How Timeshare Financing Works for Vacation Property

Many of us would love to own a vacation home, but the added expense is not always doable. Because we can’t all own multiple properties, vacation timeshares continue to be a popular choice for solo travelers, couples, and families who want more space, amenities, and “a place to call home” at their locale of choice.

We’ll give you an honest rundown of how timeshares work, their pros and cons, and a few financing options.

What Is a Timeshare?

A timeshare is a way for multiple unrelated purchasers to acquire a fractional share of a vacation property, which they take turns using. They share costs, which can make timeshares far cheaper than buying a vacation home of one’s own.

Timeshares are a popular way to vacation. In fact, 9.9 million U.S. households own at least one timeshare, according to the American Resort Development Association (ARDA). The average price of a weekly timeshare is $24,140. This figure can vary widely depending on the location, size, and quality of the property, the length of stay, time of year, and the rules of the contract.

How Do Timeshares Work?

If you’ve ever been lured to a sales presentation by the promise of a free hotel stay, spa treatment, or gift card, it was probably for a vacation timeshare. As long as you sit through the sales pitch, you get your freebie. Some invitees go on to make a purchase. You can also buy a timeshare on the secondary market, taking over from a previous owner.

What you’re getting is access to a property for a set amount of time per year (usually one to two weeks) in a desirable resort location. Timeshares may be located near the beach, ski resorts, or amusement parks. You can trade weeks with other owners and sometimes even try out other properties around the country — or around the world — in a trade.

In addition to the upfront cost of the timeshare, owners pay annual maintenance fees based on the size of the property — about $1,000 on average — whether or not you use your timeshare that year. These fees, which cover the cost of upkeep and cleaning, often increase over time with the cost of living. Timeshare owners may also have to pay service charges, such as fees due at booking.

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Types of Timeshares

There are two broad categories of timeshare ownership: deeded and non-deeded. In addition, you’ll find four types of timeshare use periods: fixed week, floating week, fractional ownership, and points system.

It’s important to understand all of these terms before you commit.

Deeded Timeshare

With a deeded structure, each party owns a piece of the property, which is tied to the amount of time they can spend there. The partial owner receives a deed for the property that tells them when they are allowed to use it. For example, a property that sells timeshares in one-week increments will have 52 deeds, one for each week of the year.

Non-deeded Timeshare

Non-deeded timeshares work on a leasing system, where the developer remains the owner of the property. You can lease a property for a set period during the year, or a floating period that allows you greater flexibility. Your lease expires after a predetermined period.


Timeshares offer one of a handful of options for use periods. Fixed-week means you can use the property during the same set week each year.


Floating-week agreements allow you to choose when you use the property depending on availability.

Fractional Ownership

Most timeshare owners have access to the property for one or two weeks a year. Fractional timeshares are available for five weeks per year or more. In this ownership structure, there are fewer buyers involved, usually six to 12. Each party holds an equal share of the title, and the cost of maintenance and taxes are split.

Points System

Finally, you may be able to purchase “points” that you can use in different timeshare locations at various times of the year.

Is a Timeshare a Good Investment?

Getting out of a timeshare can be difficult. Selling sometimes involves a financial loss, which means they are not necessarily a good investment. However, if you purchase a timeshare in a place that your family will want to return to for a long time — and can easily get to — you may end up spending less than you would if you were to purchase a vacation home.

Benefits of Timeshare Loans

The timeshare developer will likely offer you financing as part of their sales pitch. The main benefit of a timeshare loan is convenience. And if you’re happy to return to the same vacation spot year after year, you may save money compared to staying in hotels. Plus, for many people, it may be the only way they can afford getting a vacation home.

Drawbacks of Timeshare Loans

Developer financing offers often come with very high interest rates, especially for buyers with lower credit scores: up to 20%. And if you eventually decide to sell, you will probably lose money. That’s because timeshares tend not to gain value over time. Finally, if you’re not careful about running the numbers before you commit, you can end up paying more in annual fees than you expect.

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Financing a Timeshare

Developer financing is often proposed as the only timeshare financing option, especially if you buy while you’re on vacation. However, with a little advance planning, there are alternative options for financing timeshares. If developer financing is taken as an initial timeshare financing option, some timeshare owners may want to consider timeshare refinance in the future.

Home Equity Loan

If you have equity built up in your primary home, it may be possible for you to obtain a home equity loan from a private lender to purchase a timeshare. Home equity loans are typically used for expenses or investments that will improve the resale value of your primary residence, but they can be used for timeshare financing as well.

Home equity loans are “secured” loans, meaning they use your house as collateral. As a result, lenders will give you a lower interest rate compared to the rate on an unsecured timeshare loan offered at a developer pitch. You can learn more about the differences in our guide to secured vs. unsecured loans.

Additionally, the interest you pay on a home equity loan for a timeshare purchase may be tax-deductible as long as the timeshare meets IRS requirements, in addition to other factors. Before using a home equity loan as timeshare financing, or even to refinance timeshares, be aware of the risk you are taking on. If you fail to pay back your loan, your lender may seize your house to recoup their losses.

