Dec
14
2025
A man sits at a table outside, smiling, looking at his investments on a tablet.

Capital Markets Explained

By | Growing Wealth, invest, Investing | Comments Off on Capital Markets Explained

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.

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 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.

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Dec
12
2025

How Much Do I Need to Retire?

By | invest, Investing, Preparing for Retirement | Comments Off on How Much Do I Need to Retire?

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.

money management guide for beginners

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.

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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

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.

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.

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.

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.

Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

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Dec
12
2025

Can You Name a Trust as a Beneficiary of an IRA?

By | invest, Investing, Preparing for Retirement | Comments Off on Can You Name a Trust as a Beneficiary of an IRA?

Individual retirement accounts (IRAs) offer a tax-advantaged way to invest for retirement. When opening an IRA, one question you’ll need to answer is who should be the beneficiary. You could name your spouse or another relative, but it’s also possible to list a trust as beneficiary of IRA assets.

A trust is a legal arrangement used in estate planning that allows an individual called a
trustee to manage assets for one or more beneficiaries, according to the specific wishes of the person who creates the trust.

There are advantages and disadvantages to naming a trust as the beneficiary of an IRA. It’s helpful to understand the implications of this process when developing your estate plan.

Key Points

•   Naming a trust as an IRA beneficiary allows the account holder to control when and how IRA assets are distributed after they’re gone.

•   IRA assets can be left to a trust in order to provide financially for those dependent on care, such as minors or special needs individuals.

•   When an IRA is left to a trust instead of a spouse, that spouse will not be able to claim or roll those assets into their own IRA, as they would if they were the beneficiary.

•   IRA assets held in a trust must be distributed within five years if the IRA owner died before starting to take required minimum distributions (RMDs).

•   A trust that qualifies as a see-through trust, which passes assets to beneficiaries through the trust, may be able to bypass certain distribution requirements.

How an IRA Is Inherited

The way IRAs work is that the account holder makes contributions to the IRA to help save for retirement. Those under age 50 may contribute up to $7,000 annually in 2025, while those up 50 and up may contribute up to $8,000 annually. In 2026, those under age 50 may contribute up to $7,500 annually, while those 50 and up can contribute up to $8,600 a year.

The account holder names one or more beneficiaries to inherit the IRA. After the account holder’s death, IRA beneficiaries must take distributions from the account — known as required minimum distributions (RMDs) — and pay any required taxes due on those distributions, in accordance with Internal Revenue Service (IRS) rules.

You can select one or more beneficiaries when you open an IRA and then update your beneficiaries at any time. For example, you could make a change to your beneficiary designation if you get married or divorced and wish to name or remove your spouse.

Types of Designated IRA Beneficiaries

A designated IRA beneficiary, similar to a 401(k) beneficiary, is the individual who will inherit the IRA account, as chosen by the account owner. A designated IRA beneficiary must be a person.

There are two primary categories of designated beneficiaries: Spouse and non-spouse. Non-spouse designated beneficiaries to an IRA can include:

•   Children

•   Parents or other family members

The IRS recognizes a separate category of designated beneficiaries, referred to as eligible designated beneficiaries (EDBs). This term is used to describe beneficiaries who benefit from special treatment regarding inherited IRA distributions under the SECURE Act, which went into effect in 2020. The following individuals qualify for EDB status:

•   Spouses and minor children of the deceased IRA owner

•   Disabled or chronically ill individuals

•   Individuals who are not more than 10 years younger than the IRA owner

Eligible designated beneficiaries can space out required minimum distributions from an inherited IRA over their lifetime. Ordinarily, non-spouse beneficiaries who inherit an IRA are required to withdraw all of the assets from the account within 10 years, under the rules of the SECURE ACT.

Non-Designated Beneficiaries

Non-designated beneficiaries are entities that inherit an IRA or another retirement account. Examples of non-designated beneficiaries include:

•   Estates

•   Charities

•   Trusts

Non-designated beneficiaries must withdraw IRA assets within five years of the account owner’s death if the owner died before they were required to start taking RMDs at age 72 before 2023, and at age 73 beginning in 2023.

However, if the account owner died after they started taking out RMDs, the payout rule applies. According to this rule, the beneficiary (in this case, the trust) must take out the assets over what would have been the account owner’s life expectancy if they had not died.

