What is the Average Savings by Age

There are endless reasons why a person may want to save money. Be it for a trip they’ve been dreaming of, a home repair project that’s long overdue, a new car, college, or just for the general “future,” it’s a good idea to start putting away a few more nickels and dimes, if possible.

Those already doing so can give themselves a pat on the back as it’s a harder task than one may think. According to a 2019 survey by Bankrate , just 40% of the more than 1,000 survey respondents said they would be able to cover an unexpected $1,000 expense, such as a car breaking down or a flooded home, with the money currently sitting in their savings.

Instead of being able to pay for the emergency with cash on hand, over one-third of the respondents said they would have to put the expense on a credit card or take out a loan. (Hey, it’s not called emergency savings for anything.)

But emergencies can happen to anyone at any time. And so can good things, like a new baby, a wedding, a new home, or job opportunity that means moving across town, the country, or the world (which can get really expensive, fast).

So yes, there are lots of reasons to save, and lots of ways to save too, (which we’ve outlined below). However, for those looking for a benchmark of just how much they should’ve saved by a specific age, things get tricky.

Average savings by age is a tough metric because there are so many variables that go into a number like that. We get it, though, everyone wants a guidepost.

So to help set some loose goals, we’ve outlined a few groups and the average American savings by age, to assist everyone in figuring out just how far their saving needs to go.

(Note: Like with all financial issues, your situation—and mileage—may vary.)

Why Everyone Should Be Saving for the Future

As we mentioned above, life can happen fast. For example, the average cost of just having a new baby can run anywhere from $5,000 to $14,500, let alone the cost of raising your kid for the rest of their life.

And, if that baby wants to get a college degree, you’re looking at a whole new ballpark of savings, as the cost of a college education can run from about $40,000 to well past $100,000.

There’s one other big reason to save for the future: People are living longer. However, people’s nest eggs appear to be losing feathers faster than they thought.

According to a 2019 survey by Aegon Center for Longevity, Transamerica Center for Retirement Studies and Instituto de Longevidade Mongeral Aegon in Brazil, just 36% of American workers are “very confident they will be able to retire comfortably.” Globally, that number is just 29%.

Almost Half the Population Has No Savings

Again, like Bankrate’s 2019 survey shows, a mere 40% of the more than 1,000 survey respondents said they would be able to cover an unexpected $1,000 expense.

The Federal Reserve also notes that 39% of all Americans don’t have enough cash in savings to cover even a $400 emergency.

To make matters worse, according to a 2019 study by ING Group International Surveys , 27% of Americans have no money saved. Even a few dollars saved is something to be proud of—but you shouldn’t stop there.

A Snapshot of the Typical American Household’s Savings

According to another 2018 survey by Bankrate , the typical American household has $8,863 in a savings account at a bank or credit union. But, this number varies greatly by age and number of people in a household. Let’s break it down.

Average Savings for Those 35 and Younger

The 2016 Federal Reserve Survey of Consumer Finances found that those Americans under the age of 35 had an average savings account balance of $8,362 .

Because this is such a large age bracket that can skew from teenagers just graduating high school to recent college grads to young professionals well into a decade’s worth of work, it’s tough to nail down age-by-age where the average may be.

It is typically suggested to have three to six months of expenses in an emergency account. At the very least aim for having $1,000 handy in a savings account just in case.

After hitting a savings stride at a new job, people may want to consider looking into any employer-sponsored retirement funds such as an IRA or a 401(k).

Minimally, add in whatever amount the company will match to ensure potential future savings thanks to compound interest. For reference, the average 401k savings for someone between the ages of 20-29 in 2019 was $11,800.

Average Savings by Age 35-44

The 2016 Federal Reserve Survey of Consumer Finances also found that those Americans between the ages of 35-44 had an average savings account balance of $20,839. Since this age bracket is now well into adulthood, it’s prudent to save up that three- to six-month savings account, to cover the cost of everything from an accident to a lost job.

Now may also be the time to think about diversifying a financial portfolio and potentially investing in the stock market or in real estate.

Again, for reference on where a person may want to be at for retirement savings goals, the average 401k savings for someone between the ages of 30-39 in 2019 was $42,400.

Average Savings by Age 45-54

The 2016 Federal Reserve Survey of Consumer Finances found that those Americans between the ages of 45-54 had an average savings account balance of $30,441.

At this point, common financial advice dictates that a 50 year old should have at least six times their annual salary if their intention is to retire at 67.

And, by the age of 40-49, a person may want to hit the average retirement savings, which sits at $102,700.

Average Savings by Age 55-64

The 2016 Federal Reserve Survey of Consumer Finances found that those Americans between the ages of 55-64 had an average savings account balance of $45,133.

As this is the time when most Americans are staring down retirement in a few years it’s a good idea to kick up savings, specifically retirement savings into high gear.

That’s because while younger people are capped at contributing $18,500 a year to a 401(k) account, those over the age of 50 are allowed to contribute an additional $6,000.

