Investing Archives

Dec

2025

A smiling man wearing glasses sits in front of a computer tablet with an open notebook and a cup of coffee.

Roth TSP vs. Roth IRA: How They Compare

By Rebecca Lake | Growing Wealth, invest, Investing, Preparing for Retirement | Comments Off

Table of Contents

What Are Roth Thrift Savings Plans (TSP)?
What Are Roth IRAs?
Similarities Between Roth TSP vs Roth IRA
Differences Between Roth TSP vs. Roth IRA
Roth TSP vs. Roth IRA: The Pros
Roth TSP vs. Roth IRA: The Cons
Roth TSP vs. Roth IRA: Which Is Better for Your Retirement Goals?
FAQ

Both Thrift Savings Plans (TSPs) and Individual Retirement Accounts (IRAs) come in traditional and Roth versions. One of the main differences between a Roth TSP vs. Roth IRA is who can contribute. Federal employees and members of the military can save in a Roth TSP. Anyone with earned income that’s within IRS income thresholds can contribute to a Roth IRA.

In either case, your contributions are not tax-deductible, but you can make tax-free qualified withdrawals when you retire.

Key Points

• Roth TSPs are available to federal employees and military members, while Roth IRAs are accessible to anyone with earned income within IRS income thresholds.

• Contributions to both Roth TSPs and Roth IRAs are made with after-tax dollars, allowing for tax-free qualified withdrawals in retirement.

• Roth TSPs have higher annual contribution limits and allow for employer matching contributions, unlike Roth IRAs.

• Roth IRAs typically offer a broader choice of investment options than Roth TSPs.

• Choosing between a Roth TSP and Roth IRA depends on employment status, contribution capacity, and retirement goals.

What Are Roth Thrift Savings Plans (TSP)?

The Thrift Savings Plan is a retirement plan that’s designed specifically for federal employees. You’re generally eligible to contribute to a TSP if you’re covered by the Federal Employees’ Retirement System (FERS) or the Civil Service Retirement System (CSRS). Members of the military can also save for retirement in a TSP.

A Roth TSP allows you to contribute after-tax dollars. When you make qualified withdrawals in retirement, those withdrawals are not taxed. Earnings are considered qualified if:

• At least 5 years have passed since January 1 of the first year in which you began making contributions, and

• You’re 59 ½ or older, permanently disabled, or deceased.

Contributions are made through elective salary deferrals, similar to a 401(k) plan. Catch-up contributions are allowed for workers aged 50 or older. Under the SECURE 2.0 Act, a higher catch-up contribution limit applies in 2025 and 2026 for those ages 60 to 63. The IRS determines how much you can save in a Roth TSP each year. Here are the contribution limits for 2025 and 2026.

	2025	2026
Elective Deferrals	$23,500	$24,500
Catch-Up Contributions	$7,500	$8,000 $11,250 for those ages 60-63
Annual Additions Limit	$70,000	$72,000

The annual additions limit is the total amount you can contribute in a calendar year. It includes employee contributions, as well as automatic and matching contributions made by your employing agency. Catch-up contributions do not count in this total.

🛈 While SoFi does not offer a Roth TSP, we do offer a Roth IRA to help members save for retirement.

What Are Roth IRAs?

A Roth IRA retirement account is an individual retirement account that allows you to contribute after-tax dollars, then make qualified withdrawals tax-free. Roth IRAs are available to individuals through brokerages, banks, and other financial institutions, rather than through employers.

You’ll need to have earned income to contribute to a Roth IRA. The IRS sets the maximum annual contribution limit. Catch-up contributions are allowed if you’re 50 or older. Here’s how the limits compare for 2025 and 2026.

	2025	2026
Annual Contributions	$7,000	$7,500
Catch-Up Contributions	$1,000	$1,100

The annual limit does not apply to rollover or reservist contributions. How much you can contribute to a Roth IRA is based on your income and tax filing status.

You can make the full contribution in 2025 if:

• You file single or head of household and your modified adjusted gross income (MAGI) is less than $150,000

• You’re married, file separately, did not live with your spouse during the year and your MAGI is less than $150,000

• You’re married and file jointly or are a qualifying widow(er) and your MAGI is less than $236,000

You can make a full contribution in 2026 if:

• You file single or head of household and your MAGI is less than $153,000

• You’re married, file separately, did not live with your spouse during the year, and your MAGI is less than $153,000

• You’re married and file jointly or are a qualifying widow(er) and you’re MAGI is less than $242,000

There are no required minimum distributions for Roth IRAs, so you can leave money in your account until you need it. You can also withdraw original contributions at any time, without a tax penalty.

Similarities Between Roth TSP vs Roth IRA

It’s important to open a retirement account that fits your needs. In terms of what’s similar between a Roth IRA vs. Roth TSP, they both allow you to contribute money on an after-tax basis. In other words, you pay taxes on the money that goes into the plan upfront so you can withdraw it tax-free later.

Once you reach age 59 ½, you can begin taking distributions without triggering any tax consequences. In terms of early withdrawals from a TSP vs. Roth IRA, there’s no difference. The IRS can assess a 10% early withdrawal penalty when taking money out of either account prematurely.

Both Roth IRAs and Roth TSPs are subject to the five-year rule mentioned earlier. Again, that rule dictates that at least five years must have passed since making your first contribution in order to avoid a tax penalty when making withdrawals.

TSP Roth vs. Roth IRA Similarities
Funded with…	After-tax dollars
Contributions are…	Not tax-deductible
Qualified withdrawals are…	Tax-free

Differences Between Roth TSP vs. Roth IRA

While they do have some things in common, there are some notable differences between a Roth IRA vs. TSP.

First, the TSP is an employer-sponsored plan, while an IRA is not. If you don’t work for the federal government you wouldn’t have access to a Roth TSP, but you could still open a Roth IRA and contribute to it.

Next, Roth TSPs have much higher annual contribution limits and catch-up contribution limits. They also allow for employer matching contributions, something you won’t get with a Roth IRA. Your ability to contribute to a TSP is not limited by your income either.

While Roth IRAs allow you to withdraw original contributions at any time without a tax penalty, that’s not the case for Roth TSPs.

TSP Roth vs. Roth IRA Differences
Contribution limits…	Are higher for Roth TSPs
Matching contributions…	Only apply for Roth TSPs
Contribution withdrawals…	Only Roth IRAs allow you to withdraw original contributions at anytime without a tax penalty

Roth TSP vs. Roth IRA: The Pros

There are several types of retirement plans that can offer tax advantages, including both Roth TSP and Roth IRA accounts. In terms of the pros, the main benefits of choosing either of these accounts lies in the ability to withdraw money when you retire tax-free.