Personal Loan

Another option to consider for timeshare financing is obtaining a personal loan from a bank or an online lender. While interest rates for personal loans can be higher than rates for home equity loans, you’ll likely find a loan with a lower rate than those offered by the timeshare sales agent.

Additionally, with an unsecured personal loan as an option for timeshare financing, your primary residence is not at risk in the event of default.

Getting approved for a personal loan is generally a simpler process than qualifying for a home equity loan. Online lenders, in particular, offer competitive rates for personal loans and are streamlining the process as much as possible.

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The Takeaway

Timeshares offer one way to secure a place to stay in your favorite vacation destination each year — without having to buy a second home. And timeshares may save you money over time compared to the cost of a high-end hotel. However, beware of timeshare financing offered by developers. Interest rates can be as high as 20%. There are other ways to finance a timeshare that can be more affordable, including home equity loans and personal loans.

SoFi personal loans offer lower fixed rates to qualified applicants. And there are no fees ever. Find out your interest rate online with no impact to your credit1 and no commitment.

Thinking about using a personal loan for timeshare financing? Check out SoFi to see your rate in just 60 seconds.


Can I rent my timeshare to someone else?

Whether or not you can rent your timeshare out to others will depend on your timeshare agreement. But in many cases your timeshare resort will allow you to rent out your allotted time at the property.

Can I sell my timeshare?

Your timeshare agreement will give you details about when and how you can sell your timeshare. In most cases, you should be able to sell, but it may be hard to do so, and you may take a financial loss.

Can I transfer ownership of my timeshare or leave it to my heirs?

You can leave ownership of a timeshare to your heirs when you die and even transfer ownership as a gift while you’re living. Once again, refer to your timeshare agreement for rules about what is possible and how to carry out a transfer.

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Sunroof vs Moonroof: How To Choose

Sunroof vs Moonroof: How To Choose

Today, the term “sunroof” is typically used to refer to any panel or window in the roof of a vehicle that may pop up or slide open to allow air to circulate inside the cabin. A moonroof is a type of sunroof that features a stationary glass panel. There are many different sizes, shapes, and styles of sunroofs.

If you’re deciding which one to choose for a new car, we’ll share the differences and the pros and cons of each.

What Is a Sunroof?

“Sunroof” has become a generic term for any panel or window in a car’s roof. More specifically, a sunroof is usually a panel located on the top of a vehicle that slides back to reveal a window or opening in the roof. The panel is usually opaque, matching the vehicle’s body color. It can be electric or manual.

Sunroofs can come in sliding or pop-up versions. Sometimes, a sunroof’s panel can be completely removed.

What Is a Moonroof?

“Moonroof” is a term introduced in 1973 by a marketing manager at Ford. A moonroof is a type of sunroof, made of transparent glass. It may be stationary or slide back, but can’t be removed. New cars typically have moonroofs instead of sunroofs.

A “lamella” moonroof has multiple glass panels that slide back and provide a scenic view. A panoramic moonroof has fixed glass panels that cover most of the vehicle’s roof.

Moonroof vs Sunroof Differences

As mentioned above, a sunroof is typically a painted metal panel that blends into the rest of the car roof and that slides open or can be removed. A moonroof is essentially a window in the roof, whose glass panel may or may not slide open.

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Pros and Cons of Sunroof

Sunroof pros: Opening the sunroof can give motorists a sense of being in a convertible without the expense. (Learn more about the costs associated with luxury vehicles.) A sunroof can make the interior space feel larger and keeps it well ventilated, reducing the need for AC. The opaque panel prevents the car from overheating on sunny days.

Sunroof cons: A sunroof can add weight to a vehicle and leave less headroom.

It can also be tempting for passengers — especially children — to extend their hands or head through the roof. However, manufacturers (and common sense) caution that it’s unsafe.

Although sunroofs add to a car’s value, they can also cost more to insure. (You can find out how much by shopping around on online insurance sites.) And the moving parts are vulnerable to jamming, which can lead to pricey repairs.

Attempts to retrofit a sunroof may not be successful, with leaks being the most common complaint. Factory-installed sunroofs are more reliable than ones using aftermarket parts.

Pros and Cons of Moonroof

Because a moonroof is a type of sunroof, most of the sunroof pros and cons above also apply to moonroofs. However, there are a few additional considerations:

Moonroof pros: In recent years, the moonroof has become more popular than the sunroof. Drivers appreciate how they allow sunlight in even when closed. Because there are no moving parts, a moonroof isn’t prone to mechanical problems.

Moonroofs typically come with a sliding sunshade inside, allowing people in the car to decide how much sun protection they’d like.

Moonroof cons: Because the glass absorbs heat, you may need to run your AC more on hot days.

Safety Considerations for Sunroofs and Moonroofs

As mentioned, it can be tempting to reach through or stand up in a vehicle with a sunroof or moonroof. For safety reasons, once the car is turned on, the driver and passengers should be seated and buckled.

Sunroofs and moonroofs also make a car more susceptible to break-ins, since there’s one more entry point for thieves to smash or pry open.

In case of a collision, there is additional risk of glass shattering, which can cause injury.

Recommended: How Much Does Car Insurance Go Up After an Accident?

