Nov
26
2023
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Understanding IRA Rollover Rules: A Comprehensive Guide

By | Growing Wealth, Investing, Preparing for Retirement | No Comments

If you’re leaving your job, there are numerous things you must attend to before you clock out for the last time. One task that’s extremely important is figuring out what to do with the retirement account you have set up through the company you’re leaving.

Once you separate from your employer, you will have a few options to choose from when deciding what to do with your retirement savings, including doing an IRA rollover.

Read on to learn more about IRA rollovers and the IRA rollover rules.

What is an IRA Rollover?

An IRA rollover is the movement of funds from a qualified plan, like a 401(k) or 403(b), to an IRA. This scenario could come up when changing jobs or when switching accounts for reasons such as wanting lower fees and more investment options.
There are several factors to be aware of regarding what an IRA rollover is and how it works.

People generally roll their funds over so that their retirement money doesn’t lose its tax-deferred status. But, let’s say you leave your job and want to withdraw the money from your 401(k) so you can use it to pay some bills. In this case, you’d be taxed on the money and also receive a penalty for withdrawing funds before age 59 ½.

However, if you roll your money over instead of withdrawing it, you don’t have to pay taxes or penalties for an early withdrawal. Plus, you can keep saving for retirement.

When you roll funds over to a new IRA, you should follow IRA rollover rules that can help ensure you do everything legally, don’t have to pay taxes, and don’t pay penalties for any mistakes.

The Difference Between Direct and Indirect Rollovers

You can choose between two types of rollovers and it’s important to know the differences between each.

Direct Rollovers

First, you may choose a direct rollover, which is the moving of funds directly from a qualified retirement plan to your IRA, without ever touching the money. Your original company may move these funds electronically or by sending a check to your IRA provider. With a direct rollover you don’t have to pay taxes or early distribution penalties since your funds move directly from one tax-sheltered account to another.

Indirect Rollovers

The second option is an indirect rollover. In this case, you withdraw money from your original retirement account by requesting a check made out to your name, then deposit it into your new IRA later.

Some people choose an indirect rollover because they need the money to accomplish short-term plans, or they haven’t decided what they want to do with the money upon leaving their job. Other times, it’s because they simply don’t know their options.

Differences

Many people prefer a direct rollover to an indirect rollover, because the process is simpler and more efficient. With a direct rollover, you aren’t taxed on the money. With an indirect rollover, you are taxed, and if you’re under 59 ½ years old, you have to pay a 10% withdrawal penalty, unless you follow specific IRA rollover rules. You should consult with a tax professional to understand the implications of an indirect rollover prior to making this election.

Keep in mind that a transfer is different from a rollover: A transfer is the movement of money between the same types of accounts, while a rollover is the movement of money from two different kinds of accounts, like a qualified plan into a traditional IRA.

The IRA One-Rollover-Per-Year Rule

You can only do an IRA-to-IRA rollover once every 12 months, although there are some exceptions. You’ll want to familiarize yourself with this information to follow the IRA rollover rules.

If you’re rolling funds over from an IRA, you can only complete a rollover once every 12 months. There are exceptions, such as trustee-to-trustee transfers and rollovers from a traditional IRA to a Roth IRA, which are commonly referred to as conversions.

And, most notably, the one-year rule does not apply to IRA rollovers from an employer-sponsored retirement plan like a 401(k).

The Crucial 60-Day Rollover Rule

If you choose to do an indirect IRA rollover, you have 60 days to deposit the funds into a rollover IRA account, along with the amount your employer withheld in taxes. That’s because IRS rules require you to make up the taxes that were withheld with outside funds. Otherwise, you will be taxed on the withholding as income.

If you deposit the full amount — the amount you received plus the withheld taxes — you will report a tax credit of the withheld amount. The withholding will not be returned to you, but rather settled up when you file that year’s taxes.

What You Can and Cannot Roll Over: Limitations and Eligibility

There are some rules about the types of assets you can roll over into an IRA.

Types of Distributions Eligible for Rollover

You can roll over almost any type of distribution from your IRA, with a few exceptions (see more information on that below). However, there is one key point to keep in mind.

The same-property rule says that when you withdraw assets from your retirement account, you must deposit those exact same assets into your IRA.

