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How to Consolidate Multiple Debts into a Single Payment

It’s not exactly a surprise that the average American has plenty of debt . Households with credit card debt carry an average balance of over $15,000. Frustratingly, these debts often come with exorbitant interest rates.

While some folks are able to manage their debts just fine, some may feel overwhelmed juggling loan payments of varying sizes with due dates scattered throughout the month. When life gets busy, missing a payment is too easy and can land you even further behind. Having multiple debts can be stressful and can make budgeting and planning for the future challenging. And let’s be real: No one likes feeling overwhelmed by multiple debt payments.

For most people, the goal with paying back debt—especially consumer debt, like credit card debt—is to do so as quickly and painlessly as possible. If this is your goal, you have options. One of those options is debt consolidation, where you pay off qualifying debts using a new loan, often called a “debt consolidation loan” or a “debt relief loan.” To determine whether consolidating your debts into one single payment is the right choice for you, read on.

Should I Consolidate My Debts?

It may be worth considering consolidation if it will help you simplify your finances and lower the amount of interest you pay overall on your combined sources of debt. For example, if you have multiple credit cards and each has a high interest rate, consolidating to one loan with a lower interest rate could get you out of debt sooner. That, and you could enjoy the sweet relief of only having one payment to manage for the debt you consolidated.

Consolidating your credit cards to a lower interest rate with a debt consolidation loan could help you get out of debt sooner.

Pros of Debt Consolidation

1) You can streamline multiple debts into one payment, making the payback process easier and more efficient.

2) If you consolidate your debt, you may pay less interest over the life of your loan.

3) Consolidating credit card debt can lower your revolving credit utilization ratio, which is a factor considered by most credit bureaus in the calculation of credit scores. If you lower your balance on several credit cards, but keep them open, you’ll decrease your credit utilization ratio. That’s a good thing! Revolving credit utilization ratios are also often considered by lenders when making credit decisions.

That said, debt consolidation isn’t for everyone. Taking out a new loan may come with fees, so you’ll want to do the math and make sure it’s worth it before moving forward. You should also be mindful of the repayment period and ensure you only finance the debt on a timeline that works for you. Be wary of a loan term that’s too long—even if the loan has a lower interest rate, you can pay more in interest over time with longer repayment periods.

Cons of Debt Consolidation

1) If the loan term is longer than necessary, you could potentially pay more in interest even if the rate is lower.

2) Some debt consolidation programs are scams. It is important to understand that not all loan consolidation tactics are created equal. There have been some unsavory and even fraudulent loan consolidation services that don’t really help get your debt under control. If a lender is asking for money upfront to consolidate your debt, for example, that’s a red flag.

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How Do I Consolidate My Debt?

Debt consolidation, in theory, is very simple. You, or a lender, pays off all of your unsecured debts (like credit cards and personal loans) using a new loan. Then, moving forward, you’ll only make one monthly payment on your new loan.

A “debt consolidation loan” or a “debt relief loan” is often just a personal loan. This means that you have the option to seek out personal loans from reputable banks, credit unions, or online lenders. You do not have to work with a debt consolidation services provider that you don’t feel 100% comfortable with. Think of it this way: If it sounds sketchy, it probably is.

When it comes to low-rate personal loans, at SoFi we pride ourselves on transparency and a level of customer service unmatched in the lending industry. Also, our personal loans come with no origination fees, prepayment penalties, or late fees.

Learn more about how a SoFi personal loan can help you manage your debt.

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.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website on credit.

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What is Financial Wellness & How To Achieve It

Financial wellness is something that everyone wants, in theory, but is very difficult to define. Sometimes, it feels more like a fleeting buzzword than a real state of being that a person can actually achieve.

Here’s the good news: You can accomplish financial wellness. It might not be easy, though, because financial wellness cannot be bought at a store, purchased online, or procured from a close family member.

Financial wellness is something that must be worked for. But financial wellness is worth every ounce of effort.