If you expect to be in a higher tax bracket when you retire, Roth TSP or Roth IRA withdrawals won’t increase your tax liabilities. That’s a good thing if the value of your investments within either account has risen significantly since you first began making contributions.

Roth TSPs may help you save a decent amount of money for retirement if you’re able to max out your plan each year. The addition of employer matching contributions is another benefit, since that’s essentially “free” money. You don’t get that with Roth IRAs, but these accounts can still be a good way to save if you don’t have access to a retirement plan at work.

Roth TSP Pros	Roth IRA Pros
• Contribute money on an after-tax basis • Contributions grow tax-free • Qualified withdrawals are tax-free • High annual contribution and catch-up contribution limits • Employer matching contributions may help your savings grow faster • Eligibility to contribute is not tied to your income	• Contribute money on an after-tax basis • Contributions grow tax-free • Qualified withdrawals and withdrawals of original contributions are tax-free • Save for retirement even if you don’t have a workplace retirement plan

Roth TSP Pros

Roth IRA Pros

• Contribute money on an after-tax basis

• Contributions grow tax-free

• Qualified withdrawals are tax-free

• High annual contribution and catch-up contribution limits

• Employer matching contributions may help your savings grow faster

• Eligibility to contribute is not tied to your income

• Contribute money on an after-tax basis

• Contributions grow tax-free

• Qualified withdrawals and withdrawals of original contributions are tax-free

• Save for retirement even if you don’t have a workplace retirement plan

Roth TSP vs. Roth IRA: The Cons

While there are some advantages to saving in a Roth TSP or Roth IRA, there are also some potential downsides. For one thing, you’ll need to have a federal job (that is, work for the federal government is some capacity) in order to contribute to a Roth TSP. With a Roth IRA, your ability to make a contribution hinges on your income and filing status.

Roth TSPs are also known for offering a narrower range of investment options. If you make an in-service withdrawal from your account and you’re not age 59 ½ yet, you should be prepared to pay a tax penalty.

A Roth IRA doesn’t offer matching contributions, nor can you borrow from it. Any early withdrawals that are not qualified or don’t otherwise meet the five-year rule could be subject to tax penalties. While you might have more investment options to choose from, it’s important to be mindful of the fees you may pay.

Roth TSP Cons	Roth IRA Cons
• Must be an eligible federal employee to contribute • Investment selection may be limited • In-service withdrawals only allowed for financial hardship • Early withdrawal penalty may apply	• Must be within the IRS threshold guidelines to contribute • How much you can contribute is tied to income and filing status • No option to take loans • No employer matching contributions • Early withdrawal penalty may apply

Roth TSP Cons

Roth IRA Cons

• Must be an eligible federal employee to contribute

• Investment selection may be limited

• In-service withdrawals only allowed for financial hardship

• Early withdrawal penalty may apply

• Must be within the IRS threshold guidelines to contribute

• How much you can contribute is tied to income and filing status

• No option to take loans

• No employer matching contributions

• Early withdrawal penalty may apply

Roth TSP vs. Roth IRA: Which Is Better for Your Retirement Goals?

Selecting a retirement plan is an important decision as you want to choose an option that aligns with your needs, goals, risk tolerance, and objectives. Contributing to a Roth TSP could be wise if you’re a federal employee, since you can take advantage of higher contribution limits and employer matching contributions.

A Roth IRA, meanwhile, could make sense if you don’t have access to a retirement plan at work or you want to supplement your employer’s plan. Contributing to a retirement plan at work doesn’t bar you from also contributing to a Roth IRA, as long as you’re within the income limits set by the IRS.

The one that’s better for you may depend on where you work, how much money you’re able to contribute to retirement savings each year, and when you plan to retire. When comparing investment options for a Roth TSP vs. Roth IRA, consider the overall track record of those investments as well as the fees you might pay.

The Takeaway

Whether you choose a Roth IRA vs. Roth TSP or something else, it’s important to save for retirement early and often. Even if you can only afford to contribute small amounts to a retirement account, they can add up over time as long as you remain consistent.

Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

Easily manage your retirement savings with a SoFi IRA.

FAQ

Should I max out my TSP or Roth IRA?

If you can afford to max out your TSP, it might make sense to do so before maxing out a Roth IRA. The simple reason for that is TSPs have higher annual contribution limits and you can also get a matching contribution from your employer. If you only have a Roth IRA, then maxing it out each year can help you save the most money possible toward your retirement goals.

Is a Roth IRA better for retirement or a Roth TSP?

A Roth IRA is a good retirement savings option if you want to be able to make tax-free withdrawals later. However, a Roth TSP allows you to contribute a larger amount of money each year and your employer can also make matching contributions on your behalf.

Does a Roth TSP reduce taxable income?

Roth TSP contributions are made using after-tax dollars, so they do not reduce your taxable income for the year. You can, however, manage your tax liability by taking advantage of any deductions and credits you might be eligible for.

Photo credit: iStock/nortonrsx

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SOIN-Q425-090

Dec

2025

A couple look at a tablet computer while enjoying drinks at a bar.

Aiming to Become a Millionaire? These Steps Could Help

By Samuel Becker | Financial Independence, Growing Wealth, invest, Investing, Preparing for Retirement | Comments Off

Table of Contents

Introduction to the Millionaire Mindset and Goals
Step 1: Try to Avoid Debt
Step 2: Invest Early and Consistently
Step 3: Make Saving a Priority
Step 4: Increase Your Income
Step 5: Cut Unnecessary Expenses
Step 6: Keep Your Financial Goals in Focus
Step 7: Consult With Investment Professionals
Step 8: Repeat and Refine Your Financial Plan
Additional Tips for Wealth Building
FAQ

Do you find yourself dreaming about what you would do if you were a millionaire? Maybe you fantasize about retiring early and traveling the world. Or perhaps what excites you is the thought of being able to donate to causes you care about. But, you might be wondering how to become a millionaire? You may suspect the only way you’ll ever be that rich is if you win the lottery.

Fortunately, the road to wealth isn’t that narrow; there are many ways to become a millionaire. For instance, some individuals retire with over a million dollars in savings because they made good financial decisions. Others may have started businesses that brought them success, advanced their careers so that they made enough to save seven figures, or made smart investments. Read on to learn more about how to become a millionaire, and strategies that could help get you there.

