Oct
10
2024
How to Open Your First IRA

How to Open an IRA: Beginners Guide

By | Budgeting & Goals, Building Your Career, Growing Wealth, invest, Investing | No Comments

Saving for retirement may be the biggest financial goal many of us will ever set. So it makes sense to explore all retirement savings options, including an IRA, or individual retirement account. Individual retirement accounts are tax-advantaged tools that can be opened by virtually anyone with earned income, unlike employer-sponsored 401(k) plans. The sooner you open your first IRA, the more opportunity your savings have to grow over time, potentially leading to a nice nest egg upon retirement.

There are other benefits to opening an IRA. For one, it can deliver attractive tax perks — either up front or in retirement — and it can be especially attractive to individuals who don’t have an employer-sponsored 401(k) plan, or have maxed it out already.

This article will walk you through the steps of opening an IRA — whether a traditional, Roth, or SEP IRA.

Key Points

• Opening an IRA provides a tax-advantaged way to save for retirement, allowing individuals with earned income to benefit regardless of employer-sponsored plans.

• Selecting the right investing style, either through a robo-advisor for automation or an online broker for hands-on management, is crucial when setting up an IRA.

• Different types of IRAs, including Traditional, Roth, and SEP IRAs, offer various tax benefits and contribution limits based on income and employment status.

• The process of opening an IRA involves providing personal information, identification, and selecting beneficiaries, followed by funding the account through transfers or rollovers.

• Choosing the right investments within an IRA, such as stocks, bonds, or target date funds, should align with individual risk tolerance and retirement goals for optimal growth.

How to Open an IRA

1. Choose Your Investing Style

When setting up an IRA, you have the option to select the investing style that aligns with your preferences and goals. You can choose between two primary methods: using an online broker for self-directed investing or opting for a robo-advisor for automated investing.

•   Consider a robo-advisor for a hands-off approach: If you find the array of investment choices daunting or you’re unsure where to begin, a robo-advisor might be the ideal solution. This option allows you to take a more hands-off approach and automate your investments. Simply share your retirement and investment objectives, and the robo-advisor will create and maintain a tailored portfolio specifically designed to meet your needs.

•   Choose an online broker to take control of your investments: For those who prefer to be more involved and make their own investment decisions, using an online broker for self-directed investing is the way to go. This method allows you to directly manage your investments and typically comes with the benefit of commission-free trades. This is a great choice for individuals who want to actively participate in the management of their IRA investments.

2. Choose Where to Open Your IRA

You can open an IRA at a brokerage, a bank, mutual fund company, or other financial services provider. Typically, the more personal care and advice you get, the higher the account fees will be. A robo-advisor, for instance, might charge lower fees than a brokerage.

Get a 1% IRA match on rollovers and contributions.

Double down on your retirement goals with a 1% match on every dollar you roll over and contribute to a SoFi IRA.1

1Terms and conditions apply. Roll over a minimum of $20K to receive the 1% match offer. Matches on contributions are made up to the annual limits.

3. Choose the Type of IRA You Want to Open

Traditional IRA

If you have earned income, you can open a traditional IRA regardless of how much you make per year. An IRA can be a good next step if you’ve maxed out your 401(k), for instance.

One notable difference between traditional and Roth IRA accounts is that traditional IRAs allow you to deduct your contributions on your tax returns now, meaning you pay taxes on distributions when you retire. You’ll pay a 10% penalty tax (in addition to regular income tax) on any money you withdraw from a traditional IRA before age 59 ½, with a few exceptions.

It may be better to go with a traditional IRA if you think you’ll be in a lower tax bracket after retirement. This is because you’ll be saving on a higher tax rate now (vs. the lower rate you’d be paying later, since you’d be in a lower tax bracket in retirement).

Roth IRA

Unlike traditional IRAs, there are income limits on who can open a Roth IRA. For 2024, individuals can only contribute the full amount — $7,000, with an additional $1,000 for people age 50 or over — to a Roth IRA if their income is below $146,000 for single filers. Those earning more than $146,000 but less than $161,000 can contribute a reduced amount. For married people who file taxes jointly, the limit is $230,000; those who earn up to $240,000 can contribute a reduced amount.

Roth IRA contributions are made with after-tax income. While that doesn’t offer any tax advantages now, it does mean that when you withdraw money upon retirement, you won’t have to pay taxes on it. As such, a Roth IRA may make sense for eligible individuals who typically get a tax refund and expect to be in a similar or higher tax bracket when they retire (for example, if they plan to have substantial income from a business, investments, or work).

SEP IRA

A SEP IRA, or simplified employee pension, can be set up by either an employer at a small business or by someone who is self-employed.

Employers get a tax deduction when they contribute to their employees’ IRAs, and they’re also allowed to contribute on a “discretionary basis” (meaning the employer doesn’t have to contribute in years where it’s not as financially feasible for the company.) For employees, this option may allow you to contribute a greater amount than other IRAs, depending on your income.

4. Open an IRA Account

Once you decide where to open an IRA, you’ll need to follow through with doing so. The process to open an IRA can vary a bit from provider to provider, but it’s generally pretty straightforward.

What You’ll Need to Open an IRA

•   A copy of your government-issued ID

•   Personal information, including contact information and Social Security number

•   Details on intended beneficiaries

5. Fund Your Account

Once your account is opened, you’ll receive guidance on funding an IRA. If you want to fund your account through an electronic transfer, you’ll be asked to provide banking information. It’s also possible to roll over existing retirement accounts — and yes, it is possible to open an IRA if you have a 401(k) already.

As of 2024, you can contribute up to $7,000 a year to a traditional or Roth IRA, or up to $8,000 if you’re 50 or older. If you take home more than the maximum earnings allowed for a Roth IRA but still prefer a Roth IRA over a traditional account, you might be able to contribute a reduced amount of Roth IRA contribution limits. An IRA contribution calculator can help you get an idea of how much you can contribute this year.

In many cases, it’s a good idea to invest as much as you can up to that amount each year to take full advantage of the power of compound growth.