Maintaining a Sunroof or Moonroof

Like any car feature, regular maintenance of your sunroof is recommended. And knowing how to DIY can help you save money on car maintenance. Mostly, that means keeping it clean. Here’s how:

1.    First, use a hand brush to sweep debris off the roof.

2.    Wipe down moving parts with a microfiber cloth.

3.    Clean the glass with a product without ammonia or vinegar.

4.    Lubricate moving parts with a lightweight automotive grease or WD-40.

How To Choose: Sunroof or Moonroof

When deciding between a moonroof and sunroof, consider your area’s climate and how much use you expect to get from the feature. It can also be helpful to ask friends or family who have experience with one or the other style for their opinions.

If money is a concern, a sunroof will cost $1,000-$1,500 more in a new car. Not having a sunroof will also lower your car insurance premiums.

In the end, it comes down to personal preference.

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The Takeaway

A sunroof refers to any opening or window in a car roof. A moonroof is a type of sunroof that usually features a stationary glass panel. There are many types, sizes, and styles of sunroofs, from electric to manual, pop-up to removable. Sunroofs will cost more upfront and possibly in maintenance fees and insurance. However, drivers and passengers will enjoy better light and air circulation, even without the air conditioner.

SoFi has partnered with Gabi to provide you with rapid auto insurance quotes from top insurers. Comparing these quotes can help you find a great policy and save money. Gabi will even help you close your old policy.

Real rates, with no bait and switch.


Is a moonroof better than a sunroof?

Moonroofs do have advantages, including a lack of mechanical parts that require regular maintenance and can break down. Otherwise, it’s a matter of personal preference.

What are the disadvantages of a sunroof car?

A sunroof adds to the cost of the vehicle and likely to your insurance premiums. Sunroofs also make a car more vulnerable to break-ins and break-downs of mechanical parts.

Photo credit: iStock/AscentXmedia

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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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How To Replace Windshield Wiper Blades On Your Car Or Truck in 2023

How To Change Windshield Wipers on Your Car or Truck

Changing your windshield wipers helps keep you and others safe in low-visibility conditions, from rain and snow to dust and mud. It can also save you money on a service-station visit.

We’ll walk you through how and when to change your windshield wipers, and the types of wipers that are standard on older and newer cars.

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Can Anyone Replace Windshield Wipers?

Changing your windshield wipers may be one of the easiest DIY car-maintenance tasks. All you need is a needle-nose pliers and an old towel to protect the windshield. And wiper blades can be pretty inexpensive — as little as $12 per set.

Types of Wiper Blades

There are three main types of wiper blades to choose from, each with a different price point.


The most common type of wiper blades is the standard, where a rubber squeegee is held by a metal frame. The frame pivots to keep the squeegee angled properly against the windshield. You’ll find affordable standard wipers on most older cars.


The newer beam design features a solid piece of rubber serving as frame and squeegee. Instead of pivoting, the wiper is curved to maintain contact with the windshield. Without a metal frame, this wiper is less likely to get clogged with leaves or ice.

Beam wipers are more efficient and last longer. However, they’re also more expensive. Luxury vehicles tend to feature beam-style wipers because they’re seen as more sleek and modern.


This style of wiper has nothing to do with hybrid cars. The hybrid wiper has a metal frame, like the standard, but an updated blade design that’s more efficient. These wipers are priced between the low-cost standard and the higher-cost beam.

While some drivers may choose their wipers based on how much their car is worth (cheap car = cheap wipers), remember that safety is the most important factor.

Recommended: Insurance Tips for First-time Drivers

Getting Ready To Change Wiper Blades

The prep work is pretty simple, but we’ll break it down anyway.

If this type of project is up your alley, check out other ways to save on car maintenance.

Know Which Part of the Blade To Change

Standard windshield wipers contain three main parts: a lower wiper arm, a blade that connects to the arm, and a rubber liner that wipes off your windshield. It’s the rubber refill that typically needs to be changed. Beam-style wipers have only two parts: the arm and the rubber blade.

Measure the Blade You Have

Measure both of your wiper blades — the driver’s side and the passenger’s side may not be the same length.

Buy Replacement Blades

Many auto-parts store websites feature parts-finder tools that allow you to match the type of wiper to your make and model of car. At the auto-parts store, measure the replacements to make sure you’re getting the exact same size as what you currently have.

By the way, windshield wiper replacements aren’t covered by car insurance, nor do they count toward your insurance deductible.

Recommended: How To Lower Your Car Insurance

Installing New Wiper Blades

All it takes is three steps to remove the old wipers and insert the new ones.

Unhook the Old Wiper Blade

For standard wipers, gently pull the arm of the wiper away from the windshield glass. You may want to place a folded towel against the glass just in case you accidentally let the wiper go. Flip the rubber blade so it goes bottoms-up. Find the retaining clips near the end of the blade. Use pliers to pinch them together so you can slide out the blade.

Another style of connector is the J-hook, named for the J shape at the end of the blade. J-hooks have a tab that must be lifted or pushed to release the blade. Once released, pull the wiper down toward the base to remove it.

Insert the New Wiper

Slide the replacement blade into the same place where you just removed the old one. Make sure that the replacement blade is between the clips so they won’t scratch your windshield. Then make sure that the last clip clicks into place. Gently turn the arm back to its normal position, and release the arm of the blade.