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Benefits to Naming a Trust as an IRA Beneficiary

So, can a trust be the beneficiary of an IRA? Yes. But should a trust be the beneficiary of an IRA? That answer is largely determined by the specifics of your situation. Here are some of the advantages of naming a trust as beneficiary to an IRA.

Control

Assets held in a trust are managed by a trustee who is bound by a fiduciary duty, meaning that they must act in the best interest of their client. During your lifetime you may act as your own trustee, with someone else succeeding you at your death. Any trustee you name is required to adhere to your wishes, as specified in the trust document.

That means you can have a say in what happens to IRA assets after you’re gone. That’s one of the chief benefits to a trust. If you were to name an individual as IRA beneficiary, on the other hand, they could do whatever they like with the money.

Special Situations

Trusts can be used to manage assets on behalf of minor children or special needs children/adults. You may set up a trust for the purpose of providing financially for a family member or another individual who is dependent on you for their care.

Setting up an IRA financial trust ensures that their needs will continue to be met after you’re gone. You can leave specific instructions for your trustee and any successor trustees you name on how the trust assets should be used to fund the care for these individuals.

Disadvantages to a Trust IRA Beneficiary

Naming a trust as the beneficiary of an IRA doesn’t always make sense, however. You may lose more than you benefit by choosing a trust as beneficiary vs. an individual. Here are some of the drawbacks to carefully consider.

Distribution Rules

Non-person IRA beneficiaries, including trusts, must fully distribute assets within five years of the account owner’s death if the owner had not yet begun taking required minimum distributions, or if the account is a Roth IRA. If the account owner died after they started taking out RMDs, however, the beneficiary must take out the assets over what would have been the account owner’s life expectancy if they had not died.

The only exception to these rules is if a trust qualifies as a see-through trust (learn more about that below).

By comparison, designated non-spouse beneficiaries generally have a 10-year window in which to withdraw IRA assets. Spousal beneficiaries can treat the IRA as their own and roll it over to their retirement account, which may minimize their tax liability.

Loss of Spousal Benefits

Naming a trust as IRA beneficiary when you have a living spouse takes away some of the tax benefits that are typically afforded to spouses when inheriting retirement accounts.

Most importantly, they don’t have the option to treat the IRA as their own. That could increase their tax obligation when receiving trust assets, leaving them with less inherited wealth to fund their retirement.

Rules for Trusts Inheriting IRAs

The SECURE Act introduced rules for trusts that inherit IRAs, including the five-year requirement for distributions. The rules says that non-designated beneficiaries must withdraw IRA assets within five years of the account owner’s death if the owner died before they were required to start taking out RMDs at age 72 before 2023, and at age 73 beginning in 2023.

If the account owner died after they started taking out RMDs, the beneficiary must take out the assets over what would have been the account owner’s life expectancy if they had not died.

Trusts may be able to bypass these requirements if they qualify as see-through entities, meaning they pass retirement assets to beneficiaries. With see-through trusts, the RMDs that must be taken are calculated based on the age of the beneficiary.

Here are the rules for see-through trusts.

•   Trusts must be valid according to the laws of the state in which they’re created.

•   The trust must become irrevocable, meaning it can’t be changed, when the account owner passes away.

•   Trust beneficiaries must be readily identifiable.

•   A copy of the trust must be provided to the custodian by October 31 in the year following the account owner’s death.5

These are the most current rules as of 2024. New legislation or updates to existing legislation can change inherited IRA rules.

Process for Updating IRA Beneficiary

The process for updating IRA beneficiaries is usually determined by the brokerage or bank that holds your IRA. If you need to make an update, you’ll need to contact your IRA custodian for the next steps.

Typically, you’ll fill out a beneficiary change form and share some information about the new beneficiary. If you’re updating your IRA beneficiary to a trust you’ll likely need to share the trust’s tax identification number as well as the trustee’s name and contact information.

Keep in mind that if you have an irrevocable trust you may not be able to make the change. Talking to an estate planning attorney or financial advisor can help you better understand what changes you can or cannot make.

The Takeaway

If you’re considering a trust as part of your estate plan and you also have an IRA, think about your specific situation and objectives. Putting an IRA in a trust could make sense if you have a special family situation or you want some say in how the assets are to be used after your death. On the other hand, it’s important to weigh the tax consequences your heirs might face.

If you don’t yet have an IRA but you’d like to set one up and begin making IRA contributions, it’s easy to open a retirement account online.

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

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

FAQs

Who pays the taxes if a trust is the beneficiary of an IRA?