This is known as a catch-up contribution. The average retirement savings account for a person between the ages of 50-59 in 2019 was $174,100. It’s important to note that taking out cash before the age of 59 ½ could mean tax penalties.

Average Savings by Age 65+

This is when savings really peaks for the average American. The 2016 Federal Reserve Survey of Consumer Finances found that those Americans between the ages of 65-74 had an average savings account balance of $54,089.

However, that savings number does drop over time. According to the survey, Americans above the age of 75 had an average savings account balance of $42,391.

This drop means it’s all the more important to create a retirement budget and stick to to ensure enough savings for as long as a person needs it.

But, before retirement, try to hit the average retirement savings number of 2019 for those aged 60-69, which was $195,500.

Saving a Little Bit More

Reaching specific savings goals doesn’t have to be complicated. It just means doing a bit of homework, strategizing, and staying diligent about personal finances.

The first step in saving more is to analyze current expenses to see what can be cut back on or cut out altogether to make more room for saving. This means creating a monthly personal budget and tracking current personal spending.

To track spending, a person could create an excel spreadsheet and list out all expenditures by categories like groceries, phone bill, car expenses, housing, medical, entertainment, etc, over the course of a month. Then, make sure to fill it in with every single dollar spent to see where every cent of money is going.

To make this process a little easier, SoFi offers SoFi Relay, which allows users to connect all their accounts to one mobile dashboard and track spending habits in real time.

After the month is up, the next step is to look back on the expenditures list. Was there anything that surprised you? Going to coffee shops more often than needed? How about that gym membership, did it actually get used? This is the time to get a little ruthless.

After figuring out what’s left, try implementing a general financial outline like the 50/30/20 rule. This means typically 50% of after-tax income goes toward essential expenses like food and rent, while 30% goes toward discretionary expenses like nights out at the movies or concerts. The last 20% belongs to savings and retirement account goals.

Now, it’s time to get creative about saving even more for the future. This can be done by simply direct depositing more cash into a savings or retirement account right from a paycheck. That way, it’s like the cash never existed in the first place.

Those looking to save a few more bucks every month could also do so by getting rid of a bunch of unnecessary expenses like recurring payments on apps they may not even use anymore. But, instead of pocketing that cash for fun, they can go ahead and reroute all that cash right to their savings.

Still feeling the pinch and don’t really have room to save more from a budget? Living paycheck to paycheck (which upward of 74% of Americans are) isn’t anything to be ashamed of, however it may be time to consider taking in a little more work via the gig economy.

Working part-time via an app like Uber, Lyft, or Taskrabbit allows people to set their own hours and make as much cash as they need depending on how much time they can dedicate.

However, those aren’t the only gig economy jobs available. Those with a talent for photography, writing, or creative arts could try freelancing with publications or individual businesses.

And hey, if you’ve got a spare bedroom, try listing it on room rental websites. Users of the most popular rental service earned an average of $924 per month renting out rooms in their home or other properties, according to 2019 data.

Making Your Savings Work Even Harder

There’s one more way to start making more money for your savings account and future, and it takes barely any work at all: Signing up for online investing with SoFi Invest®.

With the account, users can trade stocks and ETFs, buy crypto, or even start an automated investing program to make things quicker and easier than going it alone.

And, for those feeling a bit squeamish about diving headfirst into investing that’s okay too as SoFi Invest gives users the option to invest in smaller amounts like buying fractional shares with SoFi Stock Bits.

The new offering from SoFi gives users the ability to buy and sell fractional shares in mega-brands like Apple, Amazon, and Tesla. And investing a little now can go a long way in saving for tomorrow, next year, and your happy retirement to come.

Put your money to work toward all your long-term financial plans with SoFi Invest.


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

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Tips for Creating a Financial Plan

It’s time to talk about the big picture for a minute, so close your eyes and imagine your future. What does it look like? Are you sitting poolside, sipping margaritas while someone else takes care of your property?

Maybe you’re in an apartment at the heart of New York City, within walking distance to all the greatest shows and restaurants. Or maybe you simply want to have enough money to fully retire—no part-time gig needed.

How to Create a Financial Plan

A financial plan is not just another word for budget or debt-reduction plan. It’s the long-term roadmap that could help make your vision a reality. The smaller pieces, like budgets and debt-payoff strategies, are tools to help you get there.

And whether you sit down with a financial planner or do it yourself, putting pen to paper and writing down not only what you want, but how you plan to get it, could help take it out of your head and make it real. (If you’re the creative type, you might even consider a vision board.)

Setting Your Goals

While everyone’s financial goals will be different based on their individual situation, these three tend to rise to the top of the list:

•   Having an emergency fund. Many recommend a goal of three to six months worth of living expenses. It might help cover those unexpected expenses that show up, or float you through a loss of income, without wrecking your plan.
•   Growing your 401(k) or other retirement accounts. Contributing at least as much to your 401(k) that your employer is willing to match at 100% is akin to doubling your money. Combine that with the magic of compound interest, and you could see your balance grow at a nice pace.
•   Getting rid of high-interest debt. It’s no secret that eliminating your credit card debt could not only save you thousands of dollars in the long run, it could also help improve your credit score.

