Mar
16
2026
An older couple thoughtfully reviews documents and a tablet together, focused on their retirement planning.

Achieving Retirement Readiness When Your Employees Are Struggling with Debt

By | Preparing for Retirement | Comments Off on Achieving Retirement Readiness When Your Employees Are Struggling with Debt

Most workers hope to be free from financial responsibilities such as debt by the time they reach retirement age. But for a growing number of employees in the U.S., debt is proving difficult to shake. Just like younger employees, older workers are experiencing increasing levels of debt, including credit card balances and, surprisingly, student loan debt.

More than 70% of Americans age 55 and over carry some form of debt, and over half report that this financial burden has “held them back” in life, according to a February 2025 National Debt Relief survey. For older borrowers, debt not only inhibits retirement savings but can also mean needing to work far longer than they had planned. Entering retirement with debt is particularly risky, as fixed incomes can make repayment more difficult. Of the 2,000 adults surveyed, 67% of non-retired respondents in debt stated they now expect to work past their planned retirement age to support themselves and their families.

Key Points

•   Over 70% of Americans age 55 and over carry some form of debt.

•   High-interest debt like credit cards can significantly hamper retirement savings for both Gen X and Boomer employees.

•   A quarter of all outstanding student debt is held by people age 50 and older, with average balances around $45,000.

•   HR professionals can help by tailoring debt counseling and student loan repayment benefits to address older workers’ needs.

•   Benefits like employer-matched 401(k) contributions for student loan payments can benefit older employees with their own or Parent PLUS loans.

Understanding Good and Bad Debt

Of course, some debt can be essential to smart financial planning for your employees. Taking out a low-interest mortgage for a home, for example, can be a wise investment that increases an individual’s net worth, while increasing their quality of life.

But high-interest credit card debt can significantly hamper an employee’s financial wellness, including retirement readiness. Unfortunately, 53% of Gen Xers (ages 46 to 61), and 43% of boomers (ages 62 to 80) carry a balance from month to month, according to Bankrate’s 2026 Credit Card Debt Survey.

For a growing number of employees, student debt is also standing in the way of retirement planning — and not just for recent grads. In the first quarter of 2025, 26% of all outstanding student debt was held by people age 50 and older, according to the U.S. Department of Education’s Federal Student Aid office. Borrowers aged 50 to 59 have an average student loan debt balance of $45,126.

What HR Pros Can Do for Older Employees Carrying Debt

The good news? It’s likely you already have plenty of benefits on hand that can help with the debt/retirement readiness dilemma. It’s a matter of making sure these benefits are flexible enough to be targeted toward and communicated to older workers. The following steps can help ensure that your organization is offering the benefits your employees — of all ages — need to adequately prepare for retirement.

Beef Up Your Debt Counseling Services

Effective debt management is important for the financial well-being of any employee. But for older employees, who have less time to save for retirement and may soon be facing a decline in income, debt can be an even more pressing concern.

Review your financial planning and debt counseling services — whether they are implemented in-house or through a vendor. Make sure that debt counseling is delivered in a way that addresses employees at different ages and stages of life. You may even want to consider segmenting debt counseling by age so the solutions accommodate older employees with a different debt payback and retirement planning time frame.

Review Your Student Loan Repayment Benefits

Student loan repayment benefits are often geared toward recruiting and retaining younger employees. And that’s great. But these benefits can also be a secret weapon for your 50-plus crowd too. Let’s take a closer look.

•   Employer-sponsored student loan repayment: Employers can contribute $5,250 annually per employee toward tuition reimbursement or student loan payments on a tax-exempt basis. The “One Big Beautiful Bill Act” (signed July 2025) made this benefit — which was set to expire at the end of 2025 — permanent. Starting in 2027, this $5,250 limit will be adjusted for inflation. This can be a big bonus for recent grads, as well as older employees.

•   Matching 401(k) contributions for student debt repayment. The Secure Act 2.0, formally authorizes matching contributions for student loan repayment, allowing companies to match employees’ qualified student loan payments with contributions to their retirement accounts, including 401(k)s, 403(b)s, SIMPLE IRAs, and government 457(b) plans. This program might seem designed to benefit younger employees, who may be choosing between paying off their student loans and contributing to their retirement accounts. But don’t overlook the fact that older employees (who may still carry their own student debt or have Parent PLUS loans) could get a boost from this benefit as well.

Keep Employees Up to Date on Student Loan Forgiveness

Following the rollback of certain income-driven repayment plans, employees need clear guidance on which, if any, federal forgiveness programs remain available to them. No employer wants their employees to miss out on these and other lucrative benefits, or fall behind on the latest student loan news.

Consider offering online education tools and personalized counseling support to help employees — from recent grads to older borrowers — navigate the ever-changing landscape of repayment and forgiveness programs. At the same time, it’s crucial to make sure your team has the resources to stay current and relevant to your employees.

Tailor Retirement Counseling to 50-Plus

Whether your older employees are worried about debt or not, retirement planning changes once your employees enter their fifties and beyond. Consider offering access to retirement advisors who can assess older employees’ retirement preparedness and offer strategies to help them accumulate retirement savings, while paying down debt.

