Guide to IRA Margin Accounts

Guide to IRA Accounts With Limited Margin

An IRA account with limited margin is a retirement account that allows investors to trade securities with unsettled cash. It’s a more lenient structure versus a cash account, where you must wait for trades to settle before using the money for further trading. But an IRA account with limited margin isn’t a true margin account in that you can’t use leverage.

Nonetheless, an IRA account with limited margin offers a few advantages, including the ability to defer or avoid short-term capital gains tax, and you’re protected against good faith violations. That said, there are still restrictions, so before setting one up, it may be beneficial to learn more about how these accounts work.

What Is an IRA Account With Limited Margin?

An IRA account that may have limited margin — often called simply a limited margin IRA — presents a more flexible option to invest for retirement than a traditional IRA. These types of IRAs may allow you to trade with unsettled funds, meaning that if you close a position you don’t have to wait the standard two days after you trade, you can use those funds right away.

There may also be tax benefits. In a traditional IRA margin account, capital gains taxes are deferred until funds are withdrawn. This is similar to a regular IRA, where you don’t pay taxes on contributions or gains until you withdraw your money.

You may also be able to use limited margin in a Roth IRA, and there may be even more tax benefits when using limited margin in a Roth IRA. You don’t pay any capital gains because Roth accounts are tax-free, since Roth contributions are made with after-tax money.

As noted, an IRA account with limited margin may allow investors to trade with unsettled cash. However, a limited margin IRA is just that — limited. It is not a true margin account, and does not allow you to short stocks or use leverage by borrowing money to trade with margin debits. In that sense, it is different from margin trading in a taxable brokerage account.

You may be able to use limited margin in several IRA types. In addition to having margin IRAs with traditional and Roth accounts, rollover IRAs, SEP IRAs, and even small business SIMPLE IRAs are eligible for the margin feature. While mutual funds are often owned inside an IRA, you cannot buy mutual funds on margin.

💡 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.

How Does Limited Margin Work?

Limited margin works by allowing investors to trade securities without having to wait for funds to settle. You can think of it like an advance payment from positions recently sold.

The first step is to open an IRA account and request that the IRA margin feature be added. Once approved, you might have to request that your broker move positions from cash to margin within the IRA. This operational task will also set future trades to the margin type.

IRAs with limited margin will state your intraday buying power — you should use this balance when day trading stocks and options in the IRA.

An advantage to trading in limited margin IRAs is that you can avoid or defer capital gains tax. Assuming you earn profits from trading, that can be a major annual savings versus day trading in a taxable brokerage account. If you trade within a pre-tax account, such as a traditional or rollover IRA, then you simply pay income tax upon the withdrawal of funds. When using Roth IRA margin, your account can grow tax-free forever in some cases.

The drawback with an IRA with limited margin versus day trading in a taxable account is you are unable to borrow money from your broker to create margin debits. You are also unable to sell securities short with an IRA with limited margin account. So while it is a margin account, you do not have all the bells and whistles of a full margin account that is not an IRA.

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Borrow against your current investments at just 11%* and start margin trading.


*For full margin details, see terms.

Who Is Eligible for an IRA With Limited Margin?

Some brokerage firms have strict eligibility requirements such as a minimum equity threshold (similar to the minimum balances required in full margin accounts). When signing up, you might also be required to indicate that your investment objective is the “most aggressive.” That gives the broker a clue that you will use the account for active trading purposes.

Another restriction is that you might not be able to choose an FDIC-insured cash position. That’s not a major issue for most investors since you can elect a safe money market fund instead.

IRA Margin Calls

An advantage to having margin in an IRA is that you can more easily avoid margin calls by not having to wait for cash from the proceeds of a sale to settle, but margin calls can still happen. If the IRA margin equity amount drops below a certain amount (often $25,000, but it can vary by broker), then a day trade minimum equity call is issued. Until you meet the call, you are limited to closing positions only.

To meet the IRA margin call, you just have to deposit more cash or marginable securities. Since it is an IRA, there are annual contribution limits that you cannot exceed, so adding funds might be tricky.

💡 Quick Tip: One of the advantages of using a margin account, if you qualify, is that a margin loan gives you the ability to buy more securities. Be sure to understand the terms of the margin account, though, as buying on margin includes the risk of bigger losses.

Avoiding Good Faith Violations

A good faith violation happens when you purchase a security in a cash account then sell before paying for the purchase with settled cash. You must wait for the funds to settle — the standard is trade date plus two days (T+2 settlement) for equity securities. Only cash and funds from sale proceeds are considered “settled funds.” Cash accounts and margin accounts have different rules to know about.

A good faith violation can happen in an IRA account without margin. For example, if you buy a stock in the morning, sell it in the afternoon, then use those proceeds to do another round-trip trade before the funds settle, that second sale can trigger a good faith violation. Having margin in an IRA prevents good faith violations in that instance since an IRA with limited margin allows you to trade with unsettled funds.