While those are certainly important, they’re not the entire list. Some other financial goals that might make sense to you could include:

•   Getting (and keeping) good credit. If your dreams include large purchases, or even starting a small business, a bad credit score can be a deal-breaker. The minimum number needed to buy a home, for example, currently sits at around 620 for a conventional loan. (If you’re struggling with bad credit, there are ways to help increase your score.)
•   Paying off your student loans. If this is one of your financial goals, you likely share it with more than 44 million of your closest friends. And while a student loan is generally considered “good” debt, it still accrues interest. It’s also a potentially large chunk of money that could go toward other areas of your plan.
•   Living within your means. Conventional wisdom suggests you shouldn’t borrow more than you can afford. If you think you may need to borrow money, you could begin with a reality check to decide if you can afford to pay off the debt. If not, you may want to consider saving money until you can.
•   Saving for your kids’ education. No one can predict what the higher-ed landscape will look like when your kids are ready to start filling out applications. But we do know that the average costs for tuition and fees for a public college are hovering at just over $10,000 and are currently increasing at a rate of 3.1% over inflation .
•   Growing your investment portfolio. This might include items like your 401(k) and IRA, but it can also mean a foray into the world of stocks and mutual funds. Becoming a smart investor can not only be a goal by itself, but a way to achieve many of your other goals.

The goals that you choose as part of your financial plan may be on vastly different timelines, and you may need to accomplish one before you can move on to another.

One way to stay focused is to remember that you’re in it for the long haul, and huge changes probably aren’t to happen overnight (unless you win the Powerball, of course.)

Understand Your Resources

Knowing exactly what you have to work with might be one of the most important keys to building a plan that works. To put the entire puzzle together, though, you’ll need to find all the pieces.

One way to get started is to gather up all your paper and electronic bank statements, billing accounts, and portfolio documents. (You might also consider storing all your passwords in one place while you’re at it.

Because, let’s be real, remembering all your logins might be the hardest part of this whole process.) So, what are you looking for? The details on where your money is, how it’s moving, and whether it’s working for or against you. This might include:

•   Income: Salary, investment income, alimony, monetary gifts
•   Expenses: Bank debits, monthly billing statements, and other sources of everyday spending
•   Assets: Savings accounts, home equity, or physical items you own (your house, car, collectibles, etc.)
•   Liabilities: Credit card debt, student loans, mortgage(s), and any other sources of debt

The next step—categorizing spending—might be one of the most challenging due to the ever-changing nature of monthly expenses. (But you’ll likely thank yourself for putting in the work later.) An app like SoFi Relay® can give you a birds-eye view of your finances and let you track expenses all from one place.

However you choose to organize your finances, you might want to consider a method that feels natural rather than trying to force yourself into a pre-set structure. You might be more prone to let all your hard work go idle if you just don’t like the system.

Analyzing Outcomes & Exploring Alternatives

If the organization is the outline of your financial puzzle, then creating and analyzing your working plan is like filling in the center. If a piece doesn’t work one way, you can turn it around and try something different.

For example, if your 401(k) continues to grow at its current rate, and you continue to contribute the same amount each month, how much will you have at age 65? What if you push your retirement until age 67, or increase your risk-tolerance on your retirement accounts?

Or, if your debt will take too long to pay off using the snowball method, might another strategy work better? You could keep an eye out for areas in your plan that fall especially short and consider giving them some extra TLC.

With a lot of diligence and “if this, then that” tinkering, you may soon find yourself looking at a realistic, workable financial plan.

Looking for Help If You Need It

But if the picture just isn’t coming together, don’t forget that DIY doesn’t mean do it alone. If you look around, you’re likely to find quality, no- or low-cost expert advice that could help ensure you’re on the right track.

Your employer may offer access to planning tools, for example, as part of their employee benefits package. A number of low- or no-cost services may also be available to you, such as the Association for Financial Counseling and Planning Association .

And, if you become a SoFi member, you’ll have complimentary access to financial planners.

Implementing the Plan

Did you think you’d get through an entire article on how to make a financial plan without one mention of the “b” word? Here it is—the part where you create a budget that helps you implement your plan.

If saving is your ultimate goal, one helpful way to create a solid budget is to track every cent to the penny. Understanding your spending habits could be an effective way to control them.

You might also want to stick to some of the basic tenets of personal finance, like paying your bills on time, keeping one eye on your credit report, and choosing your financial institutions wisely.

You could get your money growing quickly, for example, by setting up a SoFi Money® cash management account.

Monitoring and Reviewing

It’s been a few months since you implemented your financial plan, and so far, so good. But things may have changed a bit.

You paid off one credit card, so you need to reallocate that payment to the next debt. Or, a goal that used to be at the top of your list isn’t so important any more.