To work towards something, first, we must first understand it. The Consumer Financial Protection Bureau (CFPB)did a comprehensive study on financial wellness in 2017 where they found that because individuals value different things, strictly monetary measures such as income or net worth were not a perfect measure of financial wellness.

Instead, financial wellness relies on our ability to take care of our current and future selves with the resources we have. Naturally, this is going to look a little bit different for everybody.

Below, we will take some time to understand the definition of financial wellness. With this foundation, we can begin to design and enact a plan for anyone who wants to work towards financial well-being.

What Is Financial Wellness?

The CFPB defines the four elements of financial well-being, which include:

•  You have “Control over day-to-day, month-to-month finances.”

•  You have the “Capacity to absorb a financial shock.”

•  You are “On track to meet your financial goals.”

•  You have the “Financial freedom to make choices to enjoy life.”

Again, you’ll notice the absence of traditional markers of financial success, like earning a high income. While having a high income certainly helps, there are plenty of people who are high earners but are not financially well. Conversely, those who are low or middle earners are not precluded from achieving financial wellness.

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Taking Steps Toward Financial Wellness

Next, we will cover some tips that can help you work toward financial wellness.

Paying Attention to Your Mindset

Financial wellness is connected to emotional wellness. These concepts are all related, and it is hard to have one without the other. Those who have experienced trauma or difficult experiences with money (such as growing up in poverty) may need to address what may be a tenuous relationship with money. Heck, all of us should take time to examine the way that money affects our mental states.

This process is going to look different for everyone. Some people may feel the need to do an examination of their beliefs about money they have from growing up. Others may want to explore issues with a professional.

For some folks, creating daily affirmations (such as “I am deserving of abundance”) or building a gratitude mindset (“I am grateful to live in a place where saving money is possible”) may work well. Keeping your money mindset in shape can take continual work, so try pairing exercises like these with the more logistical money tips we go through below.

Tracking Your Spending

It’s not glamorous, and it is that last thing that so many people want to do on their precious weekends, but tracking spending is essential to financial wellness. There is real truth to the saying “What gets measured gets improved.” There’s no way to fix problems like overspending without understanding exactly what goes in and what goes out.

Additionally, having a good budget is an important first step in building a solid overall financial infrastructure, which can include more advanced steps like saving and investing for long-term goals, like retirement.

It can feel overwhelming to start, but it doesn’t have to be. Begin with this month’s spending. Pull up your statements and organize purchases into categories, such as utilities, groceries, dining out, and shopping. Once it is added up, does a spending category jump out at you? This simple exercise often reveals at least a surprise or two.

If you don’t want to do manual tracking, you can use an app like SoFi Relay or see if your bank account provides a tracking feature. SoFi Checking and Savings® accounts provide weekly spending charts so you can visualize where your money is going.

Your next step would be to organize this information into a monthly cash flow report, where you compare your source(s) or income versus the money that was spent in that same month. Did you spend more than you earned? Or did you earn more than you spent, with some leftover for savings? Next month, go through the exercise again (it gets easier every time). What patterns are emerging? Understanding these habits will be crucial to your success.

Building Saving into Your Budget

An integral part of financial wellness is having money in the bank. People who have saved money also tend to have peace of mind knowing that they could afford an emergency or job layoff. Additionally, financially well people are also typically saving for their future. This means setting some money aside for long-term goals like retirement.

To begin a saving routine, you can start by opening a savings account and transferring a portion of the money in your checking account into your new account. It can be a good idea set up a savings account that is separate from your checking.

Some people may find that cutting back on their spending and moving extra funds into savings is the way that works best for them. (For tips on reducing spending, see below.) Other people may find that a more proactive approach is best.

To fully embrace your new savings plan, you can set up an automatic, recurring transfer from your checking account to your savings account. It’s okay to start small—even small amounts matter, and everyone has to start somewhere.

Looking for Big Wins to save Money

If you want to start saving more money, often the fastest way to do so is by spending less money.

