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Dec

2025

How to Save for Retirement at 30

By Austin Kilham | invest, Investing, Preparing for Retirement | Comments Off

Table of Contents

5 Ways to Start Saving for Retirement at 30
FAQ

Learning how to save for retirement at 30 is an ideal time to start because you may have a steady salary and access to a workplace retirement plan. It can also be complicated: You may have more expenses and new choices to think about.

The main reason to start saving for retirement in your 30s, though, is that time is on your side. Setting aside even a small amount on a regular basis can help grow your nest egg over time.

While an employer-sponsored plan can make saving easier, you can also set up and manage a retirement plan using an IRA.

Key Points

• Saving for retirement at 30 is crucial because this is when time is on your side, and can help your nest egg grow.

• At the same time, the onset of adult financial responsibilities may make it hard to set aside money for the future.

• If you have access to a workplace retirement plan, like a 401(k), this can get you started. Setting aside even small amounts on a steady basis can add up over time.

• Even without a 401(k), it’s possible to open your own IRA and start saving and investing now.

• Remember that saving for retirement comes with certain tax advantages that may be useful in the present and down the road.

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.

5 Ways to Start Saving for Retirement at 30

You can set yourself on a path to healthy retirement savings by using the following strategies. First up, putting money into a designated retirement plan.

1. Contribute to a Workplace Account or an IRA

Saving in tax-advantaged retirement accounts available through work, such as a 401(k), is one of the best things you can do to start saving for retirement.

• Annual contributions

Your 401(k) allows you to contribute up to $23,500 a year in 2025, and $24,500 in 2026. Contributions come directly from your paycheck as pre-tax dollars, which lowers your taxable income in the year you make them.

Regular, automatic contributions, coupled with the benefits of compounding returns, can help your savings grow. Starting a 401(k) at 30 gives you a few decades for your funds to grow over time.

• Employer matching funds

Also, many 401(k)s allow employers to contribute to your retirement, and many will offer matching funds as part of your compensation package. Aim to save at least as much as is required to receive your employer’s match.

Work toward maxing out your 401(k) contributions, especially as your salary grows over time.

• Investing your 401(k)

Many workplace plans offer pre-set portfolios, like target-date funds, as well as a wide selection of other investments.

In some cases, your employer may select a basic option for you. It’s important to check so that you can make the best choice for your financial goals. You may be able to invest online directly through the plan sponsor.

You can access the funds penalty-free once you reach age 59 ½, but you will owe taxes on the money at that time.

Recommended: How to Invest Your 401(k)

2. Open an IRA

An IRA is a retirement account that anyone with earned income can open. If you don’t have a 401(k) at work, you can open an IRA, which will give you access to a tax-advantaged account to save for retirement.

Even if you already have a 401(k), opening an IRA can be a good way to save even more, though you may not be able to deduct your contributions. The contribution limit for an IRA 2025 is $7,000 per year, and the limit is $7,500 per year in 2026.

IRAs come in two different types: traditional and Roth IRAs. If you don’t have a 401(k), you can make contributions to a traditional IRA with pre-tax dollars. Like a 401(k), money in these accounts grows tax-deferred, and you’ll pay the taxes on it when you make withdrawals in retirement.

If you meet certain income restrictions, you may be able to contribute to a Roth IRA instead or in addition to these tax-deferred accounts. With a Roth, you make the contributions with after-tax dollars, but your money will grow tax-free inside the account, and you do not have to pay taxes when you make withdrawals.

3. Plan Your Asset Allocation

Diversification is a strategy whereby you spread your money across different asset classes. To minimize risk from a decline in one type of asset, it typically makes sense to create a diversified portfolio, including a mix of asset classes, such as stocks, bonds and other assets.

Understanding Mutual Funds

Owing to the difficulty of researching, choosing, and managing multiple securities, most retirement savers choose to invest in mutual funds or exchange-traded funds (ETFs) within their retirement plans. These funds are a type of pooled investment that holds hundreds of different securities.

For example, if you buy shares in an ETF that tracks the S&P 500 index, you’ll be investing in the 500 stocks included in that index.

You may want to invest in stock mutual funds or ETFs, bond mutual funds or ETFs, or hybrid funds that include some of each type of asset.

Understanding Asset Allocation

Your asset allocation refers to the proportion of each asset class that you hold. Your asset allocation will reflect your goals, risk tolerance, and time horizon. Given the relatively long period until your retirement, you might consider a relatively aggressive portfolio consisting mostly of stocks in your retirement account.

Stocks typically provide the most potential for growth, but they also fluctuate more than some other asset classes, and they can be risky. Since you have three decades or more before you retire, you have time to ride out the natural ups and downs of the market.

Bonds tend to be less volatile than stocks but also offer lower returns, and may balance out the riskier equity allocation. As you approach retirement, you may consider rebalancing your asset allocation to include more conservative investments to help protect the income you will need to draw upon soon.

Target-date funds are a type of mutual fund that automatically readjusts your portfolio as you near your target date, often the year in which you wish to retire.

4. Diversify Within Asset Classes

Just as a portfolio with different types of assets offers some downside protection, so too, does diversification within those asset classes. If you invest the entire stock portion of your portfolio shares in just one fund and the share price drops, the value of your entire portfolio drops as well.

Now imagine that you own shares in 500 different companies. When one stock fares poorly, it will have a relatively small effect on the rest of your portfolio. Diversification helps limit the negative effects that any asset class, sector, or company could have on your portfolio.

You can further diversify your portfolio by including companies from different sectors and of all sizes from different parts of the globe. This same idea is true for other asset classes. For example, you could hold funds with a mix of government and corporate bonds, and the corporate bonds could represent companies from various sectors and locations.

5. Don’t Cash Out Your 401(k) When You Get a New Job

If you’re only in your 30s, it’s likely that you’ll change jobs a couple of times or more, over the course of your career. When you change jobs, you’ll have a number of options for what to do with the 401(k) you hold with your previous employer.

One of these options is to cash out your 401(k). But this is typically not a great idea from a personal finance perspective. If you take a lump sum payment and you’re younger than 59 ½, you will owe income taxes on the withdrawal, and also a 10% early withdrawal penalty. What’s more, your money will no longer be working for you in a tax-advantaged account, potentially setting you back in your retirement savings goals.