When a trust retains income from an inherited IRA, the trust pays tax on that income. If IRA assets are passed on to the trust beneficiaries, then the beneficiaries pay the tax.

Can a trust be the beneficiary of Roth IRAs and traditional IRAs?

A trust can be the beneficiary of a traditional or Roth IRA. It’s possible for someone to have both types of IRAs and name a trust as beneficiary to one or both of them.

Do IRAs with beneficiaries go through probate?

Probate is a legal process in which a deceased person’s assets are inventoried, outstanding debts are paid, and remaining assets are then passed on to their heirs. Generally speaking, retirement accounts with designated beneficiaries are not subject to probate.

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/miniseries

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.

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

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

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The Ultimate Guide to Investing for Retirement at Age 60

The Ultimate Guide to Investing for Retirement at Age 60

By | Growing Wealth, invest, Investing | Comments Off on The Ultimate Guide to Investing for Retirement at Age 60

Retirement is a milestone that many people look forward to with great anticipation. While the freedom of having more time to spend with loved ones, pursue hobbies, or travel is certainly something to be celebrated, it is also important to plan, save, and invest so this future can be a reality.

It’s never too late to start saving and investing for these future goals, even if you’re nearing 60. And if you’ve been saving for years, it’s still smart to continue to invest for retirement when you reach 60. However, your investment strategies may need to change as you near the end of your working years. In this guide, we’ll explore key factors to consider when investing for retirement at age 60, as well as some low-risk investment options that may be suitable for those nearing retirement.

Investing for Retirement at 60

As you approach 60, retirement may be just around the corner. Maybe you’ve been saving for retirement your entire career. Or perhaps you started saving late and need to grow your nest egg quickly for your golden years. No matter the case, as retirement nears, you may wonder what to do to ensure financial stability.

Investing for retirement is critical to help you reach a comfortable financial position. But planning for retirement at age 60 may seem overwhelming. After all, there are several investment accounts you could open or continue to invest in, not to mention the various types of investments you could have in those accounts. With a little bit of research and planning, you can put yourself on the path of living comfortably in retirement.

If you’re beginning your investment journey, it’s better to start immediately rather than putting it off because you’re overwhelmed by the prospect of failing to meet your financial goals. It’s better to save and invest in different types of retirement plans now rather than put it off and have nothing down the road.

Options for Investing for Retirement at Age 60

Investing for retirement at age 60 can be a confusing and daunting process, particularly for those new to investing. But with some planning, retirees can find the best options for their needs. The following are some options to help you invest for retirement at age 60:

401(k)

A 401(k) is an employer-sponsored, tax-advantaged retirement savings plan that can be a valuable tool for someone who is 60 years old and looking to save for retirement. A 401(k) plan allows you to save for retirement on a tax-deferred basis, which means that your contributions could reduce your taxable income for the current year, and your investment earnings grow tax-free until you withdraw the funds in retirement.

If your employer offers a 401(k), it can be particularly advantageous for someone who is 60 years old as it provides several features that can help to maximize your retirement savings:

•   Catch-up contributions: If you are 50 or older, you can make catch-up contributions to your 401(k) plan, which allows you to contribute more money to your account each year than younger participants. In 2025, the annual catch-up contribution is up to $7,500 more than the standard $23,500 contribution limit. In 2026, the annual catch-up contribution is up to $8,000 more than the standard $24,500 contribution limit. Also in 2025 and 2026, those aged 60 to 63 may contribute up to an additional $11,250 (instead of $7,500 in 2025 ans $8,000 in 2026), thanks to SECURE 2.0.

•   Employer matching contributions: Many 401(k) plans offer employer matching contributions, which can help to boost your retirement savings. Maxing out your employer match can be an effective way of increasing savings.

•   Several investment options: A 401(k) plan typically offers a range of investment options, including mutual funds, exchange-traded funds (ETFs), and individual stocks and bonds. These investment options allow you to diversify your portfolio and manage risk.

•   Loan options: Some 401(k) plans allow you to borrow from your account, which can be helpful in times of financial need.

IRA

An individual retirement account (IRA) is a tax-advantaged investment account that provides a way to save for retirement outside of an employer-sponsored plan, such as a 401(k). An IRA can be an option for someone who is 60 years old and looking to save for retirement. There are two main types of IRAs: traditional and Roth.