Clipping coupons or not ordering the appetizer once a month aren’t going to be the items that make or break your budget. Instead, look for ways that you can win big on savings. Easy ways to do this include cutting back in one of the categories we tend to spend the most amount of money on—housing, transportation, food, and other bills.

There are almost always ways to spend less in these categories—it’s often a matter of what we’ve grown comfortable with or accustomed to. With housing, you could downsize or have roommates. On transportation, you could own a more affordable car or consider car alternatives.

For food, actually use those groceries that you buy, or consider cutting back or eliminating eating out. There are plenty of ways to lower phone, electric, and gas bills. As a bonus, you can cancel any and all subscriptions (like cable) that you aren’t using.

Controlling Your Debt

It can be hard to feel financially well if you are also feeling overwhelmed by debt. Debt can come in many forms—credit cards and other personal loans, auto loans, student loans, and mortgages. People incur debt for many reasons, some of which are in their control and some that aren’t. Either way, large debt loads or big monthly debt bills can trigger stress in a person.

What can you do to control debt that feels out of control? The first step is to remind yourself that debt can be overcome and that it does not define you or your future. Second, make a plan to get out of debt by listing out all sources of debt, and tackling them either by the avalanche or the snowball method.

If you are dealing with credit card debt, specifically, you can call the credit card companies and ask them to lower your annual percentage rate (APR). Explain to them your situation and that you are trying to improve and organize your finances. A lower APR means lower interest charges, which may help you make some headway in paying off your credit card debt.

Depending on your APR, you may want to consider paying off your credit cards with a personal loan at a lower rate. This probably won’t make your debt go away (or stem the problem that caused the debt), but it could help you pay off your debt faster.

Accepting That Financial Education Is Ongoing

According to the CFPB, a characteristic that all financially well people share is that they are committed to learning about how to manage their money. They understand that both work and education is a continuous process.

We’ve provided a lot to think about here, so you can start with one or two items, and build from there. Don’t expect yourself to get there right away—remember to embrace the idea that financial wellness is a journey and an ongoing process. Good luck as you find a path towards financial wellness that works the best for you.

Having the right checking and savings account can go a long way in helping a person achieve financial wellness. Learn more about SoFi Checking and Savings today!

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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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SoFi members with direct deposit activity can earn 4.50% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.50% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.50% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 8/9/2023. There is no minimum balance requirement. Additional information can be found at


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What is a Checking and Savings Account?

Do you have multiple accounts that hold your money across different banks? If you’re like a lot of people, you keep one account for your savings, and yet another for checking. Some people have additional accounts for their retirement savings or after-tax investments—but that’s a whole different can of worms.

For those looking for a better way to manage their checking and savings, there’s another account that should be on your radar: a checking and savings account. It’s a hybrid between a checking and a high-yield savings account. You can write checks and they’ll even issue you a debit card. In this article, we’ll answer the question, “What is a checking and savings account,” along with a discussion of their benefits, how they’re used, and who might benefit from using this type of account.

What Is a Cash Management Vehicle?

A checking and savings account—also known as a cash management vehicle—is designed to manage cash, make payments, and earn interest. It’s a hybrid between a checking and savings account.

Cash management accounts typically come equipped with checking account features such as a debit card and ATM withdrawals. They also typically pay a higher rate of interest than keeping your money in a traditional savings account. If you have a checking account, you know how little they pay in interest; .08% is the national average .

Cash management accounts are often all-in-one accounts, and they can combine features of a checking account, brokerage account, and an interest-bearing savings account. (Not all checking and savings accounts include all these features, though.)

While checking and savings accounts used to be limited to those with high balances in brokerage accounts, this is no longer always the case. For example, online-only financial services companies are breaking the mold by offering similar accounts to those without a brokerage account or without having to meet a minimum balance requirement. They’re able to offer higher interest rates because they don’t maintain brick and mortar locations.

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What to Look for in a Checking and Savings Account

While most checking and savings accounts share similarities, they won’t all be the same. Here are some items to consider when shopping around for a checking and savings account.