A better option is to roll over your 401(k) into another tax-advantaged retirement account, such as your new employer’s plan, if they offer one, without paying income taxes. Or you can roll your 401(k) into an IRA without paying taxes. IRA accounts offer the added benefit of additional investment options, and they may have lower fees than your 401(k).

6. Protect Your Earnings with Disability Insurance

An injury or an illness that keeps you from going to work can hamper your retirement savings plan. However, disability insurance can help cover a portion of your lost income — usually between 50% and 70% — for a period of time.

Most employers offer some sort of short-term disability insurance, with a benefit period of three to six months. Some employers may offer long-term policies that cover periods of five, 10, or 20 years, or even through retirement age.

Check with your employer to see if you are covered by a disability policy and whether it provides enough coverage for your needs. If your employer’s plan falls short, or you don’t have access to one, you might consider purchasing a policy on your own.

The Takeaway

The earlier you can start saving for retirement the better. A long time horizon gives you the opportunity to take advantage of compounding growth for a longer period of time, which can help you increase the amount you’re able to save. Pay attention to the fees you’re paying on investments, which can eat away at returns over time.

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 starting to save for retirement in your 30s too late?

Not at all. Being in your 30s is often the best time to start, because you may have a steady salary and access to a workplace retirement plan. Even if you don’t, you can still set up your own retirement plan using an IRA. Setting aside money on a regular basis can build a nest egg over time, because time is what helps money to grow.

How much should a 30-year-old have saved for retirement?

One rule of thumb is to aim to save an amount that’s equivalent to your salary. But that’s just a benchmark. It’s far more important to start saving even small amounts, but on a regular basis, using automatic transfers.

Can I save for retirement if I have debt?

Being in debt makes it harder to save for the future, no doubt. And while it’s difficult to save when you’re paying down bills, saving even a little bit can make a big difference to your nest egg over time.

Photo credit: iStock/AJ_Watt

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.

Mutual Funds (MFs): 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 clicking the prospectus link on the fund's respective page at sofi.com. You may also contact customer service at: 1.855.456.7634. Please read the prospectus carefully prior to investing.Mutual Funds must be bought and sold at NAV (Net Asset Value); unless otherwise noted in the prospectus, trades are only done once per day after the markets close. Investment returns are subject to risk, include the risk of loss. Shares may be worth more or less their original value when redeemed. The diversification of a mutual fund will not protect against loss. A mutual fund may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.

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.

Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.

S&P 500 Index: The S&P 500 Index is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S. It is not an investment product, but a measure of U.S. equity performance. Historical performance of the S&P 500 Index does not guarantee similar results in the future. The historical return of the S&P 500 Index shown does not include the reinvestment of dividends or account for investment fees, expenses, or taxes, which would reduce actual returns.
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.

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CN-Q425-3236452-47

Dec

2025

Setting Up a Retirement Account for Your Child

By Rebecca Lake | invest, Investing, Preparing for Retirement | Comments Off

Opening a tax-advantaged individual retirement account (IRA) for minors becomes possible once they start earning income. Even babysitting or lawn-mowing money counts.

A custodial IRA offers certain advantages: It can jump start a child’s interest in investing, and possibly help build their future nest egg. But there are annual contribution limits and other potential drawbacks to consider, such as the child’s eligibility for college financial aid.

🛈 Currently, SoFi does not offer custodial banking or investment products.

How to Open a Retirement Account for Your Child

Opening a retirement fund for a child means opening a custodial IRA. Generally speaking, a custodial account is one that’s owned by an adult — a parent, grandparent, or legal guardian — on behalf of a minor.

The adult does the investment planning for their child, and manages the money in the account until the child reaches the age of majority (it varies by state). At that point, all the money in the account belongs to the child.

Steps to Opening a Retirement Account for a Child

Here’s how opening a retirement account for minors typically works.

Step 1: Choose a Brokerage

Custodial IRAs are offered by many brokerages, so you’ll need to choose where to open yours. This could be the brokerage where you currently have your investment accounts or a different one.

When deciding on a custodial IRA, consider the range of investments offered, the fees you’re likely to pay, and how easy it is overall to open and manage new accounts. For example, some brokerages let you set up an IRA for a child online, while others require you to fill out and mail in the necessary paperwork.

Step 2: Complete the Application

On the application for a custodial IRA, the brokerage will typically ask for specific information, including:

• Contact information (e.g., your phone number, email address, and mailing address)

• Personal information about yourself, including your name, date of birth, and Social Security number

• Personal information about your minor child, including their name, date of birth, and Social Security number

• Employment information, if applicable

You’ll also need to share routing information and the account number for the bank account you plan to use to make contributions. If you’re moving money from another brokerage firm, you’ll be asked to provide the account number and type.

Step 3: Choose an IRA Type

Should you choose a traditional or a Roth IRA for your child? Both offer tax benefits and both have the same annual contribution limits for kids. For minors, a Roth IRA typically works better. One reason is that the child’s tax rate is typically quite low, and likely much lower than their tax rate will be upon retirement.

Step 4: Fund the Account and Choose Investments

Once you’ve opened a retirement account for a child, you can fund the account using your linked bank account and then make your investment selections. As the custodian, you choose how the money in the IRA is invested, though you might want to talk to your kids first to get their feedback. Generally, custodial IRAs can offer the same investment selections as IRAs for adults, which can mean stocks, mutual funds, exchange-traded funds (ETFs), bonds and other securities.

Different Types of IRAs for Children

As mentioned earlier, there are two main types of IRAs you can open for a minor child: traditional and Roth. The main difference lies in their tax treatment. The IRS regulates contributions to and withdrawals from each type of IRA.

Traditional IRA

A traditional IRA is funded with pre-tax dollars. The IRS allows eligible taxpayers to claim a deduction for contributions. When you take money out in retirement, you pay taxes on the earnings.

Traditional IRAs can make sense for people who can benefit from tax-deductible contributions. That might be less valuable to your child than the tax benefits that a Roth IRA could yield.

Roth IRA

You start a Roth IRA using after-tax dollars, so you get no tax deductions on your contributions. But they can offer something else: tax-free qualified distributions. This means no matter what tax bracket your child is in when they retire, they can withdraw their money from a Roth IRA tax-free.