For example, if you take out $10,000, then $10,000 must go into your IRA, even if some of the original withdrawal was withheld for taxes. If you withdraw stocks, those same stocks must go into the new IRA, even if their value has changed.

This means that when you withdraw money, you can’t use the cash to invest, then put the money you earn from those investments into the IRA. That money would be considered regular income, so you’d be taxed on it.
If you break this rule, not only will you have to pay taxes, but you may also be required to pay a penalty.

Exemptions and Restrictions on Rollover Eligibility

You cannot roll over your annual required minimum distributions (RMDs), which you must take annually when you turn 73.

Also, you cannot roll over loans that were taken as distributions or hardship distributions from your retirement account.

IRA Rollovers and Taxes

Taxes will not be withheld if you do a direct rollover of your retirement account to an IRA or another retirement account.

However, if an IRA distribution is made to you, it’s typically subject to 20% withholding.

Compatibility Rules When Rolling Funds to an IRA

Unfortunately, you don’t always have the ability to transfer funds directly from one type of retirement account to another. You can roll over from certain types to others, but not every kind of account is compatible with every other account. For example: You can roll funds from a Roth 401(k) into a Roth IRA, but not into a traditional IRA; and you can roll funds from a traditional IRA into a SIMPLE IRA, but only after two years.

Rules Specific to 401(k), 403(b), and Other Employer-Sponsored Plans

If you have a Roth 401(k) or 403(b), you can roll the money in those accounts into a Roth IRA without paying taxes. However, if you have a traditional 401(k) or 403(b), you can still roll over the funds, but it will be considered a Roth conversion. In this case, you’ll need to pay income taxes on the money.

When in doubt, check the rules at irs.gov, and consult a tax advisor to confirm you’re making the right moves.

Your Rollover IRA: How to Optimize and Manage It

If you don’t already have an IRA provider, choose the one you want to use to open your new IRA. You can look for a provider that gives you the kind of investment options and resources you want while keeping the fees low to help you save as much as possible for retirement.

An online broker might be right for you if you plan to manage your investments yourself. Another option is a robo-advisor, which can provide help managing your money for lower fees than a human advisor would. But then again you might feel most comfortable with a person helping to manage your account. Ultimately, the choice of a provider is up to you and what’s best for your needs and situation.

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

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


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.

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.

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.

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.

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Nov
26
2023
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Corporate Earnings Uncovered: A Step-by-Step Reading Guide

By | Growing Wealth, Investing | No Comments

Companies issue earnings frequently, often on a quarterly basis. But knowing how to read an earnings report isn’t easy, and it requires a bit of legwork to get up to speed and understand the financials that businesses are reporting. Even so, it can be important, as those financials may help dictate your next investment moves.

Again, by learning how to read an earnings report, you could unlock invaluable information about the state of a company over time, as well as come to your own conclusions about whether the company’s stock is a worthwhile buy for you.

The Basics of Earnings Reports

When you invest in a stock, you are investing in a small sliver of ownership in a publicly traded company. To be publicly traded, companies are required to file quarterly (and annual) financial statements with the U.S. Securities and Exchange Commission (SEC).

For the uninitiated, looking at an earnings report may be akin to trying to read hieroglyphics. But you can break down the essentials and with some practice, it should all start to make sense.

Understanding the Essentials of Earnings Reports

Again, earnings reports are financial filings that keep shareholders and regulators apprised of the financial and legal standing of a company, typically filed quarterly. Financial transparency also allows current and potential investors to make decisions about the company through their own analysis and judgment.

Earnings reports contain information about company performance and critical metrics such as profits and revenue (or similar terms, like “net income”), and how those metrics compare to previous quarters or years. They also generally include some guidance or comments from company leadership.

The Timing of Earnings Releases

Generally, when you hear someone speaking of a general “earnings report,” they are referring to the forms 10-Q and 10-K, which are quarterly and annual financial filings, respectively. Both disclose a company’s revenue, expenses, profit, and other financial information each quarter.

The Anatomy of an Earnings Report

Some earnings reports are more in-depth than others, but they tend to all have at least some common elements. That includes an income statement (which, again, contains information related to profits, revenues, and losses), balance sheet, cash flow statement insights, and a statement of shareholder equity, which could be a breakdown of a company’s complete financial picture, along with assets and liabilities. In all, the report could be dozens of pages long.

Going deeper, here are some of the key elements.

