haven’t done since the Harry Potter movies were still coming out, but everyone needs cash in a pinch. Having a debit card with fee-free access is a plus.

Digital Banking

A bank’s app and online services are becoming increasingly important, especially as millennials start to open accounts for their kids and Gen-Z enters the workforce. Again, the best approach is to decide what features are important to you and narrow down from there. Does the bank offer online deposits via smartphone? Is their app easy to navigate?

Can you activate push alerts for low balances, or can you link your account to another financial institution? (Life hack: Linking to an outside bank account can help you lower overdraft fees—you’ll still get charged if your bank has to pull from the external account, but it’s typically less than if you didn’t have any other account to pull from at all.)

To get a good idea of a bank’s actual user experience, see if you can download a demo or find one on YouTube. Ratings and reviews can also be a great way to find out other customers’ experiences— the good, the bad and the ugly—as opposed to trusting a commercial to be honest with you.

Investment Account Options

If you’re looking for more than just checking and savings, consider a bank that also has investment account options. Having everything you need within the same financial system can make deposits, withdrawals, transfers, and automatic saving a breeze.

The Fine Print

A bank’s marketing and large-print promises may seem perfect at first blush, but it’s imperative to read the terms and conditions. Look for things like expiration dates for any introductory APRs and the rate moving forward, monthly account maintenance fees or out-of-network ATM charges, and whether the bank is FDIC-insured. (Make sure it is.) More often than not, banks can leave the less-desirable components of their account structures out of their marketing materials.

Check Out SoFi MoneyTM

With SoFi Money®, you get the best of both worlds: 21st century cash management and old-fashioned, human-to-human customer support.

Choose SoFi for a company that works as hard as you do. A SoFi Money account is a cash management account with no account fees (subject to change), and access to the SoFi community.


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.
SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank. SoFi Money Debit Card issued by The Bancorp Bank. SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.

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Typical Landscaping Costs You Can Expect

As with any home improvement project, a wide range of pricing structures exist. Depending upon your needs for landscaping design, and whether you plan to do it yourself or hire a professional, it can greatly vary.

A beautifully landscaped home can improve your day-to-day life, while enhancing the curb appeal. Whether you plan to stay in the home you’re landscaping or sell it in the near future, then your home will present a stunning face to the world.

If you’re planning to sell your home, now or in the future, then your landscaping can play a key role in enticing potential buyers into wanting to see the inside of the home—an important step in the selling process.

In this post, we’ll share more about the benefits of quality landscaping (you might be surprised!), what the current landscaping trends are (so you can follow them, if desired, or avoid them to create something unique and different), along with ranges of what you might expect to pay for the landscaping of your dreams. Finally, we’ll also share smart strategies on how to budget and pay for this project.

Benefits of Landscaping

Landscaping can add beauty to virtually any home, and it can also add literally tens of thousands of dollars to your property’s value. According to HomeGuides from SFGate.com , this is one of the few home improvements that can add immediate value to your home, with that value often increasing as time passes.

When a home is well landscaped, the article continues, it can increase the home’s value by as much as 5.5% to 12.7%, depending upon the original value of the house and the type of landscaping done. Factors that make landscaping appealing to buyers include:

•  sophisticated design

•  plant size and maturity

•  diversity of plant life

Plus, studies cited by Texas A&M University show remarkable and surprising potential benefits associated with being surrounded by plants, including:

•  improved concentration and memory

•  elevated moods

•  reduced likelihood of stress-related depression

•  accelerated healing

•  improved relationships

•  boosted levels of compassion

•  increased energy

•  boosted performance

•  better learning environment

•  and more

Clearly, there are significant benefits of attractive landscaping. So, how do you choose the design, plant life included and so forth?

Landscaping Trends

BobVila.com offers practical guidance on landscape planning, sharing that cookie cutter designs are a thing of the past. Instead, the article shares, landscape design should fit your lifestyle. If, for example, you dazzle people with your grilling skills, fitting a dream outdoor kitchen into your patio makes good sense. Or, if you find peace through yoga, using landscaping to create a private “om” space can be ideal.

Also design landscaping around your life stage. For example, “families might opt for kid-friendly flower gardens, busy singles might gravitate toward easy-care coneflowers, and outdoor entertainers might prefer fragrant lavender and basil to perfume the backyard air.”

As one more tip from this article, serenity gardens are among the hottest, most versatile styles of landscaping today. People use water and plant choices to create a relaxing, even meditative, mood.

Eco-friendly landscaping is in demand, according to LoveYourLandscape.org , with a growing emphasis on water management and conservation that influences the design and maintenance of the plants. This will likely cause people to increasingly use plants native to their area, and to focus on xeriscaping, which involves the use of low-water plants. Smart irrigation technology will also likely increase in demand.

