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Dec

2025

A person looks at stock charts on their phone while working at a desk.

How to Analyze Stocks: 4 Ways

By Laurel Tincher | Growing Wealth, invest, Investing | Comments Off

Table of Contents

Why Analyzing Stocks Is Important
Understanding Financial Statements
4 Ways to Analyze a Stock
Quantitative vs Qualitative Analysis
Pros and Cons of Doing Your Own Stock Analysis
FAQ

There’s no single way to analyze stocks. But there are many methods that ordinary investors can use to find stocks that are trading at a discount to their underlying value.

The first step in how to analyze a stock before buying is reviewing financial statements. From there, investors can use various methods of analysis to assess investment opportunities and potentially identify worthwhile investments.

Key Points

• There are four common methods of analyzing stocks: technical analysis, qualitative analysis, quantitative analysis, and fundamental analysis.

• Technical analysis focuses on supply and demand patterns in stock charts to make investment decisions.

• Qualitative analysis examines factors like a company’s leadership, product, and industry to evaluate investment opportunities.

• Quantitative analysis uses data and numerical figures to predict price movements in stocks.

• Fundamental analysis looks at a company’s financial health and value to determine if its stock is under or overvalued.

Why Analyzing Stocks Is Important

The process of stock analysis can reveal important information about a company and its history, allowing investors to make more informed decisions about buying or selling stocks. Analyzing stocks can help investors identify which investment opportunities they believe will deliver strong returns. Further, stock analysis can assist investors in spotting potentially bad investments.

Whether your strategy involves short vs. long term investing, or day trading, analyzing stocks is going to be important.

Understanding Financial Statements

The first step in understanding stock analysis is knowing the basics of business reporting. There are three main types of financial statements that an investor may want to look at when doing analysis:

• Income statement: This statement shows a company’s profits, which are calculated by subtracting expenses from revenue.

• Balance sheet: The balance sheet compares a company’s assets, liabilities, and stockholder equity.

• Statement of cash flows: This statement outlines how a company is spending and earning its money.

In addition to these statements, a company’s earnings report
contains information that can be useful for doing qualitative analysis. The annual report includes the company’s plans for the future and stock value predictions.

4 Ways to Analyze a Stock

The next step in stock evaluation is deciding which type of analysis to do. Here’s a look at some of the different methods for how to analyze a stock.

1. Technical Analysis

Technical analysis is a method for analyzing stocks that looks directly at a stock’s supply and demand in order to make investing decisions. This form of analysis takes the stance that all information needed is present within stock charts and the analysis of history and trends.

Some key focal points of technical analysis are:

• Stock prices move in trends.

• History repeats itself.

• Stock price history can be used to make price predictions.

• Stock price contains all relevant information for making investing decisions.

• Technical analysis does not consider intrinsic value.

Trend indicators are one of the most important parts of technical analysis. These indicators attempt to show traders whether a stock will go up or down in value. Uptrends mean higher highs and higher lowers, whereas downtrends mean lower lows and lower highs. Some common trend tools include linear regression, parabolic SAR, MACD, and moving averages.

Technical analysis also uses leading indicators and lagging indicators. Leading indicators signal before new trends occur, while lagging indicators signal after a trend has ended. These indicators look at information such as volume, price, price movement, open, and close.

There can be some pros and cons to using technical analysis, however, which can be important to consider when factoring in your risk tolerance.

Day traders tend to focus on technical analysis to try to capitalize on short-term price fluctuations. But because technical analysis generally focuses on short-term fluctuations in price, it’s not as often used for finding long-term investment opportunities.

Further, while technical analysis relies on objective and consistent data, it can produce false signals, particularly during trading conditions that aren’t ideal. This method of analysis also fails to take into consideration key fundamentals about individual shares or the stock market.

2. Qualitative Stock Analysis

When considering how to analyze a stock, it’s generally a good idea to look at whether the company behind the stock is really a good business. Qualitative analysis looks into factors like a company’s leadership team, product, and the overall industry it’s a part of.

A few key qualitative metrics include:

• Competitive advantage: Does the company have a unique edge that will help it be successful in the long term? If a company has patents, a unique manufacturing method, or broad distribution, these can be positive competitive advantages.

• Business model: Analyzing a business model includes looking at products, services, brand identity, and customers to get a sense of what the company is offering.

• Strong leadership: Even a great idea and product can fail with poor management. Looking into the credentials of the CEO and top executives of a company can help in evaluating whether it’s a good investment.

• Industry trends: If an industry is struggling, or looks like it may in the future, an investor may decide not to invest in companies in that industry. On the other hand, new and growing industries may be better investments. This is not always the case, as there are strong companies in weak industries, and vice versa.

3. Quantitative Analysis

Similar to technical analysis, quantitative analysis looks at data and numbers in an attempt to predict future price movements. Specifically, quantitative analysis evaluates data, such as a company’s revenues, price-to-earnings ratio, and earnings-per-share ratio, and uses statistical modeling and mathematical techniques to predict a stock’s value.

The upside is that this financial data is publicly available, and it creates an objective, consistent starting point. It can help with identifying patterns, and it can be useful in assessing risk. However, it requires sifting through a lot of data. Further, there’s no certainty when it comes to patterns, which can change.

4. Fundamental Analysis

Fundamental analysis looks at a company from a basic financial standpoint. This gives investors a sense of the company’s financial health and whether its stock may be under- or overvalued. Fundamental analysis takes the stance that a company’s stock price doesn’t necessarily equate to its value.

There are a number of key tools for fundamental analysis that investors might want to familiarize themselves with and use to get a fuller picture of a stock.

Earnings Per Share (EPS)

One of the main goals for many investors is to buy into profitable companies. Earnings per share, or EPS, tells investors how much profit a company earns per each share of stock, and how much investors are benefiting from those earnings. Companies report EPS quarterly, and the figure is calculated by dividing a company’s net income, minus dividend payouts, by the number of outstanding shares.

Understanding earnings per share can give investors guidance on a stock’s potential movement. On a basic level, a high EPS is a good sign, but it’s especially important that a company shows a high or growing EPS over time. The reason for this is that a company might have a temporarily high EPS if they cut some expenses or sell off assets, but that wouldn’t be a good indicator of the actual profitability of their business.

Likewise, a negative EPS over time is an indicator that an investor may not want to buy a stock.

Revenue

While EPS relates directly to a company’s stock, revenue can show investors how well a company is doing outside the markets. Positive and increasing revenues are an indicator that a company is growing and expanding.

Some large companies, especially tech companies, have increasing revenues over time with a negative EPS because they continue to feed profits back into the growing business. These companies can see significant stock value increases despite their lack of profit.

One can also look at revenue growth, which tracks changes in revenue over time.