Income Statement: How much money a company made over a period of time. Usually, the current quarter’s information is compared to previous quarters or multiple quarters.

Balance Sheet: What a company owns and what they owe—its assets and liabilities.

Cash Flow Statement: This section details the exchange of money between the company and the outside world over a given period of time.

Statement of Shareholder Equity: Changes of interest for the company’s shareholders over a given period of time. Here, you’ll find information on the value of all outstanding shares along with the potential dividend payment made by the company during the previous quarter(s).

For many investors, the income statement is of particular interest. This document details how much a company earns, how much it spends, and how profitable it is over a certain period of time. These numbers can reveal a lot about where a business is at and where they’re headed.


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Beyond the Numbers: Interpreting Earnings Reports

Understanding the basics of an earnings report is one thing. Using what’s gleaned from those reports is another.

Reading Between the Financial Lines

What does an earnings report actually tell you, as an investor? It’s not always so clear. In that sense, it’s important to try and put the numbers in the report into context so that it can help you plan your next market move – if you make one at all.

Looking deeper at the financials, though, here are some key terms and items to look for, which are typically found in the income statement.

Revenue: A company’s sales. This is also known as the “top line,” because it sits at the top of the cash flow statement. This figure does not take into account the costs of running a business, so may not be the best indicator as to the overall financial health of a company.

Cost of Revenue/Cost of Sales: Directly under the revenue or sales figure you’ll find a section that details the costs of producing the goods sold, such as production and manufacturing. To be clear, these are not all of the costs associated with running a business, only the costs directly associated with the sale of the product or service.

Below this figure, you will find the section referred to as “gross profit” or “gross margin,” which is the cost of revenue subtracted from the revenue. It is called “gross” because the figure is not net of all costs associated with running a business—only the costs associated with sales.

Operating Expenses: These are the costs of running a business that cannot necessarily be attributed to a company’s operations for a given period. Research and development, marketing expenses, and salaries of administrative personnel are all examples.

Here, it is possible to account for depreciation expenses, such as the wear and tear on assets such as machinery and tools or other assets that are used over long periods of time.

At this point in the cash flow statement, a company may account for adjustments to income due to interest earnings or expenses (such as earning interest in a savings account or paying interest on debts) or income taxes. Sometimes, this information is listed separately.

Earnings: This is a company’s profits, also known as the net income or “bottom line,” because earnings exist at the bottom of the cash flow statement after all costs are subtracted. This is the money that the company made in the previous quarter after all costs of running the business are accounted for. Ultimately, this is going to be the number that most concerns shareholders, as a profitable business model is what attracts many investors.

Not all businesses are profitable all of the time, so it is possible that an earnings number can reflect a loss. When a company is recording a loss, the number is written inside of parentheses.

Earnings Per Share (EPS): While the earnings figure is certainly important, it’s helpful to have some context as to what that means to investors. The EPS calculation divides the earnings figure by the number of outstanding shares to derive a figure that represents what it would look like if those earnings were to be evenly spread across all shareholders.

For example, an EPS number of $1 would indicate a $1 earning per share of outstanding stock. However, a $1 EPS does not necessarily mean that’s what the company pays out to each shareholder.

Instead, it’s a way for investors to compare profitability across businesses within the same industry, to a business’s past profitability, or to expectations for a company’s future profitability. More than anything, it is used as a tool for analysis.

For a more qualitative look at a business, you could take a look at the section titled Management’s Discussion and Analysis. Here, executives summarize both the numbers detailed in the financial statements and what’s going on in the business that might not be outwardly obvious simply by looking at the numbers.

For example, executives could take this time to discuss a merger or other market factors that may have led to skewed numbers for that quarter.

Assessing Financial Risk Factors in Reports

All businesses are facing some sort of risk, be it from growing competition in a specific sector, or increasing interest rates. Often, company leadership might discuss those risks in the commentary in an earnings release, or in an accompanying earnings call. Other times, investors can suss out potential risk in the numbers themselves (are revenues in a specific area falling, and why?). The important thing to know is that if businesses are facing some sort of risk, investors may be able to find clues as to how big of a threat those risks are in the filings.

The Earnings Season Explained

Investors are likely to become familiar with the term “earnings season,” and for good reason.