A retirement calculator can help you figure out whether you’re on track for retirement. A quick rule of thumb: By the time you’re 30, it’s typically good to have the equivalent of one year’s salary saved.

Rolling Over a 401(k) into an IRA

If you’re leaving a job with an employee-sponsored retirement plan, you can roll over your 401(k) into a traditional IRA. When you roll money over from a 401(k), there’s no limit to how much you can add to an IRA at that time. Going forward, additional contributions will be capped at the typical IRA contribution limit.

Bonus Step: Choose Your Investments

Investors can choose to invest in stocks, bonds, mutual funds, low-cost index funds, or exchange-traded funds (ETFs) — or a combination thereof – through a financial institution.

One popular type of investment fund geared toward retirement savings is a “target date fund.” A target date fund is calibrated to the year you plan to retire, and it’s meant to automatically update your mix of assets, like stocks and bonds, so they’re more aggressive earlier in life and more conservative as you approach retirement.

Ultimately, the mix of investments in your IRA should depend on your personal risk tolerance, lifestyle, and retirement goals.

Pros and Cons of IRAs

If you’re contemplating whether to open an IRA, it’s important to understand the pros and cons of this category of retirement account. Here’s a look at the pros and cons of traditional and Roth IRAs, two of the most common types of IRAs:

Pros

 Cons
Tax-advantaged saving Lower contributions limits than other types of retirement accounts
Anyone can open one Income limits on contributions/ deductions
Wider array of investment options No employer matching contributions
Easy to set up Have to set it up yourself

Traditional IRA

Contributions to a traditional IRA are potentially tax deductible, which can lower your taxable income for the year. However, you will pay taxes on withdrawals in retirement.

Roth IRA

With a Roth IRA, contributions are made with after-tax dollars, but the growth and withdrawals in retirement can occur tax free. This can be a significant advantage if you expect to be in a higher tax bracket in retirement.

Investing in Your Retirement

Once you’re familiar with how to open an individual retirement account, the process itself is pretty straightforward — possibly the biggest lift involved is deciding which IRA suits your personal situation and retirement goals best: a traditional, Roth, or SEP IRA. From there, you’ll need to decide where to start a Roth IRA or other type or IRA, then go through the formal process of starting an IRA, which includes providing certain information, funding the account, selecting a contribution amount, and deciding where to invest your funds.

That can all sound like a lot, but getting started on saving for your retirement doesn’t have to be difficult. SoFi Invest makes opening an IRA simple — it’s possible to sign up in less than five minutes. You can be as involved in the investment process as you want to be — either with hands-on investing or our automated investing technology, in which our algorithm will recommend an appropriate mix of investments based on your age and retirement goals.

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

FAQ

How much money is required to open an IRA?

There’s no universal minimum amount required to open an IRA. That being said, some providers will have minimum requirements.

Can you open an IRA all on your own?

Yes, it’s definitely possible to open an IRA on your own. The process is simple, similar to opening a bank account, and you can do so at most banks, brokerages, or other financial institutions. Often, it’s possible to start an IRA online.

Can you open an IRA at a bank?

Yes, many banks offer IRAs. You can also open an IRA at credit unions, brokerages, and investment companies.

About the author

money management guide for beginners

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.

Claw Promotion: Customer must fund their Active Invest account with at least $25 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

SoFi Invest®

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

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

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.

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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Oct
02
2024
Businessman on cell phone

How to Roll Over Your 401(k): Knowing Your Options

By | Budgeting & Goals, Building Your Career, Growing Wealth, invest, Investing, Life & Career | No Comments

It’s pretty easy to rollover your old 401(k) retirement savings to an individual retirement account (IRA), a new 401(k), or another option — yet millions of workers either forget to rollover their hard-won retirement savings, or they lose track of the accounts. Given that a 401(k) rollover typically takes minimal time and, these days, minimal paperwork, it makes sense to know the basics so you can rescue your 401(k), roll it over to a new account, and add to your future financial security.

Whether you’re starting a new job and need to roll over your 401(k), or are looking at what other options are available to you, here’s a rundown of what you need to know.

Key Points

•   Rolling over a 401(k) to an IRA or new 401(k) is typically straightforward and your retirement funds will continue to have the opportunity to grow.

•   Moving 401(k) funds to another 401(k) is often the simplest option and allows you to continue to have a higher contribution limit.

•   Moving 401(k) funds to an IRA may provide more investment choices and control over those investments.

•   Leaving a 401(k) with a former employer is an option but may involve additional fees and complications.

•   Direct transfers are simpler and generally preferred over indirect transfers, which run the risk of incurring tax liabilities and penalties.

401(k) Rollover Options

For workers who have a 401(k) and are considering next steps for those retirement funds — such as rolling them to an IRA or another 401(k), here are some potential avenues.

Roll Over Money to a New 401(k) Plan

If your new job offers a 401(k) or similar plan, rolling your old 401(k) funds into your new 401(k) account may be both the simplest and best option — and the one least likely to lead to a tax headache.

That said, how you go about the rollover has a pretty major impact on how much effort and paperwork is involved, which is why it’s important to understand the difference between direct and indirect transfers.

How to Roll Over Your 401(k): Direct vs Indirect Transfers

Here are the two main options you’ll have if you’re moving your 401(k) funds from one company-sponsored retirement account to another.

A direct transfer, or direct rollover, is exactly what it sounds like: The money moves directly from your old account to the new one. In other words, you never have access to the money, which means you don’t have to worry about any tax withholdings or other liabilities.

Depending on your account custodian(s), this transfer may all be done digitally via ACH transfer, or you may receive a paper check made payable to the new account. Either way, this is considered the simplest option, and one that keeps your retirement fund intact and growing with the least possible interruption.

Another viable, but more complex, option, is to do an indirect transfer or rollover, in which you cash out the account with the expressed intent of immediately reinvesting it into another retirement fund, whether that’s your new company’s 401(k) or an IRA (see above).

But here’s the tricky part: Since you’ll actually have the cash in hand, the government requires your account custodian to withhold a mandatory 20% tax. And although you’ll get that 20% back in the form of a tax exemption later, you do have to make up the 20% out of pocket and deposit the full amount into your new retirement account within 60 days.