Price-to-earnings (P/E) Ratio

One of the most common methods of analyzing stocks is to look at the P/E ratio, which compares a company’s current stock price to its earnings per share. P/E is found by dividing the price of one share of a stock by its EPS. Generally, a lower P/E ratio is a good sign.

Using this ratio is a good way to compare different stocks. One can also compare an individual company’s P/E ratio with an index like the S&P 500 Index to get a sense of how the company is doing relative to the overall market.

The downside of P/E is that it doesn’t include growth.

Price-Earnings-Growth (PEG) Ratio

Since P/E doesn’t include growth, the PEG ratio is another popular tool for analyzing stocks and evaluating stock performance. To look at EPS and revenue together, investors can use the price-earnings-growth ratio, or PEG.

PEG is calculated by dividing a stock’s P/E by its projected 12-month forward revenue growth rate. In general, a PEG lower than 1 is a good sign, and a PEG higher than 2 indicates that a stock may be overpriced.

PEG can also be used to make predictions about the future. By looking at PEG for different time periods in the past, investors can make a more informed guess about what the stock may do next.

Price-to-Sales Ratio (P/S)

The P/S ratio compares a company’s stock price to its revenues. It’s found by dividing stock price by revenues. This can be useful when comparing competitors — if the P/S is low, it might be more advantageous to buy.

Debt-Equity Ratio

Although profits and revenue are important to look at, so is a company’s debt and its ability to pay it back. If a company goes into more and more debt in order to continue growing, and they’re unable to pay it back, it’s not a good sign.

Debt-equity ratio is found by dividing a company’s total liabilities (debt) by its shareholder equity. In general, a debt-equity ratio under 0.1 is a good sign, while a debt-equity ratio higher than 0.5 can be a red flag for the future.

Debt-to-EBITDA

Similar to debt-to-equity, debt-to-EBITDA measures the ability a company has to pay off its debts. EBITDA stands for earnings before interest, tax, depreciation, and amortization.

A high debt-to-EBITDA ratio indicates that a company has a high amount of debt that it may not be able to pay off.

Dividend Yield

While a stock’s price can vary significantly from day to day, dividend payments are a way that investors can earn a consistent amount of money each quarter or year. Not every company pays out dividends, but large, established companies sometimes pay out some of their earnings to shareholders rather than reinvesting the money into their business.

Dividend yield is calculated by dividing a company’s annual dividend payment by its share price.

One thing to note is that dividends are not guaranteed — companies can change their dividend amounts at any time. So if a company has a particularly high dividend yield, it may not stay that way.

Price-to-Book Ratio (P/B)

Price-to-book ratio, or P/B, compares a company’s stock market value to its book value. This is a useful tool for finding companies that are currently undervalued, meaning those that have a significant amount of growth but still relatively low stock prices.

P/B ratio is found by dividing the market price of a stock by the company’s book value of equity. The book value of equity is found by subtracting the company’s total liabilities from its assets.

Company Reports and Projections

When companies release quarterly and annual earnings reports, many of them include projections for upcoming revenue and EPS. These reports are a useful tool for investors to get a sense of a stock’s future. They can also affect stock price as other shareholders and investors will react to the news in the report.

Professional Analysis

Wall Street analysts regularly release reports about the overall stock market as well as individual companies and stocks. These reports include information such as 12-month targets, stock ratings, company comparisons, and financial projections. By reading multiple reports, investors may start to see common trends.

While analysts aren’t always correct and can’t predict global events that affect the markets, these reports can be a useful tool for investors. They can keep them up-to-date on any key happenings that may be on the horizon for particular companies. The information in the reports also can result in stock prices going up or down, since investors will react to the predictions.

Quantitative vs Qualitative Analysis

Here’s a quick rundown looking at the key differences between quantitative and qualitative analysis. Again, this can be important when weighing your risk tolerance as an investor.

Quantitative vs. Qualitative Analysis
Quantitative Analysis	Qualitative Analysis
Looks at data and numerical figures to predict price movements	Looks at business factors such as leadership, product, and industry
May require sifting through a lot of data, and may be difficult for some investors	Metrics include business models, competitive advantage, and industry trends
Concerned more with the “quantity” and hard data a business produces	Concerned more with the “quality” of a business

Pros and Cons of Doing Your Own Stock Analysis

If you feel like you can do a little stock analysis on your own, there are some pros and cons to it.

Pros

Perhaps the most obvious pro to doing your own stock analysis is that you don’t need to pay someone else to do it, you can do it on your own schedule, and learn as you go. You can develop knowledge that’ll likely help you as you continue to invest in the future. There are also numerous tools out there that you can use to analyze stocks which may not have been around in years or decades past.

Cons

Stock analysis can be an involved process, which can require a lot of investment in and of itself – both monetarily (if you’re using paid tools) and in terms of time. Depending on how deep you want to go, too, it can be a complex process. You may get frustrated or burnt out, or even make a mistake that leads to a bad investment decision.

Test your understanding of what you just read.

The Takeaway

There are a number of ways to analyze stocks, including technical, fundamental, quantitative, and qualitative analysis. The more an investor gets comfortable with terms like P/E ratio and earnings reports, the more informed they can be before making any decisions. Stock analysis is an involved process, however, and may be above the typical investors’ head and ability.

It is important to do your research and homework in relation to your investments, however. If you feel like you could use some guidance or a helping hand, speaking with a financial professional is never really a bad idea.

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).

¹Opening and funding an Active Invest account gives you the opportunity to get up to $3,000 in the stock of your choice.

FAQ

What is the best way to analyze a stock?

There’s no “best” way to analyze stocks. The right option for an investor will depend on their personal preferences and investing objectives. And remember, there’s no need to just use one method to analyze a stock — often, analysts will combine different methods of analysis to generate a more robust stock analysis.

What are key indicators to look for when analyzing a stock?

There are a ton of potential indicators that investors can look at, but some broad indicators that investors can start with include stock price history, moving averages, a company’s competitive advantages, business models, and industry trends.

What is an example of stock analysis?

A very, very basic example of stock analysis would include looking at a stock’s share price, comparing it to its historical averages and moving averages, overall market conditions, and looking at the company’s financial statements to try and gauge where it might move next.

You may also be interested in:

How to Pick Stocks: Essential Steps for Investors

How To Know When to Buy a Stock

Using Fundamental Analysis to Choose Stocks

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

SOIN-Q425-070

Dec

2025

Strike Price, Explained: Definition and Examples

Strike Price: What It Means for Options Trading

By Rebecca Lake | Growing Wealth, invest, Investing | Comments Off

Editor's Note: Options are not suitable for all investors. Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Please see the Characteristics and Risks of Standardized Options.