Key Points

• Eliminating high-interest debt through methods like the debt avalanche and building an emergency fund helps free up money for wealth-building investments and prevents future financial setbacks.

• Starting to invest early allows compounding returns to maximize growth over time, with strategies adjusted from aggressive to conservative as retirement approaches and circumstances change.

• Maximizing retirement account contributions through 401(k) employer matches and and contributing to IRA investments may help you make progress over time toward achieving millionaire status and financial security.

• Increasing income through career advancement, additional education, salary negotiations, or side hustles can provide more resources to save and invest, while cutting unnecessary expenses preserves existing wealth.

• Maintaining discipline by avoiding lifestyle inflation, staying focused on long-term financial goals, and consulting with investment professionals can help ensure sustained progress toward building millionaire-level net worth.

Introduction to the Millionaire Mindset and Goals

Many millionaires are not born into wealthy families or individuals who suddenly struck it rich. In fact, many millionaires are people who work for a living every day. In general, what tends to set them apart is that they have a millionaire mindset. They are smart and disciplined when it comes to their money. And they stay focused on their financial goals.

Defining What It Means to be a Millionaire

The true definition of a millionaire is someone with a net worth of at least $1 million. That means that their assets, minus any debt, is $1 million or more.

So, if you have $500,000 in savings and investments, plus a house that’s worth at least $500,000, you’d meet the criteria. If, that is, you own the house outright and don’t have a lot of debt such as car loans, student loans, or credit cards to pay off. But if you still owe money on your house and you’ve got a fair amount of debt to repay, you probably aren’t a millionaire. At least, not yet.

To do the math for your situation, total up your assets. Then subtract your debts from that amount. This will show you how close you are to reaching millionaire status, and possibly give you a sense of what you might have to do to get there.

Following these eight strategies can help when it comes to how to become a millionaire.

Step 1: Try to Avoid Debt

As we just saw in the example above, one thing that could be holding you back from becoming a millionaire is debt, especially if that debt is “bad debt,” a term often used for high-interest debt. Eliminating your debt is key because it’s difficult to build wealth if you’re paying a significant portion of your income toward interest.

Paying off debt could help free up money to invest and build wealth. One way to repay debt is to use the debt avalanche method. With this technique, you pay off your debts with the highest interest rates first and then focus on debts with the next highest interest rates (while still making minimum payments on all of your debt, of course).

Eliminating debt isn’t just about paying off existing debt, though, it’s also about avoiding the chances of going into debt in the future. Part of a debt payoff strategy could involve spending less so that you don’t need to rely on credit. You can also set a strict budget and pay with cash whenever possible.

In addition, you may want to create an emergency fund by setting aside a certain amount of money every month. That way, if you have a financial setback, you don’t have to go into credit card debt.

Recommended: Ready to build your emergency fund? Use our emergency fund calculator to determine the right amount.

Step 2: Invest Early and Consistently

Investing successfully doesn’t happen overnight. It takes time. That’s why you need to start early. There are a few rules to know that could help you improve your chances of becoming a millionaire.

Benefits of Compounding Returns

First, compounding returns can make all the difference. They can help your money grow, as long as the returns are reinvested.

Here’s how they work: Compounding returns depend on how much an investment gains or loses over time, which is known as the rate of return. The longer your money is invested, the more compounding it can do. That’s why some individuals start saving aggressively when they’re young.

Saving $100,000 by the time you’re 30 might not be possible for everyone, but the more you save early on, the greater impact it could have on your net worth.

And here’s the thing: Even if you’re in your 30s, 40s, or 50s now, it’s never too late to start saving. The important thing is that you start, period. And that you keep saving.

There are other investing strategies that could help as you work on how to become a millionaire. For instance, you could reduce the amount you spend on investment fees. High investment fees can have a big impact on your returns, so you might want to look into low-fee investments.

Also, you should make sure that you invest in a way that’s right for you throughout your life. That may mean investing more aggressively when you’re younger and gradually becoming more conservative in your investments as you get older and closer to retirement.

Step 3: Make Saving a Priority

Your savings is the amount of money you have left after paying taxes and spending money.

Many Americans aren’t saving enough to become a millionaire — in September 2025, the average personal savings rate was 4.7%, according to the Bureau of Economic Analysis. You’ll likely need to save more than three times that amount to become a millionaire.

Effective Saving Strategies for Long-term Wealth

To save for your goals, you might consider starting by investing in your company’s 401(k). Max out your 401(k) if you can. At the very least, invest at least enough to earn the employer match, if there is one. That way your employer is contributing to your savings.

In addition, consider opening a traditional IRA or a Roth IRA and contribute as much as possible, up to the limit set by the IRS. These IRAs are tax-advantaged, so they’ll help with your tax bill, too.

And investigate other savings options, as well, such as contributing to a child’s 529 college savings plan.

Step 4: Increase Your Income

You can’t join the ranks of millionaires if you’re not bringing in more money than you need for your basic necessities. The more money you make, the more you can save and invest.

Tips for Boosting Earnings and Maximizing Income

Some ways to boost your income include asking for a raise or looking for a new higher-paying job. You could also go back to school to earn an advanced degree that could lead to a position with a higher income. Your current employer might even help you cover the cost; check with your HR department.

Another one of the ways to earn extra money is to take on a side hustle. You could tutor students on evenings or weekends, do freelance writing, or dog sit. And those are just some of the options to consider.

Step 5: Cut Unnecessary Expenses

Getting control of your spending is critical to building wealth. That doesn’t mean you have to cut back on everything that gives you pleasure, but you could consider the happiness return on investment you get from the money that you spend. How big of an apartment or home do you truly need to be content? What kind of car do you need? Do you have to buy lunch out every day or could you bring your own lunch from home?

Identifying and Eliminating Non-Essential Spending

You could find ways to cut back on the things that don’t matter so much, but not skimping to the point that you miss out on things you love. For example, maybe you need your gym sessions (and there are plenty of low-cost gyms out there), but you can do without purchasing a coffee every morning.

Also, you could focus on cutting back on big expenses instead of those that won’t have a huge impact on your budget. For example, dining out only once a month, adjusting your thermostat higher or lower depending on the season, or finding a less expensive, smaller home could help you save a significant amount of money over time.

Step 6: Keep Your Financial Goals in Focus

To become a millionaire, you’ll need to stay laser-focused on your financial goals. When everyone else around you is spending money, going on fancy vacations, and buying expensive cars, remind yourself what’s truly important to you. Keep your spending in check, continue to save and invest, and avoid taking on debt.