Make sure to test your blades while parked. You don’t want an improperly attached blade flying off on a rainy day!

When To Change Wipers

There are a few reasons you might want to replace your windshield wipers. Consider keeping a pair of replacement blades in your trunk or garage so that you have them when you need them.

It’s recommended that you change both wipers at the same time, even if only one is giving you trouble. Now is a good time to check your wiper fluid as well.

How Often To Change Wipers

Experts recommend changing wiper blades every year. But it depends on what type you have and how hard they have to work. Inexpensive standard wipers should be replaced every six months. Beam-style blades last twice as long.

In regions with long, icy winters and/or dry, dusty summers, you may need to replace your blades more frequently. In balmier climates, every two years might be sufficient. To be on the safe side, you can proactively change them at predetermined intervals — possibly at the same time as your personal insurance planning check-in.

Cracked Wipers

Periodically check the wipers for cracks or tears, even if you haven’t noticed any problems. Also check to see if any small chunks are missing. You don’t want to wait till you’re driving in the rain to discover a problem.

Wipers Leaving Streaks

If your blades leave streaks, this likely means that they’ve outlived their useful life. If in doubt, change your blades.

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The Takeaway

Changing out windshield wipers is an easy maintenance task that anyone can handle. However, some auto-parts stores will install wipers for free with their purchase. Older cars tend to feature standard wipers, which have a metal frame holding a rubber blade. Newer cars commonly have one-piece, “beam-style” wipers. Beam wipers are more efficient and last longer, but are also more expensive. Standard wipers are less expensive but don’t last as long. It’s a good idea to change your wipers every six to 12 months — more if you live in an area with extreme winters.

Here’s another way to protect yourself behind the wheel: getting the right auto insurance. SoFi has partnered with Gabi to use a blend of technology and human interaction to provide you with multiple insurance quotes from top insurers in just minutes.

Real rates, with no bait and switch.


Can you replace a windshield wiper yourself?

This is one of the easiest car maintenance tasks, so yes. You can replace them yourself with just a pair of needle-nose pliers and a towel to protect your windshield.

Is it cheaper to replace windshield wipers yourself?

It can be. If you buy windshield blades online, they can be as low as $12-16 per set. In an auto-parts store, they can go for $23-38 per set or more — though some stores will install them for you free.

Is it easy to install wiper blades?

Fortunately, there are just a couple of simple steps involved to remove the blades and put new ones on. Although everyone defines “easy” differently, this is one of the more straightforward car maintenance tasks.

Photo credit: iStock/hxyume

Insurance not available in all states.
Gabi is a registered service mark of Gabi Personal Insurance Agency, Inc.
SoFi is compensated by Gabi for each customer who completes an application through the SoFi-Gabi partnership.

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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What Is a Roth IRA and How Does It Work?

A Roth IRA is an individual retirement account that allows you to contribute after-tax dollars, and then withdraw the money tax free in retirement.

A Roth IRA is different from a traditional IRA, which is a tax-deferred account: meaning, you contribute pre-tax dollars — but you owe tax on the money you withdraw later.

Many people wonder what a Roth IRA is because, although it’s similar to a traditional IRA, the two accounts have many features and restrictions that are distinct from each other. Roth accounts can be more complicated, but for many investors the promise of having tax-free income in retirement is a strong incentive for understanding how Roth IRAs work.

What Is a Roth IRA?

A Roth IRA is a retirement account where you make contributions with after-tax money. And, since you’ve already paid tax on the money you contributed, it grows tax free over time, and you can withdraw the money tax free when you retire.

That said, because you’re making after-tax contributions, you can’t deduct Roth deposits from your income tax the way you can with a traditional IRA.

Understanding Contributions vs Earnings

An interesting wrinkle with a Roth IRA is that you can withdraw your contributions tax and penalty free at any time. That’s chiefly because you’ve already paid tax on that money.

Withdrawing investment earnings on your money, however, is a different story. Those gains need to stay in the Roth for a minimum of five years before you can withdraw them tax free — or you could owe tax on the earnings as well as a 10% penalty.

It’s important to know how the IRS treats Roth funds so you can strategize about the timing around contributions, Roth conversions, as well as withdrawals.

More on Roth rules and restrictions below.

Roth IRA Eligibility

Technically, anyone can open any type of IRA, as long as they have earned income (i.e. taxable income). The IRS has specific criteria about what qualifies as earned income. Income from a rental property isn’t considered earned income, nor is child support, so be sure to check.

There are no age restrictions for contributing to a Roth IRA. There are age restrictions when contributing to a traditional IRA, however.

Roth IRA Annual Contribution Limits

For 2022, the annual contribution limits for both Roth and traditional IRAs is $6,000, or $7,000 if you’re 50 or older.

The extra $1,000 is called a catch-up provision, for those closer to retirement.

For 2023, the annual limit is $6,500, and $7,500 for those 50 and up.

Remember that you can only contribute earned income. If you earn less than the contribution limit, you can only deposit up to the amount of money you made that year.