Table of Contents

What Is a Strike Price?
Examples of Strike Price in Options Trading
Moneyness
How Is Strike Price Determined?
How Do You Choose a Strike Price?
What Happens When an Option Hits the Strike Price?
FAQ

In options trading, a strike price represents the price at which an option purchaser can buy or sell an option’s underlying asset. An option strike price can also be referred to as an exercise price or a grant price, as it comes into play when a trader is exercising the option contract they’ve purchased.

A strike price can determine how much or how little an investor stands to gain by exercising an option contract, and can also inform the value of the option. Trading options can potentially generate higher rewards, though it can entail taking more risk than investing in individual stocks. Understanding strike prices is key to developing a successful options trading strategy.

Key Points

• Strike price is the price at which an option holder can buy or sell the underlying asset through the option.

• The strike price helps determine the value of an option and the potential gain for the trader.

• Strike prices are set when options contracts are written and can vary for different contracts.

• There are different types of options, including calls and puts, each of which will have a set strike price.

• Understanding strike price is crucial for developing a successful options trading strategy.

What Is a Strike Price?

An option is a contract that gives the owner or buyer of the option the right, though not the obligation, to buy or sell a particular security on or before a specific date, at a predetermined price. In options trading terminology, this price is called the strike price or the exercise price.

Strike prices are commonly used in derivatives trading. A derivative draws its value from an underlying investment. In the case of options contracts, this can be a stock, bond, commodity, or other type of security or index.

Further, options contracts can trade European-style or American-style. With European-style options, investors can only exercise them on their expiration date. American-style options can be exercised any time up to and upon the expiration date. This in itself doesn’t affect strike price for options contracts.

In options trading, there are two basic types of options: calls and puts. With either type of option, the strike price is set at the time the options contract is written. This strike price determines the price at which the underlying asset would be bought or sold if the option is exercised.

Calls

A call option conveys the right (though not the obligation) to a purchaser to buy shares of an underlying stock or other security at a set strike price. Call option writers are obligated to sell the shares if the option is exercised.

Puts

A put option conveys the right (though not the obligation) to a purchaser to sell shares of an underlying stock or other security at a set strike price. This is one way that investors can short a stock. Put option writers are obligated to buy the shares if the option is exercised.

Examples of Strike Price in Options Trading

Having an example to follow can make it easier to understand the concept of strike prices and how they may affect the value of an option contract. When trading options, traders must select the strike price and length of time they’ll have before exercising an option.

The following examples illustrate how strike price works when trading call or put options.

Buying a Call

Call options, again, give a purchaser the right, but not the obligation, to purchase a security at a specific price. At the same time, the seller of the call option must sell shares to the investor exercising the option at the strike price.

Let’s say you hold a call option to purchase 100 shares of XYZ stock at $50 per share (the strike price). You believe the stock’s price, currently trading at $45, will increase over time. This belief eventually pans out as the stock rises to $70 per share thanks to a promising quarterly earnings call. At this point, you could exercise your option to buy shares of the stock at the $50 strike price. The call option seller would have to sell those shares to you at that price.

The upside here is that you’re purchasing the stock at a discount, relative to its actual market price. You could then turn around and sell the shares you purchased for $50 each at the new higher price point of $70 each. This allows you to collect a $20 per share profit, less the premium you paid to purchase the call contract and any trading fees owed to your brokerage (or online brokerage).

Keep in mind, however, that if the price of the underlying stock remains below the strike price, the option will expire worthless, and you will lose the premium you paid for the option.

Buying a Put

Put options give purchasers the right, but not the obligation, to sell a security at a specific strike price. The seller of a put option has an obligation to buy shares from a trader who exercises the option.

So, assume that you hold a put option to sell 100 shares of XYZ stock at $50 per share (the strike price). You believe that the stock’s price, currently at $55, is going to decline in the next few months. The stock’s price drops to $40 per share so you decide to exercise the option. This allows you to make a profit of $10 per share (minus the premium paid per share and any fees), since you’re selling the shares at the $50 strike price, rather than their current lower market price.

But again, if the price of the stock remains above the strike price the option will expire with no value and you would lose the premium you paid upfront.

Writing a Covered Call

A covered call is an options trading strategy that can be useful when an investor believes the price of stock they own may remain neutral or rise slightly. This strategy involves doing two things:

• Writing a call option for a security

• Owning an equivalent number of shares of that same security

Writing (or selling) covered calls is a way to potentially generate income from the premiums traders pay to purchase the call option. Premiums paid by a call option buyer are nonrefundable, even if they choose not to exercise the option later.

The premium from a covered call may also offer a degree of downside protection if the stock price falls slightly (though losses would still be substantial if the price dropped significantly)..

So, say you own 100 shares of XYZ stock, currently trading at $25 per share. You write a call option for 100 shares of that same stock with a strike price of $30. You then collect the premium from the investor who buys the option.

One of two things can happen at this point: If the stock’s price rises slightly, but remains below the $30 stock price, then the option will expire worthless. You still keep the premium for writing it and you still own your shares of stock.

On the other hand, assume the stock’s price shoots up to $35. The purchaser exercises the option, meaning you must sell them those 100 shares. You still collect the premium, but your profit from selling those shares is capped at $5 per share, given the $30 strike price.

Investors should always consider the potential tradeoffs of writing covered calls, since they could cap upside potential. Covered calls are generally suitable for investors who would be comfortable selling their shares, if needed.

Moneyness

Moneyness describes an option’s strike price relative to its market price. There are three ways to measure the moneyness of an option:

In the Money

Options are in the money when they have intrinsic value. A call option is in the money when the market price of the underlying security is above the strike price. A put option is in the money when the market price of the underlying security is below the strike price.

At the Money

An option is at the money when its market price and strike price are the same (or nearly the same).

Out of the Money

An out-of-the-money option has no intrinsic value. A call option is out of the money if the market price of the underlying security is below the strike price. A put option is out of the money when the market price of the underlying security is above the strike price.

Understanding moneyness is important for deciding when to exercise options and when they may be at risk of expiring worthless.

How Is Strike Price Determined?

The strike price of an option contract is set when the contract is written. Strike prices may be determined by the exchange they’re traded on (like the Chicago Board Options Exchange, or CBOE). For listed options, strike prices are set by the exchange at standardized intervals based on the underlying asset’s market price.

A writer may issue multiple strike prices for the same underlying security so traders can choose the level they want. For example, you might see five option contracts for the same stock with strike prices of $90, $92.50, $95, $97.50 and $100. This allows investors an opportunity to select varying strike prices when purchasing calls or put options for the same stock.

Note, however, that writing calls that aren’t covered entails significant risk and can result in substantial losses. Both individual and institutional investors can write options, but there is significant risk involved — particularly when the calls they write aren’t covered.

How Do You Choose a Strike Price?