Educating employees on retirement savings catch-up opportunities — and encouraging them to take advantage of them — can further boost employees’ retirement readiness. Currently, adults age 50 and older can make additional contributions to their retirement accounts. Under the SECURE 2.0 Act, high-earning individuals making at least $150,000 in the prior year must make their catch-up contributions on a Roth (after-tax) basis starting in 2026.

The Takeaway

Understanding the connection between debt and retirement readiness among all of your employees, but especially those nearing retirement, is a top challenge for benefits pros.

Sofi at Work is here to help with financial education resources, platforms, and tools you need to make sure your older employees are retirement ready.

Photo credit: iStock/LaylaBird

Products available from SoFi on the Dashboard may vary depending on your employer preferences.

Advisory tools and services are offered through SoFi Wealth LLC, an SEC-registered investment adviser. 234 1st Street San Francisco, CA 94105.

SoFi Student Loan Refinance Loans, Personal Loans, Private Student Loans, and Mortgage Loans are originated through SoFi Bank, N.A., NMLS #696891 (Member FDIC), (www.nmlsconsumeraccess.org ). The 529 Savings and Selection Tool is provided by SoFi Wealth LLC, an SEC-registered investment adviser. For additional product-specific legal and licensing information, see SoFi.com/legal. 2750 E. Cottonwood Parkway #300 Cottonwood Heights, UT 84121. ©2025 Social Finance, LLC. All rights reserved. Information as of November 2025 and is subject to change.


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.

SOAW-Q126-004

Read more
Mar
09
2026
A woman sits at her kitchen table drinking a cup of coffee.

Retiring With Student Loan Debt

By | Preparing for Retirement, Student Loans, student_loan | Comments Off on Retiring With Student Loan Debt

If you’re getting ready to retire and you have student loan debt, you’re not alone. According to the National Consumer Law Center, 3.5 million adults aged 60 or older owe more than $125 billion in student loans.

While you do have to pay student loans after retirement, there are ways to make the process more manageable. Read on to learn about retiring with student loan debt, including options for forgiveness and how to save money on your loans.

Key Points

•  Approximately 3.5 million adults aged 60 or older have student loan debt, requiring monthly payments in retirement until the loans are repaid.

•  Data shows that borrowers aged 50 to 61 have the highest average federal student loan balance, which is $46,556.

•  Fixed retirement income creates challenges for covering loan payments; if loans go into default due to nonpayment, the federal government can withhold up to 15% of an individual’s Social Security benefit.

•  Income-driven repayment plans typically offer lower payments based on discretionary income and family size, while Public Service Loan Forgiveness requires 120 qualifying payments from those who are eligible, before canceling remaining loan balances.

•  Federal loan consolidation combines multiple loans into one streamlined payment, while refinancing replaces existing federal and private loans with a new loan with new rates and terms.

Can You Retire With Student Loan Debt?

It is possible to retire with student loan debt, but you will need to keep making your monthly payments during retirement until your student loans are fully repaid.

Even if you’ve been saving for retirement for decades, loan payments can put an extra strain on your budget during your golden years, so it’s a good idea to plan ahead.

Paying Back Student Loans After Retirement

Student loans are financial obligations you must repay, even in retirement. If you fail to pay them, your student loans can go into default, which can have serious repercussions.

There are advantages and disadvantages to paying student loans in retirement and it’s helpful to know what they are.

Pros of Paying Back Student Loans After Retirement

Paying off student loans in retirement can help you maintain or strengthen your credit. When you pay your loan on time each month, that positive credit behavior is reflected on your credit report. It could positively impact your credit score, which could help you qualify for better interest rates on a mortgage, personal loans, and credit cards.

In addition, paying off your student loans as quickly as possible in retirement can reduce the amount of interest you’ll pay. The sooner you pay off the loans, the less interest you’ll pay overall.

And finally, paying off your student loan debt will leave you with more money in your budget. Whether you choose to travel or move to your dream retirement location, you’ll be able to dedicate more funds to your goals. Plus, you’ll have the peace of mind of knowing your student debt has been eliminated.

Cons of Paying Back Student Loans After Retirement

All that said, paying student loans in retirement can be challenging. Individuals aged 50 to 61 have the highest average federal student loan balance, which is $46,556, according to the Education Data Initiative. That’s a steep amount to pay off after retiring.

Once an individual is on a fixed retirement income, it can be a struggle to make the monthly loan payments. The money that you need to allocate to your student loan likely means that you’ll have less to spend on essentials, including daily living expenses and healthcare, and less to contribute to savings. You might need to work longer or get a part-time job to bring in extra income.

And if you fail to make student loan payments, your loans could end up in default. At that point, the federal government can withhold up to 15% of your Social Security benefits as well as your tax refund to put toward your outstanding federal student loan balance.

Defaulted student loans are reported to the credit bureaus and they typically remain on your credit report for seven years. A default damages your credit and can make it difficult to get a loan or credit cards.

At What Age Can You Stop Paying Student Loans?

Unfortunately, there is no age when you can just stop paying your student loans. Retirement has no impact on your obligation to repay your student loan debt. No matter what your age, your monthly loan payments will continue to be due each month until the loan is paid off.