What is Earnings Season and Why it Matters

Earnings season refers to the four times during the year when companies release quarterly earnings reports, and many of them tend to do so around the same time. As such, it’s a sort of “season,” as investors get to dig through several earnings reports and try to suss out trends and make decisions regarding their portfolios.

The Impact of Earnings Reports on Stock Prices

Earnings season can be a volatile time for stock prices, as a company’s performance, put on paper and released to the world, allows everyone to see how it’s doing – and decide whether to buy, sell, or hold their stock. As such, an unexpected earnings report – good or bad – can create volatility in the market. That’s why investors will want to pay attention around earnings season.

Earnings Calls: What to Expect

Investors are able to take part in earnings calls, which often requires tuning in either online or by phone. While every earnings call is different, they tend to have the same elements: Company management (usually the CEO or another C-suite executive) discusses the top-line financial results for the period, and then discusses what’s ahead.

Getting the Most Out of Earnings Reports

As an investor, you’ll want to do what you can with the latest earnings reports. That includes pulling out the most pertinent information, knowing what to anticipate, and then synthesizing it all into actionable insights.

Analyzing the Report: TL;DR for Financial Reports

For most investors, the top-line financials, and perhaps any comments from company leadership, are the most important things to check out in an earnings report. For instance: did the company generate a profit? Was it more or less than expected? Are executives bullish or bearish about the coming quarter? If you’re strapped for time, those are the things you’ll want to know as an investor.

Upcoming Earnings Report Calls: What to Anticipate

Companies generally announce earnings calls well in advance – sometimes even months in advance. That gives investors plenty of time to plan to attend, and to make any pre-earnings market moves. It may be a good idea to read financial media or analyst reports, too, to get a sense of what to expect. Expectations are a huge element in the market, and even if a company reports strong numbers, they may be below expectations, causing share values to fall.

Leveraging Earnings Reports

At the end of the day (or earnings season), earnings reports are tools that investors can use to plan their next moves and hone in their investment strategy. But there are also sub-strategies that they can use during earnings season, too.

Strategies for Investors During Earnings Season

While some investors may find it profitable to day-trade or even swap options during earnings season, many investors may want to try and get a sense of where expectations lie, and position themselves accordingly. For instance, if expectations are that a company’s report will show it lost money, then an investor may want to sell their holdings, anticipating a fall in share prices the day earnings come out.

The opposite can also be true, however. Perhaps the safest play, though, is to stick to a buy-and-hold strategy, and not let any market volatility – earnings-induced, or otherwise – change that strategy.

Things to Consider for Quarterly Reports

As noted, considering top-line financial metrics and company leadership’s posturing is important for investors. But you may also want to think about the context of the earnings report – which quarter, or time of the year is it covering, for instance. If a retail company reports strong Q4 earnings, for instance, that may have been influenced by the holiday shopping season.

Or, if a food company is struggling with higher costs during the summer because of a drought causing shortages, that’s something else. There are lots and lots of factors that can affect a company’s performance.

Using Earnings Reports to Forecast Market Trends

It may be tempting to try and use earnings reports to forecast market trends, but tread carefully – nobody knows what the market is going to do next. There may be some things to be gleaned about what the future holds, but be careful and perhaps consider consulting with a financial professional before making any moves based on hunches.

Again, earnings reports are critical tools and troves of information for investors, but they are backward-looking, and the world is a wild place – you never know what’s going to happen next.

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

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.


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.

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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26
2023
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How to Set and Reach Savings Goals

By | Budgeting & Goals, Growing Wealth, money | No Comments

Whether you want to save money for a trip to Japan, a down payment on your first home, or the wedding of your dreams, you are probably going to need a well-funded savings account. And for many people, that means implementing and sticking to a savings strategy.

A great first step to saving money is defining your savings goals. What is it that you’re working for? Whatever the answer is, having a specific goal — and not losing sight of it — can help you reach it. While getting to the finish line may require some planning and discipline, the reward will likely be well worth the effort.

Because living your best life probably requires having money saved, here are some strategies you might find helpful when trying to set and reach your savings goals.

1. Identifying Your Goals

There are some savings goals that are nearly universal, like retirement and an emergency fund, and others that will be unique to you. Everyone’s finances and goals are different. Before you can reach your savings goals, it’s important to know what they are. This is the fun part — you may want to spend some time dreaming and planning here.