Pros and Cons of Limited Margin Trading in an IRA

Can IRA accounts have margin? Yes. Can you use margin in a Roth IRA? Yes. Should your IRA have the limited margin feature added? It depends on your preferences. Below are the pros and cons to consider with IRAs with limited margin.

Pros

Cons

You are permitted to trade with unsettled cash. You cannot trade using actual margin (i.e. leverage).
You can avoid good faith violations. You cannot engage in short selling or have naked options positions.
You take on more risk with your retirement money.

The Takeaway

An IRA account with limited margin allows people investing in individual retirement accounts to trade securities a bit more freely versus a cash account. The main benefit to having an IRA with limited margin is that you can buy and sell stocks and options without waiting for lengthy settlement periods associated with a non-margin account.

But remember: Unlike a normal margin account, this type doesn’t allow you to use leverage. That means a margin-equipped IRA doesn’t permit margin trading that creates margin debit balances. You are also not allowed to have naked options positions or engage in selling shares short.

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).

Get one of the most competitive margin loan rates with SoFi, 11%*

FAQ

Is an IRA a cash or a margin account?

An IRA can either be a cash account or a limited margin account. While a cash account only lets you buy and sell securities with a traditional settlement period, a limited margin IRA might offer same-day settlement of trades. You are not allowed to borrow funds or short sell, however.

Is day trading possible in an IRA?

Yes. You can day trade in your IRA, and it can actually be a tax-savvy practice. Short-term capital gains can add up when you day trade in a taxable brokerage account. That tax liability can eat into your profits. With a limited margin IRA that offers same-day settlement, however, you can buy and sell stocks and options without the many tax consequences of a non-IRA. The downside is that, in the case of losses, you cannot take advantage of the $3,000 capital loss tax deduction because an IRA is a tax-sheltered account. Another feature that is limited when day trading an IRA is that you cannot borrow funds to control more capital. A final drawback is that you are limited to going long shares, not short.

Can a 401(k) be a margin account?

Most 401(k) plans do not allow participants to have the margin feature. An emerging type of small business 401(k) plan — the solo brokerage 401(k) — allows participants to have a margin feature. Not all providers allow it, though. Also, just because the account has the margin feature, it does not mean you can borrow money from the broker to buy securities.


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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.

*Borrow at 10%. Utilizing a margin loan is generally considered more appropriate for experienced investors as there are additional costs and risks associated. It is possible to lose more than your initial investment when using margin. Please see SoFi.com/wealth/assets/documents/brokerage-margin-disclosure-statement.pdf for detailed disclosure information.
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What Is A Hostile Takeover?

What Is a Hostile Takeover?

A hostile takeover is when one entity or investor tries to take control of a company without the permission of that company’s management or board of directors. That’s why the unwelcome acquisition bid is considered ‘hostile.’

There are various ways a hostile takeover can occur. The hostile company or investor may make a tender offer to buy the other company’s shares directly from shareholders. Or they may attempt a proxy fight, where the hostile company tries to replace the other company’s board of directors.

The implications of a hostile takeover can affect investors of all stripes. If you own shares of the companies involved, the outcome of a takeover can be important for short- and long-term stock price movements.

How Hostile Takeovers Work

A hostile takeover is a type of legal acquisition in which a bidder — either another company or an investor — seeks to acquire a majority stake in the target company without the approval of the target’s board of directors. Hostile takeovers are often characterized by aggressive tactics such as proxy fights, tender offers, and open letters to company shareholders.

This aggressive action contrasts with typical acquisitions, where two companies work together to agree on a deal, and the board of directors of the target company approves of the purchase. Investors who own stock in a company that’s involved in any kind of merger or takeover need to pay attention to the motives, proposed terms, and possible outcomes.

Reasons for a Hostile Takeover

There are many reasons why a company or investor may try to take over another company. Hostile takeovers happen when a target company’s management refuses initial takeover offers, but the bidding company is persistent in its efforts to acquire the company.

Sometimes it’s because the stock market undervalues the target company’s shares, and the bidder believes that they can increase the company’s value. Other times, it may be because the bidder wants the target company’s assets, brand recognition, or market share.

If the company making the hostile takeover successfully acquires a majority of the shares, then it can gain control of the target company. Once in power, the acquiring company can make changes to the target company’s management, strategy, and operations.

In some cases, the company making the hostile takeover may take steps to increase the value of the company, such as selling off non-core assets, cutting costs, or increasing investment in research and development.

Recommended: How to Buy Stocks: A Step-by-Step Guide

Hostile Takeover Strategies

There are a few ways a company may pursue a hostile takeover. Sometimes a bidder may try to buy a significant percentage of shares of the target company on the open market, hoping to gain enough voting power to persuade the board of directors to accept a takeover offer. If that doesn’t work, the bidder uses its voting power to change management.