FDIC (Federal Deposit Insurance Corporation) insurance protects your money in the event your bank goes belly-up. For your safety and protection, it is essential that your checking and savings account is FDIC-insured. Some banks offer more coverage by using a system that spreads their deposits across several banks (this is done behind the scenes). For example, SoFi Checking and Savings offers $1.5 million in FDIC insurance per account.

Interest Rate

Generally, you’re able to get a higher rate of interest within a checking and savings account than you are with a savings account at a brick and mortar bank. This interest rate will likely not be as high as in an online-only savings account, the trade-off being that an online-only savings account will usually limit your access to your money. SoFi Checking and Savings has aspects of a high-yield savings account and a checking account.


When deciding on an account, you’ll want to investigate its accessibility. Cash management accounts usually offer either a credit card or debit card hooked up to the account, allowing you to use it as if it were a checking account.

Most will also allow you to withdraw money at an ATM and set up bill pay. (For comparison, some high-yield savings accounts only allow you to access your money a certain number of times per month. Limiting the number of transactions in an account allows them to offer a higher interest rate.)


As with most types of bank accounts, there is a possibility for fees, such as monthly or annual account maintenance fees, or fees to use out-of-network ATMs. Conversely, some checking and savings accounts will actually reimburse you for any ATM fees you incur.

If you travel internationally, also be sure to check the account’s policy on international transactions and ATM usage. SoFi Checking and Savings, for instance, reimburses 100% of all ATM fees, even internationally, on qualified accounts.

Bank Locations

Brick and mortar locations for checking and savings accounts are limited because in the past, most checking and savings accounts have been offered by brokerage banks. Brokerage banks do have physical locations, but they’re often limited to large cities.

If it’s important to you to be able to walk into a location, you’ll want to research whether there is on near you. Online-only banks specifically opt out of providing physical locations, often so they can offer more by way of interest rates. This will likely become more common as financial services move the majority of their operations online.

Who Should Use a Checking and Savings Account?

Because a cash management vehicle is a hybrid between checking and high-yield savings accounts, they would suit anyone who would like to consolidate the two. Most financially savvy folks understand that larger cash balances should be earning more interest than is offered in a “regular” checking account, but dislike coordinating checking and savings accounts at different banks.

Really, anyone looking to consolidate and elevate their finances should, at the very least, research a cash management vehicle to see whether it makes sense given their financial goals and the structure of their current accounts.

A checking and savings account is an excellent place to save up for short to mid-term goals, such as an emergency fund, a down payment for a home, for a wedding, or an exotic trip to celebrate paying off student loans.

As the landscape of financial services changes, it’s a good idea to stay up to date on advances in technology and improvements to the services provided to consumers. For a long time, brick and mortar banks had very little competition, as the physical locations (and convenience) were paramount to effective banking. As banking moves online, those with the most branches won’t necessarily be the ones providing the best customer service or the most competitive interest rates.

SoFi, who has been leading the charge in refinancing student loans to lower rates, is expanding its business to offer a checking and savings account that offers an interest rate competitive with high-yield savings accounts. They’re able to do so precisely because they don’t maintain physical branches—and understand the need for a more versatile checking and savings account that’s easy to use and and has no fees.

Thinking about merging checking and saving into one, interest-bearing account? Get the best of checking and savings—in one account. Learn more about SoFi Checking and Savings today!

SoFi can’t guarantee future financial performance.
This information isn’t financial advice. Investment decisions should be based on specific financial needs, goals and risk appetite.
Neither SoFi nor its affiliates is a bank.
SoFi Checking and SavingsTM is offered through SoFi Securities, LLC, member FINRA/SIPC.
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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5 Things Your 401k Provider Doesn’t Want You to Know

For many American workers, signing up for an employer-sponsored 401k plan is pretty much a no-brainer.