Roth IRA withdrawal rules also allow contributions to be withdrawn at any time, tax- and penalty-free.

Funding a Child’s Retirement Account

Both traditional and Roth IRAs have annual contribution limits, and you have to contribute earned income. For tax year 2025, the annual contribution limit for traditional and Roth IRAs is $7,000. For tax year 2026, the contribution limit is $7,500.

The same rules apply to custodial IRAs. In tax year 2025, kids can contribute an amount equal to their earnings for the year or the $7,000 annual limit, whichever is lower. In 2026, kids can contribute an amount equal to their earnings for the year or the $7,500 annual limit, whichever is lower. So if your child makes $5,000 by babysitting and mowing lawns in a year, the most they’d be able to add to their IRA is $5,000.

Again, it’s important to remember that kids need to have income (specifically, taxable compensation) to open and contribute to a traditional or Roth IRA. According to the IRS, that includes:

• Wages

• Salaries

• Commissions

• Tips

• Bonuses

• Net income from self-employment

Investment income, including interest and dividend income, doesn’t count as income that can be contributed to the child’s IRA, under IRS guidelines.

Can a Parent Contribute to a Child’s IRA?

A parent can contribute to a child’s IRA only if that child has earned income of their own for the year.

Again, contributions to a child’s IRA must not exceed their allowed limit for the year. Going back to the previous example, in which your child earned $5,000, they could technically put all of that money into their IRA. Or you could offer to split the difference and let them put in $2,500 while contributing the remaining $2,500 yourself.

Keeping careful records of your child’s earnings for the year can help you avoid contributing too much to their IRA. Also, offering to put in an equivalent amount (without breaching the limit) can be a good motivator for kids to invest in their IRA.

Benefits of a Child Opening a Retirement Account

Opening up a Roth IRA for a child can benefit them in several ways.

• Kids can get an early taste of what it means to invest money rather than saving it. The IRA can be a teaching tool to help a child learn how the market works and the importance of setting long-term financial goals.

• Kids who start saving for retirement at an early age have the ability to take full advantage of the power of compounding interest. A child who contributes $5,000 each year starting at age 14 and earns a 7% annual return, for example, could have $2.3 million saved for retirement by age 65. Running the numbers using a Roth IRA calculator can give you an idea of how much of a head start on growing wealth you might be able to give your child by opening a minor IRA.

• The money in a Roth IRA for a child is tax-free when they take qualified distributions. This can result in substantial tax savings if they’re in a higher tax bracket when they retire.

Cons of a Child Opening a Retirement Account

Before you open a traditional or Roth IRA for a child, there are some drawbacks to consider.

• While contributing to a Roth IRA may offer some long-term benefits, there are no guarantees, and the money is then locked up until your child turns 59 ½ (although early withdrawals are possible, and might incur a penalty).

• A Roth IRA might affect your college-bound child’s financial aid eligibility. Just having money in a Roth IRA won’t cause any snags if your child is applying for federal student aid. But if they withdraw contributions from their Roth IRA for any reason — including paying for college expenses — that money is counted as income, which may affect eligibility for need-based aid.

• Investments within a custodial IRA entail some level of risk, as with all investments.

Pros	Cons
An IRA can be a good way to teach kids about investing and the stock market.	Funds in an IRA are typically restricted (although Roth contributions can be withdrawn at any time, penalty-free).
Starting an IRA for a child at a young age means they have more time to benefit from compounding interest.	Withdrawal of contributions from a Roth IRA could affect a child’s financial aid eligibility.
Qualified distributions are tax-free in retirement.	Investments within a custodial IRA entail some level of risk.

The Takeaway

IRAs can be a valuable addition to a retirement savings strategy if you’re interested in investment planning for children or for yourself. If you haven’t started saving for the future yet or your child is starting to earn income of their own, there’s no time like the present to consider opening an IRA.

FAQ

How do I set up a retirement account for a minor?

To get started, find out which brokerages allow you to open custodial IRAs for minor children. Then you need to choose a brokerage and IRA type, fill out the appropriate paperwork, and make a deposit or transfer to fund the IRA.

How do I give my kids an IRA?

You can open an IRA for your child once they have earned income of their own. This would be a custodial account: You own it until the child reaches adulthood, at which point it belongs to them. The other way to give an IRA to your kids is to name them as your IRA beneficiary when you pass away. If the child is a minor when they inherit the IRA, they would need a custodian to manage it for them.

When can I start a 401(k) for my child?

You can’t start a 401(k) for a child, unless you run a business that offers a 401(k) to its employees and your child works for you. You can, however, open an IRA for a minor child who has earned income, and make contributions to it on their behalf, as long as the total contributions don’t surpass the amount earned by the child that year.

About the author

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.

You may also be interested in:

How To Invest For Your Kids: Secure Their Financial Future

Tips for Teaching Your Kids About Investing

Creating an Investment Plan for Your Child

Photo credit: iStock/VioletaStoimenova

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.

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

Dec

2025

Do You Pay Capital Gains on Roth IRAs and IRAs?

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

You don’t have to pay capital gains tax on investment profits while they are held in a traditional or a Roth IRA account. In most cases, the question of taxes comes into play when you withdraw money from a traditional or Roth IRA.

Each type of IRA is subject to a different set of tax rules, and it’s essential to know how these accounts work, as the tax implications are significant now as well as in the future.

IRAs, Explained

An Individual Retirement Account (IRA) is a tax-advantaged account typically used for retirement savings. There are two main types of IRAs — traditional IRAs and Roth IRAs — and the tax advantages of each are quite distinct.

Generally speaking, all IRAs are subject to contribution limits and withdrawal rules, but Roth IRAs have strict income caps as well as other restrictions.

Contribution Limits

For tax year 2025, the annual contribution limit for both Roth and traditional IRAs is $7,000, and $8,000 for those 50 or older. For tax year 2026, the annual IRA contribution limit is $7,500, and $8,600 for those 50 or older.

It’s important to know that you can only contribute earned income to an IRA; earned income refers to taxable income like wages, tips, commissions. If you earn less than the contribution limit, you can only deposit up to the amount of money you made that year.

One exception is in the case of a spousal IRA, where the working spouse can contribute to an IRA on behalf of a spouse who doesn’t have earned income. Like ordinary IRAs, spousal IRAs can be traditional or Roth in style.