It takes discipline. But instead of thinking about the stuff you don’t have, appreciate all the good things in your life, like your family and friends. Remember that you’re saving for your future. You’ll be able to enjoy yourself then if you have the money you need to live comfortably and happily.

Think of it this way: You’re making yourself and your financial security the priority. Make that your mantra.

Step 7: Consult With Investment Professionals

Investing can be complicated because there are so many options to choose from. If you need help figuring out what investments are right for you, consider working with a qualified financial advisor.

Leveraging Advice for Wealth Building

A good financial advisor could help you select the right investments and the best investing strategies for your situation. They can also help you plan and budget to reach your goals. But be sure to be an active participant in the process. Ask questions, be involved. Why are they suggesting a specific investment? And if you don’t feel comfortable with something, say so.

Finally, be sure to check your investment performance regularly. Know what you are investing in, how much, and why.

Step 8: Repeat and Refine Your Financial Plan

The final step to becoming a millionaire is to stay committed to your goal and your plan. Keep saving and investing your money. Stay out of debt. Let time and the power of compounding returns kick in. Be patient.

But also, don’t be afraid to refine or change your plan if need be. For instance, as you get closer to retirement, you will likely want to choose safer, less aggressive investments. You can keep saving and growing money throughout different ages and stages, but your method for doing so can evolve to make sense for where you are in your life.

Additional Tips for Wealth Building

In addition to all of the strategies above, there are a few other techniques that may help you reach millionaire status.

Lifestyle Considerations and Spending Habits

As you work your way up the ladder and earn more money throughout your career, you may be tempted to increase your lifestyle spending, too. After all, you have more money now, so you may feel the urge to spend it.

But here’s the thing: Giving in to these temptations can be a slippery slope. It might start with a bigger house in a nice neighborhood, and then grow to taking extravagant vacations and driving a luxury car. Before you know it, you could be spending way more than you’re saving.

Try to avoid lifestyle splurging if you want to be a millionaire. Instead, take the extra money and save and invest it. That way, you’ll be able to reach your goal even faster.

The Takeaway

Becoming a millionaire is possible if you take the right approach. It involves saving and investing your money, spending wisely, and avoiding debt. You need to be disciplined and focused, and it won’t always be easy. But staying committed to your goals can reward you with financial security and success.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

¹Opening and funding an Active Invest account gives you the opportunity to get up to $3,000 in the stock of your choice.

FAQ

How much money does the average person save?

As of September 2025, the average personal savings rate in the United States was 4.7%, according to data from the Bureau of Economic Analysis.

How many millionaires are there in the U.S.?

There are nearly 24 million millionaires in the United States as of 2025, which is roughly 40% of the world’s total.

What steps can people follow to try and become a millionaire?

Some strategies that could help individuals reach $1 million net worths include avoiding debt, investing early and consistently, prioritizing saving, increasing income, cutting unnecessary expenses, keeping goals in focus, working with professionals, and periodically refining your financial plan.

Photo credit: iStock/pixelfit

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SOIN-Q425-063

Dec

2025

A lone black swan among several white swans arranged in neat rows.

Black Swan Events and Investing, Explained

By Melanie Mannarino | Growing Wealth, invest, Investing | Comments Off

Table of Contents

What Is a Black Swan Event?
Examples of Black Swan Events
Why Do Black Swan Events Happen?
Can You Predict a Black Swan Event?
FAQ

The term “black swan event” is widely used in finance today to describe an unanticipated event that severely impacts the financial markets. The name stems from the discovery of avian black swans by Dutch explorer De Vlamingh while exploring Australia in the late 1600s. Historians credit de Vlamingh with separating the “expected” (i.e., a white swan, which were plentiful) with the “unexpected” (i.e., a black swan, which was a rare sighting).

Writer, professor and former Wall Street trader Nassim Nicholas Taleb popularized the financial theory of “black swan” events in his 2007 book The Black Swan: The Impact of the Highly Improbable. Taleb described the occasional, but highly problematic, arrival of black swans on the investment landscape, and outlined what, in his opinion, economists and investors could do to better understand those events and protect assets when they occur.

Key Points

• Black swan events are extremely rare, unpredictable occurrences with severe consequences that become obvious only in hindsight, a concept popularized by Nassim Nicholas Taleb in his 2007 book.

• Historical black swan events include the Soviet Union’s collapse, 9/11 terrorist attacks, the dot-com bubble burst, and the 2008-2009 financial crisis, each causing catastrophic economic damage.

• Black swan events are identified by three characteristics: extreme rarity with no prior similar events, severe widespread impact on economies and societies, and retrospective recognition of preventability.

• Predicting specific black swan events is virtually impossible due to complex interactions among political, financial, environmental, and social factors that create unpredictable chains of consequences.

• Preparing for black swan events requires portfolio diversification, avoiding panic-driven market timing, maintaining conservative investment strategies, and potentially capitalizing on opportunities during market downturns through dollar-cost averaging.

What Is a Black Swan Event?

According to Taleb, a black swan event is identifiable due to its extreme rarity and to its catastrophic potential damage to life and health, and to economies and markets. Taleb also notes in the book that once a black swan landed and devastated everything in its path, it was obvious in hindsight to recognize the event occurred.

This is how Taleb describes a black swan event in his book: “A black swan is an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences,” Taleb wrote in his book. “Black swan events are characterized by their extreme rarity, their severe impact, and the widespread insistence they were obvious in hindsight.”

It can be a difficult concept for investors. Who, after all, throughout the history of the stock market, would leave their finances unprotected from a black swan onslaught if they knew the event was imminent?

By definition, predicting the arrival of a black swan is largely outside the realm of probability. All anyone needs to know, Taleb maintains, is that black swans occur and investors should not be surprised when they do happen.

Taleb outlines three indicators that signal the arrival of a black swan event. Each is meaningful in truly understanding a black swan scenario.

1. Black swan events are outliers. No similar and prior event could predict the arrival of a particular black swan.

2. Black swan events are severe, and typically inflict widespread damage. That damage also has a severe impact on economies, cultures, institutions, and on families and communities.

3. They’re usually recognized in hindsight. When black swans occur and eventually dissipate, recriminations take its place. While the specific black swan event wasn’t predicted, observers say the event could have and should have been prevented.

💡 Quick Tip: All investments come with some degree of risk — and some are riskier than others. Before investing online, decide on your investment goals and how much risk you want to take.

Examples of Black Swan Events

It’s become common for politicians and investors to call any negative event a “black swan” event, whether or not it meets Taleb’s definition. However, history has no shortage of true black swan events, which led to large, unpredictable market corrections.