The bidder may also take aggressive measures, such as making open letters to shareholders or launching a public relations campaign to pressure the target company’s management to accept the offer. The most common hostile takeover tactics include:

•   Tender offers: A tender offer is when the bidding company reaches out directly to the target company’s shareholders, offering to purchase shares — usually at a premium to the current market value. The bidder pursues a tender offer to bypass a company’s leadership and get enough shares to have a controlling stake in the company. Each shareholder can then decide if they want to sell the stake in the company.

•   Proxy fights: A proxy fight is a battle between competing groups of shareholders to gain control of a company. In a hostile takeover, a bidder, which usually owns a portion of the target company’s stock, tries to persuade other shareholders to vote out the target company’s management. This may allow the bidder to replace the board of directors and seize control of the company.

Recommended: Explaining the Shareholder Voting Process

Examples of Hostile Takeovers and Takeover Attempts

A hostile takeover usually starts when the acquiring company makes an unsolicited bid to purchase the target company. If the board of directors of the target company doesn’t approve of the proposal, they may reject the offer. The acquiring company then will pursue a hostile takeover bid by going directly to the shareholders or trying to replace the board of directors.

However, hostile takeovers don’t usually reach this conclusion. The target companies may defend themselves, causing the bidding company to drop the takeover attempt. Or the target company’s board of directors will relent and eventually agree to terms on an acquisition.

In some cases, antitrust laws or shareholder resistance can thwart a hostile takeover in its tracks.

Choice Hotels’ Attempted Takeover of Wyndham Hotels & Resorts

When Choice Hotels International, Inc. (CHH) made a hostile bid for Wyndham (WH) early in 2023, concerns arose over the potential for a monopoly, given that each company controlled multiple hotel brands and close to half a million hotel rooms.

Choice made multiple attempts to acquire Wyndham, starting in April 2023, but by December their strategy had evolved into an outright takeover. The $7.8 billion attempt did not go through, however, and Choice backed out in March of 2024, citing a lack of shareholder support.

JetBlue’s Strategy to Acquire Spirit Airlines

In March of 2024, JetBlue (JBLU) scuttled its attempted $3.8 billion acquisition of Spirit Airlines (SAVE). This marked the end of JetBlue’s protracted pursuit of the smaller budget airline, which began as a merger proposal in 2022. After Spirit rebuffed JetBlue’s advance, the situation devolved into a hostile takeover — with a twist. JetBlue hoped to prevent Spirit from joining forces with Frontier. Unfortunately, the Justice Department ruled against the takeover, and a similar fate befell the Spirit + Frontier merger as well.

Elon Musk Takes Over Twitter

In one of the more well-known hostile bids in recent years, Tesla (TSLA) CEO Elon Musk moved to take over Twitter in 2023, in a months-long process that was closely followed — and widely debated — by business and media alike.

Despite speculation that the hostile takeover would not succeed, The final $44 billion deal resulted in a complete rebranding of Twitter as X.

Sanofi’s Acquisition of Genzyme

The French healthcare company Sanofi (SNY) attempted a hostile takeover of the American pharmaceutical firm Genzyme in 2010. Before the hostile bid, Sanofi’s management made several friendly offers to buy Genzyme, but the American company’s management declined.

As a result, Sanofi courted shareholders to gather support for a deal and made a tender offer. This put pressure on Genzyme management to finally accept a deal, which they did. Sanofi bought Genzyme for $20.1 billion in 2011.

Kraft Foods’ Takeover of Cadbury

Kraft Foods (KHC), an American food company, launched a hostile bid for Cadbury, a UK-based chocolate company, in 2009. The hostile takeover was motivated by Kraft’s desire to increase its market share in the global confectionery market and acquire Cadbury’s valuable portfolio of brands. Cadbury’s management opposed the takeover and put together a hostile takeover defense team. Also, Cadbury shareholders and the UK government opposed the deal. However, Kraft was ultimately successful in acquiring Cadbury, and the takeover was completed in 2010 for $19.6 billion.

How Can Companies Defend Against Hostile Takeovers?

Companies can deploy various strategies to defend against a potential or imminent hostile takeover. These defensive plans are intended to make the hostile takeover more difficult, expensive, or less attractive to the bidder.

Poison Pill

Companies may adopt a shareholder rights plan, more commonly known as a poison pill, to protect themselves from a hostile bidder. With a poison pill, the target company’s shareholders have the right to purchase additional shares at a discount if a hostile takeover attempt is made, diluting the ownership of the existing shareholders. This makes it more expensive for the acquirer to buy a controlling stake in the company and often deters hostile takeover attempts altogether.

Golden Parachute

A golden parachute is a hostile takeover defense where the target company offers its top executives large severance packages if another firm takes over the company and the executives are terminated due to the acquisition. This makes the purchase more expensive and unattractive for a potential buyer.