For example, say you have $50,000 in your old 401(k). If you elected to do an indirect transfer, your custodian would cut you a check for only $40,000, thanks to the mandatory 20% tax withholding.

But in order to avoid fees and penalties, you’d still need to deposit the full $50,000 into your new retirement account, including $10,000 out of your own pocket. In addition, if you retain any funds from the rollover, they may be subject to an additional 10% penalty for early withdrawal.

With all of that in mind, rolling over your money into a new 401(k) has some pros and cons:

Pros:

•   Often the simplest, easiest rollover option when available.

•   Should not typically result in any tax liabilities or withholdings.

•   Allows your investments to continue to grow (hopefully!), uninterrupted.

Cons:

•   New employer may change certain aspects of your 401(k) plan.

•   There may be higher associated fees or costs with your new plan.

•   Indirect transfers may tie up some of your funds for tax purposes.

Roll Over Your 401(k) to an IRA

If your new job doesn’t offer a 401(k) or other company-sponsored account like a 403(b), you still have options that’ll keep you from bearing a heavy tax burden. Namely, you can roll your 401(k) into an IRA.

The entire procedure essentially boils down to three steps:

1. Open a new IRA that will accept rollover funds.

2. Contact the company that currently holds your 401(k) funds and fill out their transfer forms using the account information of your newly opened IRA. You should receive essential information about your benefits when you leave your current position. If you’ve lost track of that information, you can contact the plan sponsor or the company HR department.

3. Once your money is transferred, you can reinvest the money as you see fit. Or you can hire an advisor to help you set up your new portfolio. It also may be possible to resume making deposits/contributions to your rollover IRA.

This option also has its pros and cons, however.

Pros

•   IRAs may have more investment options available.

•   You’ll have more control over how you allocate your investments.

•   You could potentially reduce related expenses, depending on your specifications.

Cons

•   May require you to liquidate your holdings and reinvest them.

•   Lower contribution limit compared to 401(k).

•   May involve different or higher fees and additional costs.

•   IRAs may provide less protection from creditor judgments.

•   You’ll be subject to new distribution rules – namely, you’ll need to be 59 1/2 before withdrawing funds to avoid incurring penalties.

Leave Your 401(k) With Your Former Employer

Leaving your 401(k) be – or, with your former employer – is also an option.

If you’re happy with your portfolio mix and you have a substantial amount of cash stashed in there already, it might behoove you to leave your 401(k) where it is.

You’ll also want to dig into the details and determine how much control you’ll have over the account, and how much your former employer might.

You might also consider any additional fees you might end up paying if you leave your 401(k) where it is. Plus, racking up multiple 401(k)s as you change jobs could lead to a more complicated withdrawal schedule at retirement.

Pros

•   It’s convenient – you don’t do anything at all, and your investments will remain where they are.

•   You’ll have the same protections and fees that you previously had, and won’t need to get up to speed on the ins and outs of a new 401(k) plan.

Cons

•   If you have a new 401(k) at a new employer, you could end up with multiple accounts to juggle.

•   You’ll no longer be able to contribute to the 401(k), and may not get regular updates about it.

Cash Out Your Old 401(k)

Cashing out, or liquidating your old 401(k) is another option. But there are some stipulations investors should be aware of.

Because a 401(k) is an investment account designed specifically for retirement, and comes with certain tax benefits — e.g. you don’t pay any tax on the money you contribute to your 401(k), depending on the specific type — the account is also subject to strict rules regarding when you can actually access the money, and the tax you’d owe when you did.

Specifically, if you take out or borrow money from your 401(k) before age 59 ½, you’ll likely be subject to an additional 10% tax penalty on the full amount of your withdrawal — and that’s on top of the regular income taxes you’ll also be obligated to pay on the money.

Depending on your income tax bracket, that means an early withdrawal from your 401(k) could really cost you, not to mention possibly leaving you without a nest egg to help secure your future.

This is why most financial professionals generally recommend one of the next two options: rolling your account over into a new 401(k), or an IRA if your new job doesn’t offer a 401(k) plan.

Pros

•   You’ll have immediate access to your funds to use as you like.

Cons

•   Early withdrawal penalties may apply, and there will likely be income tax liabilities.

•   Liquidating your retirement account may hurt your chances of reaching your financial goals.

When Is a Good Time to Roll Over a 401(k)?

If there’s a good time to roll over your 401(k), it’s when you change jobs and have the chance to enroll in your new employer’s plan. But you can generally do a rollover any time.

That said, if you have a low balance in your 401(k) account — for example, less than $5,000 — your employer might require you to do a rollover. And if you have a balance lower than $1,000, your employer may have the right to cash it out without your approval. Be sure to check the exact terms with your employer.

When you receive funds from a 401(k) or IRA account, such as with an indirect transfer, you’ll only have 60 days from the date you receive them to then roll them over into a new qualified plan. If you wait longer than 60 days to deposit the money, it will trigger tax consequences, and possibly a penalty. In addition, only one rollover to or from the same IRA plan is allowed per year.

The Takeaway

Rolling over your 401(k) — to a new employer’s plan, or to an IRA — gives you more control over your retirement funds, and could also give you more investment choices. It’s not difficult to rollover your 401(k), and doing so can offer you a number of advantages. First of all, when you leave a job you may lose certain benefits and terms that applied to your 401(k) while you were an employee. Once you move on, you may pay more in account fees for that account, and you will likely lose the ability to keep contributing to your account.

There are some instances where you may not want to do a rollover, for instance when you own a lot of your old company’s stock, so be sure to think through your options.

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).

Help grow your nest egg with a SoFi IRA.

FAQ

How can you roll over a 401(k)?

It’s fairly easy to roll over a 401(k). First decide where you want to open your rollover account, then contact your old plan’s administrator, or your former HR department. They typically send funds to the new institution directly via an ACH transfer or a check.

What options are available for rolling over a 401(k)?