Traditional IRAs

All IRAs are tax advantaged in some way. When you invest in a traditional IRA, you may be able to take a tax deduction for the amount you contribute in the tax year that you make the contribution.

The contributions you make may be fully or partially tax-deductible, depending on whether you or your spouse are covered by a workplace retirement plan. If you’re not sure, you may want to check IRS.gov for details.

The money inside the account grows tax-deferred, meaning any capital appreciation of those funds is not subject to investment taxes, i.e. capital gains tax, while held in the account over time. But starting at age 59 ½ , qualified withdrawals are taxed at regular income tax rates.

If you think about it, this makes sense because you make contributions to a traditional IRA on a pre-tax basis. When you take withdrawals, you then owe income tax on the contributions and any earnings.

With some exceptions, early withdrawals from a traditional IRA prior to age 59 ½ are subject to income tax and a 10% penalty.

Recommended: IRA Tax Deduction Rules

Roth IRAs

Roth IRAs follow a different set of rules. You contribute to a Roth IRA with after-tax money. That means you won’t get a tax deduction for contributions you make in the year that you contribute.

Your contributions grow inside your Roth IRA tax-free, along with any earnings. When you reach retirement age and start to make withdrawals, you won’t owe income tax on money you withdraw because you already paid tax on the principal (i.e. your original contribution amounts) — and the earnings are not taxed on qualified withdrawals.

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.

What Are Capital Gains Taxes?

Capital gains refer to investment profits. In a taxable investment account you would owe capital gains tax on the profits you made from selling investments: e.g., stocks, bonds, real estate, and so on.

You don’t owe capital gains tax just for owning these assets — it only applies if you profit from selling them. Depending on how long you held an investment before you sold it, you would owe short- or long-term capital gains.

Retirement accounts, however, are subject to their own set of tax rules, and traditional and Roth IRAs each handle capital gains taxes differently.

Are Gains Taxed in Traditional IRAs?

Traditional IRA plans, as noted above, are tax-deferred, which essentially means that investment profits are not subject to capital gains tax while they remain in the account. Given this, the sale of individual investments like stocks inside an IRA is not considered a taxable event.

However, with tax-deferred accounts like traditional IRAs, you do have to pay ordinary income tax on withdrawals (meaning, you’re taxed at your marginal income rate).

So when you take withdrawals from a traditional IRA, you will owe income tax on the amount you withdraw, including any investment gains (i.e., earnings) in the account.

Are Gains Taxed in Roth IRAs?

The same principle applies to Roth IRAs, even though these are after-tax accounts: You don’t have to pay taxes on investment income or any assets that you buy or sell inside your Roth IRA.

Because you contribute to a Roth IRA with after-tax money, your money grows tax-free inside your IRA. Also, the earnings in the account grow tax-free over time and those gains are not taxed within the account.

In addition, qualified withdrawals of contributions and earnings from a Roth IRA are tax free. But remember: early or non-qualified withdrawal of earnings from a Roth IRA would be subject to taxes and a penalty (with some exceptions; for details see IRS.gov).

Roth IRA Penalties

Because you contribute to a Roth IRA with after-tax money, you can always withdraw your contributions (meaning your principal) without paying any tax or penalties.

If you wait to withdraw money from your Roth IRA until you reach age 59 ½, you can also withdraw your earnings without tax or penalties — as long as you’ve had the account for at least five years.

If you withdraw Roth IRA earnings before age 59 ½ or before you’ve held the account for five years, you may be charged a 10% early withdrawal penalty, though there are IRA withdrawal rules that may help you avoid the penalty in certain situations.

Are Gains Taxed in 401(k)s?

An IRA and a 401(k) work in a similar way when it comes to capital gains tax. Just as there are traditional and Roth IRAs, there are also traditional and “designated” Roth 401(k) plans, and they work similarly to their corresponding IRA equivalents.

So, generally speaking, you do not owe any capital gains tax on the sale of any investments held inside either type of 401(k) account.

Opening an IRA With SoFi

Most people are familiar with the basic tax advantages of using an IRA to save for retirement. Traditional IRAs are tax-deferred accounts and may provide a tax deduction in the years you make contributions. Roth IRAs are after-tax accounts that can provide tax-free income in retirement.

But the fact that you don’t have to pay capital gains tax is also worth noting. With both a traditional IRA and a Roth IRA, buying and selling stocks or other investments is not considered a taxable event. That means that you will not owe capital gains tax when you sell investments inside your IRA.

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 grow your nest egg with a SoFi IRA.

FAQ

Are Roth IRAs subject to capital gains tax?

No, buying and selling stocks or other investments inside a Roth IRA is not considered a taxable event. This means that you will not owe capital gains tax for buying or selling investments inside your Roth IRA. And because contributions to Roth IRAs are made with after-tax money, you also won’t owe income tax on qualified withdrawals.

Do you have to pay taxes if you sell stocks in a Roth IRA?

Selling stocks inside a Roth IRA is not considered a taxable event. So whether you regularly buy and sell stocks inside your Roth IRA, or just have unrealized gains and losses, you won’t need to worry about capital gains tax.

What happens when you sell a stock in your Roth IRA?

Buying and selling stocks inside an IRA is not considered a taxable event. So you won’t owe capital gains tax on stock you sell, but you also won’t be able to offset gains with a loss you capture from a stock sale inside your IRA.

Photo credit: iStock/designer491

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

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CN-Q425-3236452-61

Dec

2025

The Ultimate Guide to SIMPLE IRAs for Employees and Small Businesses

By Austin Kilham | Growing Wealth, invest, Investing | Comments Off

SIMPLE IRA is a tax-advantaged retirement account that can help self-employed individuals and small business owners save and invest for the future.

You may already be familiar with traditional individual retirement accounts (IRAs). A SIMPLE IRA, or Saving Incentive Match Plan for Employees, is similar to a traditional IRA in that it’s also a tax-deferred account. But the contribution limits for SIMPLE IRAs are higher, and the tax treatment of these plans is slightly different.

Also, SIMPLE IRAs require employers to provide a matching contribution.

What Is a SIMPLE IRA?