When deciding which options contracts to buy, strike price is an important consideration. Stock volatility and the passage of time can affect an option’s moneyness and your potential losses or profits should you exercise the option.

As you compare strike prices for call or put options, consider:

• Your personal risk tolerance

• Where the underlying asset is trading, relative to the option’s strike price

• How long you have to exercise the option

You may also consider using various options trading strategies to manage risk. That may include using covered calls as well as long calls, long puts, short puts, married puts, and others. Learning more about how to trade options can help you apply these strategies to pursue potential profits while potentially managing risk exposure, given the high risk of options trading.

What Happens When an Option Hits the Strike Price?

When the price of an option’s underlying asset is equal to or near the strike price it’s considered at the money. This means it has no intrinsic value as the strike price and market price are the same. There’s typically no incentive for an investor to exercise an option that’s at the money at expiration as there’s nothing to be gained from either a call or put option. In this scenario, the option may expire worthless.

If you’re the purchaser of an option that expires worthless, you would lose the money you paid for the premium to buy the contract. If you’re the writer of the option, you would profit from the premium charged to the contract buyer.

The Takeaway

Strike price is a critical concept for investors to know, especially if they’re trading or otherwise dealing with options as a part of their investing strategy. In an options contract, the strike price simply refers to the set price at which the purchaser can buy or sell the underlying security. Again, options can be high risk and fairly high-level, and may not be appropriate for all investors.

SoFi’s options trading platform offers qualified investors the flexibility to pursue income generation, manage risk, and use advanced trading strategies. Investors may buy put and call options or sell covered calls and cash-secured puts to speculate on the price movements of stocks, all through a simple, intuitive interface.

With SoFi Invest® online options trading, there are no contract fees and no commissions. Plus, SoFi offers educational support — including in-app coaching resources, real-time pricing, and other tools to help you make informed decisions, based on your tolerance for risk.

Explore SoFi’s user-friendly options trading platform.

FAQ

What is a strike price in options trading?

The strike price, also known as the exercise price or grant price, is the predetermined price at which an investor can buy or sell the underlying asset of an option contract. This price is set when the options contract is written. It’s a critical factor that helps determine the value of the option and an investor’s potential gain or loss upon exercising the contract.

How does the strike price work for call and put options?

For call options, the strike price is the price at which the purchaser has the right, but not the obligation, to buy the underlying security if the market price moves in their favor. For put options, the strike price is the price at which the purchaser has the right, but not the obligation, to sell the underlying security if the market price moves favorably.

Note that writers of options contracts are obligated to buy or sell the underlying security at the strike price if a purchaser chooses to buy or sell the underlying security.

What are the three measures of an option’s “moneyness”?

Moneyness describes an option’s strike price relative to its market price. An option that is in the money (ITM) has intrinsic value. A call is ITM if its market price is above the strike price; a put is ITM if its market price is below the strike price.

An option that is out of the money (OTM) has no intrinsic value. A call is OTM if the market price is below the strike price; a put is OTM if the market price is above the strike price.

An option is at the money (ATM) if the market price and strike price are the same.

Photo credit: iStock/Paul Bradbury

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

SOIN-Q325-033

Dec

2025

A pink question mark is shown to illustrate questions people have about what 401(k) benchmarking is and how it works.

What Is 401(k) Plan Benchmarking?

By Mike Zaccardi, CMT, CFA | Growing Wealth, invest, Investing, Preparing for Retirement | Comments Off

Table of Contents

How 401(k) Benchmarking Works
The Importance of 401(k) Plan Benchmarking
How to Benchmark Your 401(k) Plan: 3 Steps
FAQ

Benchmarking a 401(k) retirement plan refers to how a company assesses their plan’s design, fees, and services to ensure they meet industry and ERISA (Employee Retirement Income Security Act) standards.

Benchmarking 401(k) plans is important for a few reasons. First, the company offering the plan needs to be confident that they are acting in the best interests of employees who participate in the 401(k) plan. And because acting in the best interests of plan participants is part of an employer’s fiduciary duty, benchmarking can help reduce an employer’s liability if fiduciary standards aren’t met.

If a company’s plan isn’t meeting industry benchmarks, it may be wise for an employer to change plan providers. Learn more about how benchmarking works and why it’s important.

Key Points

• Benchmarking evaluates 401(k) plan design, fees, and services to meet ERISA standards.

• Annual benchmarking can ensure compliance and help reduce employer liability.

• Administrative, investment, and transaction fees must be evaluated to make sure they are reasonable.

• Service quality of the plan, including customer support and investment guidance, is assessed.

• Optimizing 401(k) plan features may enhance employee retention and satisfaction.

How 401(k) Benchmarking Works

While a 401(k) plan is a convenient and popular way for participants to invest for retirement, the company offering the plan has many responsibilities to make sure that its plan is competitive. That is where 401(k) benchmarking comes into play.

An annual checkup is typically performed whereby a company assesses its plan’s design, evaluates fees, and reviews all the services offered by the plan provider. The 401(k) plan benchmarking process helps ensure that the retirement plan reduces the risk of violating ERISA rules. For the firm, a yearly review can help reduce an employer’s liability and it can save the firm money.

ERISA, the Employee Retirement Income Security Act, requires that the plan sponsor verifies that the 401(k) plan has reasonable fees. ERISA is a federal law that mandates minimum standards that retirement plans must meet. It helps protect plan participants and beneficiaries.

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

The Importance of 401(k) Plan Benchmarking

It is important that an employer keep its 401(k) plan up to today’s standards. Making sure the plan is optimal compared to industry averages is a key piece of retirement benchmarking. It’s also important that your employees have a quality plan to help them save and invest for retirement. Most retirement plan sponsors conduct some form of benchmarking planning, and making that a regular event — such as annually — is important so that the employer continuously complies with ERISA guidelines.

Employers have a fiduciary responsibility to ensure that fees are reasonable for services provided. ERISA also states that the primary responsibility of the plan fiduciaries is to act in the best interest of their plan participants. 401(k) benchmarking facilitates the due diligence process and reduces a firm’s liability.

How to Benchmark Your 401(k) Plan: 3 Steps

So, as an employer, how exactly do you go about benchmarking 401(k) plans? There are three key steps that plan sponsors should take so that their liability is reduced, and the employees get the best service for their money. Moreover, 401(k) benchmarking can help improve your service provider to make your plan better.

1. Assess Your 401(k) Plan Design

It’s hard to know if your retirement plan’s design is optimal. Two gauges used to figure its quality are plan asset growth and the average account balance. If workers are continuously contributing and investments are performing adequately compared to market indexes, then those are signs that the plan is well designed.