Student Loan Forgiveness Options

However, one option that might help with student loans in retirement is loan forgiveness. There are some federal student loan forgiveness programs offered by the U.S. Education Department that borrowers with student loan debt may want to explore.

Income-Driven Repayment (IDR) Plans

Borrowers with federal student loans may be able to get their loans forgiven through an income-driven repayment plan. IDR plans base monthly payments on an individual’s discretionary income and family size. Because repayment is stretched over 20 or 25 years, your monthly payments may be lower.

As of March 2026, there are three IDR plans available: Pay as You Earn (PAYE), Income-Based Repayment (IBR), and Income-Contingent Repayment (ICR). Only one of these plans, the IBR plan, offers forgiveness as an option on the remaining balance on your loan after 20 years.

Public Service Loan Forgiveness (PSLF)

Borrowers who work full-time in public service might be eligible for Public Service Loan Forgiveness (PSLF). They must work for a qualifying employer and make 120 qualifying payments under an eligible repayment plan, such as an IDR plan. After that, the remaining loan balance may be forgiven.

Options for Paying Off Student Loans During Retirement

Once a borrower pays off their student loans in retirement, they can enjoy retirement without the stress of education debt hanging over them. As part of preparing for retirement, you may want to come up with a strategy for repaying your loans so that you have a plan in place.

There are a number of repayment options to consider, including the ones below. Using a student loan repayment calculator may be helpful as you evaluate each one.

Lump Sum

If you can afford to pay off your loans all at once, you could potentially save a lot of money overall. You’ll eliminate the interest you would have owed if you paid the loan off over time, which could be considerable, depending on the length of your loan term. Plus, you’ll immediately free up money in your monthly budget to dedicate to other financial goals.

Consolidate Your Loans

If you have multiple federal student loans, another potential option is student loan consolidation. With this process, you combine multiple federal student loans into one new loan with one new monthly payment. The interest rate on the new loan is the weighted average of your existing loan rates rounded up to the nearest one-eighth of one percent.

Just be aware that while consolidating student loans streamlines and simplifies your monthly payments, it typically won’t save you money overall.

Refinance Student Loans

Borrowers with private student loans, or a combination of federal and private loans, might want to consider student loan refinancing. When you refinance, you replace your existing loans with a new loan with new rates and terms. Ideally, you would receive a loan with a lower interest rate or shorter loan term through refinancing. That could save you money on interest over the life of the loan.

However, it’s important to understand that if you refinance federal loans, you lose access to federal benefits, such as income-driven repayment plans and student loan forgiveness. If you think you may need these programs, refinancing is probably not the right option for you.

Adjusting Your Retirement Budget

You could also tweak your budget to free up some extra money to put toward your monthly student loan payments. Start by reviewing your expenses carefully. Look for costs that you could reduce or eliminate, such as subscription services, restaurant meals, gym memberships you rarely use, and so on. By directing those funds to your student loan payments, you may be able to pay off your loans a little faster.

You might also consider the avalanche method for repaying debt. With this process, you pay more money to the student loan with the highest interest rate while continuing to make minimum payments on your other loans. Once you pay off that loan, you focus on the loan with the next highest interest rate and so on. This can help reduce the amount of interest you’ll pay over time.

How Student Loan Debt Can Impact Retirement Planning

Student loan debt can affect retirement planning in several different ways. Here are some of the impacts student loans can have and what to do about them.

Impact on Monthly Cash Flow

Making monthly student loan payments means borrowers will have less money for other things, including daily living expenses such as housing, utilities, and groceries.

They’ll also have less money to allocate toward saving and investing for retirement. According to a 2026 report by Fidelity, borrowers over age 50 with student loan debt have retirement balances that are about 30% less than those in the same age group that don’t have student loan debt.

Impact on Social Security or Fixed Income

Student loan debt can also impact a borrower’s Social Security benefits and fixed income. If their federal student loans go into default because they are unable to pay them, the government can withhold up to 15% of a borrower’s Social Security benefits to apply to the outstanding loans, as long as the remaining balance on their monthly Social Security benefit is at least $750. This can create financial hardship for those on a fixed income, especially for low-income individuals.

Balancing Debt Payoff vs Retirement Savings

It can be challenging to juggle paying off loans and saving for retirement, but older borrowers can strive to strike a balance between the two.

Because workers near retirement age tend to have large student loan balances, as noted earlier, prioritizing paying off their debt could save them money on interest and keep them from falling into delinquency or default on their federal loans. In this case, they may want to put more money or extra payments toward their loans. As they pay off loans, they could then direct the money toward retirement.

Another option some borrowers may want to explore is working longer to pay off their student loan debt before retiring. That way, they can retire free of student debt — along with the stress and financial struggles it brings — and fully concentrate on saving for the future once they retire.

Take control of your student loans.
Ditch student loan debt for good.

The Takeaway

Dealing with student loans in retirement isn’t ideal, but having a plan in place for paying off your loans could help you save money on interest, free up funds you can devote to other goals, and give you peace of mind.

Potential ways to make your student loan debt more manageable include using an income-driven repayment plan, pursuing student loan forgiveness, or refinancing your student loans. Weighing all the options can help borrowers decide which one is best suited to their situation.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

Do you have to pay back student loans when you retire?