Next, you’ll want to list those goals in order of priority. Keep in mind, priority doesn’t necessarily mean which happens soonest (although it could). For example, even though retirement is far away, it will likely be the most expensive savings goal a person will have during their lifetime. Therefore, it may rank higher in priority than other savings “wants,” such as a new television or an exotic vacation.

Because many people won’t be able to save for each of their big goals right away, ranking them in order of importance can help you determine which to work on first.

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2. Determining Monthly Amounts

This is a necessary — and often eye-opening — exercise. First, list out your top two or three financial goals. Next, think about how much money you need to accomplish each goal and the time frame, in months, for accomplishing the goal. Then, divide the former by the latter.

For example, let’s say you want to save $6,000 for an emergency fund in one year (12 months), $10,000 for a wedding in four years (48 months), and $20,000 for a down payment in six years (72 months).

By dividing the savings goal by the number of months, you’ll find you need to save $500 per month for your emergency fund, $208 per month for your wedding fund, and $278 per month for your down payment.

This may be another exercise in prioritization, helping you hone in on what to focus on first.

Recommended: 10 Ways To Save Money Fast

3. Writing Down Your Goals

Research suggests that people who write their goals down are more likely to reach them than those who don’t. There could be a few reasons for this.

One is that a written list can serve as a practical reminder that you have goals to work toward. You can give yourself an extra visual cue by posting your goal (or goals) in a place where you’ll see it often, like on the fridge.

Writing down a goal may also help connect the creative, thinking part of the brain with the action-oriented and pragmatic parts of the brain. To translate your savings dreams into reality, it may be important to get as many parts of your brain and consciousness involved as possible.

You may find it valuable (and fun) to take this idea a step further and create a vision board for your goals.

Recommended: Savings Goals by Age: Smart Financial Targets by Age Group

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4. Tracking Your Progress

There’s an old saying that goes “what gets measured gets improved.”

If you truly want to get better at spending and saving, then you may want to track both your daily spending habits and your long-term progress on your savings goals. This may feel difficult at first, but will likely get easier with practice and as you hone the methods that work for you.

With daily or weekly spending habits, there are lots of ways to track how you’re doing. If you don’t know where to start, there’s always the old-fashioned way — with a pen and paper. This is a great way to really wrap your head around where your money is going, and the act of writing down each “spend” may actually help you to spend less. Or, you could collect receipts and enter your expenses in an Excel spreadsheet or Google Sheet. Or, even easier, you may want to get a budgeting app (like SoFi’s) for your phone or other mobile device. These tools connect to your bank and credit card accounts and automatically track and categorize your spending.

With savings goals, it’s also possible to track your progress via pen and paper or using a spreadsheet — simply write down your goal and jot down your progress every time you make a transfer to your savings account. Budgeting apps are also a great way to track your savings, since they automatically import your transactions when you link your bank account(s).

5. Celebrating Small Successes

To help avoid savings fatigue and to keep the fire burning, don’t forget to treat yourself along the way. Positive reinforcement might be an important element to your success.

How might you do this? You don’t have to wait until you’ve reached your big goal to celebrate — you can give yourself some love throughout the journey. For example, if the goal is to save $10,000, then you might celebrate when you hit $5,000 in addition to when you cross the finish line.

Celebrating can be as simple as treating yourself to a hot chocolate or the fanciest coffee in town, but it can help to find a way to give yourself that mental victory.

6. Automating

If you’re like many people, you’re busy and not wild about taking on another chore. So, what can we do to make saving money less of a chore? One potential way to do this is to automate.

Automating is a simple and powerful way to make progress toward savings goals without having to think about it all the time.

To automate your savings, you might set up a recurring transfer from your checking account to your savings account on the same day each month, ideally right after you get paid. Financial experts refer to this strategy as “paying yourself first.” If you wait until you’ve paid all your bills and done your spending for the month to make a manual transfer, you might (a) forget and (b) not have anything left to move to savings.

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7. Choose a High-Yield Savings Account

As you work toward your financial goals, you’ll want to make sure to put your accumulating funds in a high-yield savings account to maximize your money. A high-yield savings account is a type of federally insured savings product that earns rates that are much better than the national average. This allows your money to grow faster and can help you reach your savings goals sooner.