Benchmarking can also help assess if a Roth 401(k) feature should be added. Another plan feature might be to adjust the company matching contribution or vesting schedule. Optimizing these pieces of the plan can help retain workers while meeting ERISA requirements.

2. Evaluate Your 401(k) Plan Fees

A 401(k) plan has investment, administrative, and transaction fees. Benchmarking 401(k) plan fees helps ensure total costs are reasonable. It can be useful to take an “all-in” approach when assessing plan fees. That method can better compare service providers since different providers might have different terms for various fees.

But simply selecting the cheapest plan does not account for the quality and depth of services a plan renders. Additional benchmarking is needed to gauge a retirement plan’s quality. Here are the three primary types of 401(k) plan fees to assess:

• Administrative: Fees related to customer service, recordkeeping, and any legal services.

• Investment: Amounts charged to plan participants and expenses related to investment funds.

• Transaction: Fees involved with money movements such as loans, 401(k) withdrawals, and advisory costs.

3. Evaluate Your 401(k) Provider’s Services

There are many variables to analyze when it comes to 401(k) benchmarking of services. A lot can depend on what your employees prefer. Reviewing the sponsor’s service model, technology, and execution of duties is important.

Also, think about it from the point of view of the plan participants: Is there good customer service available? What about the quality of investment guidance? Evaluating services is a key piece of 401(k) plan benchmarking. A solid service offering helps employees make the most out of investing in a 401(k) account.

The Takeaway

Investing for retirement is more important than ever as individuals live longer and pension plans are becoming a relic of the past. With today’s technology, and clear rules outlined by ERISA, it may be easier for workers to take advantage of high-quality 401(k) plans to help them save and invest for the long term.

For the company offering the plan, establishing a retirement benchmarking process is crucial to keeping pace with the best 401(k) plans. Reviewing a plan’s design, costs, and services helps workers have confidence that their employer is working in their best interests. Benchmarking can also protect employers.

If your company already has a 401(k) plan that you contribute to as an employee, you might also consider other individual retirement accounts to open. You can learn more about various options available, such as IRAs. There are different types of IRAs, including traditional and Roth IRAs. You may want to explore them as an option to help reach your retirement savings goals.

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

Help build your nest egg with a SoFi IRA.

🛈 While SoFi does not offer 401(k) plans at this time, we do offer a range of individual retirement accounts (IRAs).

FAQ

How often should a 401(k) be benchmarked?

It’s considered a best practice to benchmark a 401(k) annually to make sure the plan complies with ERISA (Employee Retirement Income Security Act) guidelines. Making sure that the plan’s fees are reasonable and acting in the best interests of plan participants is part of an employer’s fiduciary duty. Benchmarking facilitates the due diligence process and reduces an employer’s liability if fiduciary standards aren’t met.

How do I benchmark my 401(k) fees?

To benchmark your 401(k) fees, take an “all-in” approach by calculating the service provider fees plus the investment expenses for the plan. This helps you compare your plan’s fees to fees charged by other service providers. In addition, assess the plan’s quality by looking at administrative fees (fees related to customer service and recordkeeping, for instance), investment fees (expenses related to investment funds and amounts charged to participants in the plan), and transaction fees (fees related to moving money, such as withdrawals or loans).

Why is 401(k) benchmarking important?

The process of 401(k) benchmarking is important for making sure a 401(k) plan is a quality plan and that it is in compliance with ERISA rules. An employer has a fiduciary duty to act in the best interest of their employees, and ensuring that a 401(k) plan has reasonable fees is part of that due diligence. Benchmarking can also help protect an employer and reduce their liability.

Photo credit: iStock/MicroStockHub

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

SOIN-Q425-026

Dec

2025

A man sits at a table outside, smiling, looking at his investments on a tablet.

Capital Markets Explained

By Colin Dodds | Growing Wealth, invest, Investing | Comments Off

Table of Contents

What Are Capital Markets?
What Is the Main Purpose of Capital Markets?
What Are the Types of Capital Markets?
Capital Markets vs. Financial Markets vs. Money Markets
Real-world Examples of Capital Markets
The Takeaway
FAQ

A capital market is an exchange or platform where individuals, institutions, governments, and other entities come together to buy and sell securities. Well-known capital markets typically include the stock, bond, and commodities markets.

Capital markets generally facilitate the trading of longer-term securities vs. money markets, where investors can buy short-term debt. Capital markets today may or may not have specific geographical locations, as most capital markets conduct business electronically.

Key Points

• Capital markets refers to platforms that enable entities to sell securities to raise funds for various purposes, and where investors can buy those instruments.

• Examples of well-known capital markets include the stock market, bond market, commodities market, forex market, and more.

• Capital markets can have physical locations in financial capitals such as Tokyo, London, or New York, but most securities trading is done electronically.

• Capital markets are a critical part of the global economy, as they make it possible for money to change hands with relative ease.

• Primary markets are where securities are issued for the first time, and secondary markets are where they’re traded subsequently.

What Are Capital Markets?

Capital markets perform a key economic role. They bring together those who need to sell securities and those who wish to buy them, thereby facilitating the movement of capital around the world. Capital markets include a wide range of securities markets where funds can be traded between companies, governments, institutions, and individuals for myriad reasons (like investing online).

Established capital markets include stock and bond markets, and commodities. Capital markets and money markets are distinct, though: money markets are where short-term debt is traded. Most capital markets are located in the world’s financial centers, such as London, New York, Singapore, and Hong Kong.

What Is the Main Purpose of Capital Markets?

As noted, the main purpose of capital markets is to bring buyers and sellers together, specifically, for those who want to transact in securities markets. This means that they’re a meeting place for organizations or entities (governments, companies, etc.) that need money to get it from those who are willing to lend it or buy equity (investors).

Capital markets are important to the functioning of the broader economy.

What Are the Types of Capital Markets?

There are different types of capital markets, including broad markets: primary and secondary markets.

Primary vs Secondary Market

Capital markets are commonly divided into primary and secondary markets. The primary markets are where issuers sell “new” securities, and where investors buy them.

The other side of the capital markets are the secondary markets. This is where investors buy and sell the securities that have already been issued, often through a self-directed investing account.

Stock Market vs Bond Market

Stock markets are probably the most well-known of the capital markets. They are where companies go to acquire the capital they need to grow, and where investors go to buy stocks, and find opportunities for their capital to grow.

Bond markets operate differently. For one thing, the bond market doesn’t have a central exchange. Instead, they sell over the counter (OTC). And most of the people who trade in this OTC market are professional traders, such as pension funds, investment banks, hedge funds, and asset managers.

A bond is similar to an IOU, in that investors agree to lend capital to a government, company, or other bond issuer in exchange for regular interest payments over time, and a guarantee their principal will be repaid when the bond matures.