Reviewing your plan can mean not only making adjustments, but simplifying. This can include automating any new payments, consolidating new debts, or opting out of paper statements to reduce clutter.

Plus, having the right accounts can go a long way toward helping a person achieve their financial goals. Learn more about how SoFi Money can help.


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What is a Quiet Period?

For investors living in the era of “fake news,” it probably isn’t hard to imagine the chaos which might ensue if there weren’t any rules regarding the marketing of IPOs.

The SEC regulates the sale of securities to ensure that it is done fairly and investors receive accurate information. One of the ways it does this is by restricting the type of communication a company is allowed to do during the time leading up to and following an IPO.

When a company decides to issue an Initial Public Offering (IPO) there are numerous legal and financial steps they go through in preparation.

These include preparing a prospectus and filing an IPO registration statement with the Securities and Exchange Commission. The prospectus is a publicly available document which includes:

•   A description of the company’s business and assets
•   Information about the company’s management team
•   A description of the security being offered in the IPO
•   Independently certified financial statements

The quiet period is a time when company executives, board members, management, and employees cannot publicly promote the company or its stock. Investment bankers and underwriters also cannot put out buy or sell recommendations.

It starts when the company files the registration statement, including a recommended offering price for the security, and lasts for 30 days.

During this time, the SEC looks over all the documentation and approves the registration. The quiet period allows the SEC to complete the review process without bias or interruption and ensures that the company doesn’t attempt to hype, manipulate, or pre-sell their stock.

Companies are allowed to discuss information already in the prospectus during the quiet period, and oftentimes they will go on a “road show” to present this information and get a sense for the potential market. Activities generally avoided during the quiet period are advertising campaigns, conferences, and press interviews.

Some companies are now choosing to confidentially file for IPOs and only release information a few weeks before the sale. The confidential filing had only been allowed for companies with revenue under $1 billion since the 2012 JOBS Act and was extended to all companies in 2017.

This option allows businesses to avoid negative media attention, and if there are any changes in the stock market between the time they file and their planned IPO date, they can adjust their plans accordingly—and without scrutiny.

A study conducted at The Wharton School of The University of Pennsylvania showed that media coverage during a quiet period can result in negative outcomes for investors, so the confidential filing process could potentially help improve those outcomes.

Another quiet period takes place each quarter, during the month before a company files its quarterly earnings report. Similar to the pre-IPO quiet period, executives and management must be careful not to publicly say anything which could be perceived as insider information.

History of the Quiet Period

The quiet period was enacted in 1933 as part of the Securities Act. Prior to the 1929 stock market crash, the Federal Government didn’t regulate the sales or marketing of securities.

This was handled by each individual state. The goal of the Securities Act was to prevent fraudulent activity and marketing hype, as well as to ensure that potential investors across the nation were all presented with the same materials prior to an IPO.

The Securities and Exchange Commission (SEC) became the central regulating party. Companies were now required to register with the SEC and put together a prospectus document outlining the company’s team, assets, finances, and the security being offered in the IPO.

Since the SEC must act as a neutral party when vetting a company’s registration materials, the quiet period allows them to perform this task unbiased. It also gives investors the chance to assess the prospectus and IPO pricing in order to make informed purchasing decisions.

A few amendments have been made to the Securities Act regarding the quiet period since the 1930s. These include the recognition that companies may have made public statements prior to filing their registration, and clarifications about the type of marketing and communications a company is still allowed to do.

In the early 2000s the SEC modernized the rules of the quiet period to include clarifications about digital and online communications.

Other recent changes have made the rules more lax, such as permitting the solicitation of accredited investors. Perhaps one day the quiet period may no longer be enforced, but for now it is still an important part of the IPO process.

Violation of the Quiet Period

Violation of the quiet period is called “gun-jumping.” If the SEC deems a statement made by a company is in violation of the quiet period, consequences can include:

•   A delayed IPO
•   Liability for violating the Securities Act
•   Requirement to disclose the violation in the company’s prospectus

What to do During a Quiet Period

Quiet periods can be a good time to assess whether you’re interested in investing in a company’s IPO. Seasoned investors look to profit at the end of the quiet period, called the quiet period expiration.

At this time the stock price and trading volume can see drastic movement up or down, since a flood of information gets released from analysts.

Unbiased prospectus information about recent filings can be viewed on the SEC website. It’s a good idea to read the prospectus so you can judge for yourself whether a company’s mission, team, and financials look like a sound investment.

One of the keys to building a successful long term portfolio is diversification. By mixing investments from higher and low risk, new and established companies, you can likely reduce the risk of a single investment having an outsized effect on your performance.

IPOs have the potential to be lucrative investments, but can also turn out to be extremely volatile and could lose value. A good way for new investors to add recent IPO stocks to their portfolios is through an IPO ETF.

ETFs include multiple stocks and are generally rebalanced over time, so investors can hope to gain access to growing companies while diversifying their risk.

Don’t Keep a Lid on Your Investments

If you have questions or want to discuss your investment strategies and portfolio, the SoFi Invest team is here to help. Investing in IPOs can be risky and takes time.