Some banks offer special, high-interest savings accounts that earn better rates than traditional accounts. One of the best places to look for high-interest savings accounts is online banks. Online banks, which save significant costs by not having to maintain branches, rarely charge monthly fees. They also typically offer rates that are much higher than those paid by traditional banks.

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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% 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 10/24/2023. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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2023
A Guide to Financial Securities Licenses

A Guide to Financial Securities Licenses

By | Growing Wealth, invest, Investing | Comments Off on A Guide to Financial Securities Licenses

Before someone can sell securities or offer financial advice they must first obtain the appropriate securities license. The Financial Industry Regulatory Authority (FINRA) is the organization that sets the requirements, oversees the process for earning an investments license, and administers most of the tests.

If you’re considering a career in the financial services industry it’s important to understand how securities licensing and registration works. Investors may also benefit from understanding what the various FINRA licenses signify when selecting an advisor.

Key Points

•   Securities licenses are required for individuals to sell securities and offer financial advice.

•   The Financial Industry Regulatory Authority (FINRA) sets the requirements and administers most of the tests for earning securities licenses.

•   Different licenses allow financial professionals to offer a range of financial products and services to clients.

•   The North American Securities Administrators Association (NASAA) is responsible for licensing investment advisor firms and enforcing state securities law.

•   Some common FINRA licenses include Series 6, Series 7, Series 3, Series 63, Series 65, and Series 66, each with its own specific focus and requirements.

What Is a Securities License and Who Needs Them?

A securities license is a license that allows financial professionals to sell securities and/or offer financial advice. The type of license someone holds can determine the range of financial products and services they have authorization to offer to clients. Someone who holds one or more securities or investments licenses is a registered financial professional.

FINRA is the non-governmental agency responsible for overseeing the activities of registered financial professionals. That includes individuals who hold FINRA licenses to sell securities or offer advisory services. Individual investors do not need a license to buy and sell stocks.

Recommended: How to Start Investing in Stocks: A Beginner’s Guide

Under FINRA rules, anyone who’s associated with a brokerage firm and engages in that firm’s securities business must have a license.

Some specific examples of individuals who might need to have a license from FINRA include:

•   Registered Investment Advisors (RIAs)

•   Financial advisors who want to sell mutual funds, annuities, and other investment packages on a commission-basis

•   Investment bankers

•   Fee-only financial advisors who only charge for the services they provide

•   Stockbrokers and commodities or futures traders

•   Advisors who oversee separately managed accounts

•   Individuals who want to play an advisory or consulting role in mergers and acquisitions

•   IPO underwriters

The North American Securities Administrators Association (NASAA) represents state securities regulators in the United States, Canada, and Mexico. This organization is responsible for licensing investment advisor firms and securities firms at the state level, registering certain securities offered to investors, and enforcing state securities law.

💡 Quick Tip: Investment fees are assessed in different ways, including trading costs, account management fees, and possibly broker commissions. When you set up an investment account, be sure to get the exact breakdown of your “all-in costs” so you know what you’re paying.

Types of FINRA Licenses

FINRA offers a number of different securities licenses. If you’re considering a career in securities trading, it’s important to understand which one or ones you might need. The appropriate license will depend on the type of securities that you want to sell, how you’ll get paid, and what (if any) other services you’ll provide to your clients.

Here’s a rundown of some of the most common FINRA licenses, what they’re used for and how to obtain one:

Series 6

FINRA offers the Series 6 Investment Company and Variable Contracts Products Representative Exam for individuals who work for investment companies and sell variable contracts products. The types of products you can sell while holding this securities license include:

•   Mutual funds (closed-end funds on the initial offering only)

•   Variable annuities

•   Variable life insurance

•   Unit investment trusts (UITs)

•   Municipal fund securities, including 529 plans

Obtaining this FINRA license requires you to also pass the introductory Securities Industry Essentials (SIE) exam. This 75-question exam tests your basic knowledge of the securities industry. FINRA offers a practice test online to help you study for the SIE. You can also watch a tutorial to learn how the 50-question Series 6 exam works.

Beyond those options you may consider investing in a paid Series 6 study prep course. Series 6 courses can help you familiarize yourself with the various variable products you can sell with this license and industry best practices. You’ll need to obtain a score of at least 70 to pass both the SIE and the Series 6 exam.