SIMPLE IRA plans are employer-sponsored retirement accounts for businesses with 100 or fewer employees. They are also retirement accounts for the self-employed and sole proprietors. If you’re your own boss, and thus self-employed, you can set up a SIMPLE IRA for yourself.

For small business owners and the self-employed, SIMPLE IRAs are an easy-to-manage, low-cost way to contribute to their own retirement — while at the same time helping employees to contribute to their savings as well, both through tax-deferred, elective contributions, and a required employer match.

SIMPLE IRAs offer higher contribution limits than traditional IRAs (see below), but employers and employees still benefit from tax advantages like tax-deferred growth and contributions that are either deductible (for the employer) or reduce taxable income (for the employee).

How Does a SIMPLE IRA Work?

A SIMPLE IRA is one of many different types of retirement plans available, but it can be appealing for small business owners and those who are self-employed owing to the lower administrative burden.

That’s because, unlike a 401(k) plan (which requires a plan sponsor and a plan administrator, as well as a custodian for employee assets), a SIMPLE IRA basically enables the employer to set up IRA accounts at a financial institution for eligible employees — or allow employees to do so at the financial institution of their choice.

Once the plan is set up and contributions are made, the employee is fully vested (i.e., they have ownership of all SIMPLE IRA funds, per IRS rules), which is helpful when saving for retirement.

Employee Eligibility

In order for an employee to participate in a SIMPLE IRA, they must have earned at least $5,000 in compensation over the course of any two years prior to the current calendar year, and they must expect to make $5,000 in the current calendar year.

It’s possible for employers to set less restrictive rules for SIMPLE IRA eligibility. For example, they could lower the amount employees are required to have made in a previous two-year time. However, they cannot make participation rules more restrictive.

Employers can exclude certain types of employees from the plan, including union members who have already bargained for retirement benefits and nonresident aliens who don’t receive their compensation from the employer.

Employee Contribution Limits

Those who have a SIMPLE IRA can contribute up to $16,500 in 2025 (plus an extra $3,500 in catch-up contributions for those 50 and older). In 2026, they can contribute up to $17,000 (plus an extra $4,000 in catch-up contributions for those 50 and older). In both 2025 and 2026, those aged 60 to 63 can contribute $5,250 (instead of $3,500 and $4,000 respectively), thanks to SECURE 2.0.

Contributions reduce employees’ taxable income, which lowers their income taxes in the year they contribute. Contributions can be invested inside the account, and may grow tax-deferred until an employee makes withdrawals when they retire.

IRA withdrawal rules are particularly important to pay attention to as they can be a bit complicated. Withdrawals made after age 59 ½ are subject to income tax. If you make withdrawals before then, you may be subject to an additional 10%, with some exceptions, or 25% penalty (if you’ve had the account for less than two years).

Account holders must make required minimum distributions, or RMDs, from their accounts when they reach age 73 (as long as they turn 72 after December 31, 2022).

Matching Contributions

An employer is required to provide a matching contribution to employees in one of two ways. They can match up to 3% of employees’ compensation. Or they can make a non-elective contribution of 2% of employees’ compensation.

If an employee doesn’t participate in the SIMPLE IRA plan, they would still receive an employer contribution of 2% of their compensation, up to the annual compensation limit, which is $350,000 for 2025, and $360,000 for 2026.

This two-tiered structure allows employers to choose whatever matching structure suits them.

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.

SIMPLE IRA vs Traditional IRA

When it comes to a SIMPLE IRA vs. a traditional IRA, the two plans are similar, but there are some key differences between the two. A SIMPLE IRA is for small business owners and their employees. A traditional IRA is for anyone with earned income.

To be eligible for a SIMPLE IRA, an employee generally must have earned at least $5,000 in compensation over the course of two years prior — and expect to make $5,000 in the current calendar year. With a traditional IRA, an individual must have earned income in the past year.

Contribution Limits

One of the biggest differences between the two plans is the contribution limit amount.

While individuals can contribute $7,000 in 2025 to a traditional IRA (or $8,000 if they are 50 or older), and $7,500 in 2026 (or $8,600 if they are 50 or older), those who have a SIMPLE IRA can contribute $16,500 in 2025, plus an extra $3,500 in catch-up contributions for those 50 and older, for a total of $20,000, and they can contribute $17,000 in 2026 plus an extra $4,000 in catch-up contributions, for a total of $21,000. Those aged 60 to 63 can contribute a catch-up of $5,250 for both 2025 and 2026 (instead of $3,500 and $4,000), for a total of $21,750 in 2025, and $22,250 in 2026.

Tax Treatment

And while both types of IRAs are considered tax deferred, SIMPLE IRAs use two different tax treatments.
For example: a traditional IRA generally allows individuals to make tax-deductible contributions. With a SIMPLE IRA, the employer or sole proprietor can make tax-deductible contributions to a SIMPLE IRA — while employees benefit from having their elective contributions withheld from their taxable income.

Both methods can help lower taxable income, potentially providing a tax benefit. But withdrawals are taxed as income, as they are with a traditional IRA.

Dive deeper: SIMPLE IRA vs Traditional IRA

SIMPLE IRA vs 401(k)

SIMPLE IRAs have some similarity to employer-sponsored 401(k) plans. Contributions made to both are made with pre-tax dollars, and the money in the accounts grows tax-deferred.

But while a 401(k) gives an employer the option of providing matching contributions to employees’ plans, a SIMPLE IRA requires matching contributions by the employer, as noted above.

Another major difference between the two plans is that individuals can contribute much more to a 401(k) than they can to a SIMPLE IRA.

• In 2025, they can contribute $23,500 to their 401(k) and an additional $7,500 if they’re 50 or older. Those aged 60 to 63 can contribute $11,250 instead of $7,500 to their 401(k), thanks to SECURE 2.0. In 2026, they can contribute $24,500 and an additional $8,000 if they are 50 or older. Those aged 60 to 63 can again contribute $11,250 instead of $8,000.

• In comparison, individuals can contribute $16,500 to a SIMPLE IRA in 2025, plus an additional $3,500 if they are 50 or older, and in 2026, they can contribute $17,000, plus an additional $4,000 if they are 50 or older. Those aged 60 to 63 can contribute $5,250 (instead of $3,500 and $4,000) in 2025 and 2026, thanks to SECURE 2.0.