For someone who is 60 years old, an IRA can offer a number of benefits in terms of retirement savings:

•   Tax benefits: A traditional IRA provides tax-deferred growth on your contributions, meaning that you can deduct your contributions from your taxable income for the current year and pay taxes on the funds when you withdraw them in retirement. A Roth IRA provides tax-free growth on your contributions, meaning you can withdraw the funds in retirement without paying any taxes on the investment earnings.

•   Catch-up contributions: Like a 401(k), you are eligible to make annual catch-up contributions to your IRA if you are 50 or older. For 2025, the annual catch-up contribution is $1,000 more than the standard $7,000 contribution limit. For 2026, the annual catch-up contribution is $1,100 more than the standard $7,500 contribution limit.

Recommended: What is an IRA?

Real Estate

Investing in real estate is another option to save for retirement. Real estate investments provide a source of passive income, which may help supplement your retirement savings and hedge against inflation. There are several ways that someone who is 60 years old can invest in real estate, including:

•   Rental property: Investing in rental property can provide a steady stream of rental income, which can help to supplement your retirement savings.

•   Real estate investment trusts (REITs): Some REITs own and manage income-producing properties. Investing in REITs can provide exposure to a diverse portfolio of real estate assets without the responsibility of managing the properties yourself.

Annuities

Annuities may be an attractive investment vehicle for someone saving for retirement. An annuity is an investment product that provides a guaranteed income stream in exchange for a lump sum payment or a series of payments. It’s important to note that there are several types of annuities, each with unique features and benefits.

An annuity can offer many benefits for retirement savings:

•   Guaranteed income: An annuity provides a guaranteed stream of income, which can help to provide financial stability in retirement.

•   Protection from market downturns: Certain types of annuities can provide protection from market downturns, which can help to mitigate the impact of stock market losses on your retirement savings.

Things to Consider When Investing for Retirement at Age 60

Regardless of your financial situation, you can continue or start to invest for retirement at age 60. However, before you start investing at age 60, you should consider the following:

Retirement Goals

You want to figure out your desired lifestyle that you’ll have during retirement and how much money you will need to support it. You may want to travel the world. Or you want to live a low-key life near your family. Depending on your retirement goals, you’ll have much different needs.

Figuring out your retirement goals will help you determine how much you need to save and invest and what types of investments may be most suitable for your needs.

Time Horizon

One of the most important things to consider when investing for retirement at age 60 is your time horizon. With only a few years remaining until retirement, it’s important to consider how much time you have to invest and how long your investments need to last. This may affect the types of investments you choose, as you’ll likely want to focus on more conservative options that have a lower risk of losing your initial capital.

Risk Tolerance

Your risk tolerance may change as you get closer to retirement. At age 60, you may be less willing to take on the risk of losing your initial investment, as you’ll want to ensure that your savings last throughout your retirement. With a risk-averse outlook, you may consider lower-risk investment options such as certificates of deposit (CDs), dividend-paying stocks, or bond funds made up of US Treasuries and high-grade corporate debt.

Current Savings

Another critical factor to consider when investing for retirement at age 60 is your current savings. The amount you have already saved will play a significant role in determining how much you can invest and how much you will need to save. It’s also important to consider whether you have any other sources of retirement income, such as a pension plan or Social Security.

Social Security

Social Security is an important source of retirement income and can help supplement your other investments. When you turn 62, you can start receiving Social Security benefits. However, your benefits may be reduced if you start taking them early. Therefore, you want a holistic view of how your Social Security benefits will fit into your retirement plan.

Health Care Expenses

Healthcare expenses can significantly impact retirement savings, as they can be one of the largest expenses for individuals during their retirement years. Thus, you should factor in the potential for the need to pay for health care in your retirement savings plans.

According to the Fidelity Retiree Health Care Cost Estimate, the average 65-year-old couple retiring in 2022 can expect to spend approximately $315,000 on healthcare expenses throughout their retirement. This amount can quickly eat into an individual’s retirement savings, leaving them with less money for other costs such as housing, food, and entertainment.

Taxes

Some investment options have different tax implications, and it’s important to consider how your investments will be taxed in retirement. For example, traditional IRAs and 401(k)s are tax-deferred, meaning that you won’t have to pay taxes on the money you invest until you withdraw it in retirement. On the other hand, Roth IRAs and 401(k)s are taxed upfront, so you won’t have to pay taxes on the money you withdraw in retirement.