Series 7

People who see stocks and other securities must take the Series 7 General Securities Representative Exam. A Series 7 investments license is typically needed to sell:

•   Public offerings and/or private placements of corporate securities (i.e. stocks and bonds)

•   Rights

•   Stock warrants

•   Mutual funds

•   Money market funds

•   Unit investment trusts

•   Exchange-traded funds (ETFs)

•   Real estate investment trusts (REITs)

•   Options on mortgage-backed securities

•   Government securities

•   Repos and certificates of accrual on government securities

•   Direct participation programs

•   Venture capital

•   Municipal securities

•   Hedge funds

This securities license offers the widest range, in terms of what you can sell.

You’ll need to take and pass the SIE to obtain a Series 7 exam. The Series 7 exam has 125 questions in a multiple choice format and 72% is a passing score. FINRA offers a content outline you can review to get a feel for what’s included on the exam. You may also benefit from taking a study course that covers the various securities you’re authorized to sell with the Series 7 license as well as the ethical and legal responsibilities the license conveys.

Series 3

Investment professionals can earn the Series 3 license by completing the Series 3 National Commodities Futures Exam. This test focuses on the knowledge necessary to sell commodities futures. This is a National Futures Association (NFA) exam administered by FINRA. It has 120 multiple choice questions, with 70% considered a passing score.

You have to pass the Series 3 license exam to join the National Futures Association. In terms of what’s included in the exam and how to study for it, the test is divided into these subjects:

•   Futures trading theory and basic functions terminology

•   Futures margins, options premiums, price limits, futures settlements, delivery, exercise and assignment

•   Types of orders

•   Hedging strategies

•   Spread trading strategies

•   Option hedging

•   Regulatory requirements

Neither FINRA nor the NFA offer detailed study guides or practice tests for the Series 3 securities license. But you can purchase study prep materials online.

💡 Quick Tip: How to manage potential risk factors in a self directed investment account? Doing your research and employing strategies like dollar-cost averaging and diversification may help mitigate financial risk when trading stocks.

Series 63

The Series 63 Uniform Securities Agent State Law Exam is an NASAA exam administered by FINRA. The test has 60 questions, of which you’ll need to get at least 43 correct in order to pass with a score of 72%.

You’ll need this license if you also hold a Series 6 or Series 7 license and you want to sell securities in any state. The NASAA offers a downloadable study guide that offers an overview of what’s included on the Series 63 securities license exam. Topics include:

•   Regulation of investment advisors

•   Regulation of broker-dealers

•   Regulation of securities and issuers

•   Communication with customers and prospects

•   Ethical practices

Beyond that, the NASAA offers a list of suggested vendors for purchasing Series 63 exam study materials. But it doesn’t specifically endorse any of these vendors or their products for individuals who plan to obtain a Series 63 license.

Series 65

The Series 65 Uniform Investment Adviser Law Exam is another NASAA test that’s administered by FINRA. Holding this license allows you to offer services as a financial planner or a financial advisor on a fee-only basis. The exam has 130 multiple choice questions and you’ll need to get at least 92 questions correct to pass.

As with the Series 63 exam, the NASAA offers a study guide for the Series 65 exam that outlines key topics. Some of the things you’ll need to be knowledgeable about include:

•   Basic economic concepts and terminology

•   Characteristics of various investment vehicles, such as government securities and asset-backed securities

•   Client investment recommendations and strategies

•   Regulatory and ethical guidelines

You can review a list of approved vendors for Series 65 study materials on the NASAA website.

Series 66

The Series 66 Uniform Combined State Law Exam is the third NASAA exam administered by FINRA. Financial professionals who want to qualify as both securities agents and investment adviser representatives take this test.

This multiple choice exam has 100 questions and you’ll need a score of 73 correct or higher to pass. If you already hold a Series 7 license, which is a co-requisite, you could choose to take the Series 66 exam in place of the Series 63 and Series 65 exams.

The study guide and the scope of what the Series 66 exam covers is similar to the Series 65 exam. So if you hold a Series 65 license already, you may have little difficulty in studying and preparing for the Series 66 exam.

The Takeaway

Earning a securities license could help to further your career if you’re interested in the financial services industry. Knowing which license you need and how to qualify for it is an important first step.

Fortunately, you don’t need to hold a FINRA license to invest for yourself. For instance, you could do some research and work at building a diversified portfolio.

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


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

Photo credit: iStock/jacoblund

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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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.

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