If you’re looking for an efficient way to add some of the newest IPO stocks to your portfolio, let SoFi do the heavy lifting using the Automated Investing platform.

Or, if you love doing your own IPO homework, the SoFi Active Investing platform can give you access to stocks of newly public companies.

Learn more about SoFi Invest®.


External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.

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What is The Average Rate of Return on a 401K?

If your employer offers a 401(k) plan, you’ve probably wondered if it’s really the right place to put a portion of your hard-earned money every month.

You’ve likely been told that the earlier you start saving for retirement, the better off you’ll be. But how can you know that the average rate of return on your 401(k) investments will be the same or more than other available options?

After all, if you’re going to make sacrifices now to put money toward the future, you want it to be the best retirement possible.

A Few 401(k) Basics

To understand what a 401(k) has to offer, it can help to know what it is. The IRS defines a 401(k) as “a feature of a qualified profit-sharing plan that allows employees to contribute a portion of their wages to individual accounts.”

In other words, employees can choose to delegate a portion of their pay to an investment account that is set up through their employer.

And because participants put the money from their paycheck into their 401(k) on a pre-tax basis, those contributions reduce their annual taxable income.

Taxes are deferred on contributions and growth in a 401(k) account until the money is withdrawn (unless it’s an after-tax Roth 401(k)).

A 401(k) is a “defined-contribution” plan, which means the participant’s balance is determined by contributions made to the plan and the performance of the investments the participant chooses.

That makes it different from a “defined-benefit” plan, or pension, which puts the investment risk on the plan provider and guarantees the employee a monthly income in retirement.

Employers aren’t required to make contributions to employee 401(k) plans, though many do—typically by offering to match a certain percentage of an employee’s contributions.

Besides the tax advantages and the convenience of automatic 401(k) payroll deductions—which can help make saving simpler for everyone, but especially for those who might otherwise lack the discipline—it’s the employer match that can be a big draw for plan participants. It’s tough to turn down free money.

Employer-sponsored 401(k)s have made investing accessible to more Americans, and the plans encourage saving for the long-term. Compound growth over time can be one of an investor’s most valuable tools.

And the less money there is coming out of a paycheck because of taxes, the more there is available for compounding. But there are other factors to consider when looking at a 401(k).

One of the less-talked about benefits of 401(k) plans is that they’re protected by federal law. The Employee Retirement Security Act of 1974 (ERISA) sets minimum standards for employers that choose to set up retirement plans and for the administrators who manage them.

Those protections include a claims and appeals process to make sure employees get the benefits they have coming—that there is a right to sue for benefits and breaches of fiduciary duty if the plan is mismanaged, that certain benefits are paid if the participant becomes unemployed, and that plan features and funding are properly disclosed. Another plus: ERISA-qualified accounts are protected from creditors.

401k Fees, Vesting and Penalties

But there are some downsides for some 401(k) investors. The typical 401(k) plan charges a fee of 1% of assets under management. That means an investor who has $100,000 in a 401(k) could pay $1,000 or more. And as that participant’s savings grow over the years, the fees could add up to thousands of dollars.

Fees eat into your returns and make saving harder—and there are companies, including SoFi Invest®, that don’t charge management fees on their investment accounts. (If you’re unsure about what you’re paying, you should be able to find out from your plan provider, HR, or you can do your own research on various 401(k) plans.)

Although any contributions a participant makes belong to that individual 100% from the get-go, a vesting schedule may dictate the degree of ownership the employee has when it comes to employer contributions.

And don’t forget, some of the money in that tax-deferred retirement account also belongs to Uncle Sam. And he wants 401(k) investors to keep growing their savings for retirement.

So besides any other taxes due when there’s a withdrawal, if a participant decides to take money from a 401(k) before reaching age 59½, there’s usually a 10% penalty. (Although there are some exceptions.) And at age 70½, retirees are required to take minimum distributions from their tax-deferred retirement accounts.

Another thing to consider when looking at signing up for a 401(k) is what kind of investing you’d like to do. A lot of 401(k) plans have a slim selection of investments to choose from.

Employers are required to offer at least three basic options: a stock investment option, a bond option, and cash or stable value option.

Many offer more than the minimum, but they stick mostly to mutual funds. That’s meant to streamline the decision-making for investors who might be overwhelmed by too many choices and suffer from analysis paralysis. But for those looking to diversify outside the basic asset classes, it can be limiting.

How Do 401(k) Returns Hold Up?

It would be nice if we could know the average rate of return to expect from a 401(k). But the answer is, it depends. It depends on the investments a particular plan has to choose from and the portfolio a particular participant creates. And it depends on what the market decides to do from day to day and year to year.

Based on past numbers, the classic 60/40 portfolio—the moderate asset allocation common among investors participating in 401(k) plans—generally provides an annual return that ranges from 5% to 8% .

But that doesn’t mean a 60/40 investor will always be in that range. Sometimes that mix will have double-digit returns. Sometimes, it will drop down to negative numbers.