The following events are considered some of the most infamous among economists and historians.

The Soviet Union’s Historic Collapse

Economists consider the collapse of the Soviet Union in 1991 a major black swan. Only 10 years earlier, the Russian empire was considered a major global economic and military threat. A decade later, the Soviet Union was no more, significantly shifting the global geopolitical and economic stage.

The 9/11 Terrorist Attacks

In hindsight, the United States might have seen the attacks on the World Trade Center in New York City and the Pentagon in Washington, D.C. coming. International terrorism had long been a big risk management issue for the U.S. government, but the severity of the attack left the world stunned — and plunged the U.S. into a serious economic decline. Stocks lost $1.4 trillion in value the week after the attacks.

The Dot-com Bubble

In the late 1990s, investors were indulging in irrational exuberance and nowhere was that more clear than with the nation’s stock market — particularly with white-hot technology stocks. With an army of Internet stocks in the IPO pipeline, overvalued tech stocks plummeted, taking the entire stock market down in the process. The damage was staggering, with the Nasdaq Index losing 78% of its value between March 2000 and October 2002.

The 2008-2009 Financial Crisis

After a series of high-risk derivative bets by major banks, mounting losses in the U.S. mortgage market, and the collapse of Lehman Brothers, the U.S. economy teetered on the edge of disaster — a scenario it would take almost a decade to correct. The unemployment rate doubled to more than 10%, domestic product declined 4.3%, and at its worst point, the S&P 500 plummeted 57%, creating a bear market.

It’s worth noting that although some people have referred to the Covid-19 pandemic as a black swan event, Taleb does not consider it to be one since he feels there was enough historical precedence to foresee it.

Why Do Black Swan Events Happen?

Since black swan events are virtually impossible to predict, there is no concrete answer as to why they happen. The world is complicated, with many different factors — political, financial, environmental, and social, among others — impacting one another and setting off chains of events that could potentially become black swan events in scope and magnitude.

Can You Predict a Black Swan Event?

By its very definition, it’s nearly impossible to predict a specific black swan event. This makes it hard to prepare for black swans as you would for other investment risks.

Instead, investors may want to focus on making sure they’re prepared, generally, for the unknown. Here’s how to help do that:

• Try to develop a pragmatic mindset. Investors are better off knowing unanticipated negative events do exist and could arrive on their doorstep at any time. Keep in mind the possibility of black swans and consider building an expectation of stock volatility into your overall portfolio-management strategy.

• Try to avoid getting bogged down by long-term forecasts. Relying solely on expert predictions or far-off investment outlooks can be overwhelming, since unexpected events, including black swans can happen at any time and it’s normal for markets to fluctuate. Instead, some investors consider building a more conservative element into your investment portfolio, one that relies more on protecting your assets, so you’re not tempted to make rash moves during a black swan event. Have a candid conversation with your financial advisor, or educate yourself if you don’t have a financial advisor, about how proper diversification may help build a portfolio that balances the need for performance with the need for protection.

• Don’t panic when a black swan event happens. As tempting as it might be to try to get out of a market during a black swan event and get back in when it fades away, resist the urge to engage in market timing.

• Many investors try looking for opportunities. Putting money into the markets during a black swan event can be difficult and potentially risky, but investing in a down market may yield positive returns over the long-term.

Rather than trying to time the market, some investors may consider using a dollar-cost averaging strategy, when making regular purchases — even during a black swan event.

The Takeaway

For long-term investors, the prudent stance on black swan events is to acknowledge their existence, build some protection into your investment portfolio to help mitigate potential damage, and be ready to take full advantage of a market upturn once the black swan flies away.

¹Opening and funding an Active Invest account gives you the opportunity to get up to $3,000 in the stock of your choice.

FAQ

What is a black swan event in recent years?

One of the most recent black swan events was the 2008-2009 financial crisis known as the Great Recession. That’s when a series of high-risk derivative bets by major banks, mounting losses in the U.S. mortgage market, and the collapse of Lehman Brothers, the biggest U.S. bankruptcy ever, pushed the U.S. economy to the edge of disaster.

What was the biggest black swan event?

The Great Depression of 1929 was probably the most infamous black swan event. It started with the U.S. stock market crash in October 1929 and led to a worldwide drop in stock prices. The U.S. economy shrank by 36% between 1929 and 1933, many banks failed, and the U.S. unemployment rate skyrocketed to more than 25%. It was the longest and most severe economic recession in modern history.

What are the attributes that identify a black swan event?

According to Nassim Nicholas Taleb, who popularized the black swan theory, the attributes that identify a black swan event are: 1) black swan events are rare and no similar or prior event could predict them, 2) black swan events are severe and inflict widespread damage, and 3) after the fact, observers say the black swan event could have and should have been prevented.

Photo credit: iStock/by Martin Nancekievill

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For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

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Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.

S&P 500 Index: The S&P 500 Index is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S. It is not an investment product, but a measure of U.S. equity performance. Historical performance of the S&P 500 Index does not guarantee similar results in the future. The historical return of the S&P 500 Index shown does not include the reinvestment of dividends or account for investment fees, expenses, or taxes, which would reduce actual returns.
Dollar Cost Averaging (DCA): Dollar cost averaging is an investment strategy that involves regularly investing a fixed amount of money, regardless of market conditions. This approach can help reduce the impact of market volatility and lower the average cost per share over time. However, it does not guarantee a profit or protect against losses in declining markets. Investors should consider their financial goals, risk tolerance, and market conditions when deciding whether to use dollar cost averaging. Past performance is not indicative of future results. You should consult with a financial advisor to determine if this strategy is appropriate for your individual circumstances.

Investing in an Initial Public Offering (IPO) involves substantial risk, including the risk of loss. Further, there are a variety of risk factors to consider when investing in an IPO, including but not limited to, unproven management, significant debt, and lack of operating history. For a comprehensive discussion of these risks please refer to SoFi Securities’ IPO Risk Disclosure Statement. This should not be considered a recommendation to participate in IPOs and investors should carefully read the offering prospectus to determine whether an offering is consistent with their investment objectives, risk tolerance, and financial situation. New offerings generally have high demand and there are a limited number of shares available for distribution to participants. Many customers may not be allocated shares and share allocations may be significantly smaller than the shares requested in the customer’s initial offer (Indication of Interest). For more information on the allocation process please visit IPO Allocation Procedures.

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.