Recommended: 401(k) Tax Rules on Withdrawals and Contributions

Cost of Living

Inflation, or the rise of the cost of living, can erode the value of your investments over time, so you want to factor in how inflation may affect your savings in the future. This can include investing in assets that may appreciate in value, such as stocks, or in assets that generate income, such as bonds and rental property.

Recommended: How Does Inflation Affect Retirement?

Open an Online IRA With SoFi

People may think that by the time they turn 60, they should have enough money to retire and live comfortably. However, like anything in life, things sometimes work out differently than you planned. So if you don’t have the retirement nest egg you envisioned by the time you turned 60, it doesn’t mean you should avoid saving altogether. By assessing your current financial situation, selecting appropriate investments, and taking advantage of retirement plans, you can ensure a secure financial future even if you’re starting at 60.

If you’re ready to start investing for retirement, you can open an online retirement account with SoFi. SoFi offers Traditional, Roth, and SEP IRAs for investors looking to reach their financial goals for retirement. With a SoFi Invest® active IRA, you’ll be able to access a broad range of investment options, like buying and selling stocks, exchange-traded funds (ETFs), and fractional shares with no commission.

Help grow your nest egg with a SoFi IRA.

FAQ

Are you able to invest for retirement at 60?

It is possible to invest for retirement at age 60. However, it is also important to consider other factors, such as your current savings, retirement goals, and overall financial situation, to determine if investing for retirement at 60 is your best course of action.

Can you open a retirement account for investments at age 60?

You can open retirement accounts for investments at age 60. Several options are available, such as a traditional IRA or a Roth IRA. Additionally, these accounts allow catch-up contributions for people aged 50 or over.

How much money does the average 60-year-old invest for retirement?

The average amount a 60-year-old has saved for retirement can vary greatly depending on several factors, such as their current financial situation, savings habits, and overall financial goals. According to a report by Vanguard, the average and median retirement savings balance for individuals between the ages of 55 and 64 in 2021 was $256,244 and $89,716, respectively.

Photo credit: iStock/sureeporn

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.

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When to Start Saving for Retirement

When Should You Start Saving for Retirement?

By | Budgeting & Goals, Growing Wealth, invest, Preparing for Retirement | No Comments

If you ask any financial advisor when you should start saving for retirement, their answer would likely be simple: Now, or in your 20s if possible.

It’s not always easy to prioritize investing for retirement. If you’re in your 20s or 30s, you might have student loans or other goals that seem more “immediate,” such as a down payment on a house or your child’s tuition. But starting early is important because it can allow you to save much more. In fact, setting aside a little every year starting in your 20s could mean an additional hundreds of thousands of dollars of accumulated investment earnings by retirement age.

No matter what age you are, putting away money for the future is a good idea. Read on to learn more about when to start saving for retirement and how to do it.

Key Points

•   Starting to save for retirement in your 20s is ideal, as it gives your money more time to potentially grow and benefit from compounding. Compounding occurs when any earnings received are added to your principal balance, so future earnings are calculated on this updated, larger amount.

•   Assessing personal financial situations and retirement goals is crucial when determining how much to save for retirement, regardless of age.

•   Individuals in their 30s, 40s, 50s, or 60s can still successfully start saving for retirement, with different strategies tailored to each age group.

•   Regular contributions and taking advantage of employer-sponsored plans are key steps in building a solid retirement savings strategy at any age.

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

money management guide for beginners

What Is the Ideal Age to Start Saving for Retirement?

Ideally, you should start saving for retirement in your 20s, if possible. By getting started early, you could reap the benefits of compound interest. That’s when money in savings accounts earns interest, that interest is added to the principal amount in the account, and then interest is earned on the new higher amount.

Starting to save for retirement in your 20s can allow you to save much more. In fact, setting aside a little every year starting in your 20s could mean an additional hundreds of thousands of dollars of accumulated investment earnings by retirement age.

That said, if you are older than your 20s, it’s not too late to start saving for retirement. The important thing is to get started, no matter what your age.

Get a 1% IRA match on rollovers and contributions.

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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 #1 Reason to Start Early: Compound Interest

If you start saving early, you could reap the benefits of compound interest.

CFP®, Brian Walsh says, “Time can either be your best friend or your worst enemy. If you start saving early, you make it a habit, and you start building now, time becomes your best friend because of compounded growth. If you delay — say 5, 10, 15 years to save — then time becomes your worst enemy because you don’t have enough time to make up for the money that you didn’t save.”