That, however, does not translate into boring! People are adding “pops of color and whimsy,” with purple plants being especially popular. Landscapers are therefore expected to use more violets, verbena, clematis and iris. Also trending are “patterned plants” with more intricate details, from striped leaves to brightly colored veins and more.

Here’s one more trend, this one by NewHomeSource.com : the imperfect garden. Forget, the article shares, rows of flowers that are perfectly aligned. Instead, intentionally incorporate imperfection, and feel free to repurpose old gates, add uneven rocks and otherwise make your landscaping truly unique. Then, go outside and relax!

Landscape Budget Planning

First, give yourself permission to dream, to think big. What does your ideal landscaping look like? Feel like?

Then, create a list of both needs and wants. In your “needs” column, list repairs that must be done for safety’s sake, ranging from drainage challenges, broken fences, toxic plants that need rooted out, dead tree limbs that need removed and so forth.

Walk around your property as you make this list and use this time to also imagine what the property could look like with the stunning new landscaping you’re envisioning. Perhaps some of the ideas we’ve listed above have inspired you in an unexpected direction. Have fun!

Now, prioritize your list and be clear about which items are optional (perhaps a special type of trellis material for climbing roses) and which are not (trip hazards where you plan to add outdoor seating). Be sure to write down your priorities.

Initially, this may feel like a waste of time but, once you get into the midst of your project, you may run across new landscaping ideas. When this happens, it’s important to be able to ground yourself by reviewing how you prioritized and why.

According to Houzz, about 60 to 70% of choices that get made impulsively cost more than what was included in the original budget. Sometimes, things are added on the spur of the moment because you discover they’re necessary. Other times, they’re not. So, review your priorities and make your decision thoughtfully based upon your original plan.

Next, determine how much you can spend, keeping in mind how quality landscaping can add significant value to your home. Then, it might make sense to talk to three professional landscapers to find out pricing. Even if you intend to do some work yourself, these professionals will likely share information you hadn’t yet considered. (Hiring them in the off-season can save you money.)

Add a cushion of 10-20% and then determine if you can fund this out of savings, or if you’ll likely need to obtain additional funds.

How Much Does Landscaping Cost?

Now that you’ve done preliminary landscape budget planning, here is a look at the average cost of landscaping. According to Thumbtack.com, you should figure on paying $500-$700 for a small project, with landscaping costs for larger, more complex projects being $20,000 and up.

If you’re planning a larger project, the site notes that the American Society of Landscape Architects recommends that you budget your project at 5-10% of the value of your home.

If you plan to use a designer for your project, Thumbtack.com suggests that you budget $50-75 per hour for that professional to draw up plans, choose the plants, and find and purchase hardscape materials. Plants could cost $320-900 for 1,000 square feet of lawn.

At Thumbtack.com, you can enter your zip code to get estimates from local landscapers, and you can do the same through ImproveNet.com .

Home Equity Loans Versus Personal Loans

If you’ve decided to invest in your home’s value through landscaping—and the price point is above what you can afford from savings alone—then it may make sense to weigh the pros and cons of a home equity line of credit (HELOC) and then of a personal loan.

In certain circumstances, a HELOC may make sense. If, for example, you have significant home equity and plan to borrow a large amount to fund landscaping costs, a HELOC may offer a lower interest rate. Plus, the payments could be tax deductible.

Advantages of using an unsecured personal loan include that it doesn’t tie up any equity in your home. Fees are typically less (perhaps with no fees, whatsoever) and the application and approval processes are typically pretty fast. With a HELOC, you very well may need to pay for an appraisal and go through a more detailed application and approval process.

Personal Loans at SoFi

Home renovations are one of the most efficient ways to boost home values, and landscaping can be an excellent way to improve both its appearance and value. Choosing a SoFi personal loan for your landscaping project could be a smart choice for multiple reasons. With a home improvement loan from SoFi, you can benefit from:

•  Quick process: You can get started more quickly, with the timeline from online approval to funding averaging seven days.

•  Fixed payments: This helps you to keep your budget manageable and your project on schedule.

•  Kept home equity: The equity in your home is not on the line.

•  No fees. None. No surprises. None. What you see is what you get.

You can find your rate is just two minutes, with no commitment. Then, when you’re ready, you can complete your personal loan application—after you sign on the dotted line, it’ll be time to finally start your landscaping project.

Ready to get started? You can quickly and easily apply for your personal loan online.