Stock and bond markets are one way to divide up the capital markets. But there are other securities such as convertible bonds, convertible preference shares and other alternative securities that companies sell to raise capital.

Capital Markets vs. Financial Markets vs. Money Markets

Financial markets are a broader category that include both capital markets and money markets. People sometimes use all three terms interchangeably, but there are some distinctions.

Financial Markets

Financial markets, generally, are any venue in which individuals and institutions trade any financial asset, including stocks, bonds, currencies, derivatives, commodities, and alternative investments.

Capital Markets

Capital markets specifically refer to the places where companies and other entities go to raise capital. Some distinguish capital markets as the segment where investors can invest in longer-term securities, versus the short-term instruments available through money markets.

Money Markets

Capital markets are also distinct from money markets in that the money market is where investors trade short-term debt, generally less than one year. Money markets support entities that need the return from short-term debt instruments.

The key distinction between money markets and capital markets are the types of securities traded, their risk level, and duration.

Money market instruments are generally fixed-income securities, and as such can be considered lower risk than other securities traded in the capital markets.

Real-world Examples of Capital Markets

Here are a few examples of capital markets at work in the real world.

Example 1: A Company Goes Public (IPO)

Many companies will choose to conduct an initial public offering, or IPO, in an effort to raise capital in quantities that simply aren’t available through private investors. The public capital market creates the opportunity for millions of investors to buy stakes in the company.

A company will usually consider an IPO when it has grown in size and matured as an organization. From a size perspective, one common time to consider an IPO is when a unicorn company has reached a valuation of $1 billion, though many companies go public before this point.

For many companies, the day of its IPO represents the beginning of a new stage of growth. In addition to the funds raised in an IPO, the credibility and transparency of being a publicly traded company can make it easier and less expensive to borrow money in the future.

Example 2: A City Issues Bonds for a New School

To access public funding through a bond issue, a company or another entity will start by discussing its need for capital with an investment bank or banks, which will act as the underwriter. In some cases, an entity may issue bonds directly, without using an underwriter.

If the bond issuer doesn’t have a rating from a bond-rating agency, the bank will help the borrower get in touch with the right rating agencies.

Once the terms of the bond are agreed upon, and the rating assigned to it, the bank sets up meetings with institutional investors. If they respond positively, then the bonds go to the investors who agreed to buy it over the course of the meetings leading up to the issuance date.

Example 3: Capital Markets in Real Estate

There are several ways that capital markets can serve or operate within the real estate sector. For instance, if a real estate developer needed to raise capital to fund a project, they could securitize it and sell shares, such shares of a real estate investment trust (REIT). Or, if a city needed to fund a project, they could sell shares of municipal bonds to raise the money to do it.

Further, there are financial instruments that are backed by real estate, such as mortgage-backed securities.

The Takeaway

The term capital markets encompasses the in-person and electronic exchanges where companies, governments, institutions, and other entities go to obtain capital from investors.

While the term financial markets is often used to indicate the means by which all types of securities and investment are traded, capital markets tends to refer to the platforms that facilitate the trading of equities and longer-term debt instruments.

¹Opening and funding an Active Invest account gives you the opportunity to get up to $3,000 in the stock of your choice.

FAQ

What are capital markets in simple terms?

Capital markets bring together companies and other entities that need capital for various purposes, and investors who are willing to buy the securities they offer.

What is the capital market vs the stock market?

The stock market is an important subset of capital markets. It’s where companies that issue shares of their stock can find willing investors.

What is a primary market vs a secondary market?

A primary market is where securities or certain assets are issued for public sale for the first time, and a secondary market is where those securities or assets are subsequently traded or transacted.

Who are the main participants in capital markets?

Broadly, the main participants in capital markets are issuers, or those looking to sell equity or debt for funding, and investors, who are those looking to spend or lend capital in exchange for equity. Intermediaries could also be included, and those include market makers who connect issuers and investors.

Is the foreign exchange (forex) market a capital market?

Yes, the forex market could be considered a type of capital market.

Photo credit: iStock/Ivan Pantic

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.

Investing in an Initial Public Offering (IPO) involves substantial risk, including the risk of loss. Further, there are a variety of risk factors to consider when investing in an IPO, including but not limited to, unproven management, significant debt, and lack of operating history. For a comprehensive discussion of these risks please refer to SoFi Securities’ IPO Risk Disclosure Statement. This should not be considered a recommendation to participate in IPOs and investors should carefully read the offering prospectus to determine whether an offering is consistent with their investment objectives, risk tolerance, and financial situation. New offerings generally have high demand and there are a limited number of shares available for distribution to participants. Many customers may not be allocated shares and share allocations may be significantly smaller than the shares requested in the customer’s initial offer (Indication of Interest). For more information on the allocation process please visit IPO Allocation Procedures.

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.

¹Claw Promotion: Probability of Member receiving $1,000 is a probability of 0.026%; If you don’t make a selection in 45 days, you’ll no longer qualify for the promo. Customer must fund their account with a minimum of $50.00 to qualify. Probability percentage is subject to decrease. See full terms and conditions.

Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.

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.

SOIN-Q425-047

Dec

2025

How Much Do I Need to Retire?

By Dan Miller | invest, Investing, Preparing for Retirement | Comments Off

Table of Contents

How Much Money Do You Need to Retire?
Are You Currently Saving Enough?
Factors That Impact How Much Retirement Savings You’ll Need
Closing the Gap Between Current Savings and Your Goal
FAQ

While there are formulas and calculators that can help you determine a basic amount that you need to save for retirement, these are just ballpark numbers. In some cases it can be useful to game out a couple of different scenarios — using different assumptions about where you might live, whether you’ll work part time or travel, and so on.

Doing this can help you, and your spouse or partner, decide on the retirement path that suits you. It can also help you make the best estimate of how much you need to retire.

Key Points

• Determining the amount needed for retirement is a personalized calculation influenced by lifestyle, savings, Social Security, and various other factors.

• Guidelines suggest saving 15% to 20% of income for retirement, with targets based on age, such as 10 times salary by age 67.

• The 80% rule recommends replacing 80% of pre-retirement income, while the 4% rule provides a method for estimating required savings based on annual expenses.

• Factors like retirement age, pre-retirement income, desired lifestyle, and future expenses significantly impact the amount needed for a comfortable retirement.

• Starting retirement planning early and regularly assessing savings can help close the gap between current funds and future needs, especially considering inflation and healthcare costs.

This article is part of SoFi’s Retirement Planning Guide, our coverage of retirement readiness and all the steps you need to create a successful retirement plan.

How Much Money Do You Need to Retire?

There isn’t a single number you need to retire that will work for everyone. As mentioned, every person’s situation is unique and comes with its own complications and assumptions for what retirement might mean.