How to Run a SIMPLE IRA Plan

SIMPLE IRAs are relatively easy to put in place, since they have no filing requirements for employers. Employers cannot offer another retirement plan in addition to offering a SIMPLE IRA.

If you’re interested in setting up a SIMPLE IRA, banks and brokerages may have a plan, known as a prototype plan, that’s already been approved by the IRS.

Otherwise you’ll need to fill out one of two forms to set up your plan:

• Form 5304-SIMPLE allows employees to choose the financial institutions that will receive their SIMPLE IRA contributions.

• You can also fill out Form 5305-SIMPLE, which means employees will deposit SIMPLE IRA contributions at a single financial institution chosen by the employer.

Once you have established the SIMPLE IRA, an account must be set up by or for each employee, and employers and employees can start to make contributions.

Notice Requirements for Employees

There are minimal paperwork requirements for a SIMPLE IRA. Once the employer opens and establishes the plan through a financial institution, they need to notify employees about it. This should be done by October 1 of the year the plan is intended to begin. Employees have 60 days to make their elections.

Eligible employees need to be notified about the plan annually. Any changes or new terms to the plan must be disclosed. At the beginning of each annual election period, employers must notify their employees of the following:

• Opportunities to make or change salary reductions.

• The ability to choose a financial institution to receive SIMPLE IRA contribution, if applicable.

• Employer’s decisions to make nonelective or matching contributions.

• A summary description provided by the financial institution that acts as trustee of SIMPLE IRA fund, and notice that employees can transfer their balance without cost of penalty if the employer is using a designated financial institution.

Participant Loans and Withdrawals

Participants cannot take loans from a SIMPLE IRA. Withdrawals made before age 59 ½ are typically subject to a 10% penalty, or 25% if the account is less than two years old, in addition to any income tax due on the withdrawal amount.

Rollovers and Transfers to Other Retirement Accounts

For the first two years of participating in a SIMPLE IRA, participants can only do a tax-free rollover to another SIMPLE IRA. After two years, they may be able to roll over their SIMPLE IRA to a traditional IRA or an employer-sponsored plan such as 401(k).

A rollover to a Roth IRA would require paying taxes on any untaxed contributions and earnings in the accounts.

The Advantages and Drawbacks of a SIMPLE IRA Plan

While SIMPLE IRAs may offer a lot of benefits, including immediate tax benefits, tax-deferred growth, and employer contributions, there are some drawbacks. For example, SIMPLE IRAs don’t allow employees to save as much as other retirement plans such as 401(k)s and Simplified Employee Pension (SEP) IRAs.

In 2025, employees can contribute up to $23,500 to a 401(k), plus an additional $7,500 for those 50 and over. Those aged 60 to 63 can contribute $11,250 instead of $7,500 to their 401(k), thanks to SECURE 2.0.

In 2026, they can contribute $24,500 to a 401(k), plus an additional $8,000 for those 50 or older. Those aged 60 to 63 can contribute $11,250 instead of $8,000 to their 401(k), thanks to SECURE 2.0.

Individuals with a SEP IRA account can contribute up to 25% of their employee compensation, or $70,000, whichever is less, in 2025, and up to 25% of their employee compensation, or $72,000, whichever is less, in 2026.

The good news is, employees with SIMPLE IRAs can make up some of that lost ground. Employers may be wondering about the merits of choosing between a SIMPLE and traditional IRA, but they can actually have both.

Employers and employees can open a traditional or Roth IRA and fund it simultaneously with a SIMPLE IRA. For 2025, total IRA contributions can be up to $7,000, or $8,000 for those 50 and over. In 2026, total IRA contributions can be up to $7,500, or $8,600 for those 50 or older.

Here some pros and cons of starting and funding a SIMPLE IRA at a glance:

Pros of a SIMPLE IRA	Cons of a SIMPLE IRA
Employers are required to provide a matching contribution for all eligible employees.	Lower contribution limits than other plans, such as 401(k)s and SEP IRAs.
Lower cost and less paperwork than other retirement accounts; there are no filing requirements with the IRS.	Withdrawals made before age 59 ½ are subject to a possible 10% or 25% penalty, depending on how long the account has been open.
Contributions are tax deductible for employers and pre-tax for employees (both lower taxable income).	Participants cannot take out a loan from a SIMPLE IRA.
A SIMPLE IRA may offer more investment options than a 401(k) or other employer plan.	There is no Roth option to allow employees to fund a SIMPLE account with after-tax dollars that would translate to tax-free withdrawals in retirement.

Eligibility and Participation in a SIMPLE IRA

As mentioned previously, there are some rules about who can participate in a SIMPLE IRA. Here’s a quick recap.

Who Can Establish and Participate in a SIMPLE IRA?

Small business owners with fewer than 100 employees and self-employed individuals can set up and participate in a SIMPLE IRA, along with any eligible employees.

Employers can’t offer any other type of employer-sponsored plan if they set up a SIMPLE IRA.

Employees’ Eligibility and Participation Criteria

In order for an employee to be eligible to participate, they must have earned at least $5,000 in compensation over the course of any two years prior to the current calendar year, and they must expect to make $5,000 in the current calendar year.

Employees can choose less restrictive requirements if they choose. They may also exclude certain individuals from a SIMPLE IRA, such as those in unions who receive benefits through the union.

Investment Choices and Account Maintenance

Because the employer doesn’t have to set up investment options for the SIMPLE IRA, employees have the advantage of setting up a portfolio from the investments available at the financial institution that holds the SIMPLE IRA.

Investment Choices for a SIMPLE IRA

Typically, there may be more investment choices with a SIMPLE IRA than there with a 401(k) because the SIMPLE IRA account may be held at a financial institution with a wide array of options.

Investment choices can include stocks, bonds, mutual funds, exchange-traded funds (ETFs), target-date funds, and more.

Understanding SIMPLE IRA Distributions

There are particular rules for SIMPLE IRA distributions, as there are with all types of retirement accounts.

Withdrawal Rules and Tax Consequences

As discussed previously, withdrawals made before age 59 ½ are subject to income tax plus a potential 10% or 25% penalty, depending on how long the account has been open.

Withdrawals made after age 59 ½ are subject to income tax only and no penalty. Account holders must make required minimum distributions from their accounts when they reach age 73 (as long as they turn 72 after Dec. 31, 2022).