SOIN-Q425-064

Dec

2025

A colorful photo of the looping tracks of a roller coaster represent the volatile nature of risk.

Risk Tolerance Quiz: How Much Risk Are You Willing to Take?

By Pam O’Brien | Growing Wealth, Investing | Comments Off

Table of Contents

Risk Tolerance Quiz
What Investment Risk Tolerance Is
What Your Risk Tolerance Means
Finding Investments That Match Your Risk Tolerance
FAQ

In finance, “risk” refers to the risk of losing money. Determining how much risk you feel comfortable with can help you decide how best to invest your money. The stock market can be volatile, and the assets and allocations you choose should be those that make you feel comfortable personally and financially.

Your risk tolerance may change, depending on the goal you’re investing for and your time horizon, as well as your personal circumstances. In some cases, you may feel more comfortable taking on a little more risk exposure when you have a longer time period to reach your goal.

Risk is a highly personal factor, though, and it takes careful thought to know where you stand. Take our Risk Tolerance quiz to gain insight into your own tolerance for risk.

Key Points

• Risk tolerance refers to an investor’s comfort level with the possibility of losing money.

• In general, higher-risk investments may provide greater returns but are less predictable than lower-risk investments, which typically offer lower returns.

• Investment goals, time-frame, financial circumstances, and personal temperament all help determine an individual’s risk tolerance.

• Investment styles are divided into conservative, moderate, and aggressive, which generally correspond to portfolios favoring lower-risk funds, a balance of assets, or high-potential-return assets, respectively.

• The article introduces a risk tolerance quiz to help evaluate an individual’s personal risk level.

What Investment Risk Tolerance Is

When it comes to investing, understanding risk tolerance involves the following three factors:

• Your risk capacity: This is your ability to handle risk financially — the amount of money you can afford to lose without impacting your financial security. How close you are to retirement and the financial obligations you have will affect your risk capacity, whether you’re investing online or through a traditional brokerage.

• Your needs and wants: These are your goals for your finances and your lifestyle. For instance, maybe you want to retire soon or save up for a down payment on a new house.

• Your emotional risk IQ: This refers to your personality and how you see risk. You might be a thrillseeker who likes to live on the edge. Or perhaps you prefer a sure and steady approach.

Understanding Risk vs. Reward

As you get familiar with various aspects of risk, as well as your own risk tolerance, it helps to understand the risk-reward continuum when it comes to your investments.

Remember: Higher-risk investments are generally less predictable, but may provide higher returns. Lower-risk investments generally offer lower returns, but they’re typically more reliable and less volatile.

Recommended: Stock Market Basics

What Your Risk Tolerance Means

Once you know whether your investment style is conservative, moderate, or aggressive, you can dig a little deeper to understand what’s driving your specific risk tolerance.

• First, of course, there are the goals you’re saving and investing for. Is it retirement? A down payment on a new house? Sending your kids to college? Where your money is going will make you more or less willing to take risks for the potential of higher returns.

• The length of your investment time frame often relates to risk tolerance. Investors with short-term goals, or those nearing retirement, often focus on strategies that prioritize capital stability, as there is less time to recover from market volatility before that money is needed.

A longer time horizon, such as for a newbie investor in their 20s, provides decades for potential market recovery. This time frame can align with growth-focused strategies that pursue higher potential returns. Conversely, investors with a medium-term horizon may consider a balanced approach that seeks to mitigate risk while still pursuing growth.

• Your financial circumstances, now and in the future, can also impact risk tolerance. Investors who anticipate income growth may find themselves with a higher risk tolerance. Conversely, individuals facing uncertain income, such as freelancers, or those not anticipating salary growth, typically prioritize capital preservation and a more cautious approach to investing.

Finally, there’s your temperament. If you invest in stocks, for example, are you going to be filled with anxiety every time the market dips? Or can you remain calm and focused?

Thinking about these different factors can give you some insights into your feelings about money, and the types of investments you may want to choose.

Finding Investments That Match Your Risk Tolerance

With this new knowledge in hand, you can invest your money in a way that makes sense for you and the amount of risk you feel comfortable with. These are some scenarios you might want to think about, depending on your investment style.

• Conservative: A conservative investor may opt for a portfolio that mainly consists of assets that tend to be stable and lower risk, such as money market funds and government bonds.

• Moderate: An investor who takes moderate risks might choose to balance their portfolio between riskier assets like stocks and more stable investments like money market funds and bonds.

• Aggressive: An investor who is interested in self-directed investing will likely gravitate to assets with a high potential for return, but also a higher potential for volatility and loss, such as growth stocks and alternative investments.

Whatever your risk tolerance is, it’s wise to diversify your portfolio across different asset classes including stocks, bonds, and commodities.

The Takeaway

Each investor has a risk tolerance level that depends on their individual circumstances. Using our risk tolerance quiz can help you evaluate how much risk you should take.

That said, it’s vital to know that all investments come with some degree of risk. A conservative investor will likely feel better with lower-risk investments, while an aggressive investor will typically look for assets with high growth potential, despite the higher risk they pose.

Once you have investments that suit your style and temperament, the better you may feel about your investment strategy. Just be sure to check your investments regularly to make sure they’re on target to help you to meet your financial goals.

Invest with as little as $5 with a SoFi Active Investing account.

FAQ

What is an example of risk tolerance?

If the idea of making an investment, and watching it possibly lose and gain money, is a source of anxiety, you may have a low tolerance for risk. If portfolio ups and downs don’t bother you, perhaps because you believe you may come out ahead eventually, you may have a higher risk tolerance.

How does risk tolerance relate to investing strategy?

Once you know how much risk you want to take on, you can choose investments that match your comfort level. If you prefer as little risk of loss as possible, you may want to invest in assets that provide a steady rate of return. If you can tolerate some risk of loss, you may want to consider investments with a higher risk/reward profile.

Remember: higher risk investments may have higher returns, but there are no guarantees. Lower risk investments tend to have lower returns, but typically provide a higher degree of stability.

Can your risk tolerance change?

Yes. Your risk tolerance can change over time. And your risk tolerance may also change depending on your circumstances, or the goal you’re investing for.

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SOIN-Q425-021

Dec

2025

A woman uses a laptop and calculator at a coffee table while sitting on a couch.