Pac-Man Defense

A Pac-Man defense is an offensive strategy employed by a target company in a hostile takeover attempt. A Pac-Man defense refers to a target company that fights back against a hostile bidder by launching its own takeover bid for the bidder.

How Hostile Takeovers Affect Investors

A hostile takeover can significantly affect investors who own shares of either the target or bidding company, causing uncertainty in short- and long-term stock market prospects.

In the short term, investors who own shares of the competing companies may see share prices rise or fall, depending on whether the markets view the proposal as a good or bad deal.

Recommended: Understanding Market Sentiment

The target company’s management may also make the company less attractive to a bidder, such as by adopting poison pill provisions or increasing debt levels. These tactics may increase costs and debt burdens, which may negatively impact the long-term outlook for the company.

However, the target company’s share price may be positively affected as the hostile company tries to buy the target company’s shares at a premium.

If the hostile takeover is successful, the investors in the target company may see a change in the management of the company, as well as a potential change in the company’s strategy. This may change the long-term outlook for the company, which may be bullish or bearish for investors.

On a macro level, a hostile takeover can also affect the industries in which the target company and bidder operate. If the hostile takeover is successful, the industry may see a consolidation of companies, affecting market competition and share prices of related firms.

The Takeaway

Investors may hear about hostile takeover bids in the press, causing them to wonder how the situation may affect them and their portfolios. In some situations, the stock of the companies involved may go up, and the stock may go down in other situations. In the end, it’s essential to monitor the news of the deal carefully and pay attention to price fluctuations.

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.


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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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What Is a Self Directed IRA (SDIRA)?

Guide to Self-Directed IRAs (SDIRA)

Individual retirement accounts, or IRAs, typically allow for a lot of flexibility in the kinds of investments you can make, from stocks and bonds to mutual funds and exchange-traded funds (ETFs).

However, most IRAs don’t allow certain alternative investments like precious metals and real estate. If you want to hold assets like these in your retirement account, you’ll need a self directed IRA (SDIRA), a specific type of Roth or traditional IRA.

What Is a Self-Directed IRA (SDIRA)?

Self directed IRAs and self directed Roth IRAs allow account holders to buy and sell a wider variety of investments than regular traditional IRAs and Roth IRAs. Experienced investors, familiar with sophisticated or risky investments, often use these.

While a custodian or a trustee administers the SDIRA, the account holder typically manages the allocation themselves, taking on responsibility for researching investments and due diligence. These accounts may also come with higher fees than regular IRAs, which can cut into the size of your retirement nest egg over time.

What Assets Can You Put in a Self-Directed IRA or a Self-Directed Roth IRA?

Individuals can hold a number of unique alternative investments in their SDIRA, including but not limited to:

•   Real estate and land

•   Cryptocurrency

•   Precious metals

•   Mineral, oil, and gas rights

•   Water rights

•   LLC membership interest

•   Tax liens

•   Foreign currency

•   Startups through crowdfunding platforms

Recommended: Types of Alternative Investments

Types of SDIRAs

There are specific kinds of SDIRAs customized to investors looking for certain types of investments. The different types include:

Self-directed SEP IRAs

Simplified Employee Pension IRAs (SEP IRAs) are for small business owners or those who are self-employed so that they can make contributions that are tax deductible for themselves and any eligible employees they might have. This type of retirement account gives them the flexibility to invest in alternative investments.

Self-directed SIMPLE IRAs

A Savings Incentive Match Plan IRA (SIMPLE IRA) is a tax-deferred retirement plan for employers and employees of small businesses. Both the employer and the employees can make contributions to this plan. It allows for some alternative kinds of investments.

Recommended: SIMPLE IRA vs Traditional

Self-directed Precious Metal IRAs

Similarly, there are self-directed IRAs for those who would like to invest in precious metals like gold. However, be aware that some precious metal IRAs may charge higher fees than the market price for precious metals.

How Do Self-Directed IRAs Work?

Now that you know the answer to the question, what is a self directed IRA?, it’s important to understand how these accounts work and the self directed IRA rules. You’ll also want to familiarize yourself with the guidelines regarding opening an IRA if you have a 401(k).

Aside from their ability to hold otherwise off-limits alternative investments, SDIRAs work much like their traditional counterparts. SDIRAs are tax-advantaged retirement accounts, and they can come in two flavors: traditional SDIRAs and Roth SDIRAs.

Traditional IRA Contributions and Withdrawal Rules

IRA contributions to traditional accounts goes in before taxes, which reduces investors’ taxable income, lowering their income tax bill in the year they make the contribution. For 2024, individuals can contribute up to $7,000 in total across accounts. Those age 50 and up can make an extra $1,000 catch-up contribution for a total of $8,000. Investments inside the account grow tax-deferred.