The 2-Year Rule and Early Withdrawal Penalties

There is a two-year rule for withdrawals from a SIMPLE IRA. If you make a withdrawal within the first two years of participating in the plan, the penalty may be increased from 10% to 25%, with some exceptions (e.g., for a first-time home purchase, for higher education expenses, and more). In addition, all withdrawals are subject to ordinary income tax.

The Takeaway

SIMPLE IRAs are one of the easiest ways that self-employed individuals and small business owners can help themselves and their employees save for retirement, whether they’re experienced retirement investors or they’re opening their first IRA.

These accounts can even be used in conjunction with certain other retirement accounts and investment accounts to help individuals save even more.

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 grow your nest egg with a SoFi IRA.

Photo credit: iStock/shapecharge

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

SOIN-Q324-054
CN-Q425-3236452-28

Dec

2025

Mega Backdoor Roths, Explained

By Samuel Becker | Growing Wealth, invest, Investing, Terminology | Comments Off

For those who earn an income that makes them ineligible to contribute to a Roth IRA, a mega backdoor Roth IRA may be an effective tool to help them save for retirement, and also get a potential tax break in their golden years.

Only a certain type of individual will likely choose to employ a mega backdoor Roth IRA as a part of their financial plans. And there are a number of conditions that have to be met for mega backdoor Roth to be possible.

Read on to learn what mega backdoor Roth IRAs are, how they work, and the important details that investors need to know about them.

Key Points

• A mega backdoor Roth IRA allows high earners to save for retirement with potential tax benefits, despite income limits on traditional Roth IRAs.

• This strategy involves making after-tax contributions to a 401(k) and then transferring these to a Roth IRA.

• Eligibility for a mega backdoor Roth depends on specific 401(k) plan features, including the allowance of after-tax contributions and in-service distributions.

• Contribution limits for 401(k) plans in 2025 and 2026 allow for significant after-tax contributions, enhancing the potential retirement savings.

• The process, while beneficial, can be complex and may require consultation with a financial professional to navigate potential hurdles.

What Is a Mega Backdoor Roth IRA?

The mega backdoor Roth IRA is a retirement savings strategy in which people who have 401(k) plans through their employer — along with the ability to make after-tax contributions to that plan — can roll over the after-tax contributions into a Roth IRA.

But first, it’s important to understand the basics of regular Roth IRAs. A Roth IRA is a retirement account for individuals. For tax year 2025 (filed in 2026), Roth account holders can contribute up to $7,000 (or $8,000 for those 50 and older) of their after-tax earnings. For tax year 2026 (filed in 2027), they can contribute up to $7,500 (or $8,600 for those 50 and older) of their after-tax earnings.

Individuals can withdraw their contributions at any time, without paying taxes or penalties. For that reason, Roth IRAs are attractive and useful savings vehicles for many people.

But Roth IRAs have their limits — and one of them is that people can only contribute to them if their modified adjusted gross income (MAGI) is below a certain threshold.

In 2025, the limit is up to $150,000 for single tax filers (those earning from $150,000 to $165,00 can contribute a reduced amount); for married people who file taxes jointly, the limit is up to $236,000 (those earning from $236,000 to $246,000 can contribute a reduced amount).

In 2026, the limit is up to $153,000 for single tax filers (those earning from $153,000 to $168,000 can contribute a reduced amount); for married people who file taxes jointly, the limit is up to $242,000 (those earning from $242,000 to $252,000 can contribute a reduced amount).

💡 Quick Tip: Did you know that you must choose the investments in your IRA? Once you open a new IRA and start saving, you get to decide which mutual funds, ETFs, or other investments you want — it’s totally up to you.

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.

How Does a Mega Backdoor Roth Work?

When discussing a mega backdoor Roth, it’s helpful to understand how a regular backdoor Roth IRA works. Generally, individuals with income levels above the thresholds mentioned who wish to contribute to a Roth IRA are out of luck. However, there is a workaround: the backdoor Roth IRA, a strategy that allows high-earners to fund a Roth IRA account by converting funds in a traditional IRA (which has no limits on a contributors’ earnings) into a Roth IRA. This could be useful if an individual expects to be in a higher income bracket at retirement than they are currently.

The mega backdoor Roth is a strategy that allows individuals, particularly high-income earners who exceed standard Roth IRA income limits, to make additional, large after-tax contributions to a 401(k) plan and then convert those funds to a Roth IRA for tax-free growth.

The process takes advantage of a loophole in retirement plan contribution rules and typically involves a two-step process: maximizing regular pre-tax 401(k) contributions, making additional after-tax contributions, then converting the after-tax funds into a Roth account.

For example, people who have 401(k) plans through their employer — along with the ability to make after-tax contributions to that plan — can potentially roll over up to $46,500 in 2025, and $47,500 in 2026, in after-tax contributions to a Roth IRA. That mega Roth transfer limit has the potential to boost an individual’s retirement savings.

Example Scenario: How to Pull Off a Mega Backdoor Roth IRA

The mega backdoor Roth IRA process is pretty much the same as that of a backdoor Roth IRA. The key difference is that while the regular backdoor involves converting funds from a traditional IRA into a Roth IRA, the mega backdoor involves converting after-tax funds from a 401(k) into a Roth IRA.

Whether a mega backdoor Roth IRA is even an option will depend on an individual’s specific circumstances. These are the necessary conditions that need to be in place for someone to try a mega backdoor strategy:

• You have a 401(k) plan. People hoping to enact the mega backdoor strategy will need to be enrolled in their employer-sponsored 401(k) plan.

• You can make after-tax contributions to your 401(k). Determine whether an employer will allow for additional, after-tax contributions.

• The 401(k) plan allows for in-service distributions. A final piece of the puzzle is to determine whether a 401(k) plan allows non-hardship distributions to either a Roth IRA or Roth 401(k). If not, that money will remain in the 401(k) account until the owner leaves the company, with no chance of a mega backdoor Roth IRA move.

If these conditions exist, a mega backdoor strategy should be possible. Here’s how the process would work:

Open a Roth IRA — so there’s an account to transfer those additional funds to.