Many Americans aren’t sure where to begin when it comes to figuring out the exact amount they’ll need. In a 2024 SoFi Retirement Survey, 75% of adults don’t know how much they will need to retire. Just 1 in 4 have done the calculations to determine the amount, while 41% have a general sense, and 34% have no idea how much they’ll need for retirement.

do you know how much you need to retire - sofi retirement survey results
Source: SoFi’s 2024 Retirement Survey

Fortunately, there are some rules of thumb to consider to help determine retirement savings.

1. Retirement Savings Targets by Age

If you’re just starting out in life, you might think that with retirement decades away that you don’t have to worry about it. But the sooner you start saving for retirement, the better off you’ll be. Here are a few rough targets for how much you should have saved at certain ages:

By Age…	You should target saving this much
30	1X your salary
40	3X your salary
50	6X your salary
60	8X your salary
67	10X your salary

Source: Fidelity, “When Can I Retire”

These should only be considered as very rough guidelines — for more detailed retirement targets, consider working with a financial advisor.

retirement savings target by age

2. The 80% Rule

One basic guideline is known as the 80% rule, which says you should aim to replace 80% of your pre-retirement income. So, if you earn $100,000, you’ll need about $80,000 per year when you retire.

This is only meant as a guideline, but it has been called into question by some experts as being too high. As the thinking goes, your expenses decline in retirement, largely because you’re no longer saving for retirement, nor are you commuting.

Others have said workers should aim to replace 100% of their pre-retirement income, owing to inflation.

3. The 4% Rule

Another popular rule of thumb is the 4% rule, which says that you can take your projected annual retirement expenses and divide them by 4% (0.04) to know how much money you’ll need before you can safely retire.

If you project annual expenses of $50,000, you’ll need $1,250,000 (which is $50,000 divided by 0.04). Then each year you could withdraw 4% (indexed for inflation), which would come mostly if not completely from the appreciation of the portfolio.

Since the 4% rule was introduced in 1994, other advisors have said that it is not conservative enough, due partly to increased longevity, and have suggested 3.33% or even 3.7% might be more appropriate.

example of the 4 percent rule

💡 Quick Tip: Did you know that opening a brokerage account typically doesn’t come with any setup costs? Often, the only requirement to open a brokerage account — aside from providing personal details — is making an initial deposit.

Are You Currently Saving Enough?

First, take a good long look at how much you’re putting away for retirement. Have you reached —or come close to — the goal of saving 15% to 20% of your income? Unfortunately, many people have not.

In the SoFi Retirement Survey, just 17% of respondents say they’re putting 15% or more of their income toward retirement. The majority are contributing much less. Here’s how the numbers break down:

Retirement Contributions

• 49% contribute less than 10% of their income

• 23% contribute less than 5% of their income

• 17% contribute 15% or more of their income

Of those who are contributing 15% or more of their income to retirement savings, 50% have a household income of $100,000 or more. The older they get, the more likely survey respondents are to contribute. While 32% of those aged 25 to 34 put at least 15% of their income toward retirement savings, the number jumps to 60% for those aged 25 to 44.

Factors That Impact How Much Retirement Savings You’ll Need

factors to consider when saving for retirement

When considering how much you’ll need to retire, here are a few things that you will want to keep in mind:

Age You Plan to Retire

In simple terms, your retirement age is the age when you decide to retire. For example, you might set your target retirement date as 62 or 65 or 66 — all of which are related to Social Security benefits in some way.

Social Security has largely shaped how we view retirement age in the U.S. because that monthly payout is what enables the majority of people to leave work. Ninety-seven percent of adults ages 60 or older receive Social Security, according to a 2024 estimate by the Social Security Administration. And most people ages 65 and older say Social Security is the majority of their income, according to an analysis by the Center on Budget and Policy Priorities, a nonpartisan research and policy institute.

While retiring at 62 is the earliest age when you can claim Social Security, that’s not your “full retirement age” – 67 is generally considered the full retirement age for those born in 1960 or later.

Pre-Retirement Income

Some financial planners suggest that you base your retirement projections on your pre-retirement income. You might use 70%, 75%, or 80% of your current income as a basis for estimating how much money you’ll need in retirement.

For a more detailed look, go through your budget and see how each type of expense will change in retirement. You may need more or less income than you think.

Retirement Lifestyle Goals

Another thing to think about is how your lifestyle overall might change in retirement. Consider whether you plan to move or make other big lifestyle changes that can impact both expenses and taxes. While some costs may go down (such as if you pay off the mortgage on your home), others might go up as you change your lifestyle.

As one example, if you want to explore the world or visit grandchildren, your travel budget may drastically increase from pre-retirement levels.

Social Security

Social Security benefits can provide a vital supplement to your retirement income and help you get closer to financial security. However, it’s critical to understand that the amount of your benefit will vary depending on your age.

The earliest you can start receiving Social Security Benefits is age 62, but your benefits will be reduced by as much as 30% if you take them that early — and they will not increase as you age.

If you wait until your full retirement age (FRA) you can begin receiving full benefits. Your full retirement age is based on the year you were born. For example, if you were born in 1960 or later, your full retirement age is 67. You can find a detailed chart of retirement ages on the Social Security website.

But here is the real Social Security bonus: If you can put off claiming your Social Security benefits until age 70, perhaps by working longer or working part time, the size of your benefits will increase considerably. Typically, for each additional year you wait to claim your benefits up to age 70, your benefits will grow by 8%.

Future Retirement Expenses

Creating an estimated budget can help you get a sense of what your retirement expenses might be. For example, you may know how much you’ll pay for things like housing, utilities, and food. But it’s also important to consider any future expenses that could require you to spend more each month in retirement.

Most people aren’t sure how much money they need to retire, according to SoFi’s retirement survey. Just one quarter of respondents say they know the amount they need.

• 41% have a rough estimate of how much they’ll need to retire comfortably

• 25% know how much they’ll need to retire comfortably

• 25% don’t know how much they’ll need to retire comfortably

Of those who don’t know how much they’ll need for retirement, about 40% are aged 45 or older.

That’s why it’s so important to start thinking now about the expenses you might face in retirement. The sooner you start planning and saving for these costs, the more time — and ideally, the more money — you may be able to stash away.

For instance, healthcare can be a major cost in retirement, especially if you retire early. At age 65, you will qualify for Medicare, but if you retire before then, you’ll need to make sure that you have a plan for covering healthcare costs in retirement. Even after qualifying for Medicare, you may still have significant health-related costs, depending on your specific medical situation. While Medicare can pay for many health-related issues, it doesn’t pay for all of them. Long-term nursing care is a big exclusion.

Purchasing long-term care insurance or a long-term care annuity could provide you with the necessary funds to cover those expenses, should you need nursing care. But if you don’t have either of those options in place, you’ll need to consider how you’ll fit long-term care costs into your retirement budget.