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.
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 about bankruptcy.
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How To Contribute to Your IRA for 2018 Even After The New Year

First, allow us to give you a high five for taking your retirement savings seriously. Contributing to your IRA means that you’re taking advantage of a terrific way to save now for your retirement years later. The money you’re socking away is part of your strategic financial plan for the future. So when you reach your 70s, you’ll be prepared.

Even more good news: the money you contribute for these 12 months of the year can actually extend to
tax day
(April 15). That means you may have another three and a half months to stash cash into your IRA.

There are two type of IRAs:

Traditional IRA: Those who qualify don’t pay tax now on their contributions (this is called pre-tax dollars). You only pay taxes on withdrawals on those contributions, after your retirement. The idea behind this strategy is that it’s presumed that your tax rate will be lower in retirement, therefore you pay less in taxes.

Roth IRA: This is different than a traditional IRA, because it’s funded with after-tax dollars. However, the withdrawals are not taxed.

It’s all about the taxes, or how to legally prevent overpaying. However, you may have learned by now that there is no such thing as a free lunch—or in this case, unlimited contributions to your IRA.

The limit on traditional IRA contributions in 2018 is $5,500 if you’re younger than 50. If you’re 50 or older, the contribution limit gets a little larger: $6,500.

If You Also Have a 401(k)

First of all, good for you! You’re really working it! Know that you can still contribute to your IRA (either traditional or Roth IRA) if you also have a 401(k). However, there is a small snag: There are income eligibility rules attached if you want to contribute to your 401(k) and an IRA.

Certain income limits mean you can’t benefit from a traditional IRA if you have an employee-sponsored plan, or if your spouse already has an employee sponsored plan. Yep, you can max out your IRA, but nope, you can’t deduct it from your regular income.

Traditional IRA contribution limits: If your earned income is less than the contribution limit ($5,500 for 2018 for those under 50), you can only contribute to your traditional IRA up to your earned income. You earned $2,500 in 2018? You can only contribute up to $2,500.

Roth IRA income limits: If you earn under $135,000 and are single , you can contribute to a Roth IRA, but contributions are reduced starting at $120,000. If you’re filing jointly, your combined incomes must be less than $199,000, with reductions starting at $189,000.

You Can Only Contribute “Earned Income” To An IRA

That means any work you did that earned you wages, salaries, tips, bonuses, and commissions. Self-employment income counts, too. What earned income is not: interest and dividends from investments, income from rental property, and pensions.

For those who haven’t yet started an IRA, it does seem kind of impossible, especially if you are young—and even more so if you have school loans, credit card debt, and other financial obligations. However, there is a way to make this work without having to contribute lump sums, all at once.

Here are just a few ideas:

Create An IRA Budget

Work backwards. First, figure out how much it would take to max out your IRA contribution, and calculate it on a weekly or monthly basis.

Once you find a contribution schedule that makes you comfortable, set up an automatic deduction from your bank account. It may hurt a little at first, but think of your sweet retirement future, and the potential tax savings you’ll be rocking this year.

Start As Soon As Possible

You know why, but it always helps to hear it again and again: the sooner your money goes into your IRA, the sooner your money has the opportunity to grow. Here’s another advantage, though: if you contribute to your IRA before the April 15 tax deadline, your contribution can count toward the past year. (For example, if you make your contribution on April 14, 2019, it can count toward your 2018 contribution.)

Sacrifice—But Not Too Much

It may take a little fancy footwork to create available money for your IRA contributions: cutting down on restaurants or shopping, but don’t cut your budget so close to the bone that it interferes with your everyday life.

Keep An Eye On Your Rainy Day Fund

Emergencies are going to present themselves long before retirement, so make sure you have an emergency savings account that’s easy to access.

Ideally, that account should cover at least six months of living expenses (or hopefully more). As awesome as it is to max out your IRA, be sure that your emergency fund is where it should be, and don’t touch that money unless you absolutely need it.

Increase Your Earnings

A part-time job or a side hustle could help earn you hundreds of dollars or more that you can put into your IRA. This strategy can also help you contribute to your max limit without putting a strain on your existing budget or living expenses.

This is a lot of information to digest, but don’t for even one moment think you have to go it alone. Our SoFi financial advisors are on call to help our members work this out and the service is complimentary.

Let us help you start planning for retirement today. We’ll help you map out a sensible plan that has your goals in mind. We’ll actively manage your automated accounts, and rebalance them when life or priorities change.

Even better: When you become a SoFi Invest® member, you’ll gain access to over 200 complimentary and exclusive SoFi events, and professional career and salary guidance.

You can invest with a minimum of just $100; there is no minimum holding period and you can withdraw your money at any time.

Get started with SoFi Invest!


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.
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC .
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 about bankruptcy.
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