And no one can know how the strategy will fare as the market expands and evolves. (A financial professional may be able to help you analyze how your particular portfolio choices would have done during down markets, like those we experienced in 2000 and 2008.)

A basic 60/40 mix, which allocates 60% to equities and 40% to bonds/cash investments, is meant to maintain balance in a portfolio as the market fluctuates, minimizing risk while generating a consistent rate of return over time—even when the market is experiencing periods of volatility.

Stocks have the greatest potential for growth over time. Since 1926 , large stocks have returned an average of 10% per year, while long-term government bonds, which are considered more stable, have returned between 5% and 6%.

The 60/40 mix was popularized by Jack Bogle, the late founder of The Vanguard Group who is credited with creating the first index fund. And it’s easy to accomplish with the mutual funds available through 401(k) plans. But not every investor has to—or should—go with that exact ratio.

Asset allocation is usually based on an investor’s risk tolerance and time horizon—the amount of time until an individual will be ready to tap his or her retirement funds.

Retirement plan participants can figure out their best mix on their own, with the help of a financial advisor, or by opting for a target-date fund—a mutual fund that bases asset allocations on when the participant expects to retire.

A 2050 target-date fund will likely be more aggressive—it might have more stocks than bonds and will typically have a higher rate of return. A 2025 fund will lean more toward safety, protecting an investor who is nearer to retirement, and might be invested mostly in bonds. (Again, the actual returns an investor will see may be affected by the whims of the market.

But this is how these funds are targeted.) Most 401(k) plans offer target-date funds, and they make investing easy for hands-off investors. But if that’s not what you’re looking for, and your 401(k) plan makes an advisor available to work with you, you may be able to get more specific advice. Or, if you want more help, you could hire a financial professional to work with you on your overall plan as it relates to your long- and short-term goals.

Another possibility might be to go with the basic choices in your workplace 401(k), but also open a separate investing account with which you could take a more hands-on approach—maybe a traditional IRA if you’re still looking for tax advantages, a Roth IRA if you want to limit your tax burden in retirement, or an account that lets you invest in what you love, one stock at a time.

Making the Most of Investment Options

Whether it’s your only retirement account or not, it’s up to you to manage your employer-sponsored 401(k) in a way that makes the most of the options it offers.

One way to start is by familiarizing yourself with the rules on how to maximize the company match. Is it a dollar-for-dollar match up to a certain percentage of your salary, a 50% match, or some other calculation? It also helps to know the policy regarding vesting and what happens to those matching contributions if you leave before you’re fully vested.

With or without help, taking a little time to assess the investments in your plan could boost your bottom line, and you may be able to tailor your portfolio to better accomplish your financial goals. Checking past returns can provide some information when choosing investments and strategies, but looking to the future also can be useful.

If you have a career plan (will you stay with this employer for years or be out the door in two?) and a personal plan (do you want to buy a house, have kids, start your own business?), it may help you decide how much to invest and where to invest it.

Have you lost track of the 401(k)s you left behind at past employers? It may make sense to roll them into your current employer’s plan, or to roll them into a separate IRA outside of your workplace. You might need to update your portfolio mix, and you might be able to eliminate some fees.

Keep in mind that there are different contribution limits for 401(k)s and IRAs . For those under age 50, the 2020 contribution limit is $19,500 for 401(k)s and $6,000 for IRAs. For those 50 or older, the 2020 contribution limit is $26,000 for 401(k)s and $6,500 for IRAs. Other rules and restrictions may also apply.

The good news here is that investors have options as they save for the future. They can be as aggressive or as conservative as they want by choosing the investment mix that best suits their timeline and financial goals.

They can stick with one type of retirement account or fund, or they can diversify their investments and strategies with multiple accounts. And they can be hands-off or hands-on. The only thing they can’t afford to do is nothing.

If you have questions about how 401(k)s and other investment plans can benefit you as you work toward your goals, it can help to get some professional guidance.

With a SoFi Invest account, you’ll have complimentary access to financial advisors who can talk to you about diversifying your portfolio and maximizing the money you have to invest now and in the future.

You won’t pay transaction or SoFi management fees. And you can trade stocks online and ETFs yourself with active investing, or let SoFi put together an automated portfolio based on your input.

When you’re ready to invest, check out SoFi Invest, and get help building a plan for the future.


External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
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.
SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.

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How Much Does it Cost to Remodel a House?

In the world of HGTV renovation shows, remodeling a home might look like a breeze. Interior design pros tackle a home in 30 minutes (including commercial breaks) and finish on time—miraculously under budget.

But, real life is rarely like reality TV. Home remodels can sometimes be complicated, and costly. Coming up with a budget beforehand could help avoid the headaches and hard choices that can crop up down the line.

Ready to start calculating a potential dream home remodel? Turn off the home renovation show, grab a calculator, and read on.

There’s no one “magic number” a person can bank on when it comes to the cost of a home renovation.
However, there are several factors that a homeowner can take into account when budgeting for a home remodel: high-end vs low-end, type of home, and rooms renovated.