It’s hard to turn down the tax savings and the employer match. If you enroll right away, you might not even miss the money that’s coming out of your paycheck every month. And at most companies, signing up is automatic—check a few boxes and you’re done.

But if you leave that workplace and want to take your 401k savings with you? Well, that isn’t always so easy. You’ll have decisions to make regarding where that money could go—perhaps to an IRA or a new employer’s 401k.

Of course, your old 401k plan provider isn’t going to advise you to take the balance and roll it over into an IRA. They’re making money off your money. It’s up to you to decide the pros and cons of sticking with the old plan vs. moving to a new account that has perks of its own.

Every saver’s needs are different, and a rollover isn’t right for everyone. But here are five things 401k providers don’t want you to think about as you consider rolling your money into a new account.

Fees Matter to Your Bottom Line

If you automatically signed up for the employer-sponsored 401k when you started your job, you may not be aware of all the updates within the plan—or that you could do better by making a change. Despite ongoing efforts by federal regulators and others to make retirement plans more transparent, most 401k participants don’t seem to know or care how much they’re paying.

(Perhaps because they don’t feel they have much control over those investments or a connection to the people who do. Or maybe they simply trust that their employers are looking out for their best interests and have negotiated the lowest fees possible on their behalf.)

Service and Selection are Important

Some 401ks have limited investment options. Some lack good customer support. Depending on who’s in charge of managing your account, if you’ve moved on to another employer, it may be especially difficult to get either.

Diversification is important in a 401k, and that means putting together a portfolio with more than just mutual funds. And when an investment or strategy isn’t performing as expected, or if your asset allocation needs to be rebalanced, you need to be sure someone is keeping an eye out for you.

There’s a Chance You’ll Lose Track of Your Old Account

Okay, you might not forget you have money … somewhere. But because most accounts are now managed online, you probably don’t receive paper statements. Unless you check your balance regularly, you might not remember your password, account number or even the name of that old 401k company.

You could neglect to change your name or the beneficiary on your account if you get married or remarried. And if you forget to update your email address through the years, you likely won’t receive notices about changes. Will you eventually figure it out? Probably. But you risk leaving a virtual trail of accounts behind you as you move from one employer to the next.

An IRA May Offer More Flexibility Than You Think

If your goal is to stash away money for retirement, you’ll want convenient withdrawal options when you get there. Some 401(k) plans limit participants to quarterly or annual withdrawals in retirement—which doesn’t play well with most income plans.

With an IRA, you can take distributions whenever you want after age 59½—including setting up a monthly withdrawal plan. (Just as with a 401k, you’ll be required to take minimum distributions from a traditional IRA after age 70½.)

Doing a Rollover Doesn’t Have to Be Difficult

Start by checking out accounts to learn which option best suits your needs. You can do this online, and you’ll probably be able to set up your account online as well. (Or use the phone, if that’s more comfortable or if you have questions.) Be sure you understand everything that’s required to open an account, and think about how you’d like to see your money invested, so you can get it working for you right away.

Next, contact the financial company that’s managing your 401k. Ask about their rollover requirements and make sure you’ve met them. (There might be some forms for you to fill out. You may be able to do that work online, or they may accept a request from the company managing your new account.) Make sure you verify your account number and your current account balance. Have the 401k provider send a check in that amount to your new IRA.

Once everyone’s questions have been answered and you’ve completed all the necessary forms, the money will be sent directly to the financial institution that’s home to your new IRA with instructions to roll the money into your account. This is called, creatively, a “direct rollover,” and it’s the safest option for getting your money from Point A to Point B. The other option, an “indirect rollover,” can cost you time and money.

Confirm that your money is in your new account and that your goals, timeline and tolerance for risk are made clear. If you aren’t sure what you want or where you stand, work with an advisor who can help you with the basics.

If your new employer offers a 401(k) with some level of matching contribution, you may want to contribute enough from each paycheck to take advantage of that money. Otherwise, you may wish to stick strictly to saving in your new account to make the most of the investment options and personal service.