It’s important to pay close attention to self directed IRA rules, particularly rules for IRA withdrawals. Once individuals begin to make withdrawals at age 59 ½, they are taxed at normal income tax rates. Account holders who make withdrawals before that age may owe taxes and a possible 10% early withdrawal penalty. Traditional SDIRA account holders must begin making required minimum distributions (RMDs) after age 73.

Roth IRA Contributions and Withdrawal Rules

Roth SDIRAs have the same contribution limits as traditional SDIRAs. However, retirement savers contribute to Roths with after-tax dollars. Investments inside the account grow tax-free, and withdrawals after age 59 ½ aren’t subject to income tax.

Roths are also not subject to RMD rules. As long as an individual has had the account for at least five years (as defined by the IRS), they can withdraw Roth contributions at any time without penalty, though earnings may be subject to tax if withdrawn before age 59 ½.

There are also rules restricting who can contribute to a Roth IRA, based on their income. In 2024, Roth eligibility begins phasing out at $146,000 for single people, and $230,000 for people who are married and file their taxes jointly.

Individuals can maintain both traditional and Roth IRA accounts, however, contribution limits are cumulative across accounts, and cannot exceed $7,000, or $8,000 for those 50 and over.

Traditional vs Roth SDIRA

There are some differences between a self-directed traditional IRA and a self-directed Roth IRA.

With a traditional SDIRA, you save pre-tax money for your retirement, just like you do with a traditional IRA plan. You pay taxes on the money when you withdraw it, which you can do without penalty starting at age 59 ½. However, a self-directed traditional IRA gives you the flexibility to invest in alternative assets, like real estate or precious metals.

With a self-directed Roth IRA, just like a regular Roth IRA, you make after-tax contributions to the plan. The withdrawals you make starting at age 59 ½ are tax-free, as long as you have had the account for at least five years, according to the five-year rule. With this type of self-directed IRA, you can invest in alternative investments, such as private equity, real estate, and precious metals.

💡 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.

Pros and Cons of Self-Directed IRAs

Self-directed IRAs offer unique perks for the right investor. However, those interested must weigh those benefits against potential drawbacks.

Benefits of Self-Directed IRAs

An SDIRA allows investors to branch out into different types of investments to which they might otherwise not have access. This allows investors to seek out potentially higher returns and diversify their portfolios beyond the offerings in traditional IRAs.

Alternative investments have the potential to offer higher returns than investors might achieve with stock market investments. However, investors beware: These opportunities for higher rewards come at the price of higher risk.

Also, investors’ ability to hold a broader spectrum of investments that can help them diversify their portfolio and potentially manage risks, such as inflation risk or longevity risk, the chance an investor will run out of money before they die. For example, some SDIRAs allow investors to hold gold, a traditional hedge against inflation.

Drawbacks of Self-Directed IRAs

While there are some very real advantages to using SDIRAs, these must be weighed against their disadvantages.

For starters, investments like stocks and shares of ETFs are highly liquid. Investors who need their money quickly can sell them in a relatively short period of time, usually a matter of days.

However, some of the investments available in SDIRAs are not liquid. For example, real estate and physical commodities like precious metals may take quite a bit of time to sell if you need to access your money. Individuals who need to sell these assets quickly may find themselves in a situation in which they must accept less than they believe the asset is worth.

SDIRAs may also carry higher fees. Individuals who hold regular IRA accounts may not have to pay management or investment fees. However, SDIRA holders may have to pay fees associated with holding the account and with the purchase and maintenance of certain assets.

Finally, SDIRAs place a lot of responsibility in the hands of their account holders. Investors must research investments themselves and perform due diligence to make sure that whatever they’re buying is legitimate and matches their risk tolerance.

What’s more, investors must make sure the assets they hold meet IRS rules. Running afoul of these rules can be costly, in some cases causing investors to pay taxes and penalties.
Here’s a look at the pros and cons of SDIRAs at a glance:

Pros

Cons

Tax-advantaged growth. Contributions to traditional accounts are tax deductible. Investments grow tax-deferred in traditional accounts and tax-free in Roth accounts. Not liquid. Selling alternative investments may be slow and difficult.
Same contribution limits as regular IRAs. In 2024, individuals can contribute up to $7,000 a year, or $8,000 for those aged 50 and up. Higher fees. Individuals may be on the hook for account fees and fees associated with alternative investments.
Higher returns. Alternative investments may offer higher returns than those available in the stock market. Increased responsibility. Investors must research investments carefully themselves and ensure they stay within rules for approved IRA investments.
Diversification. SDIRAs offer investors the ability to invest in assets beyond the stock and bond markets. Higher risk. Alternative investments tend to be riskier than more traditional investments.