There are several options for rolling over a 401(k), including transferring your savings to a traditional IRA, or to the 401(k) at your new job. You can also leave the account where it is, although this may incur additional fees. It’s generally not advisable to cash out a 401(k), as replacing that retirement money could be challenging.

SoFi Invest®

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

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.

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.

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.

Claw Promotion: Customer must fund their Active Invest account with at least $25 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

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Sep
30
2024
How To Counter a Salary Offer (Sample Emails)

How To Counter a Salary Offer (Sample Emails)

By | Building Your Career, Life & Career, relay | Comments Off on How To Counter a Salary Offer (Sample Emails)

Salary negotiations can be one of the most stressful parts of the hiring process. You don’t want to offend your new employer but you don’t want to get shortchanged either. Making an appropriate counter offer requires a little skill and finesse to communicate your salary needs in a professional way.

That’s where knowing how to write a salary counter offer email comes in. A good counter offer email can help you build a stronger case for why you deserve a higher salary.

Key Points

•   When countering a salary offer via email, be professional and polite.

•   Express gratitude for the offer and highlight your qualifications and value.

•   Provide a specific counter offer with a reasonable salary range based on research and market value.

•   Justify your counter offer by emphasizing your skills, experience, and contributions.

•   Close the email by expressing enthusiasm for the opportunity and willingness to negotiate.

What Is a Counter Offer?

A counter offer is your response to the hiring company’s original salary offer. When you make a counter offer, you’re asking the company to reconsider its initial offer and bump the number. For example, if a company offers you a starting salary of $80,000, you might counter that with $85,000 or $90,000.

Making a counter offer is not uncommon, and some companies expect new hires to do a little bargaining for higher pay. There’s no guarantee that a counter offer will be accepted, but it’s still worth making one if you believe that you can get a better deal.

Writing a counter offer email can be a great way to communicate what you’re hoping to get. If you’re getting hired at your first job, you might not know how to write a counter offer salary email. The good news is that it’s not as complicated as you might think.

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When To Counter a Salary Offer

There are different reasons that a job candidate might decide to make a salary counter offer. Here are some of the most common scenarios when a counter offer can be appropriate:

•   The company is offering a salary that’s below average for the industry.

•   You believe that your skills and/or experience are sufficient to command a higher salary.

•   The salary isn’t enough to meet your financial needs.

•   You’ve received a higher offer from a competing company.

If you’re negotiating salary for your first job, it’s important to find out what is competitive pay for this type of job and for someone with your experience?

Entry level salaries are naturally lower than salaries for people with more experience or education. That doesn’t mean, however, that you should automatically accept a lower salary for an entry level position if similar companies are paying more.

Researching pay ranges for the type of job you’re accepting can help you determine the high and low figures for a salary negotiation. It may also be helpful to know what trades make the most money and how much people earn at different levels within that trade or sector.

Recommended: Refinance Your Student Loans

Keys To Asking for More Salary

There’s some groundwork that goes into negotiating higher pay, either as a new hire or an employee seeking a raise. Here are some of the most important things to consider when asking for more pay:

•   Research average salaries across your industry for employees with skills or experience equivalent to yours

•   Know what you bring to the table, and be prepared to back that up with examples

•   Be confident in your approach

•   Be realistic and understand what the company can reasonably afford to offer you

Making your request for a salary increase in writing is also important, as it gives you an opportunity to outline in detail your reasoning for a pay boost. That’s where knowing how to write counter offer salary email messages comes in handy.

Should You Negotiate Your Job Offer (Even If It’s Already Pretty Good?)

Negotiating salary or other benefits isn’t something you necessarily have to do. And it’s possible that you might feel a little awkward asking your new employer for more money right off the bat. But it may still be worth negotiating certain aspects of your pay or benefits if you think there’s some wiggle room.

For example, you might be willing to accept a lower offer in exchange for stock if you think the company’s value is only going to rise in the future. One of the advantages of buying company stock through your employer is that you may be able to get it at a discounted price.

Tuition repayment assistance is something else that may be worth negotiating if you’re starting your career with student loans in tow. Employers are increasingly offering help with student loan debt and tuition to attract and retain talented employees. That type of benefit may be well worth negotiating if your company is open to the idea.

A signing bonus can also help balance out a lower salary. If the bonus is particularly lucrative, that might be a tempting reason to skip salary negotiations. Of course, you’ll want to brush up on the basics of how to ask for a signing bonus before you start negotiating.

Should You Negotiate Your Salary Through Email or a Phone Call?

If you’re interested in attempting to wrangle a higher salary from your employer, choose your approach carefully. Asking for a salary increase over the phone has its pros and cons. Your employer might feel like they’ve been put on the spot. Or you might be so nervous that you stumble over your words and don’t communicate your request clearly.

Putting your request in writing can take the pressure off both sides. It may be easier for you to explain why you feel you deserve a higher salary in writing and you can take your time with writing your email. You can expand on how you believe you’ll be able to help the company and why making a bigger investment in your salary is justified. You can also use your email to compare the salary offer to industry averages in order to underscore your case.

An email also gives your employer a chance to review your arguments and make a decision without feeling rushed. And should they decide to counter your counter offer, they may prefer sending it back to you in email format so there’s a paper trail of all salary discussions.

Steps To Making a Salary Counter Offer

Countering an employer’s salary offer can be nerve-racking, so it’s wise to have a plan or strategy going in. We’ve put together a helpful checklist for what to do when entering salary negotiations.

Research Comparable Salaries

As mentioned, it’s important to know what the average pay is for the industry and type of job you’re accepting. You don’t want to make a counteroffer that’s too far outside the norm of what employees with your same skill set and level of experience are making, as that can cause the employer to balk.

Wage data from the Bureau of Labor Statistics is a good place to start your research. You can also check salaries on sites like Payscale.com or Salary.com to see what kind of entry-level pay competitive companies are offering.

Review the Benefits Package

Before negotiating salary, it’s helpful to look at everything an employer is offering. That might include things like subsidized health insurance, a solid retirement plan, paid time off, stock options, tuition assistance, or a remote work option. Weighing the value of those benefits against salary can help you decide if it’s worth negotiating your pay.