One exception is in the case of a spousal Roth IRA, where the working spouse can contribute to an IRA on behalf of a spouse who doesn’t have earned income.

Other Roth IRA Details

Since Roth IRAs are funded with after-tax income, contributions are not tax-deductible. One exception for low- and moderate-income individuals is something called the Saver’s Credit, which may give someone a partial tax credit for Roth contributions, assuming they meet certain income and other criteria.

Note that the deadline for IRA contributions is Tax Day of the following year. So for tax year 2022, the deadline for IRA contributions is April 18, 2023.

But if you file an extension, you cannot further postpone your IRA contribution until the extension date and have it apply to the prior year.

Roth IRA Income Restrictions

In addition, with a Roth there are important income restrictions to take into account. Higher-income individuals may not be able to contribute the full amount to a Roth IRA; some may not be eligible to contribute at all.

It’s important to know the rules and to make sure you don’t make an ineligible Roth contribution if your income is too high. Those funds would be subject to a 6% IRS penalty.

For 2022:

•   You can contribute the full amount to a Roth as long as your modified adjusted gross income (MAGI) is less than $129,000 (for single filers) or less than $204,000 for those married, filing jointly.

•   Single people earning more than $129,000 but less than $144,000 can contribute a reduced amount.

•   Married couples who earn between $204,000 and $214,000 can also contribute a reduced amount.

For 2023 the numbers have changed and the Roth IRA income limits have increased:

•   For single and joint filers: in order to contribute the full amount to a Roth you must earn less than $138,000 or $218,000, respectively.

•   Single filers earning more than $138,000 but less than $153,000 can contribute a reduced amount. (If your MAGI is over $153,000 you can’t contribute to a Roth.)

•   Married couples who earn between $218,000 and $228,000 can contribute a reduced amount. (But if your MAGI is over $228,000 you’re not eligible.)

If your filing status is…

If your 2022 MAGI is…

If your 2023 MAGI is…

You may contribute:

Married filing jointly or qualifying widow(er) Up to $204,000 Up to $218,000 For 2022 $6,000 or $7,000 for those 50 and older.
For 2023 $6,500 or $7,500 for those 50 and up.
From $204,000 to $214,000 $218,000 to $228,000 A reduced amount*
Over $214,000 Over $228,000 Cannot contribute
Single, head of household, or married filing separately (and you didn’t live with your spouse in the past year) Up to $129,000 Up to $138,000 For 2022 $6,000 or $7,000 for those 50 and older.
For 2023 $6,500 or $7,500 for those 50 and up.
From $129,000 to $144,000 From $138,000 to $153,000 Reduced amount
Over $144,000 Over $153,000 Cannot contribute
Married filing separately** Less than $10,000 Less than $10,000 Reduced amount
Over $10,000 Over $10,000 Cannot contribute

*Consult IRS rules regarding reduced amounts.
**You did live with your spouse at some point during the year.

Advantages of a Roth IRA

Depending on an individual’s income and circumstances, a Roth IRA has a number of advantages.

Advantages of a Roth IRA

•   No age restriction on contributions. With a traditional IRA, individuals must stop making contributions at age 72. A Roth IRA works differently: Account holders can make contributions at any age as long as they have earned income for the year.

   * You can fund a Roth and a 401(k). Funding a 401(k) and a traditional IRA can be tricky, because they’re both tax-deferred accounts. But a Roth is after-tax, so you can contribute to a Roth and a 401(k) at the same time (and stick to the contribution limits for each account).

•   Early withdrawal option. With a Roth IRA, an individual can generally withdraw money they’ve contributed at any time, without penalty (but not earnings on those deposits). In contrast, withdrawals from a traditional IRA before age 59 ½ may be subject to a 10% penalty.

•   Qualified Roth withdrawals are tax-free. Investors who have had the Roth for at least five years, and are at least 59 ½, are eligible to take tax- and penalty-free withdrawals of contributions + earnings.

•   No required minimum distributions (RMDs). Unlike IRAs, which require account holders to start withdrawing money after age 72, Roth IRAs do not have RMDs. That means an individual can withdraw the money as needed, without fear of triggering a penalty.

Disadvantages of a Roth IRA

Despite the appeal of being able to take tax-free withdrawals in retirement, or when you qualify, Roth IRAs have some disadvantages.

•   No tax deduction for contributions. The primary disadvantage of a Roth IRA is that your contributions are not tax deductible, as they are with a traditional IRA and other tax-deferred accounts (e.g. a SEP IRA, 401(k), 403(b)).

•   Higher earners often can’t contribute to a Roth. Affluent investors are generally excluded from Roth IRA accounts, unless they do what’s known as a backdoor Roth or a Roth conversion. (There are no income limits for converting a traditional IRA to a Roth, but you’ll have to pay taxes on the money that goes into the Roth — though you won’t face a penalty.

•   The 5-year rule applies. The 5-year rule can make withdrawals more complicated for investors who open a Roth later in life. If you open a Roth or do a Roth conversion at age 60, for example, you must wait five years to take qualified withdrawals of contributions and earnings, or face a penalty (some exceptions to this rule apply; see below).