4 Steps to Opening a Self-Directed IRA

Investors who want to open an SDIRA will need to take the following steps:

1. Find a custodian or trustee.

This can be a bank, trust company, or another IRS-approved entity. You’ll need to follow their requirements for opening an IRA account. Some SDIRAs specialize in certain asset classes, so look for a custodian that allows you to invest in the asset classes in which you’re interested.

2. Choose investments.

Decide which alternatives you want to hold in your SDIRA. Perform necessary research and due diligence.

3. Complete the transaction.

Find a reputable dealer from which your custodian can purchase the assets, and ask them to complete the sale.

4. Plan withdrawals carefully.

Because alternative assets have less liquidity than other types of investments, you may need to plan sales well in advance of needing retirement income or meeting any required minimum distributions.

Investing in Your Retirement With SoFi

If you’re opening your first IRA account, you’re likely best served with a traditional or Roth IRA. Because of the complications involved in using an SDIRA, only sophisticated investors should consider it.

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


Easily manage your retirement savings with a SoFi IRA.

FAQ

Are self-directed IRAs a good idea?

There are advantages and disadvantages to self-directed IRAs. Benefits include the fact that you can make alternative types of investments you might not otherwise be able to. That could help you diversify your portfolio and potentially increase your returns.

However, there are drawbacks to SDIRAs, including higher risk because alternative investments tend to be riskier, and potentially higher fees for maintenance of investments in the plan and account fees. In addition, investors need to research the investments themselves and follow the IRS rules carefully to make sure they comply. Finally, many alternative investments are not liquid, which means they could take longer and be more difficult to sell.

Can you set up a self-directed IRA yourself?

To set up a self-directed IRA, find a custodian or trustee such as a bank or trust company to open an account, research and choose your investments, find a reputable dealer for the investments you’d like to make, and have your custodian complete the transactions.

How much money can you put in a self-directed IRA?

In 2024, you can contribute up to $7,000 to a traditional or Roth self-directed IRA, plus an additional $1,000 if you’re 50 or older.


Photo credit: iStock/Andres Victorero


An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. This and other important information are contained in the Fund’s prospectus. For a current prospectus, please click the Prospectus link on the Fund’s respective page. The prospectus should be read carefully prior to investing.
Alternative investments, including funds that invest in alternative investments, are risky and may not be suitable for all investors. Alternative investments often employ leveraging and other speculative practices that increase an investor's risk of loss to include complete loss of investment, often charge high fees, and can be highly illiquid and volatile. Alternative investments may lack diversification, involve complex tax structures and have delays in reporting important tax information. Registered and unregistered alternative investments are not subject to the same regulatory requirements as mutual funds.
Please note that Interval Funds are illiquid instruments, hence the ability to trade on your timeline may be restricted. Investors should review the fee schedule for Interval Funds via the prospectus.

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.

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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What Is a Series E Savings Bond?

What Is a Series E Savings Bond?

Series EE bonds, or Patriot Bonds, were initiated in 1980 as a low-risk way for Americans to save. The money invested is guaranteed to double in 20 years.

They build upon the tradition of Series E bonds, or war bonds, which were introduced by the federal government in 1941. Learn more about this savings vehicle here.

What Is a Series EE Bond?

A series EE bond is a U.S. Treasury bond. It’s considered to be a very safe investment, as it’s backed by the U.S. government. It is guaranteed to double in value in 20 years, even if the government has to add funds to it to meet that mark.

To provide some context, here’s a quick look at what bonds are and how bonds work. A bond is a debt instrument. Bonds are issued by corporations or governments in order to raise capital. The bond market is huge — much larger than the equity markets. (In 2023, the market cap of the global bond market was about $133 trillion, versus $111 trillion for the stock market.) Investors provide capital to companies and governments when they buy the bonds, effectively loaning their money to that institution.

Meanwhile, the bond issuer agrees to pay investors the capital back, along with interest, after a certain period.

There are different kinds of bonds investors can purchase, including municipal, corporate, high-yield bonds, and U.S. Treasuries. A savings bond is a type of U.S. Treasury bond, issued with the full faith and credit of the U.S. government, meaning there’s virtually no chance of losing money. Savings bonds allow the government to borrow money for various purposes while giving investors a reliable and predictable stream of interest income.

Series E bonds, which were created in 1941 to help fund the WWII effort, were replaced in 1980 with Series EE bonds, or Patriot Bonds.

Get up to $300 when you bank with SoFi.

Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.60% APY on your cash!


💡 Quick Tip: An online bank account with SoFi can help your money earn more — up to 4.60% APY, with no minimum balance required.

How Do Series EE Bonds Work?

If you’re interested in buying bonds, here are details on how a Series EE bond works:

•   Series EE bonds are electronic and can only be purchased and managed online with a TreasuryDirect account. They are available in any denomination starting at $25, up to $10,000 per person named on the bond, per calendar year.