Yes. Student loans don’t just “go away” once you reach a certain age or enter retirement. You are responsible for paying back student loans, even in retirement.

How many years do you have to pay student loans?

There is no limit on how long you have to pay off student loans. You can pay them off for however long it takes. However, be aware that the longer it takes to repay your loans, the more you will typically pay in interest.

Does your student loan get written off at 50?

No, student loans do not get written off or canceled at 50 — or at any age. Borrowers have an ongoing obligation to repay their student loans.

Can Social Security be garnished for student loans?

Possibly. If you miss 270 days of payments on your federal student loans, they can go into default. Defaulting on a student loan can lead to serious consequences, including the government withholding up to 15% of your Social Security benefits

Should you pay off student loans before retiring?

Whether to pay off student loans before retiring depends on your specific situation. For those who are older and can afford to pay off student loans before retirement, doing so could help them free up money in retirement, when they are on a fixed income. However, for those who are younger, prioritizing saving for retirement may make sense because their money will potentially have more time to grow before they reach retirement age.

Photo credit: iStock/maruco

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FORFEIT YOUR ELIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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


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

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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.

SOSLR-Q126-056

Read more
Feb
27
2026
A man sitting at a desk and writing down notes on how to save while looking at his computer screen.

Is $1 Million Enough to Retire at 55?

By | Budgeting & Goals, Preparing for Retirement, relay | Comments Off on Is $1 Million Enough to Retire at 55?

Who doesn’t want to retire early? If you have $1 million stashed away by age 55, you may feel like you have enough to leave the rat race and ride out your golden years. Unfortunately, it may not be enough.

It all depends on your lifestyle and location. For some professionals, asking whether $1 million is enough to retire on may be downright naive. As people live longer and prices continue to rise, many of us can end up needing much more.

If sitting on a cool million at 55 makes you feel like you’re ahead of the game, it’s probably a good idea to slow your roll and take some key factors into consideration.

Key Points

•   Retiring at 55 with $1 million may not be enough due to longer life expectancies and rising costs.

•   The amount you need for retirement greatly depends on your lifestyle, location, health care expenses, and sources of income.

•   Early retirement typically requires replacing about 80% of your pre-retirement income each year, which can push your total savings closer to $2 million.

•   Inflation means your savings must be built to last longer than you might expect.

•   You can use a retirement calculator to create a personalized plan and set a realistic budget.

How Far $1 Million in Retirement Will Realistically Take You

One million dollars sounds like a lot of money — surely enough to last the rest of your life, right? But how far will $1 million really take you in retirement? There’s no single answer that applies to everyone. The nest egg that you will need depends on the following variables:

•   Where you’ll live when you retire

•   The lifestyle you want to lead

•   Whether you have dependents

•   Your health care costs

•   Other retirement income

•   Investment risk

•   Inflation

Considered another way, the answer comes down to your withdrawal rate — how much money you regularly withdraw from your accounts to live on — and how long you end up living. A conservative withdrawal rate, for example, is 3%. So, if you’re eating up 3% of your savings per year (with inflation on top of that), you’ll want to make sure you have enough to last for a few decades. Tools such as a money tracker can help you monitor your spending.

This is complicated stuff, and it may be best to consult a financial professional to help you plan it all out. At the very least, run some numbers yourself to figure out, “Am I on track for retirement?”

Track your credit score with SoFi

Check your credit score for free. Sign up and get $10.*

Recommended: Average Retirement Savings by State

Why You May Need a Lot More if You Retire Early

Financial experts often say that you’ll need around 80% of your pre-retirement annual income for each year of retirement. That means that if your pre-retirement annual income is $80,000, you should plan on saving around $64,000 per year of retirement.

In that scenario, if you hope to retire at 55, you would need almost $2 million. That amount would last you for around 30 years, until you’re 85. As you may have noticed, this is considerably more than $1 million.

Even then, you have to think about what happens if you live until you’re 95, or even 105. That’s 50 years of retirement — and $1 million is probably not going to last half a century. If you’re planning on retiring early, you will likely need a lot more than $1 million.

How Much You Should Ideally Save for Retirement

Again, the amount you should ideally save for retirement will depend on the kind of lifestyle you want during your retirement years. Because there are so many unknowns and variables to consider, many people simply aim to save as much as they can.

To get to a ballpark figure, though, ask yourself the following questions when crunching the numbers:

•   At what age would you like to retire?

•   What kind of lifestyle do you want to have?

•   Will you work part-time? If so, what kind of work will you do, and what is the average pay for that type of work?

•   Will you have passive income (such as rental income from a real estate property)?

•   What other sources of income will you have (Social Security, etc.)?

•   Where will you live when you retire, and what is the cost of living in that location?

•   How big of a safety net do you want for unforeseen circumstances?

•   Do you hope to leave an inheritance for your loved ones, or are you happy spending down your nest egg to zero?

Once you’ve thought about how you want to live your retirement, you can plan for that scenario. Create the budget you would like to have, then calculate the cost per year and the number of years you plan on being retired.