Last, the downside with both a traditional or a Roth IRA is that the contribution limit is low. Other retirement accounts, including a SEP-IRA or 401(k), allow you to contribute far more in retirement savings. But, as noted above, you can combine saving in a 401(k) with saving in a Roth IRA as well.

Recap: Roth IRA Withdrawal Rules

Because Roth IRA withdrawal rules can be complicated, let’s review some of the ins and outs.

Qualified Distributions

Since you have already paid tax on the money you deposit, you’re able to withdraw contributions at any time, without paying taxes or a 10% early withdrawal penalty.

For example, if you’ve contributed $25,000 to a Roth over the last five years, and your investments have seen a 10% gain (or $2,500), you would have $27,500 in the account. But you could only withdraw up to $25,000 of your actual deposits.

Withdrawing any of the $2,500 in earnings would depend on your age and the 5-year rule.

The 5-Year Rule

What is the 5-year rule? You can withdraw Roth account earnings without owing tax or a penalty, as long as it has been at least five years since you first funded the account, and you are at least 59 ½. So if you start funding a Roth when you’re 60, you still have to wait five years to take qualified withdrawals.

The 5-year rule applies to everyone, no matter how old they are when they want to withdraw earnings from a Roth.

There are some exceptions that might enable you to avoid owing tax or a penalty.

Non-Qualified Withdrawals

Non-qualified withdrawals of earnings from a Roth IRA depends on your age and how long you’ve been funding the account.

•   If you meet the 5-year rule, but you’re under 59 ½, you’ll owe taxes and a 10% penalty on any earnings you withdraw, except in certain cases.

•   If you don’t meet the 5-year criteria, meaning you haven’t had the account for five years, and if you’re less than 59 ½ years old, in most cases you will also owe taxes and a 10% penalty.

There are some exceptions that might help you avoid paying a penalty, but you’d still owe tax on the early withdrawal of earnings.


Again, these restrictions apply to the earnings on your Roth contributions. (You can withdraw contributions themselves at any time, for any reason, tax and penalty free.)

You can take an early or non-qualified withdrawal prior to 59 ½ without paying a penalty or taxes, as long you’ve been actively making contributions for at least five years, in certain circumstances, including:

•   For a first home. You can take out up to $10,000 to pay for buying, building, or rebuilding your first home.

•   Disability. You can withdraw money if you qualify as disabled.

•   Death. Your heirs or estate can withdraw money if you die.

Additionally you can avoid the penalty, although you still have to pay income tax on the earnings, if you withdraw earnings for:

•   Medical expenses. Specifically, those that exceed 7.5% of your adjusted gross income.

•   Medical insurance premiums. During a time in which you’re unemployed.

•   Qualified higher education expenses.

Not only are the early withdrawal restrictions looser than with a traditional IRA, the post-retirement withdrawal restrictions are lesser, as well. Whereas account holders are required to start taking distribution of funds from their IRA after age 72, there is no pressure to take distribution from a Roth IRA at any age.

Coronavirus-related Distributions

If you, your spouse, or a dependent suffered from the Coronavirus, it may be possible to take up to $100,000 in early withdrawals (i.e. non-qualified withdrawals) from certain retirement plans, including a Roth IRA, under provisions of the CARES Act.

In order to determine whether you’re eligible, you may want to consult a professional.

Roth IRA vs Traditional IRA

There are certain things a Roth IRA and a traditional IRA have in common, and several ways that they differ:

•   It’s an effective retirement savings plan: Though the plans differ in the tax benefits they offer, both are a smart way to save money for retirement.

•   Not an employer-sponsored plan: Individuals can open either type of IRA through a financial institution, and select their own investments or choose an automated portfolio.

•   Maximum yearly contribution: For 2022, the annual limit is $6,000, with an additional $1,000 allowed in catch-up contributions for individuals over age 50. For 2023 it’s $6,500, and $7,500 if you’re 50 and older.

There are also a number of differences between a Roth and a traditional IRA:

•   Roth IRA has income limits, but a traditional IRA does not.

•   Roth IRA contributions are not tax deductible, but contributions you make to a traditional, tax-deferred IRA are tax deductible.

•   Roth IRA has no RMDs. Individuals can withdraw money when they want, without the age limit imposed by a traditional IRA.

•   Roth IRA allows for penalty-free withdrawals before age 59 ½. While there are some restrictions, an account holder can typically withdraw contributions (if not earnings) before retirement.

Is your retirement piggy bank feeling light?

Start saving today with a Traditional or Roth IRA from SoFi.

Is a Roth IRA Right for You?

How do you know whether you should contribute to a Roth IRA or a traditional IRA? This checklist might help you decide.

•   You might want to open a Roth IRA if you don’t have access to an employer-sponsored 401(k) plan, or if you do have a 401(k) plan but you’ve already maxed out your contribution there. You can fund a Roth IRA and an employer-sponsored plan.

💡 Learn more: Do I Need an IRA If I Have a 401(k)?

•   Because contributions are taxed immediately, rather than in retirement, using a Roth IRA can make sense if you are in a lower tax bracket or if you typically get a refund from the IRS. It may also make sense to open a Roth IRA if you expect your tax bracket to be higher in retirement than it is today.