The Consumer Price Index (CPI): A Comprehensive Guide

By Austin Kilham | Growing Wealth, invest, Investing, Terminology | Comments Off

Table of Contents

What Is the Consumer Price Index (CPI)?
How the CPI Works
The Consumer Price Index (CPI) in Practice
CPI Versus Other Economic Indicators
Analyzing and Critiquing the CPI Methodology
CPI’s Broader Impact and Usage
Contemporary Relevance of CPI
Educational Resources and Further Reading on CPI
FAQ

The Consumer Price Index (CPI) is a monthly measure of how the aggregate costs of consumer goods and services in the United States are changing. Economists use CPI to help them understand whether the economy is in a period of inflation or deflation, and individuals can use it to get a sense of where prices might be headed.

Key Points

• The Consumer Price Index (CPI) measures average price changes for a basket of goods and services.

• The CPI is a major data point that influences Federal Reserve decisions on interest rates to meet a 2% annual inflation target.

• Rising CPI can increase interest rates, affecting mortgage costs and the housing market.

• Higher interest rates can reduce business sales, impact stock prices, and potentially increase unemployment.

• Despite limitations, CPI remains a relevant economic indicator, guiding policy decisions.

What Is the Consumer Price Index (CPI)?

The CPI measures the change of the weighted-average prices paid by urban consumers for select goods and services, according to the Bureau of Labor Statistics (BLS). In other words, the metric tracks the rise and fall of prices over a given period of time.

Definition and Significance

As mentioned, “CPI” is short for Consumer Price Index, and it’s an often-cited economic indicator.

The BLS produces indexes that cover two populations: CPI-U covers all urban consumers, representing more than 90% of the population. And CPI-W represents urban wage earners and clerical workers, representing approximately 30% of the population. The CPI excludes people who live in rural areas, the military, and imprisoned people.

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How the CPI Works

The CPI tracks prices for a basket of goods and services people commonly buy in eight major categories, including:

• Food and beverage

• Recreation

• Apparel

• Transportation

• Housing

• Medical care

• Education and communication

• Various services

CPI Formulas

Each month, the BLS contacts retailers, service providers, and rental spaces across the country gathering prices for about 80,000 items. It uses this data to calculate CPI using the following formula:

CPI = Cost of the Market Basket in a Given Year/Cost of the Market Basket in the Base Year.

The result is multiplied by 100 to express CPI as a percentage. The BLS uses the years 1982-1984 as its base year. It set the index level during this period at 100.

Annual CPI Calculation

Here’s an example of the annual CPI calculation, and comparing two different years to get a gist of the differences.

Imagine the cost of a hypothetical basket of goods in 1984.

	Sweatshirt	1 dozen eggs	Movie ticket
Price in 1984	$10	$1.50	$5
Quantity	2	6	10
Total Cost	$20	$9	$50

When you total the price of these goods you get $79. Using the CPI formula above you take $79/$79 x 100 = 100%. This is where the 1984 base rate of 100 comes from.

Now let’s consider the same basket of goods in 2025.

	Sweatshirt	1 dozen eggs	Movie ticket
Price in 2025	$24	$3	$15
Quantity	2	6	10
Total Cost	$48	$18	$150

When you total the prices of these goods you get $216. Now, when you plug this into the CPI formula you get $216/$79 x 100 = 273%. You can now tell that from 1984 to 2025 prices for this particular basket of goods have risen by 173%.

Diverse Categories Within CPI

The CPI tracks more than 200 categories of items, and within each category it samples hundreds of specific items at various businesses which serve to represent the thousands of items available to consumers. In addition to these categories, CPI includes government-charged user fees like water, sewage, tolls, and auto registration fees.

It also factors in taxes associated with the price of goods such as sales tax and excise tax. However, it does not include Social Security taxes or income taxes that aren’t directly related to the purchasing of goods and services.

The CPI also does not include the purchase of investments, like stocks and bonds.

The Consumer Price Index (CPI) in Practice

The CPI can be used in a variety of ways, but perhaps most prominently, in economic policy.

Usage in Economic Policy

The CPI is the most common way to measure inflation, the economic trend of rising prices over time, or deflation, the trend of falling prices. The federal government, or the Federal Reserve, more specifically, sets a target inflation rate of 2% annually, and the CPI can help the government understand whether or not its monetary policy is effective in meeting this target.

The Federal Reserve’s Utilization

The Federal Reserve may look at the CPI to gauge whether or not to raise interest rates, which may cool or heat up the economy, accordingly, by increasing the cost of borrowing. As borrowing costs go up, demand for goods or services tends to fall, lowering prices, and putting downward pressure on the CPI.

Implications for Other Government Agencies

Economists also use CPI as a measure of cost of living, the amount of money you need to cover basic expenses, such as housing, food, and health care. This is important because the government may make cost-of-living adjustments to programs such as Social Security benefits. As the cost of living rises, benefit amounts may be adjusted higher to keep up with the rising costs of goods.

Employers may also look at the cost of living to help them set competitive salaries and determine when to raise wages for employees.

CPI’s Influence on Market Sectors

The CPI can also have an influence on market sectors, like the housing markets, financial markets, and even labor markets. As noted, a lot of it is top-down — depending on how the Federal Reserve reads the CPI and decides to change interest rates, if at all.

Raising rates can temper demand in the housing market, as a mortgage can become more expensive. It can also slow down sales for all sorts of businesses, which is reflected in earnings reports and finally, in the stock market. That can then spill into the labor market, and potentially raise unemployment as companies look to cut costs.

All told, the CPI’s influence can run deep in an economy.

CPI Versus Other Economic Indicators

The CPI is only one of many economic indicators, as mentioned. Others include unemployment, and the Producer Price Index (PPI).

CPI vs Unemployment: Understanding the Relationship

As noted, there tends to be a relationship between the CPI and unemployment rate, as the Fed targets 2% inflation, and full employment. As such, it can decide to make changes to monetary policy to try and restore balance or at least get closer to its goals.

CPI vs PPI (Producer Price Index)

The Producer Price Index or PPI measures the average change over time in the selling prices received by domestic producers of goods and services. In simpler terms, this metric measures wholesale prices for the sectors of the economy that produce goods. Like the CPI, the PPI can help analysts estimate inflation, as higher prices will show up on the wholesale level first before they get passed on to consumers at the retail level.

Analyzing and Critiquing the CPI Methodology

The CPI is a useful measure in many ways, but it does have some limitations.

First, it doesn’t apply to all populations in the United States. CPI considers urban populations alone, so it is not necessarily representative of the costs for those who live outside of those areas.

Also, the CPI calculation does not take into account all of the goods and services available to consumers or new technologies not yet considered consumer staples. What’s more, the metric does not provide any contact into what’s causing prices to move up and down, such as social or environmental trends.