If you’re offered great benefits but a lower salary, getting a second job can help bridge the gap. You may already have experience with making money on the side if you’ve ever held any jobs that pay for college, like babysitting, dog-walking, or doing gig work.

Know Your Value

A little self-awareness goes a long way. When you’re applying for your first job, you may not have a lot of professional experience under your belt yet. Instead, you can focus more on your college accomplishments, skills, personality traits, and other qualities that make you an attractive candidate for the job.

Take Time To Craft Your Counter Offer

The next step is the most important, because you need to make sure you’re wording your counter offer salary email carefully to convey what you want in a respectful way. You’ll want to start your email with a polite introduction and state your request briefly at the beginning. Then go into more detail explaining why you believe your counter offer is appropriate, and close the letter politely. It’s also important to verify to whom you should send the email to ensure it gets to the right place.

Negotiate With Your Employer

Once your employer receives your salary counter offer email, they’ll review it and then respond. The immediate response may be no, at which point you’ll have to decide if you want to continue attempting to negotiate. If the employer is willing to negotiate, you can then begin salary discussions to see if you can reach an agreement that suits you both. Being willing to compromise here is important, as coming on too strongly could cause the employer to rescind your offer and hire someone else.

Make Your Final Decisions

Once you’ve completed salary negotiations, your employer may give you a little more time to make up your mind. At this point, you’ll have to decide whether to accept their final salary offer or move on to another job. (By the way, hold onto the offer email — it can serve as proof of income for student loans and apartment applications.)

You may want to review your finances before deciding if the salary is acceptable. Using a free budget app can help you get a better sense of what kind of income you need to cover your spending.

If you decide to decline, you’ll want to do so politely. Burning bridges is a bad idea, in case you later apply for a position with the same company.

Recommended: Does Net Worth Include Home Equity?

Salary Counter Offer Email (Sample Templates)

If you’ve never attempted to write a counter offer before, you may not know what your letter should include. To make things easier, here are guides for how to write a counter offer email for salary in different situations.

Requesting Additional Compensation (Sample Email)

Dear [Hiring Manager],

Thank you for extending an offer at [company name] for the position of [title]. This is a very exciting opportunity, and I’m confident that I’ll be able to make a positive contribution to the team.

I am hoping there is room to negotiate the base salary for the role. According to my research, the industry average for this position is [salary range] for someone with experience and skills comparable to mine. I believe that a salary closer to [$$$] would be more appropriate, given my background and the requirements the role entails.

Please advise as to whether you’re open to discussing this at your earliest convenience.

Thank you and I look forward to your response.

Sincerely,
[Your name]

Responding to a Lowball Offer (Sample Email)

Dear [Hiring Manager],

Thank you for extending an offer at [company name] for the position of [titel]. This is a very exciting opportunity, and I’m confident that I’ll be able to make a positive contribution to the team.

I am hoping there is room to negotiate the base salary for the role, as it seems to be lower than the average salary typically offered for this type of position. According to my research, the industry average for this position is [salary range] for someone with experience and skills comparable to mine. I believe that a salary closer to [$$$] would be more appropriate, given my background and the requirements the role entails.

Please advise as to whether you’re open to discussing this at your earliest convenience.

Thank you and I look forward to your response.

Sincerely,
[Your name]

Leveraging a Competitor Offer (Sample Email)

Dear [Hiring Manager],

Thank you for extending an offer at [company name] for the position of [title]. This is a very exciting opportunity, and I’m confident that I’ll be able to make a positive contribution to the team.

I am hoping there is room to negotiate the base salary for the role, as I’m currently considering an offer from another company. They’re offering a base salary of [$$$] along with a competitive benefits package that includes [list any benefits your recipient’s company does not offer].

I’m very interested in accepting the offer to work at [company name] if you’d be able to [match or increase] the base salary. Please advise as to whether you’re open to discussing this at your earliest convenience.

Thank you and I look forward to your response.

Sincerely,
[Your name]

Accepting the Offer (Sample Email)

Dear [Hiring Manager],

I’m pleased to accept the offer for the position of [position name] with [company name] that was extended on [date]. I’m looking forward to working with the team, and I appreciate the opportunity to negotiate a compensation and benefits package that is agreeable to all parties involved.

Per our negotiations, I understand that my starting salary will be [$$$] and that my benefits package will include [list of benefits]. I look forward to beginning work on [date].

Many thanks,
[Your name]

Rejecting the Offer (Sample Email)

Dear [Hiring Manager],

Thank you for extending an offering of employment at [company name]. I’ve enjoyed getting to know you throughout the hiring process, and I appreciate your willingness to consider my request for salary negotiation.

At this time, I must respectfully decline the position. I thank you again for the opportunity to discuss the job, and I regret that we were unable to reach a compromise suitable to all parties involved.

I do hope that you’ll find a suitable candidate for the position.

Kind regards,
[Your name]

The Takeaway

It’s natural to want to be paid what you’re worth, and negotiating your salary may be necessary to get what you want when accepting a job offer. You’ll want to research competitive salaries for your industry and type of job, and also consider the full benefits package. In email communications with your potential employer, it’s important to always be polite, professional, concise, and confident.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

See exactly how your money comes and goes at a glance.

FAQ

How do you politely negotiate salary via email?

Politely negotiating salary via email comes down to using respectful language and clearly explaining your needs and expectations. You want to state your case clearly and simply, then allow your employer time to form a response.

How do you politely counter a salary offer?

Countering a salary offer politely means making your case for better pay firmly but respectfully. You want to ensure that you’re directing your counter offer to the right person and explaining your reasoning behind for asking for higher pay.

How do you negotiate salary after receiving a job offer?

Once you receive a job offer, you can review the terms and draft a short email to ask if the employer is willing to consider salary negotiations. You then have to wait for their response to see if they’re open to negotiating. If they are, you can make your salary counter offer.