•   Individuals who are in the beginning of their careers and earning less might consider contributing to a Roth IRA now, since they might not qualify under the income limits later in life.

•   A Roth IRA can be helpful if you think you’ll work past the traditional retirement age. That’s because you can keep contributing to a Roth IRA, but not to a traditional IRA, after turning 72.

The Takeaway

A Roth IRA has many of the same benefits of a traditional IRA, with some unique aspects that can be attractive to some people saving for retirement. With a Roth IRA you don’t have to contend with required minimum distributions (RMDs); you can contribute to a Roth IRA at any age; and qualified withdrawals are tax free. With all that, a Roth IRA has a lot going for it.

That said, not everyone is eligible to fund a Roth IRA. You need to have earned income, and your annual household income cannot exceed certain limits. Also, even though you can withdraw your Roth IRA contributions at any time without owing a penalty, the same isn’t true of earnings.

You must have been funding your Roth for at least 5 years, and you must be at least 59 ½, in order to make qualified withdrawals of earnings. Otherwise, you would likely owe taxes on any earnings you withdraw — and possibly a penalty. Still, the primary advantage of a Roth IRA — being able to have an income stream in retirement that’s completely tax free — can outweigh some of the restrictions for certain investors.

Ready to start saving and investing for retirement? SoFi Invest® offers traditional and Roth IRAs for individuals who want to invest in their futures. SoFi also offers an Active Investing platform, where investors can buy stocks, ETFs or fractional shares. SoFi members have access to complimentary professional financial advisors.

For a limited time, opening and funding an account gives you the opportunity to win up to $1,000 in the stock of your choice.


Are Roth IRAs insured?

Roth IRAs are not insured, per se, but if you hold a deposit account, like a CD or money market account within your Roth IRA, these products are federally insured up to $250,000. Restrictions and rules apply, so be sure to understand the terms.

How much can I put in my Roth IRA monthly?

For tax year 2022, the maximum you can deposit in a Roth or traditional IRA is $6,000, or $7,000 if you’re over 50. How you divide that per month is up to you. You just can’t contribute more than the annual limit.

Who can open a Roth IRA?

Anyone with earned income (i.e. taxable income) can open a Roth IRA, but your income must be within certain limits in order to fund a Roth.

Tax Information: 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.
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12 Ways to Save Money on Water

12 Ways to Save Money on Water

Reducing water usage at home is a great way to lower your monthly expenses and be a better steward to the environment at the same time. But how exactly can you save H2O as well as money spent on water in your daily life?

Read on for answers, including 12 ways to save on your water bill, and:

•   What is the average monthly water bill?

•   Will using less water save you money?

•   Can lawn care lower your water bill?

•   How can you save water and money on laundry?

What Is the Average Monthly Water Bill Per Household?

The average water bill for a family of four each using roughly 100 gallons of water a day is nearly $73 a month, according to recent statistics. Water bills can vary significantly depending on where you live, how much water your family uses, and the time of year.

On average, families use more than 50% of their water in the bathroom alone. Those living in an apartment without an outdoor space may spend less on water; outdoor water usage (for gardens, lawns, and pools) accounts for about 30% of the average American’s water bill — up to 70% in the summer.

Quick Money Tip:Typically, checking accounts don’t earn interest. However, some accounts will pay you a bit and help your money grow. An online bank account is more likely than brick-and-mortar to offer you the best rates.

Does Using Less Water Save Money?

You can save money by using less water. That’s because your monthly water bill reflects water usage: The more water you use, the more money you’ll spend. Beyond financial savings, conserving water is great for the environment and can help to provide reliable water for families today and in the future.

12 Ways to Reduce Your Water Bill and Save Money

If you’re wondering “How can I save money on my water bill?” you’re in the right place. We’ve compiled a list of 12 helpful ways to save on your water bill every month:

1. Only Using the Washer for Full Loads

Washing machines are an essential appliance for keeping our clothes and linens clean, but they require a lot of water to operate. Waiting until you have enough dirty clothes for a full load — or using the machine’s “small load” option in a pinch — can go a long way in reducing water usage.

Bonus Tip: Because washing machines and laundry detergents have improved significantly over the years, you rarely need to use the hot water option. Using cold water only can keep gas or electric bills down as well.

Recommended: The Importance of Saving Money

2. Using a Dishwasher — And Only If It’s Full

Dishwashers are more efficient at washing dishes than our own hands. The trick? Only run it if it’s fully loaded. That’s how to save money on water usage and your water bill.

Bonus Tip: Save even more water by simply scraping food scraps off your plate before loading it in the dishwasher. No need to rinse it, which wastes water!

Recommended: How Much of Your Paycheck Should You Save?

3. Upgrading to Water-Efficient Appliances

Today’s washing machines and dishwashers are far more efficient than appliances from even 15 years ago. In fact, an ENERGY STAR-certified dishwasher saves nearly 3,900 gallons of water in its lifetime, and an ENERGY STAR washing machine uses 33% less water per cycle (and requires 25% less electricity to run, too).

While replacing home appliances has an upfront cost, you’ll save money on water and energy bills in the long run. Some energy-efficient appliances may even come with rebates.

Bonus Tip: Look for front-load washers; these can use up to half as much water per cycle as top-load units.