While we don’t know how long we will live, expecting a longer lifespan is a smart way to plan for retirement. You don’t want to outlive your savings and be too old to go back to work.

So, how much you should save for retirement varies significantly from person to person. Perhaps the simplest answer is to save as much as you can.

Factors to Consider When Saving for Retirement

In addition to your cost of living, you should consider the effect of inflation on retirement. Adjust your yearly cost of retirement with an inflation calculator to learn the change in value of your savings over time. For perspective, inflation, historically, has averaged just over 3%.

Fortunately, the stock market has grown faster than the inflation rate over time, so you can do some stock portfolio tracking to see whether your investments help you stay ahead of inflation.

Lastly, life expectancy is higher than it used to be. Americans are living, on average, until 79 years of age. With that in mind, plan for a longer lifespan. That way, you won’t feel as though you’re running out of money later in retirement.

Recommended: Typical Retirement Expenses to Prepare For

How to Determine the Right Amount to Retire for You

If you want to keep your current cost of living and lifestyle, take your current salary and multiply it by the number of years you’re planning on living off your retirement and then multiply the figure you get by around 80%. Then, adjust that amount for inflation using an online calculator. Finally, add a cash cushion for unforeseen events.

It involves a bit of math, but this should give you a ballpark idea of your needs. You can always use a budget planner app or a retirement calculator.

The Takeaway

Long story short: It is possible to retire with $1 million at 55. However, it may not be enough for most people. You’ll need to create a customized financial plan based on your lifestyle goals — there’s no magic formula or one-size-fits-all plan. Identify what matters to you, and then plan based on your ideal type of retirement.

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

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

FAQ

How much money do I need to retire at 55?

The amount of money you’ll need to retire at 55 will depend on the kind of lifestyle you want to lead during retirement. If you’re planning on living off of $60,000 per year and hoping to live for another 30 or so years, you’ll need almost $2 million.

Can you live on $1 million in retirement?

One million dollars is not going to be enough for most people in the US to retire on. Whether it’s enough for you will largely depend on the kind of lifestyle you want. If you’re planning on receiving a pension and/or Social Security, that will help stretch your savings.

Can I retire with $1 million in my 401(k)?

Depending on your lifestyle, $1 million in your 401(k) may not be enough. When combined with other savings and investments, it can be, but it’s probably best to consult with a financial planner who can help you determine how to best use your 401(k) savings.

What withdrawal rate should I use in retirement?

The recommended withdrawal rate is usually around 3%, meaning you should use up to 3% of your savings each year. Using a lower withdrawal rate can help your money last longer, which is important if you plan to retire early.

How does inflation affect early retirement savings?

Inflation can reduce your purchasing power over time, which means your retirement savings may not stretch as far as you expect. Planning for inflation can help ensure your money lasts throughout your retirement.

Photo credit: iStock/LaylaBird

SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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.

SORL-Q126-029

Read more
Feb
11
2026
Understanding Highly Compensated Employees (HCEs)

Understanding Highly Compensated Employees (HCEs)

By | invest, Investing, Preparing for Retirement | Comments Off on Understanding Highly Compensated Employees (HCEs)

Internal Revenue Service (IRS) rules require companies with 401(k) retirement plans to identify highly compensated employees (HCEs). An HCE, according to the IRS, passes either an ownership test or a compensation test. Someone owning more than 5% of the company would qualify as an HCE, as would someone who was compensated more than $160,000 for tax years 2025 or 2026.

The IRS uses this information to help all employees receive fair treatment when participating in their 401(k). As a result, your HCE status can affect the amount you can contribute to your 401(k).

What Does It Mean to Be an HCE?

A highly compensated employee’s 401(k) contributions will be subject to additional scrutiny by the IRS. Again, you’re identified as an HCE if you either:

•   Owned more than 5% of the business this year or last year, regardless of how much compensation you earned or received, or

•   Received at least $160,000 in compensation for tax years 2025 or 2026 and, if your employer so chooses, you were in the top 20% of employees ranked by compensation.

If you meet either of these criteria, you’re considered an HCE, though that doesn’t necessarily mean that you earn a higher salary.

For example, someone could own 6% of a business while also drawing a salary of less than $100,000 a year. Because they meet the ownership test, they would still be classified as an HCE.

It’s also possible for you to be on the higher end of your company’s salary range and yet not qualify as an HCE. This can happen if your company chooses to rank employees by pay. If your income is above the IRS’s HCE threshold but you still earn less than the highest-paid 20% of employees (while not owning 5% of the company), you don’t meet the definition of an HCE.

Highly Compensated Employee vs Key Employee

Highly compensated employees may or may not also be key employees. Under IRS rules, a key employee meets one of the following criteria:

•   An officer making over $230,000 for 2025; $235,000 for 2026

•   Someone who owns more than 5% of the business

•   A person who owns more than 1% of the business and also makes more than $150,000 a year

•   Someone who meets none of these conditions is a non-key employee.

In order for a highly compensated employee to be a key employee, they must pass the ownership or officer tests. For IRS purposes, ownership is determined on an aggregate basis. For example, if you and your spouse work for the same company and each own a 2.51% share, then you’d collectively pass the ownership test.