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Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Sep
29
2024

Law School Scholarships Guide

By | Budgeting & Goals, Building Your Career, Going to College, Student Loans, student_loan | Comments Off on Law School Scholarships Guide

Navigating the cost of law school can be daunting, but scholarships offer a valuable way to reduce financial burdens and make your legal education more affordable. Whether you’re a prospective law student or currently enrolled, understanding the variety of scholarships available is crucial to securing funding for your studies.

Keep reading to learn the types of law school scholarships available, tips for finding law school scholarships, and strategies for crafting compelling applications to increase your chances of success.

The Average Cost of Law School

The Law School Admission Council (LSAC) reports that the average annual cost of a public, out-of-state law school in 2023 was $43,590, or $30,554 for in-state students. For private law schools, the average in 2023 was $55,963. And according to Education Data Initiative, the average total cost of law school is over $230,000.

Because students aren’t yet racking up those billable attorney hours, it can be helpful to research law school scholarship opportunities before applying.

Types of Law School Scholarships

Per the numbers mentioned above, there might be a fair amount of sticker shock for those who haven’t yet applied for graduate school and are only thinking of someday going the lawyer route. Fortunately, there are a range of options for aspiring attorneys seeking to fund law school.

Full-Ride Tuition Law School Scholarships

In some cases, there are full-ride tuition scholarships and need-based grants out there. Full-rides, of course, are not available at all law schools. If a law school doesn’t explicitly advertise or highlight information regarding full-ride opportunities, interested students can contact the school to ask.

Students deciding whether to apply to law school may want to familiarize themselves with the language universities adopt to explain these scholarships. In some cases, specific scholarships are designated for particular students. Full-ride law school scholarships can be highly competitive — with some schools offering as few as two to four per enrollment year. One potential tip for the search for scholarships is to target law schools with more tuition help.

General Law School Scholarships

There are many options for law school hopefuls to find potential scholarships. The nonprofit organization Law School Admission Council (LSAC) has compiled a list of law school scholarships available to applicants. It could be well worth your time to go through the list and make note of the scholarships you’d qualify for.

Many law schools themselves offer competitive scholarships to attract stronger candidates, as well. It might also be helpful to check if a school also offers in-state residents specific tuition reductions or grants.

Law School Scholarships from Law Firms

Similarly, some law firms offer scholarships to law school students. Applying is typically a straightforward process, with many firms requiring a short essay, transcripts, and sometimes references to be considered. One such law firm scholarship is offered by The Dominguez Firm, which offers $5,000 and $2,500 annually to selected student applicants.

On top of this, there’s the rising trend of law firms helping new hires to repay a portion of their student debt once onboarded.

Diversity Law School Scholarships

Some scholarships are awarded to students with diverse backgrounds. One example of this is the Legal Opportunity Scholarship Fund offered by the American Bar Association. This scholarship is awarded to law students from a racial or ethnically diverse background.

The USLAW NETWORK Foundation also offers a $5,000 scholarship for up to 10 diverse students.

Law School Scholarships for Women

Some scholarships are offered to women attending law school. One resource is the American Association of University Women (AAUW) Fellowships and Grants, which offers scholarships to women in graduate studies, including law.

Finding Scholarships for Law School

There are dedicated resources like Fastweb and SoFi’s scholarship search tool to help prospective students find scholarships for which they may qualify. Fastweb is an online resource to help students find scholarships, financial aid, and even part-time jobs in support of college degrees.

The American Bar Association’s law student division also has a running list (along with deadlines) of law student awards and scholarships. Additionally, the Law School Admission Council offers a list of diversity scholarships available to students from diverse racial and ethnic backgrounds.

Recommended: Applying to Graduate School: Smart Tips & Strategies 

Negotiating Wiggle Room

Doing all this research and the math around law school scholarships could put applicants in a more informed position when evaluating which program to attend — and, potentially, help them to identify schools more likely to be interested in their application.

A reality of today’s admissions process for law school is negotiating scholarships. Some schools have a strict policy against negotiating, but others fully expect their initial offer to be countered. That’s why it can help to save acceptance letters and anything in writing from schools that offer admission.

Suggestions for Negotiating Law School Scholarship Offers

Offer letters could be shared with competing schools, asking if they’re able to match another university’s aid. It might be uncomfortable asking for more tuition assistance upfront, but a little discomfort now could help applicants shoulder less law school debt later on.

Doing research on law schools (and figuring out the likely cost of living expenses at each institution) could help applicants to determine which scores or grades to aim for in an effort to make law school more affordable for them. Tabulating expenses (and having records on hand) may also demonstrate to universities that the amounts being negotiated are based on well-documented expenses.

Recommended: Law School Loan Forgiveness and Repayment Options

Federal vs Private Loans for Law School

Students wanting to apply to law school should consider the differences between federal and private student loans. Federal loans come with certain benefits not guaranteed by private ones (such as forbearance or income-driven repayment), and should be used first before seeking private student loans.

Private student loans can also help applicants cover the expense of graduate school. They typically offer competitive rates and terms, but you need to have a solid credit score to qualify.

It’s important to note that private student loans don’t offer the same benefits and protections afforded to federal student loan borrowers, like Public Service Loan Forgiveness (PSLF). If a law school applicant is interested eventually in becoming a public defender or pursuing non-profit legal work, forgiveness and forbearance perks may play a role in their decision.

The Takeaway

Students looking to offset law school costs with scholarships can look to their law school, scholarship databases, local law firms, and other organizations for resources. Consider contacting the financial aid office at your law school if you are looking for scholarship resources. If students interested in law school find themselves coming up short on funds for the JD after scholarships and federal aid, additional options may be available.

If you’ve exhausted all federal student aid options, no-fee private student loans from SoFi can help you pay for school. The online application process is easy, and you can see rates and terms in just minutes. Repayment plans are flexible, so you can find an option that works for your financial plan and budget.


Cover up to 100% of school-certified costs including tuition, books, supplies, room and board, and transportation with a private student loan from SoFi.

FAQ

What LSAT score will get me a scholarship?

One general rule of thumb is that students who have a LSAT score (and sometimes GPA) above the median for a certain school could qualify for a scholarship. Chances of qualifying are even greater if your score falls in the 75th percentile for the school.