When you leave a job—whether it’s to retire or to move on to a better opportunity—there’s a lot to wrap your arms around. It’s easy to let an old 401k get lost in the shuffle. But doing a rollover doesn’t have to be complicated or time-consuming.

An IRA Might Be A Good Choice

Opening a SoFi Invest account is simple; you can do it online or on the phone. SoFi lets you invest multiple ways and without fees. You can get started with active investing if you want to do it yourself, or automated investing for a hands-off role.

SoFi advisors are credentialed financial planners who are paid a salary, not a commission or fees, so they’re looking out for your best interests. Plus, there are no SoFi management fees. SoFi can help you take a look at your current 401ks and tell you what fees you are being charged. Then, the advisors can help you put a game plan in place for your investments.

SoFi offers both traditional and Roth IRA accounts online with a wide variety of portfolio options, so you can find a mix that works toward your objectives. Advisors choose from a broad mix of exchange-traded funds (ETFs), and because these ETFs follow more than 20 indexes, you’ll have a diverse asset allocation.

With a SoFi Invest® account, your nest egg won’t be an afterthought. You can easily track your money and keep it working for you.

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SoFi can’t guarantee future financial performance.
This information isn’t financial advice. Investment decisions should be based on specific financial needs, goals and risk appetite.
Diversification and asset allocation can help reduce some investment risk. They cannot guarantee profit or fully protect against loss in a down market.
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.
Advisory services offered through SoFi Wealth, LLC, a registered investment advisor.

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How Much Should I Have Saved in My 401k?

Retirement is supposed to be the golden age of relaxation. Whether it be reading the garden, lazy days spent fishing, or early mornings on the golf course, when you retire, there are no bosses or daily meetings to preoccupy you. But what is the best way to get there?

Saving for retirement can seem daunting, especially when you consider housing expenses, student loan debt, and other day-to-day living expenses.

The average American retirement savings leave much to be desired. Most Americans nearing retirement age in the U.S. have only 12% of the recommended $1 million saved.

Actively preparing for retirement is one of the best ways to ensure you can spend your later years relaxing and enjoying your well-earned time off. There are a wide variety of accounts that allow you to save for retirement, from Traditional and Roth IRAs to a 401k, 403b, or other investment accounts. One of the most popular retirement vehicles is the 401k.

If you’re getting ahead on saving for retirement you may be wondering “how much should I have in my 401k?” While the answer to that varies depending on your financial situation, age, and more, there are a few retirement guidelines that can help you better prepare for the future.

What Is a 401k?

A 401k is an employer-sponsored retirement plan that allows both you and your employer to make contributions to the account. If your employer offers a 401k plan, you are most likely able to select a percentage or specific monetary amount to contribute to your 401k from each paycheck.

One of the major benefits of a 401k is that your employer can also make contributions. If your employer offers matching contributions, it makes sense to participate in the 401k plan, at least up until the matching maximum. Matched contributions are determined at your employer’s discretion, so check your company policy to see what is offered at your workplace.

There are two kinds of 401ks. When you contribute money to a traditional 401k, the money is tax deductible, but will be taxed when you withdraw it in retirement, at the income bracket you are in at that time. When you contribute to a Roth 401k, the money is taxed at the time of contribution, at the tax rate you are currently in. But it’s not taxed when you withdraw the money.

For both Roth and Traditional 401ks, the contribution limit for 2018 is $18,500. If you are over the age of 50, you are allowed to contribute an additional $6,000, known as a catch-up contribution. When you contribute money to a 401k, it is intended to be used in retirement .

Because of this, there is a penalty if you withdraw money before the age of 59 ½. On the other side of the age spectrum, if you do not begin withdrawals by the age of 70 ½, you will be faced with fines and penalties.

Average 401k Balance by Age

Your readiness for retirement will depend on a few factors; including your age, income, and expected retirement age. While everyone’s situation is different, it’s never too early—or too late—to start preparing for retirement.