Factors of a Home Remodel Cost

High-end Versus Low-end Renovation

A renovation of a 2,500 square foot home could cost anywhere between $25,000 and $150,000 on average . The variation in price stems mostly from the scale of the projects. According to HomeAdvisor , a homeowner can expect to generally complete the following within each budget range:

•   Low-end ($15,000-$45,000). A renovation of this size would include small changes, such as new paint and fresh landscaping. It might also include inexpensive finishes, such as new counters and flooring.
•   Middle-end ($46,000-$70,000). In addition to the low-end projects, a middle-end home renovation includes full room remodels, like a bathroom and kitchen, as well as a higher quality flooring than the low-end renovation.
•   High-end ($71,000-$200,000). A high-end budget would include the low- and middle-end projects, as well as high-quality finishes including custom cabinetry and new appliances. It might also include improvements to the foundation, HVAC, plumbing, and electrical.

As a homeowner begins to identify what rooms they want to upgrade and to what extent, they will begin to customize their renovation budget. Just one in five homeowners finish renovations under budget, so it’s recommended to pad estimates in the event of unexpected costs.

Type and Age of Home

Older homes will typically need more TLC during the renovation process. Once walls and floors are opened up, a homeowner might realize the wiring and plumbing is outdated and should be brought up to code.

While a person’s home won’t be unsellable if everything isn’t up to code, there could be issues with financing because generally lenders will not close on a home where health and safety issues are identified.

People may decide that adhering to building standards ensures the work is up to code and that it’s a safe renovation. That can involve time, money, and work. That is why sometimes older homes can involve more work than the average renovation.

If a person’s home is old enough to be considered “historic” in their town or community, they’ll want to be careful about the changes they make. Depending on where a person lives, they’ll likely need to adhere to their city’s guidelines to make sure their home still falls into the “historic“ categorization, even after a remodel.

Designated historic properties in states like Connecticut could boost a home’s value between 4% and 19% , on average.

Depending upon the condition of the home and any past upgrades, a home’s age can have an impact on the cost of renovation, but so too can the type of home, regardless of age.

HomeAdvisor estimates that Victorian homes generally cost the most to renovate per square foot, up to $200 and that farmhouses and townhouses tend to have the lowest cost per square foot, between $10-$35 .

Use SoFi’s Home Improvement Cost Calculator
to estimate the price of your next remodel.


Typical Renovation Costs by Room

For many homeowners, a dream renovation would cover every inch of the home, but for the budget-conscious, that might not be possible.

When it comes to renovation expenses, generally, not every room is created equally. Rooms with cabinets and appliances tend to be the priciest—think bathrooms and kitchens.

Kitchen Remodel

The typical range for the cost of remodeling a kitchen comes in between $13,052-$37,026 , but kitchens can have the most variation when it comes to cost, depending on finishes, appliances, and projects.

Here’s what a homeowner could expect to overhaul in a kitchen based on the budget range :

•   Low-end ($5,000-$30,000). New lighting, faucet, coat of paint, refreshed trim, and a new but budget-friendly sink backsplash. This also might include knocking down walls or a counter extension project.
•   Middle-end ($30,000-$60,000). This budget could include new appliances, floors, and tiled backsplash to the sink. It might also include new cabinets and mid-range priced countertops.
•   High-end ($65,000+). When the budget expands for a kitchen, the projects start to take on custom finishes. A high-end budget would likely include custom cabinets, high-end countertops like stone or granite, and expensive appliances. Other projects might include new lighting, hardwood flooring, and new faucet fixtures.

Because a kitchen can be so customizable and include so many levels of finishes, the budget could fluctuate greatly.

Bathroom Remodel

Bathrooms take on a similar budgeting structure. The typical range for the cost of a bathroom remodel is between $5,989-$14,964 , but that includes a range of projects and features.

For example, new cabinets in a bathroom can account for up to 30% of the budget . Other big-ticket items come in a range of prices based on low-end versus high-end finishes.

On the low-end, a new bathtub might cost just $400 , but if a homeowner is looking for a high-end tub, they could pay upwards of $8,000 . The final cost will likely hinge on the homeowner’s decision on budget range.

Bedroom and Living Room Remodel

Budgeting a bedroom remodel can be a little more cut and dry since it generally doesn’t include as many costly fixtures as a person might find in the bathroom or kitchen. A homeowner can expect to tackle a bedroom for about $7,880, on average .

This typically includes new carpet, windows, door, and refreshed molding. It might also include new heating, insulation, and updated wiring and lighting. But this budget doesn’t account for new furnishings in the bedroom, like a bed or wardrobe.

Remodeling a master suite could cost a bit more since it typically includes a bathroom and bedroom renovation. If a homeowner wants to add or expand a closet in the master suite, they can estimate adding around $1,500 to $2,000 to the room’s budget, on top of the bathroom and bedroom.