What is a good scholarship for law school?

Any scholarship for law school is a good scholarship. Scholarships typically don’t need to be repaid and can help reduce a student’s debt burden. Students looking for law school scholarships can apply for institutional aid and aid through other sources like nonprofit organizations.

Do top law schools give scholarships?

While some top law schools do not offer scholarships, many law schools do offer law school scholarships to students. For example, in the 2023-2024 class at Yale, 71% of students qualified for some form of financial aid and 62% qualified for an institutional law school scholarship. Check directly with the schools you are interested in to see if they offer scholarships to students.

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Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

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Sep
26
2024
Is a $20,000 Salary Good?

Is a $20,000 Salary Good?

By | Building Your Career, Life & Career, money | Comments Off on Is a $20,000 Salary Good?

While there’s no official guideline on what makes a salary “good,” a $20,000 salary is not typically enough for a household to live comfortably in most parts of the United States. Certainly, each person’s situation is unique in terms of their assets and expenses, but an individual making $20K a year may have a hard time making ends meet. They might need to rely on assistance from family, friends, and/or the government to afford basic necessities.

A $20,000 salary puts a single person above the poverty threshold for 2024. An individual supporting themselves plus one or more people on $20K a year, however, will live below the poverty threshold. With the record-high inflation we’ve seen in recent years, affording basic needs on a $20,000 salary has become even more challenging.

So is $20K a year good? While a $20,000 salary averages out to more than the federal minimum wage of $7.25/hour for full-time work, it is likely not an adequate income for anyone living independently and especially those with a family. In this piece, we’ll cover:

•   The current American median income.

•   Is $20K a year good?

•   A breakdown of a $20,000 salary.

•   The best and worst places to live on $20,000.

•   Tips for living on $20K a year.

Factors to Determine if a $20,000 Salary Is Good

A $20,000 salary will be challenging for anyone to live on, but a few factors may determine if it can be done — or if it’s impossible:

•   Taxes: If you are filing singly, a $20,000 salary will put you at the 12% federal income tax bracket. You may owe additional taxes for your state, city, and/or school district. For the sake of example, assume a flat 15%. That means, although you make $20,000, you only bring home $17,000 after taxes.

•   Family size: Single individuals without children can make $20,000 stretch more easily. Two or more people living off a $20,000 salary will face more challenges.

•   Location: Money goes further in some places more than others. If you live in an area with a low cost of living, a $20,000 salary may be more manageable. But if you live in a popular city, $20,000 a year may not even cover rent.

•   Debt: If you have debt, it can be more challenging to allocate your limited money to basic necessities and important financial goals, like building an emergency savings fund. If you are dealing with high-interest debt, you probably know how quickly this debt can grow when you are only paying the minimum amount due.

How Does a $20,000 Salary Compare to the American Median Income?

According to the most recent U.S. Census Bureau report, median household income was $80,610 in 2023. Keep in mind, though, that this number represents all households, which may include more than one earner. According to the Bureau of Labor Statistics, median weekly earnings for American workers was $1,117 in 2023, which comes out to $58,084.

Either way, $20,000 is far below either estimate for a median income. If you earn $20,000 and have a domestic partner or spouse who earns additional income, your salaries together might get you closer to the median income level.

$20,000 Salary Breakdown

Again, no judgment here: It’s not a matter of if a $20,000 salary is good or bad. To someone just out of high school, $20K a year might look like a good entry-level salary. But anyone who has handled monthly bills like rent and utilities will likely recognize that a $20,000 salary may be insufficient.

Here’s how a $20,000 annual salary breaks down:

•   Monthly income: $1,666.66

•   Biweekly paycheck: $769.23

•   Weekly income: $384.62

•   Daily income: $76.92 based on working 260 days a year

•   Hourly income: $9.62 based on working 2,080 hours a year

These estimates do not account for taxes. In the example above, a $20,000 salary may shrink to $17,000 after Uncle Sam has taken his cut.

Recommended: Is Making $100K a Year Good?

Can You Live Individually on a $20,000 Income?

It is possible to live individually on a $20,000 income, but you will likely only be able to afford the items on your basic living expenses list if you aren’t able to supplement your income. Living comfortably — with easy access to good health care (including mental health), balanced nutrition, safe housing, and efficient transportation — may be far more challenging on $20,000 a year.

If you make $20,000 a year, you might be able to minimize monthly expenses by looking for government assistance, getting a roommate or moving in with family, cooking at home, and using an online bank account with a high interest rate and automatic savings features.

How Much Rent Can You Afford Living on a $20,000 Income?

Wondering how much you can afford to spend on rent? Researchers have long argued that you should spend no more than 30% of your income on housing. With rising inflation and increasing rent prices, however, that’s not always possible.

If you were to stick to the 30% rule (and forget about income taxes for the sake of the example), that means you can spend $6,000 a year on rent, or $500 a month. But the median cost of rent in the U.S. was $2,100 as of September 2024, according to Zillow. That’s about four times what you could afford on $20K a year.

To afford rent on a $20,000 salary, it’s a good idea to live in a place with a very low cost of living and to have one or more roommates who can help share living expenses of rent and utilities with you. Moving in with family is also a solution if you cannot afford rent on your salary.

Best Places to Live on a $20,000 Salary

If you are making $20,000 a year (or $9.62 an hour), it might be a good idea to explore cities and states with a low cost of living.

These are the five least expensive cities to live in for 2024-2025, per U.S. News:

•   Fort Wayne, Indiana

•   Huntsville, Alabama

•   Wichita, Kansas

•   Springfield, Missouri

•   Davenport, Iowa

Living outside a city altogether is usually more affordable. Consider a rural location in one of these five cheapest states to live in:

•   Arkansas

•   Mississippi

•   Alabama

•   West Virginia

•   South Dakota

Recommended: Typical Monthly Expenses for a Single Person

Worst Places to Live on a $20,000 Salary

On the flip side, there are some major cities that are exorbitantly expensive to live in. If possible, it’s a good idea to avoid living in the following locations when you are living on $20,000 a year:

•   Hartford, Connecticut

•   Los Angeles, California

•   Miami, Florida

•   New Haven, Connecticut

•   New York City, New York

California cities clearly carry a high cost of living, but other states are also expensive. If you have a $20,000 annual salary, it’s a good idea to steer clear of any of the five most expensive states to live in:

•   Hawaii

•   New York

•   California

•   Massachusetts

•   Oregon

Is a $20,000 Salary Considered Poverty?