Here’s how compound interest works and why it can be so valuable: The money in a savings account, money market account, or CD (certificate of deposit) earns interest. That interest is added to the balance or principle in the account, and then interest is earned on the new higher amount.

Depending on the type of account you have, interest might accrue daily, weekly, monthly, quarterly, twice a year, or annually. The more frequently interest compounds on your savings, the greater the benefit for you.

Investments — including investments in retirement plans, such as an employee-sponsored 401(k) plan or a traditional or Roth IRA — likewise benefit from compounding returns. Over time, you can see returns on both the principal as well as the returns on your contributions. Essentially, your money can work for you and potentially grow through the years, just through the power of compound returns.

The sooner you start saving and investing, the more time compounding has to do its work.

💡 Quick Tip: If you’re opening a brokerage account for the first time, consider starting with an amount of money you’re prepared to lose. Investing always includes the risk of loss, and until you’ve gained some experience, it’s probably wise to start small.

Saving Early vs Saving Later

To understand the power of compound returns, consider this:

If you start investing $7,000 a year at age 25, by the time you reach age 67, you’d have a total of $2,129,704.66. However, if you waited until age 35 to start investing the same amount, and got the same annual return, you’d have $939,494.76.

Age

 Annual Return

 Savings
25 8% $2,129,704.66
35 8% $939,494.76

As you can see, starting in your 20s means you may save double the amount you would have if you waited until your 30s.

Starting Retirement Savings During Different Life Stages

Retirement is often considered the single biggest expense in many peoples’ lives. Think about it: You may be living for 20 or more years with no active income.

Plus, while your parents or grandparents likely had a pension plan that kicked off right at the age of 65, that may not be the case for many workers in younger generations. Instead, the 401(k) model of retirement that’s more common these days requires employees to do their own saving.

As you get started on your savings journey, do a quick assessment of your current financial situation and goals. Be sure to factor in such considerations as:

•   Age you are now

•   Age you’d like to retire

•   Your income

•   Your expenses

•   Where you’d like to live after retirement (location and type of home)

•   The kind of lifestyle you envision in retirement (hobbies, travel, etc.)

To see where you’re heading with your savings you could use a retirement savings calculator. But here are more basics on how to get started on your retirement savings strategy, at any age.

Starting in Your 20s

Starting to save for retirement in your 20s is something you’ll later be thanking yourself for.

As discussed, the earlier you start investing, the better off you’re likely to be. No matter how much or little you start with, having a longer time horizon till retirement means you’ll be able to handle the typical ups and downs of the markets.

Plus, the sooner you start saving, the more time you’ll be able to benefit from compound returns, as noted.

Start by setting a goal: At what age would you like to retire? Based on current life expectancy, how many years do you expect to be retired? What do you imagine your retirement lifestyle will look like, and what might that cost?

Then, create a budget, if you haven’t already. Document your income, expenses, and debt. Once you do that, determine how much you can save for retirement, and start saving that amount right now.

💡 Learn more: Savings for Retirement in Your 20s

Starting in Your 30s

If your 20s have come and gone and you haven’t started investing in your retirement, your 30s is the next-best time to start. While there may be other expenses competing for your budget right now — saving for a house, planning for kids or their college educations — the truth remains that the sooner you start retirement savings, the more time they’ll have to grow.

If you’re employed full-time, one easy way to start is to open an employer-sponsored retirement savings plan, like a 401(k). In 2025, you can contribute up to $23,500 in a 401(k), and in 2026, you can contribute up to $24,500.

One benefit to note is that your savings will come out of your paycheck each month before you get taxed on that money. Not only does this automate retirement savings, but it means after a while you won’t even miss that part of your paycheck that you never really “had” to begin with. (And yes, Future You will thank you.)

Learn more: Savings for Retirement in Your 30s

Starting in Your 40s

When it comes to how much you should have saved for retirement by 40, one general guideline is to have the equivalent of your two to three times your annual salary saved in retirement money.

Once you have high-interest debt (like debt from credit cards) paid off, and have a good chunk of emergency savings set aside, take a good look at your monthly budget and figure out how to reallocate some money to start building a retirement savings fund.

Not only will regular contributions get you on a good path to savings, but one-off sources of money (from a bonus, an inheritance, or the sale of a car or other big-ticket item) are another way to help catch up on retirement savings faster.