Inflation

Inflation eats away at the value of each individual dollar, including savings and investments, so it’s important to keep in mind the inflation rate for retirement planning. There are several strategies you can use when investing during inflation.

The cost of living in the future will be higher than it is today. For example, if rent costs $1,000 today, but next year inflation rises by 2.5%, that cost could rise to $1,025. Over a decade or more, that price could double or triple.

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

Closing the Gap Between Current Savings and Your Goal

If you realize that you have a gap between your current savings and where you think you need to be when you retire, it’s important to make a plan to address the gap. If you choose to do nothing, the gap will only grow wider.

You have three main ways to close the gap — either start saving more of your money or find a way to increase the returns your investments are earning. You can also consider making different choices about the sort of retirement you want.

Retirement Savings Accounts

You have many different ways that you can invest and save for retirement. Many employers have 401(k) accounts that give tax advantages for saving for retirement. On top of that, some employers offer matching funds when you contribute to a 401(k) account.

Another option can be to open an IRA, which you can set up on your own.

There are two main types: a traditional IRA and a Roth IRA. While both types let you contribute up to $7,000 yearly for 2025, with an additional catch-up contribution of $1,000 for those age 50 and older, and up to $7,500 for 2026, with an additional catch-up contribution of $1,100 for those 50 and older, one key difference is the way the two accounts are taxed: Traditional IRAs let you deduct your contributions up front and pay taxes on distributions when you retire, whereas Roth IRA contributions are not tax deductible, but you can withdraw money tax-free in retirement.

The Takeaway

It would be nice if there was a simple way to calculate the exact amount you need to retire on. Instead, think of your retirement amount as an ongoing series of calculations that you’ll refine as you get older, and as your thinking gets clearer.

There are some things you can predict, but many that you can’t — including the state of your health (or your spouse’s), the turns the market might take, or a change in priorities. All you can do is start early and save steadily for the retirement you hope to have one day.

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

Help build your nest egg with a SoFi IRA.

FAQ

How much money do you need to retire with a $100,000 salary?

In order to determine how much money you need to retire with a certain amount of salary, you’ll need to make a few assumptions. For example, you can estimate that you’ll need 75% of your pre-retirement income after you retire and follow the 4% rule. That would mean you’ll need $1,875,000 to be able to retire.

If you change your assumptions, it will also change your numbers. If you follow the 80% rule, for instance, you would aim to replace 80% of your $100,000 pre-retirement income — or $80,000 per year.

How can I catch up on retirement savings if I’m behind?

There are two main ways to catch up on retirement savings if you’re not meeting the targets for where you want to be. The first is to increase the amount of money you’re saving each month. Upping your contributions can help close your retirement savings gap. The other would be to try to increase the investment returns that you are earning, though that may also come with increased risk or volatility.

Should I factor in Social Security when determining how much retirement income I’ll need?

It may not be prudent to count on Social Security as a major contributor to your retirement amount, especially if it’s still decades until your retirement date. Current projections indicate that the government may not be able to fully fund Social Security payments at some point fairly soon — a June 2025 report by the Social Security Board of Trustees indicates that this might happen by 2034. Social Security recipients are still likely to receive benefits, though those benefits may be reduced by around 23%, the report said.

It’s conceivable that Congress could take action to address the shortfall, but that’s impossible to know.

Can you comfortably retire with $1.5 million?

Deciding whether $1.5 million is enough for you to comfortably retire depends a lot on your standard of living and annual retirement expenses. Using the 4% rule says that a nest egg of $1.5 million would give an annual amount of $60,000. Depending on the cost of living in your area and your own standard of living, that may be enough to retire comfortably.

Am I on track to retire comfortably?

To gauge if you are on track with your retirement savings, you can use a couple of general guidelines. The 80% rule says you will need 80% of your pre-retirement income per year when you retire. Another guideline recommends having 10 times your annual salary saved by the time you’re 67.

But you also need to factor in your personal financial situation, as well as your retirement goals to determine if you can retire comfortably. Depending on your circumstances, you may need to save more or less than the guidelines recommend.

Photo credit: iStock/Yaroslav Astakhov

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

SOIN-Q325-044
CN-Q425-3236452-42

Why Analyzing Stocks Is Important

Understanding Financial Statements

Get up to $1,000 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.

4 Ways to Analyze a Stock

1. Technical Analysis

2. Qualitative Stock Analysis

3. Quantitative Analysis

4. Fundamental Analysis

Earnings Per Share (EPS)

Revenue

Price-to-earnings (P/E) Ratio

Price-Earnings-Growth (PEG) Ratio

Price-to-Sales Ratio (P/S)

Debt-Equity Ratio

Debt-to-EBITDA

Dividend Yield

Price-to-Book Ratio (P/B)

Company Reports and Projections

Professional Analysis

Quantitative vs Qualitative Analysis

Pros and Cons of Doing Your Own Stock Analysis

Pros

Cons

The Takeaway

FAQ

What is the best way to analyze a stock?

What are key indicators to look for when analyzing a stock?

What is an example of stock analysis?

You may also be interested in:

What Is a Strike Price?

Calls

Puts

Examples of Strike Price in Options Trading

Buying a Call

Buying a Put

Writing a Covered Call

Moneyness

In the Money

At the Money

Out of the Money

How Is Strike Price Determined?

How Do You Choose a Strike Price?

What Happens When an Option Hits the Strike Price?

The Takeaway

FAQ

What is a strike price in options trading?

How does the strike price work for call and put options?

What are the three measures of an option’s “moneyness”?

How 401(k) Benchmarking Works

Get a 1% IRA match on rollovers and contributions.

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

The Importance of 401(k) Plan Benchmarking

How to Benchmark Your 401(k) Plan: 3 Steps

1. Assess Your 401(k) Plan Design

2. Evaluate Your 401(k) Plan Fees

3. Evaluate Your 401(k) Provider’s Services

The Takeaway

FAQ

How often should a 401(k) be benchmarked?

How do I benchmark my 401(k) fees?

Why is 401(k) benchmarking important?

What Are Capital Markets?

What Is the Main Purpose of Capital Markets?

What Are the Types of Capital Markets?

Primary vs Secondary Market

Stock Market vs Bond Market

Capital Markets vs. Financial Markets vs. Money Markets

Financial Markets

Capital Markets

Money Markets

Real-world Examples of Capital Markets

Example 1: A Company Goes Public (IPO)

Example 2: A City Issues Bonds for a New School

Example 3: Capital Markets in Real Estate

The Takeaway

FAQ

What are capital markets in simple terms?

What is the capital market vs the stock market?

What is a primary market vs a secondary market?

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

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

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