4. Upgrading Plumbing Fixtures, Too

Major appliances aren’t all you can upgrade. Plumbing fixtures like toilets and showerheads offer another opportunity to cut back on water usage. Search for low-flow (and dual-flush) toilets that use less water per flush; low-flow showerheads better conserve water (saving up to 20% per shower) but actually offer superior performance. In both cases, look for the EPA’s WaterSense label.

Recommended: How to Find a Contractor for Home Renovations

5. Taking Shorter Showers

This tip is pretty simple but bears repeating: The less time you spend in the shower, the less water you’ll use. And as long as you keep your showers short, you’ll save water — and money — by showering instead of taking a bath.

Bonus Tip: Want to reduce your usage and save more money on water? Get wet when you first step into the shower, then turn off the water while you lather and scrub; then rinse.

Recommended: Creative Ways to Save Money

6. Fixing Leaks

Leaky faucets and toilets that won’t stop running are noticeable, but your home may have other, less obvious plumbing leaks to watch out for, like your hot water tank or supply line. Because many drain pipes exist behind your walls, you may only catch a leak by hearing it, so keep your ears sharp throughout the year.

The cost to repair a plumbing leak can be high, but doing so will lower your water bill in the long run — and leaks left alone can develop into larger, more expensive problems down the road.

7.Turning Off the Water When Brushing Your Teeth

Letting the water run the entire time you brush your teeth — especially if you brush them for the ADA’s recommended two minutes — has become the poster child for wasting water. Turning off the water while you brush can be such an easy way to cut back on water usage and avoid the consequences of not saving money.

Bonus Tip: This also applies while shaving; only run the water when you need it.

8. Composting Instead of Using the Garbage Disposal

Have food scraps? Don’t throw them all in the garbage disposal, which uses water; try composting instead. You can compost foods like fruits, vegetables, eggshells, meat, and coffee (filters included!); doing so can be great for your garden.

Bonus Tip: Another way to reduce water usage in the kitchen is to thaw frozen meat overnight in the refrigerator, rather than running it under warm water.

Recommended: How to Save Money While Living Sustainably

9. Keeping a Pitcher of Water in the Fridge

If you let the tap run until the water gets cold enough to fill your drinking glass, you’re wasting water. Consider putting a pitcher of water in the fridge instead so that it’s cold when you want it. As a bonus, you can invest in a pitcher with a water filter for cleaner drinking water.

10. Caring for Your Lawn Strategically

Before watering your lawn, check the weather forecast. If rain is predicted in the next few days, don’t bother watering the lawn at all. Even if it’s hot out and hasn’t rained lately, your grass may not need water. Try stepping on it; if it springs back up, you don’t need to water it yet.

If you must water your lawn, check your sprinkler system to ensure there are no leaks, and don’t overwater.

Bonus Tip: Mowing your lawn less regularly is actually a good thing. Longer grass allows for deeper root growth — and thus a drought-resistant lawn that doesn’t need to be watered as often.

Recommended: 10 Most Common Budgeting Mistakes

11. Using a Commercial Car Wash

Car aficionados may insist upon washing their car every other week (or every week, if they’re dedicated). While washing and waxing your car is good for protecting its paint and maintaining its value, you can get away with fewer car washes. To keep water usage down, try once a month at most.

You can also cut your own water costs entirely by paying for a commercial wash. Commercial car washes use 60% less water and are designed to prevent water pollution from runoff. Many locations also recycle their wash water multiple times.

Recommended: How Much Auto Insurance Do You Need?

12. Covering Your Pool

Have a pool outside? Make sure you cover it when not in use. Not only does this keep unwanted debris out of the swimming area, but it also helps reduce the amount of water that evaporates each day.

Recommended: Ways to Stay Motivated to Save Money

The Takeaway

Saving money on water isn’t just great for your wallet; it’s also great for the environment. From composting to upgrading appliances to cutting back on car washes, you can dramatically reduce your family’s water consumption — and see great savings on your water bill as a result.

Better banking is here with up to 4.00% APY on SoFi Checking and Savings.


How much money can you save on your water bill by using less water?

The average American spends just under $75 a month on their water bill. If your family reduces water usage by 25%, your bill could drop to roughly $56; if you reduce water usage by 50%, your bill could be below $40. How much money you can save on your water bill depends on how much water you’re able to conserve and what the cost of water is in your city.

Why is saving water important?

Reducing water usage does more than lower your water bill. Saving water means that we use less water from rivers, bays, and estuaries — and this is a big deal for our environment. When we use less water, we also reduce water and wastewater treatment costs. Plus, it takes a lot of energy to treat, pump, and heat our water, all of which contribute to air pollution. In areas threatened by drought, reducing our personal water usage ensures our neighbors, friends, and family also have access to the water they need.

How much water is used per household a year?

The EPA estimates that the average American uses 82 gallons of water per day. For a family of four, that’s 328 gallons a day or nearly 120,000 gallons a year. Families can save a lot of water by taking simple measures: For example, the EPA estimates families save 13,000 gallons of water per year by replacing inefficient toilets — and 9,400 gallons of water annually by repairing leaks.

Photo credit: iStock/vorDa

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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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