Starting in Your 50s

In your 50s, a good ballpark goal is to have six times your annual salary in your retirement savings by the end of the decade. But don’t panic if you’re not there yet — there are a few ways you can catch up.

Specifically, the government allows individuals aged 50 and older to make “catch-up contributions” to 401(k), traditional IRA, and Roth IRA plans. That’s an additional $7,500 in 401(k) savings, and an additional $1,000 in IRA savings for 2025, and an extra $8,000 in 401(k) savings, and an extra $1,100 in IRA savings for 2026. (Note that in 2025 and 2026, those aged 60 to 63 may contribute up to an additional $11,250 to a 401(k), instead of $7,500 or $8,000.)

The opportunity is there, but only you can manage your budget to make it happen. Once you’ve earmarked regular contributions to a retirement savings account, make sure to review your asset allocation on your own or with a professional. A general rule of thumb is, the closer you get to retirement age, the larger the ratio of less risky investments (like bonds or bond funds) to more volatile ones (like stocks, mutual funds, and ETFs) you should have.

Starting in Your 60s

It’s never too late to start investing, especially if you’re still working and can contribute to an employer-sponsored retirement plan that may have matching contributions. If you’re contributing to a 401(k), or a Roth or traditional IRA, don’t forget about catch-up contributions (see the information above).

In general, when you’re this close to retirement it makes sense for your investments to be largely made up of bonds, cash, or cash equivalents. Having more fixed-income securities in your portfolio helps lower the odds of suffering losses as you get closer to your target retirement date.

💡 Learn more: Savings for Retirement in Your 60s

The Takeaway

Investing in retirement and wealth accounts is a great way to jump-start saving and investing for your golden years, whether you invest $10,000 or just $100 to get started.

The first step is to open an account or use the one that’s already open. You could also increase your contribution. If you’re opening an account, you may want to consider one without fees, to help maximize your bottom line.

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

Easily manage your retirement savings with a SoFi IRA.

FAQ

Is 20 years enough to save for retirement?

It’s never too late to start investing for retirement. If you’re just starting in your 40s, consider contributing to an employer-sponsored plan if you can, so that you can take advantage of any employer matching contributions. In addition to regular bi-weekly or monthly contributions, make every effort to deposit any “windfall” lump sums (like a bonus, inheritance, or proceeds from the sale of a car or house) into a retirement savings vehicle in an effort to catch up faster.

Is 25 too late to start saving for retirement?

It’s not too late to start saving for retirement at 25. Take a look at your budget and determine the max you can contribute on a regular basis — whether through an employer-sponsored plan, an IRA, or a combination of them. Then start making contributions, and consider them as non-negotiable as rent, mortgage, or a utility bill.

Is 30 too old to start investing?

No age is too old to start investing for retirement, because the best time to start is today. The sooner you start investing, the more advantage you can take of compound returns, and potentially employer matching contributions if you open an employer-sponsored retirement plan.

Should I prioritize paying off debt over saving for retirement?

Whether you should prioritize paying off debt over saving for retirement depends on your personal situation and the type of debt you have. If your debt is the high-interest kind, such as credit card debt, for instance, it could make sense to pay off that debt first because the high interest is costing you extra money. The less you owe, the more you’ll be able to put into retirement savings.

And consider this: You may be able to pay off your debt and save simultaneously. For instance, if your employer offers a 401(k) with a match, enroll in the plan and contribute enough so that the employer match kicks in. Otherwise, you are essentially forfeiting free money. At the same time, put a dedicated amount each week or month to repaying your debt so that you continue to chip away at it. That way you will be reducing your debt and working toward saving for your retirement.

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.

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.

Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by emailing customer service at [email protected]. Please read the prospectus carefully prior to investing.

Fund Fees
If you invest in Exchange Traded Funds (ETFs) through SoFi Invest (either by buying them yourself or via investing in SoFi Invest’s automated investments, formerly SoFi Wealth), these funds will have their own management fees. These fees are not paid directly by you, but rather by the fund itself. these fees do reduce the fund’s returns. Check out each fund’s prospectus for details. SoFi Invest does not receive sales commissions, 12b-1 fees, or other fees from ETFs for investing such funds on behalf of advisory clients, though if SoFi Invest creates its own funds, it could earn management fees there.
SoFi Invest may waive all, or part of any of these fees, permanently or for a period of time, at its sole discretion for any reason. Fees are subject to change at any time. The current fee schedule will always be available in your Account Documents section of SoFi Invest.

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 Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®

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.

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