Benefits of Being a Highly Compensated Employee

Being a highly compensated employee can offer certain advantages. Here are some of the chief benefits of being an HCE:

•   Having an ownership stake in the company you work for may entail additional employee benefits or privileges, such as bonuses or the potential to purchase company stock at a discount.

•   Even with a high salary, you can still contribute to your 401(k) retirement plan, possibly with matching contributions from your employer.

•   You may be able to supplement 401(k) contributions with contributions to an individual retirement account (IRA) or health savings account (HSA).

There are, however, some downsides to consider if you’re under the HCE umbrella.

Disadvantages of Being a Highly Compensated Employee

Highly compensated employees are subject to additional oversight when making 401(k) contributions. If you’re an HCE, here are a few disadvantages to be aware of:

•   You may not be able to max out your 401(k) contributions each year.

•   Lower contribution rates could potentially result in a shortfall in your retirement savings goal.

•   Earning a higher income could make you ineligible to contribute to a Roth IRA for retirement.

•   Any excess contributions that get refunded to you will count as taxable income when you file your return.

Benefits

 Disadvantages
HCEs may get certain perks or bonuses. 401(k) contributions may be limited.
Can still contribute to a company retirement plan. Limits may make it more difficult to reach retirement goals.
Can still contribute to an IRA. High earnings may make you ineligible to contribute to a Roth IRA.
Refunds of excess contributions could raise employee’s taxable income.

Recommended: Rollover IRA vs. Regular IRA: What’s the Difference?

Nondiscrimination Regulatory Testing

The IRS requires employers to conduct 401(k) plan nondiscrimination compliance testing each year. The purpose of this testing is to ensure that highly compensated employees and non-highly compensated employees have a more level playing field when it comes to 401(k) contributions.

Employers calculate the average contributions of non-highly compensated employees when testing for nondiscrimination. Depending on the findings, highly compensated employees may have their contributions restricted in certain ways. If you aren’t sure, it’s best to ask someone in your HR department, or the plan sponsor.

If an employer reviews the plan and finds that it’s overweighted in favor of HCEs, the employer must take steps to correct the error. The IRS allows companies to do that by either making additional contributions to the plans of non-HCEs or refunding excess contributions back to HCEs.

401(k) Contribution Limits for HCEs

In theory, highly compensated employees’ 401(k) limits are the same as retirement contribution limits for other employees. For 2025, the contribution limit is $23,500. Those 50 and older can add another $7,500, for a total of $31,000. Those aged 60 to 63 can contribute an additional $11,250, for a total of $34,750. For 2026, the contribution limit is $24,500. Those 50 and older can add another $8,000, for a total of $32,500. Those aged 60 to 63, can contribute an additional $11,250, for a total of $35,750.

One change that HCEs should be aware of: Under a new law that went into effect on January 1, 2026 as part of SECURE 2.0, individuals aged 50 and older who earned more than $150,000 in FICA wages in 2025 are required to put their 401(k) catch-up contributions into a Roth 401(k) account. Because of the way Roth accounts work, these individuals will pay taxes on their catch-up contributions upfront, but can make eligible withdrawals tax-free in retirement.

But, as noted above, these plans may be restricted for HCEs, so it’s wise to know the terms before you begin contributing.

Other Retirement Plan Considerations

For example, one thing to watch out for if you’re a highly compensated employee is the possibility of overfunding your 401(k). If your employer determines that you, as an HCE, have contributed more than the rules allow, the employer may need to refund some of that money back to you.

As mentioned earlier, refunded money would be treated as taxable income. Depending on the refunded amount, you could find yourself in a higher tax bracket and facing a larger tax bill. So it’s important to keep track of your contributions throughout the year so the money doesn’t have to be refunded to you.

Recommended: Should You Retire at 62?

401(k) vs IRAs for HCEs

A highly compensated employee might consider opening an IRA account, traditional or Roth IRA, to supplement their 401(k) savings. Either kind of IRA lets you contribute money up to the annual limit and make qualified withdrawals after age 59 ½ without penalty.

However, income-related rules could constrain highly compensated employees in terms of funding both a 401(k) and a traditional or Roth IRA.

•   An HCE’s contributions to a traditional IRA may not be fully tax-deductible if they or their spouse are covered by a workplace retirement plan. Phaseouts depend on income and filing status.

•   Highly compensated employees may be barred from contributing to a Roth IRA. Eligibility phases out as income rises. For the 2025 tax year, people become ineligible when their MAGI reaches $165,000 (if single) or $246,000 (if married, filing jointly). For the 2026 tax year, people cannot contribute to a Roth IRA when their MAGI reaches $168,000 (single filers) or $252,000 (married, filing jointly).

The Takeaway

A highly compensated employee is generally someone who owns more than 5% of the company that employs them, or who received compensation of more than $160,000 in 2025 or 2026.

Being an HCE can restrict how much you’re able to save in your company’s 401(k); under certain circumstances the IRS may require the employer to refund some of your contributions, with potential tax consequences for you. Even so, HCEs may still be able to save and invest through other retirement accounts.

SoFi offers traditional and Roth IRAs to help you grow your retirement savings. You can open an account online in minutes and build a diversified portfolio that suits your goals. It’s a hassle-free way to work toward a secure financial future.