To see if you’re on track with your retirement goals, take advantage of free online resources, like a retirement calculator that will help you estimate your financial readiness for retirement.

The earlier you start saving for retirement, the better. But if you’ve gotten a late start, there are ways to boost your retirement savings. As you age, your strategies for saving for retirement will shift. Here’s what to expect in your 20s and beyond.

In Your 20s

You’re just starting out in the work force and chances are you’re still paying off your student loan debt. While paying off your student loans and spending money on happy hour may seem more important than saving for retirement, the earlier you begin saving, the more time you will have to benefit from compound interest.

Compound interest is interest calculated on the initial principal and on the interest accumulated over the previous deposit period. This means saving for retirement in your 20s has significant advantages when you are finally ready to retire. Some experts think by the time you turn 30 , you should have saved one year’s salary toward your retirement. The average 401k savings for someone in their 20s in 2017 was $9,900.

In Your 30s

Your 30s are when you want to kick your retirement savings into high gear. It’s a good rule of thumb to up your retirement savings contributions to 15% of your monthly income . You may have other expenses like kids or a mortgage, but you’re also likely making a bit more money than you were in your 20s—so take advantage and invest some of that money in your future.

No one else will be looking out for your financial health in retirement. The average 401k savings for someone in their 30s in 2017 was $38,400.

In Your 40s

By the time you have reached your 40s, you should have a considerable chunk of change socked away for retirement. Common financial advice is that you have at least three times your annual salary saved at 40 if you intend to retire at 67. Often times, your 40s are also when you’re faced with financing your children’s education.

And when push comes to shove, many parents will put their child’s education ahead of their retirement savings. You’re now considerably closer to retirement than you were at 22, so consider opening an independents retirement savings account like an IRA, in addition to contributing to your company’s 401k plan.

Diversifying your investments may help reduce some investment risk. The average 401k savings for someone in their 40s in 2017 was $91,000.

In Your 50s

When you turn 50, you can begin making catch-up contributions to your 401k and IRA. You can contribute an additional $6,000 a year to a 401k and an additional $1,000 a year to your IRA. Take advantage of these catch-up contributions and continue to save.

Consider adding any bonuses or extra income into your 401k to boost your savings. The average 401k savings for someone in their 50s in 2017 was $152,700.

In Your 60s

As you get into your 60s, you can see retirement at the next exit. Now would be a good time to adjust your investments into less risky options. As retirement becomes more real, take the time to prepare for the unexpected and safeguard some of your investments. The average 401k savings for someone in their 60s in 2017 was $167,700.

But the average couple in their mid-60s will have to cover approximately $280,000 in health care costs. Make sure your retirement plan accounts for health care costs.

About 70% of Americans surveyed in 2016 said they plan to work as long as possible. Extending your working years could lead to financial gains down the road. Depending on when you were born, you qualify for Social Security benefits at different ages. If you were born after 1960, you won’t be able to collect Social Security until you are 67.

Invest with SoFi Invest®

If you are looking for opportunities to expand your retirement savings and complement your employer-sponsored 401k plan, consider investing with SoFi. If you have an old 401K, we can help you find out how much you are paying in management fees. Then, we can help you determine the impact of rolling over your 401K into an IRA with SoFi. Schedule an appointment here.

Additionally, at SoFi, we offer a competitive wealth management account with no SoFi management fees and members get complimentary access to financial advisors.

We’ll work with you to establish your financial goals and determine the risk profile you are most comfortable with. SoFi will work to diversify your investments and automatically rebalance your profile as needed. You can start investing with as little as $100.

Ready to take control of your financial future? See how a SoFi Invest account can help you reach your retirement goals.

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SoFi can’t guarantee future financial performance.
This information isn’t financial advice. Investment decisions should be based on specific financial needs, goals and risk appetite.
Diversification can help reduce some investment risk. It cannot guarantee profit or fully protect loss in a down market.
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.
Advisory services offered through SoFi Wealth, LLC, a registered investment advisor.

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