CPI’s Broader Impact and Usage

CPI reports are typically issued monthly by the BLS, and are available to anyone who wants to access them online. They give a broad breakdown of the previous month, and compare price changes year-over-year, and month-over-month.

Breaking Down the Monthly CPI Report

The standard CPI report has an introduction that discusses the changes over the previous month, followed by a table that outlines changes in specific price categories over the past year and several months. It further breaks down food, energy, and “all items less food and energy,” providing additional insight for each category.

Anticipating the Next CPI Report

The BLS publishes the date and time of the upcoming CPI report on its website, typically the second week of the month, at 8:30am ET.

Contemporary Relevance of CPI

In recent years, many people have kept a closely-trained eye on the CPI and CPI reports, after prices rose dramatically due to the pandemic in 2020. While there were a variety of reasons as to why prices increased, that bout of inflation — the first serious case of inflation since the 1980s — caught many people off guard, and strained consumers’ budgets. Though it has moderated in the years since, the cost of living has remained a contentious issue in the U.S.

It also led to the Fed increasing interest rates. Inflation, or the increase in the CPI over the past couple of years, peaked at more than 9% during the summer of 2022, and as of late 2025, was back down to around 3%.

Educational Resources and Further Reading on CPI

There are numerous resources and places to learn more about the CPI, especially after all the attention it has garnered in recent years.

Learning More About CPI

A simple internet search will net a cornucopia of results, loaded with information and insight into the CPI. You’re also likely to find opinion pieces and other media discussing the CPI’s shortcomings or strengths — it can be a good idea to consider everything, and formulate your own opinion.

But in terms of learning more about the CPI itself, the BLS publishes a handbook discussing the concepts and methods it uses, which can also be helpful if you’re hoping to bolster your CPI IQ.

CPI-Related Statistics and Where to Find Them

The BLS publishes the CPI, and a whole host of data and statistics related to it. With that in mind, it can be a great place to start when hunting down CPI-related data. There are multiple other sources that utilize the BLS’ data to compile charts, graphs, and more, but typically, it’s all sourced back to the BLS.

The Takeaway

Rising inflation decreases the value of individuals’ cash savings over time. Investing in stocks, bonds and other investments that offer inflation-beating returns may help consumers protect the value of their savings. Understanding CPI, and how it’s moving, can help you devise a strategy for your investment portfolio.

The CPI can be a deep topic, especially when you consider how it intersects and relates to other elements of the economy, such as unemployment and interest rates. And again, the more an investor understands about the underlying machinations of the economy, the more knowledge they’ll have to power their decisions in the market.

¹Opening and funding an Active Invest account gives you the opportunity to get up to $3,000 in the stock of your choice.

FAQ

What does CPI stand for?

CPI is an acronym that stands for “consumer price index,” and is a monthly measure of how the aggregate cost of goods and services changes over time.

What produces or calculates the CPI?

The CPI is calculated by the Bureau of Labor Statistics (BLS), a government agency. The BLS actually produces several CPI indexes, such as the CPI-U (Consumer Price Index for All Urban Consumers) and CPI-W (Consumer Price Index for Urban Wage Earners and Clerical W, among others.

What categories of goods or services are included in the CPI calculation?

The BLS tracks food and beverage, recreation, apparel, transportation, housing, medical care, education and communication, and other various service costs when compiling the CPI.

Photo credit: iStock/Prostock-Studio

INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE

SOIN-Q425-012

Roth TSP vs. Roth IRA: How They Compare

What Are Roth Thrift Savings Plans (TSP)?

What Are Roth IRAs?

Similarities Between Roth TSP vs Roth IRA

Differences Between Roth TSP vs. Roth IRA

Roth TSP vs. Roth IRA: The Pros

Roth TSP vs. Roth IRA: The Cons

Roth TSP vs. Roth IRA: Which Is Better for Your Retirement Goals?

The Takeaway

FAQ

Should I max out my TSP or Roth IRA?

Is a Roth IRA better for retirement or a Roth TSP?

Does a Roth TSP reduce taxable income?

Aiming to Become a Millionaire? These Steps Could Help

Introduction to the Millionaire Mindset and Goals

Defining What It Means to be a Millionaire

Step 1: Try to Avoid Debt

Step 2: Invest Early and Consistently

Benefits of Compounding Returns

Step 3: Make Saving a Priority

Effective Saving Strategies for Long-term Wealth

Step 4: Increase Your Income

Tips for Boosting Earnings and Maximizing Income

Step 5: Cut Unnecessary Expenses

Identifying and Eliminating Non-Essential Spending

Step 6: Keep Your Financial Goals in Focus

Step 7: Consult With Investment Professionals

Leveraging Advice for Wealth Building

Step 8: Repeat and Refine Your Financial Plan

Additional Tips for Wealth Building

Lifestyle Considerations and Spending Habits

The Takeaway

FAQ

How much money does the average person save?

How many millionaires are there in the U.S.?

What steps can people follow to try and become a millionaire?

Black Swan Events and Investing, Explained

What Is a Black Swan Event?

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Examples of Black Swan Events

The Soviet Union’s Historic Collapse

The 9/11 Terrorist Attacks

The Dot-com Bubble

The 2008-2009 Financial Crisis

Why Do Black Swan Events Happen?

Can You Predict a Black Swan Event?

The Takeaway

FAQ

What is a black swan event in recent years?

What was the biggest black swan event?

What are the attributes that identify a black swan event?

Risk Tolerance Quiz: How Much Risk Are You Willing to Take?

Risk Tolerance Quiz

What Investment Risk Tolerance Is

Understanding Risk vs. Reward

What Your Risk Tolerance Means

Get up to $1,000 in stock when you fund a new Active Invest account.*

Access stock trading, options, alternative investments, IRAs, and more. Get started in just a few minutes.

Finding Investments That Match Your Risk Tolerance

The Takeaway

FAQ

What is an example of risk tolerance?

How does risk tolerance relate to investing strategy?

Can your risk tolerance change?

The Consumer Price Index (CPI): A Comprehensive Guide

What Is the Consumer Price Index (CPI)?

Definition and Significance

How the CPI Works

CPI Formulas

Annual CPI Calculation

Diverse Categories Within CPI

The Consumer Price Index (CPI) in Practice

Usage in Economic Policy

The Federal Reserve’s Utilization

Implications for Other Government Agencies

CPI’s Influence on Market Sectors

CPI Versus Other Economic Indicators

CPI vs Unemployment: Understanding the Relationship

CPI vs PPI (Producer Price Index)

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