Help grow your nest egg with a SoFi IRA.

FAQ

Does HCE income include bonuses?

The IRS treats bonuses as compensation for determining which employees are highly compensated. Overtime, commissions, and salary deferrals to a 401(k) account are also counted as compensation.

What is the difference between a key employee and a highly compensated employee?

A highly compensated employee is someone who passes the IRS’s ownership test or compensation test. A key employee is someone who is an officer or meets ownership criteria. Highly compensated employees can also be key employees.

Can you be a key employee and not an HCE?

It is possible to be a key employee and not a highly compensated employee in certain situations. For example, you might own 1.5% of the business and make between $150,000 and $200,000 per year, while not ranking in the top 20% of employees by compensation.

About the author

Rebecca Lake

Rebecca Lake

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


Photo credit: iStock/nensuria

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

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

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

SOIN1122014
CN-Q425-3236452-92
Q126-3525874-057

Read more
Feb
11
2026
Investing Checklist: Things to Do Before the End of 2022

Investing Checklist: Things to Do Before the End of 2025

By | Growing Wealth, invest, Investing, Preparing for Retirement | Comments Off on Investing Checklist: Things to Do Before the End of 2025

There are numerous things that investors can and perhaps should do before the clock strikes midnight on New Year’s Eve, such as maxing out retirement or college savings account contributions, and harvesting tax losses.

Read on to find out what should probably be on your investing checklist for the end of the year, what to consider tackling before your tax return is due in April, and how some simple moves this December can help set you up nicely for 2025, 2026, and beyond.

Key Points

•   Investors should maximize their 401(k) contributions by the end of 2025. They can contribute up to $23,500 for the year, plus an additional $7,500 for those over 50. People 60 to 63 can contribute a higher catch-up limit of $11,250 in 2025.

•   Tax-loss harvesting, a strategy to offset investment gains with losses and reduce tax burdens, should be considered before year-end if applicable.

•   Contributing to a 529 college savings plan before the year ends can offer state tax deductions, depending on the state.

•   Reviewing and updating estate plans and insurance policies is crucial to ensure they are current and accurate.

•   Donating appreciated stocks to charity by December 31 can provide a tax deduction for the full market value of the shares.

End-of-Year vs Tax-Day Deadlines

Before diving into the year-end investing checklist, it’s important to remember that there are a couple of key distinctions when it comes to the calendar. Specifically, though the calendar year actually ends on December 31 of any given year, Tax Day is typically in the middle of April (April 15, usually). That’s the due date to file your federal tax return, unless you file for an extension.

As it relates to your investing checklist, this is important to take into account because some things, like maxing out your 401(k) contributions must be done before the end of the calendar year, while others (like maxing out contributions to your IRA account) can be done up until the Tax Day deadline.

In other words, some items on the following investing checklist will need to be crossed off before New Year’s Day, while others can wait until April.

7 Things to Do With Your Investments No Later Than Dec. 31

Here are seven things investors can or should consider doing before the calendar rolls around to 2026.

1. Max Out 401(k) Contributions

Perhaps the most beneficial thing investors can do for their long-term financial prospects is to max out their 401(k) contributions. A 401(k) is an employer-sponsored retirement account, where workers can contribute tax-deferred portions of their paychecks.

There are also Roth 401(k) accounts, which may be available to you, which allow you to preemptively pay taxes on the contributions, allowing for tax-free withdrawals in the future.

You can only contribute a certain amount of money per year into a 401(k) account, however. For 2025, that limit is $23,500, and those over 50 can contribute an additional $7,500, for a total of $31,000. And in 2025, under SECURE 2.0, those aged 60 to 63 can make a higher catch-up limit of $11,250 (instead of $7,500) for a total of $34,750.

In 2026, the contribution limit rises to $24,500, with a $8,000 catch-up provision if you’re 50 and up, for a total of $32,500. And again, under the SECURE 2.0 Act, a higher catch-up limit of $11,250 (instead of $8,000) applies to individuals ages 60 to 63 in 2026, for a total of $35,750.

Under a new law that went into effect on January 1, 2026 as part of SECURE 2.0, individuals aged 50 and older who earned more than $150,000 in FICA wages in 2025 are required to put their 401(k) catch-up contributions into a Roth 401(k) account. With Roth accounts, individuals pay taxes on contributions upfront, but can make qualified withdrawals tax-free in retirement.

So, if you are able to, it may be beneficial to contribute up to the $23,500 limit for 2025 before the year ends. After December 31, any contributions will count toward the 2026 tax year.

2. Harvest Tax Losses

Tax-loss harvesting is an advanced but popular strategy that allows investors to sell some investments at a loss, and then write off their losses against their gains to help lower their tax burden.

Note that investment losses realized during a specific calendar year must be applied to the gains from the same year, but losses can be applied in the future using a strategy called a tax-loss carryforward. But again, tax-loss harvesting can be a fairly complicated process, and it may be best to consult with a professional

Get up to $3,000 in stock when you fund a new Active Invest account.*

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

*Customer must fund their Active Invest account with at least $50 within 45 days of opening the account. Probability of customer receiving $1,000 is 0.026%. See full terms and conditions.