A $20,000 salary is above the poverty line for an individual, but if you are a couple or a family of three or more people living on a $20,000 salary, the government considers you to be below the poverty line.

These numbers do not consider factors like variable cost of living. A localized poverty line could be more telling, especially if you live in a place with a high cost of living. If you are, say, living in a pricey city and earning $20,000 a year, you might be feeling the financial pinch more.

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Tips for Living on a $20,000 Budget

While advocating for a higher salary can infuse your line item budget with more funds, you can’t necessarily count on a raise. Taking other steps now may make it easier to live on your $20,000 salary.

Finding Out What Assistance You Qualify For

If you are making $20,000 or less, you may qualify for government assistance. Here are a few actions to consider taking:

•   Work with the U.S. Department of Housing and Urban Development for assistance with rent, including the Section 8 program.

•   Determine if you are eligible for assistance with grocery bills through the Supplemental Nutrition Assistance Program (SNAP).

•   Research the Low Income Home Energy Assistance Program (LIHEAP) to help with utilities.

•   See if you can lower your phone bill through the Lifeline Modernization Order .

•   Find out if you are eligible for free or low-cost health coverage through Medicaid and the Children’s Health Insurance Program (CHIP).

Coming Up With a Housing Plan

If you do not qualify for rental assistance from the government, you may need to come up with another plan to avoid high rent costs. Roommates can be a good way to keep rent low.

Alternatively, family and friends may be willing to offer free lodging while you save money. While it can be hard to lean on others in this way, it can be a form of financial self-care to do so until you are able to be out on your own. If you do move in with a loved one, just remember to be helpful around the house and chip in with utilities and groceries if you’re able.

Cutting Costs

After reducing your largest cost (rent), it may be possible to reduce other costs in your budget. For example, a car payment, gas, and car insurance can be costly monthly expenses. If you live in an area with great public transportation or are comfortable walking and riding a bike, you may be able to get around without owning your own vehicle.

Other costs you might be able to cut include streaming services, gym memberships, and bills from dining out.

Getting on a Budget

After finding low-cost housing and trimming unnecessary expenses, it’s a good idea to make a monthly budget that accounts for your post-tax income and your monthly expenses.

Not sure how to budget on a $20K salary? Taking care of all necessary bills (housing, utilities, groceries) is the perfect first step. Once you’ve accounted for those monthly expenses, see how much you can allocate to paying down debt or building your savings.

Recommended: How to Save Money From Your Salary

Avoiding the Wrong Kinds of Debt

Taking on debt is often necessary — when buying a house, purchasing a car, or even going to college. But when you make a low salary and struggle to pay the bills, it can be tempting to take out a payday loan or overuse a high-interest credit card.

When possible, it’s a good idea to avoid high-interest loans. In fact, instead of taking on more credit card debt, you may be able to take control of your bad debt by applying for a debt consolidation loan. These are typically personal loans that charge an interest rate that may be significantly lower than your credit cards’ rates. You use the loan to pay off the cards and then you work to eliminate the personal loan.

You might also meet with a counselor from a nonprofit debt counseling organization like the National Foundation for Credit Counseling, or NFCC .

Recommended: Debt Repayment Strategies

Supplementing Your Basic Income

You might also consider ways to bring in more income to pump up your spending power. This could include seeing if additional hours are available at your primary workplace, as well as taking on a seasonal part-time job or starting a side hustle. These are all ways to use some of your leisure time to bump up your income.

The Takeaway

A $20,000 is usually not enough for a family to live on, and it may be difficult for individuals to get by on this salary too. It may be wise to research government assistance, look for roommates to lower housing costs, and build (and stick to) a monthly budget that prioritizes paying down debt and building emergency savings. These steps can help you live on a $20,000 annual income.

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Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.30% APY on SoFi Checking and Savings.

FAQ

Can you live comfortably on $20,000 a year?

It can be difficult for an individual to live comfortably on $20,000 a year. With the right assistance from friends, family, and the government, however, it may be possible to meet basic needs. Families will face more challenges living off $20,000 a year.

What can I afford making $20K a year?

A $20,000 salary may leave room in your budget for the most basic expenses: rent, utilities, transportation, and groceries. Even then, getting government assistance and a roommate might be necessary for managing monthly expenses on $20K a year.

Is $20,000 a year middle class?

According to the most recent data from the Pew Research Center, middle class, middle-income households have incomes ranging from about $56,600 to $169,800. Thus, a family living on $20,000 is not middle class; it’s actually below the poverty level. While an individual earning $20,000 a year is not below the poverty line, they are still not considered middle class.

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SoFi members with direct deposit activity can earn 4.30% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.30% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.30% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 10/8/2024. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

​​*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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.

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Terms and conditions apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. To qualify, a borrower must be a U.S. citizen or other eligible status, be residing in the U.S., and meet SoFi's underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates reserved for the most creditworthy borrowers. If approved, your actual rate will be within the range of rates at the time of application and will depend on a variety of factors, including term of loan, evaluation of your creditworthiness, income, and other factors. If SoFi is unable to offer you a loan but matches you for a loan with a participating bank, then your rate may be outside the range of rates listed above. Rates and Terms are subject to change at any time without notice. SoFi Personal Loans can be used for any lawful personal, family, or household purposes and may not be used for post-secondary education expenses. Minimum loan amount is $5,000. The average of SoFi Personal Loans funded in 2023 was around $33K. Information current as of 2/26/24. SoFi Personal Loans originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org). See SoFi.com/legal for state-specific license details. See SoFi.com/eligibility for details and state restrictions.

✝ To check the rates and terms you may qualify for, SoFi conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, we will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

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