A living room remodel can cost between $1,500-$5,500, on average . Like the bedroom, living rooms tend to lack the “wet” features, plumbing and appliances, that can drive up the cost of the bathroom and kitchen.

If a living room has a fireplace feature, homeowners can expect to spend a bit more. Looking to add a fireplace? That could add at least $2,000 to the room .

Exterior Remodel

Updating roofing and refreshing the exterior of a home is commonly part of a renovation. A new roof could cost $20,000 , on average, but will vary depending on materials.

Adding new siding to a home will typically cost around $14,000 , but will once again fluctuate based on the material used. Painting the exterior of a home will cost between $1,710 and $4,000 .

Of course, depending on the degree to which each room is remodeled, the estimates could vary. DIY-ing projects in various rooms could also help bring down the budget.

Other Remodel Considerations

A remodel isn’t just financial spreadsheets. There are other considerations a homeowner may want to consider before taking a sledgehammer to a room.

Timeline

A renovation could take anywhere from a few days to a few months, so a homeowner may want to plan their timeline accordingly. It might be tempting to duck out of town when big projects are underway, but staying around means the homeowner could monitor projects and provide answers if any unexpected issues arise.

Additionally, renovations can be stressful and might be best scheduled around other big life events. For example, homeowners might think twice about a full home remodel that coincides with nuptials, or a baby on the way. Of course, unexpected events could arise, but there may be no need to pile on projects when so much is going on.

Who Is the Renovation for?

Before diving deep into plans, homeowners may want to consider who the renovation is for. Is it for the homeowner to enjoy decades from now, or is it to make the house more marketable for a future sale? The renovation could take a different shape depending on a homeowner’s answer.

If the remodel is just for the homeowner, then they might choose fixtures based on personal taste, or might decide to splurge on high-end bathroom features that they’ll enjoy for years.

On the other hand, if the homeowner plans to sell within a few years, they may consider tackling projects that have the greatest return on investment (ROI). That could mean prioritizing projects like a kitchen update or bathroom remodel.

Not sure about a project’s resale value? SoFi’s home project value estimator can be a useful tool to help determine the approximate resale value of a home improvement project.

Delays and Unforeseen Expenses

Homeowners might expect the unexpected when undergoing a remodel. Unexpected delays could extend the timeline, or emergency expenses could drive a project over budget.

As a general rule of thumb, it is recommended for homeowners to pad their budget by at least 10% for emergencies or unexpected costs.

Financing a Remodel

Coming up with the capital to finance a remodel can be daunting enough to make some homeowners abandon the whole process. However, there are multiple avenues homeowners can explore to start the remodel of their dreams.

Out of Pocket

Homeowners who take on small renovations and have liquid savings might decide to pay for everything out of pocket. This means no debt or interest rates to contend with.

However, paying cash for a large project can be challenging for some, and might lead to cutting corners on important elements in an effort to keep costs down. Plus, unexpected emergency costs could drive the homeowner into unexpected debt.

Out of pocket is possible for some homeowners, but it’s not the only way to pay for a remodel.

From Friends or Family

Another alternative is to borrow money from family members or friends. While this saves homeowners from having to deal with loan applications and approvals, and potentially provides more flexible terms, it can come with its own share of issues, such as risking the relationship if the borrower is unable to pay back the lender (in this case, family or friends).

Homeowners may want to carefully consider the effect borrowing money for a remodel might have on a relationship, and make sure there are plans in place in case the money can’t be repaid.

Additionally, loans from family members may be considered gifts by the IRS (and may be taxable), so it’s best to discuss with a tax professional before proceeding.

HELOC

A HELOC, or Home Equity Line of Credit, allows homeowners to pull a certain amount of equity out of their home to finance things like renovations.

Qualifying for a HELOC depends on several factors, including the outstanding mortgage amount on the home, the market value of the home, and the owner’s financial profile.

HELOCs typically come with an initial low-interest rate, and a homeowner generally has the option to only pay interest on the amount they’ve actually withdrawn.

However, they could also have high upfront costs, and can come with a variable interest rate with annual and lifetime rate caps.

Personal Loan

If a homeowner doesn’t have the cash on hand or enough equity in their home for a HELOC, then a personal loan might be a consideration.

An unsecured personal loan is generally an unsecured installment loan that isn’t attached to a person’s home equity, and typically can be funded faster than secured loans and with fewer or no upfront fees.

Personal loans might be a good option for people who recently bought their homes, need capital quickly for unexpected personal reasons, or need a loan for their home improvement project.

SoFi’s personal loans are generally funded in as little as three days, with competitive rates, and no fees. Qualified borrowers may be eligible to borrow $5,000 to $100,000 for a home improvement or other personal needs, and can apply online in a few clicks.

Home remodels are stressful enough, but with a home improvement loan from SoFi, finding a way to pay for them doesn’t have to be.


External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
Third Party Brand Mentions: No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
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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Terms, conditions, and state restrictions apply. SoFi Home Loans are not available in all states. See SoFi.com/eligibility for more information.

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