3. Consider 529 Plan Contributions

A 529 college savings plan is used to save for education expenses. There are two basic types of 529 plans, but the main thing that investors should focus on, as it relates to their year-end investing checklist, is to stash money into it before January as some states allow 529 contributions as tax deductions.

There is no yearly federal contribution limit for 529 plans — instead, the limit is set at the state level. Gift taxes, however, may apply, which is critical to consider.

4. Address Roll-Over Loose Ends

Another thing to check on is whether there are any loose ends to tie up in regard to any account roll-overs that you may have executed during the year.

For example, if you decided to roll over an old 401(k) into an IRA at some point during the year, you’ll want to make sure that the funds ended up with your new brokerage or retirement plan provider.

It may be easy to overlook, but sometimes checks get sent to the wrong place or other wires get crossed, and it can be a good idea to double-check everything is where it should be before the year ends.

5. Review Insurance Policies

Some employers require or encourage employees to opt into certain benefits programs every year, including insurance coverage. This may or may not apply to your specific situation, but it can be a good idea to check and make sure your insurance coverage is up to date — and that you’ve done things like named beneficiaries, and that all relevant contact information is also current.

6. Review Your Estate Plan

This is another item on your investing checklist that may not necessarily need to be done by the end of the year, but it’s a good idea to make a habit of it: Review your estate plan, or get one started.

There are several important documents in your estate plan that legally establish what happens to your money and assets in the event that you die. If you don’t have an estate plan, you should probably make it an item on your to-do list. If you do have one, you can use the end of the year as a time to check in and make sure that your heirs or beneficiaries are designated, that there are instructions about how you’d prefer your death or incapacitation to be handled, and more.

7. Donate Appreciated Stocks

Finally, you can consider donating stocks to charity by the end of the year. There are a couple of reasons to consider a stock donation: One, you won’t pay any capital gains taxes if the shares have appreciated, and second, you’ll be able to snag a tax deduction for the full market value of the shares at the time that you donate them. The tax deduction limit is for up to 30% of your adjustable gross income — a considerable amount.

Remember, though, that charitable donations must be completed by December 31 if you hope to deduct the donation for the current tax year.

3 Things for Investors to Do by Tax Day 2026

As mentioned, there are a few items on your investing checklist that can be completed by Tax Day, or April 15, 2026. Here are the few outstanding items that you’ll have until then to complete.

1. Max Out IRA Contributions

One of the important differences between 401(k)s and IRAs is the contribution deadline. While 401(k) contributions must be made before the end of the calendar year, investors can keep making contributions to their IRA accounts up until Tax Day 2026, within the contribution limits of course.

So, if you want to max out your IRA contributions for 2025, the limit is $7,000. But people over 50 can contribute an additional $1,000 — and you’ll have until April to contribute for 2025 and still be able to deduct contributions from your taxable income (assuming it’s a tax-deferred IRA, not a Roth IRA).

The contribution limits rise in 2026 to $7,500, and a $1,100 catch-up provision for those 50 and up. And some taxpayers may be able to deduct their contributions, too, under certain conditions.

2. Max Out HSA Contributions

If you have a health savings account (HSA), you’ll want to make sure you’ve hit your contribution limits before Tax Day, too. The contribution limits for HSAs in 2025 are $4,300 for self-only coverage and $8,550 for family coverage. People over 55 can contribute an additional $1,000. For 2026, the contribution limits are $4,400 for self-only coverage and $8,750 for family coverage. People aged 55 and up can contribute an additional $1,000 in both 2025 and 2026.

3. Take Your RMD (if Applicable)

If you’re retired, you may need to take a required minimum distribution (RMD) from your retirement account by the beginning of April next year, if it’s your first RMD. But if you’ve taken an RMD before, you’ll need to do so before the end of 2025 — so, be sure to check to see what deadline applies to your specific situation.

This generally only applies to people who are in their 70s (typically age 73 if you reach age 72 after December 31, 2022), but it may be worth discussing with a professional what the best course of action is, especially if you have multiple retirement accounts or if you have an inherited account.

The Takeaway

Doing a year-end financial review can be extremely beneficial, and a checklist can help make sure you don’t miss any important steps for 2025 — and set you up for 2026. That investing checklist should probably include things like maxing out contributions to your retirement accounts, harvesting tax losses in order to manage your tax bill, and possibly even taking minimum required distributions. Everyone’s situation is different, so you’ll need to tailor your investing checklist accordingly.

Also, it’s important to keep in mind that you may have until Tax Day in April to get some of it done — though it may be good practice to knock everything out by the end of the year. If you’re only beginning to invest, keeping this list handy and reviewing it annually can help you establish healthy financial habits.

Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.

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

Photo credit: iStock/dusanpetkovic

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

SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.

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

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.

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.

SOIN-Q424-032
CN-Q425-3236452-88
Q126-3525874-053

Read more
Close modal

See what SoFi can do for you and your finances.

Select a product below and get your rate in just minutes.

Student Loan
Refinancing

Personal
Loans

Online
Investments

Other

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

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

©2026 Social Finance, LLC All rights reserved.
TLS 1.2 Encrypted
Equal Housing Lender