•   These bonds are guaranteed to double in value in 20 years, even if the government needs to kick in extra cash. You can hold the bond for up to 10 additional years to continue to earn interest.

•   When you purchase a Series EE bond, the interest rate will be stated. Through October 31, 2024, the interest rate is 2.70%.

•   Interest is earned monthly, compounding semi-annually, for up to 30 years, unless you cash it sooner.

•   Series EE bonds can be cashed in (or redeemed) after 12 months, but early withdrawal can trigger a penalty of partial interest loss.

•   Electronic Series EE bonds can be cashed in via the TreasuryDirect site.

•   Interest earned on Series EE bonds is taxable at the federal level. Federal estate, gift, and excise taxes, as well as state estate or inheritance taxes, may also apply. If the money is used for qualified education expenses, however, you may not be subject to taxes.

•   The TreasuryDirect site also makes 1099-INT statements of interest earnings available annually.

Recommended: Understanding the Yield to Maturity (YTM) Formula

Understanding Series E Bonds

The popularity of Series E bonds may have hinged largely on the patriotic call to purchase them as part of the war effort. Buying bonds served two purposes: It helped the government to raise money for the war and it also helped to keep inflation at bay as shortages threatened to push consumer prices up. Apart from that, there were other qualities that might have made a Series E saving bond attractive.

These bonds were issued at 75% of their face value and returned 2.9% interest, compounded semiannually if held to 10-year maturity. So investors were able to earn a decent rate of return on their investment.

Series E bonds were also affordable, with initial denominations ranging from $25 to $1,000. Larger denominations of $5,000 and $10,000 were added later, along with two smaller memorial denominations of $75 and $200 to commemorate the deaths of President Kennedy and President Roosevelt, respectively.

Series E bonds were redeemable at any time after two months following the date of issue. Bond purchasers could redeem them for the full face value, along with any interest earned.

Interest from Series E bonds was taxable at the federal level but exempt from state and local taxes, adding to their appeal. And because they were issued by the federal government, they were considered a safe investment.

Recommended: Understanding the Yield to Maturity (YTM) Formula

Series EE Bond Maturity Rate

The maturity rate for EE bonds depends on when they were first issued.

Here’s a table showing the maturity dates for Series EE bonds over time:

Issuing Date Maturity Period
January – October 1980 11 years
November 1980 – April 1981 9 years
May 1981 – October 1982 8 years
November 1982 – October 1986 10 years
November 1986 – February 1993 12 years
March 1993 – April 1995 18 years
May 1995 – May 2003 17 years
After June 2003 20 years

Are Series EE Bonds Right for Me?

Series EE bonds can be a convenient, low-risk way to help your money grow over time. Plus, many people like the idea of investing in America and having their investment backed by the U.S. government. However, the rate of return may not be optimal, and the bonds are typically held for quite a long time versus a short-term investment.

Here are two popular alternatives you might consider to grow your money:

Savings Accounts

A savings account is a deposit account that’s designed to hold the money you don’t plan to spend right away. You can find various types of savings accounts at traditional banks, credit unions, and online banks. Savings accounts can pay interest, though not all at the same rate.

High-yield savings accounts at online banks, for example, tend to pay much higher rates than basic savings accounts at brick-and-mortar banks. Currently, they may offer around 4.60% APY (annual percentage yield) versus 0.58% for savings accounts.

Stocks

If you’re unclear about how stocks work, they effectively represent an ownership share in a company. When you buy shares of stock, you’re buying an ownership stake in a publicly traded company. The way you make money with stock investing is by buying low and selling high. In other words, you want to purchase stocks at one price then sell them for a higher price.

Stock trading can be a more powerful way to build wealth over time versus keeping money in a savings account or buying bonds. But there’s a tradeoff since stocks tend to be much riskier than bonds or savings accounts. Buying shares of mutual funds or exchange-traded funds (ETFs), which hold a collection of different stocks as well as bonds, is one strategy for managing that risk.

Recommended: Bonds vs. CDs: What’s Smart for Your Money?

Banking With SoFi

Series EE savings bonds can be a safe way to earn a steady rate of return. However, they aren’t the only way to grow your money.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.60% APY on SoFi Checking and Savings.

FAQ

When should I cash in EE savings bonds?

Series EE savings bonds are optimally held for 20 years, at which point the money invested will have doubled. If you’d like to keep earning interest, you may hold the bonds for up to an additional 10 years.

How long does it take for a Series EE savings bond to mature?

Series EE savings bonds mature in 20 years. At the end of that period, the initial investment’s value will have doubled. You may hold them an additional 10 years and continue to earn interest, if you like.

Do Series EE savings bonds double after 20 years? 30 years?

Series EE savings bonds double after 20 years. If you don’t redeem them, you may continue to earn interest on them for another 10 years, for a total of 30 years.


Photo credit: iStock/loveguli

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.


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 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.

As an alternative to direct deposit, 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.


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.

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.

*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.

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Smartphone and credit card

Pros & Cons of Online and Mobile Banking

Online and mobile banking are growing in popularity, thanks to how they can make transactions faster, easier, and more secure. Indeed, the number of Americans who are going all in on managing their finances this way continues to grow. Recent research shows that about 27% of Americans use online-only banks.

Whether you are among that crowd or are using your traditional bank’s website or app, online and mobile banking have many advantages. And as with most financial services, there are also downsides to consider. Here, take a closer look at this important facet of your personal finances, so you can decide which banking style suits you best.

What Is Online Banking?

There are two aspects of online banking. Most traditional retail banks offer digital banking as well as the ability to conduct business at a branch. Their mobile and online banking options can allow you to conduct your banking without going to a branch. You might, say, use your smartphone to transfer funds to another bank account or do a mobile check deposit.

But often, the term “online banking” is used to refer to online-only banking vs. traditional banking, meaning you manage your personal finances completely online. Since online banks typically have no physical locations and therefore lower overhead, they can usually offer consumers a higher annual percentage yield (APY) on deposit accounts and other perks.

💡 Quick Tip: Make money easy. Open a bank account online so you can manage bills, deposits, transfers — all from one convenient app.

Pros of Online Banking

To better understand online banking, consider these upsides:

Higher Interest Rates and Lower Fees

As mentioned, online-only banks tend to offer a higher interest rate on savings accounts and possibly checking accounts, too. Currently, the national interest rate on savings accounts is 0.46%. At some online-only banks, however, you can find an APY of 4.60%, or 10 times higher.

In addition, these banks may offer lower or no fees. Stashing your cash in one of these banks can be a way to avoid bank fees, such as account maintenance charges and the like.

Recommended: APY vs. Interest Rate: What’s the Difference?

No Minimum Balance

Many traditional banks still require you to maintain a minimum balance or else be charged a monthly fee. In terms of how much money you need to open an account online and keep it in good standing, you may be in for a pleasant surprise. A number of digital financial institutions allow a balance of just a few dollars, and you still won’t be hit with charges on your statement.

Convenience

Online banks are open 24 hours a day, 7 days a week, which means you can take care of transactions after normal bank hours. You can manage your money whenever and wherever.

ATM Access

Most online banks are part of an online network of ATMs, such as MoneyPass or Allpoint. What’s more, there is generally no fee for using these ATMs. If the financial institution doesn’t partner with an ATM network, they will typically offer to refund ATM fees up to a certain number of withdrawals.

Enhanced Online Experience

As digital innovators, online-only banks may provide a better user experience when online or in the app. Expect to get the latest tools and access to a wealth of features such as round-up savings programs or a dashboard that helps you track your earnings, spending, and savings.

Get up to $300 when you bank with SoFi.

Open a SoFi Checking and Savings Account with direct deposit and get up to a $300 cash bonus. Plus, get up to 4.60% APY on your cash!


Cons of Online Banking

There are, however, some potential downsides to managing money this way. Consider these potential issues with online banking:

No In-Person Assistance

While most online banks provide a customer service line or chat function, they generally do not offer personal bankers. This means that there is no one available face-to-face to help you with your banking needs, such as setting up accounts, applying for loans, and getting a document notarized. If you are a person who wants and appreciates this kind of personal connection, you may not be well-suited to digital banking.

Limited Services

There may be some services that you aren’t able to enjoy with an online-only bank. It may or may not offer credit cards, car loans, and mortgages; you may not be able to deposit cash easily, as you can at a brick-and-mortar bank branch. Every online bank is different, so do your research to see what services they offer.

Limited ATM Access

Although many online banks will have a network of tens of thousands of ATMs that customers can access, others may offer less robust options vs. traditional retail banks. It’s worthwhile to see exactly where a digital bank has allied ATMs near your usual haunts, like your home and office, before signing up.

Is Online Banking Safe?

People may worry about whether online banking is safe. The truth is, traditional banks are no more or less secure than online-only banks, and vice-versa. All are at a very minimal risk of a hack. Also, any bank that is insured by the FDIC guarantees the same amount of protection in the highly unlikely case of a bank failing: $250,000 per depositor, per ownership, per insured institution. That’s true regardless of whether the bank is online or not. Digital banks generally tend to offer similar fraud protection programs as brick-and-mortar banks.

Recommended: What Do You Need to Open a Bank Account Online?

The Takeaway

Whether you call it online banking, mobile banking, or digital banking, keeping your funds with an online-only bank can offer many rewards. You’re likely to earn a higher interest rate and pay fewer fees, for instance. But those who like banking in person at a branch may choose to stick with a traditional bank. Think carefully about what suits your financial style and needs best.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.60% APY on SoFi Checking and Savings.


SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.


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 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.

As an alternative to direct deposit, 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.


*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.

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