From there, pulling off the mega backdoor Roth IRA strategy may sound deceptively straightforward — max out 401(k) contributions and after-tax 401(k) contributions, and then transfer those after-tax contributions to the Roth IRA.

But be warned: There may be many unforeseen hurdles or expenses that arise during the process, and for that reason, consulting with a financial professional to help navigate may be advisable.

Who Is Eligible for a Mega Backdoor Roth

Whether you might be eligible for a mega backdoor Roth depends on your workplace 401(k) retirement plan. First, the plan would need to allow for after-tax contributions. Then the 401(k) plan must also allow for in-service distributions to a Roth IRA or Roth 401(k). If your 401(k) plan meets both these criteria, you should generally be eligible for a mega backdoor Roth IRA.

Contribution Limits

If your employer allows for additional, after-tax contributions to your 401(k), you’ll need to figure out what your maximum after-tax contribution is. For 2025, the standard 401(k) contribution limit for employees to a 401(k) is $23,500. Those age 50 to 59 or 64-plus are able to contribute up to $31,000; those 60 to 63 are able to contribute up to $34,750.

For 2026, the standard 401(k) contribution limit for employees to a 401(k) is $24,500. Those age 50 to 59 or 64-plus are able to contribute up to $32,500; those 60 to 63 are able to contribute up to $35,750.

In 2025, the IRS allows up to $70,000 ($77,500 for those 50 and up, and $81,250 for those 60-63) in total contributions, including employer and after-tax contributions, to a 401(k). In 2026, the total limits are $72,000, $80,000, and $83,250, respectively.

So how much can you contribute in after-tax funds? Here’s an example. Say you are under age 50 and you contributed the max of $23,500 to your 401(k) in 2025, and your employer contributed $8,000, for a total of $31,500. That means you can contribute up to $38,500 in after-tax contributions to reach the total contribution level of $70,000. For 2026, you would be able to contribute up to $40,500.

Is a Mega Backdoor Roth Right For Me?

Given that this Roth IRA workaround has so many moving parts, it’s worth thinking carefully about whether a mega backdoor Roth IRA makes sense for you. These are the advantages and disadvantages.

Benefits

The main upside of a mega backdoor Roth is that it allows those who are earning too much to contribute to a Roth IRA a way to potentially take advantage of tax-free growth.

Plus, with a mega backdoor Roth IRA an individual can effectively supercharge retirement savings because more money can be stashed away. It may also offer a way to further diversify retirement savings.

Downsides

The mega backdoor Roth IRA is a complicated process, and there are a lot of factors at play that an individual needs to understand and stay on top of.

In addition, when executing a mega backdoor Roth IRA and converting a traditional IRA to a Roth IRA, it could result in significant taxes, as the IRS will apply income tax to contributions that were previously deducted.

The Future of Mega Backdoor Roths

Mega backdoor Roths are currently permitted as long as you have a 401(k) plan that meets all the criteria to make you eligible.

However, it’s possible that the mega backdoor Roth IRA could go away at some point. In prior years, there was some legislation introduced that would have eliminated the strategy, but that legislation was not enacted.

The Takeaway

Strategies like the mega backdoor Roth IRA may be used by some investors to help achieve their retirement goals — as long as specific conditions are met, including having a 401(k) plan that accepts after-tax contributions.

While retirement may feel like far off, especially if you’re early in your career or still relatively young, it’s generally wise to start thinking about it sooner rather than later.

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 grow your nest egg with a SoFi IRA.

FAQ

Are mega backdoor Roths still allowed in 2025?

Yes, mega backdoor Roths are still permissible in 2025.

Is a mega backdoor Roth worth it?

Whether a mega backdoor Roth is worth it depends on your specific situation. It may be worth it for you if you earn too much to otherwise be eligible for a Roth IRA and if you have a 401(k) plan that allows you to make after-tax contributions.

Is a mega backdoor Roth legal?

Yes, a mega backdoor Roth IRA is currently legal.

Are mega backdoor Roths popular among Fortune 500 companies?

A number of Fortune 500 companies allow the after-tax contributions to a 401(k) that are necessary for executing a mega backdoor Roth IRA.

What is a super backdoor Roth?

A super backdoor Roth IRA is the same thing as a mega backdoor Roth IRA. It is a strategy in which people who have 401(k) plans through their employer — along with the ability to make after-tax contributions to that plan — can roll over the after-tax contributions into a Roth IRA.

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.

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.

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

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5 Ways to Start Saving for Retirement at 30

1. Contribute to a Workplace Account or an IRA

2. Open an IRA

3. Plan Your Asset Allocation

Understanding Mutual Funds

Understanding Asset Allocation

4. Diversify Within Asset Classes

5. Don’t Cash Out Your 401(k) When You Get a New Job

6. Protect Your Earnings with Disability Insurance

The Takeaway

FAQ

Is starting to save for retirement in your 30s too late?

How much should a 30-year-old have saved for retirement?

Can I save for retirement if I have debt?

How to Open a Retirement Account for Your Child

Steps to Opening a Retirement Account for a Child

Step 1: Choose a Brokerage

Step 2: Complete the Application

Step 3: Choose an IRA Type

Step 4: Fund the Account and Choose Investments

Different Types of IRAs for Children

Traditional IRA

Roth IRA

Funding a Child’s Retirement Account

Can a Parent Contribute to a Child’s IRA?

Benefits of a Child Opening a Retirement Account

Cons of a Child Opening a Retirement Account

The Takeaway

FAQ

How do I set up a retirement account for a minor?

How do I give my kids an IRA?

When can I start a 401(k) for my child?

You may also be interested in:

IRAs, Explained

Contribution Limits

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Roth IRAs

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Are Gains Taxed in Roth IRAs?

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Are Gains Taxed in 401(k)s?

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FAQ

Are Roth IRAs subject to capital gains tax?

Do you have to pay taxes if you sell stocks in a Roth IRA?

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How Does a SIMPLE IRA Work?

Employee Eligibility

Employee Contribution Limits

Matching Contributions

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SIMPLE IRA vs Traditional IRA

Contribution Limits

Tax Treatment

SIMPLE IRA vs 401(k)

How to Run a SIMPLE IRA Plan

Notice Requirements for Employees

Participant Loans and Withdrawals

Rollovers and Transfers to Other Retirement Accounts

The Advantages and Drawbacks of a SIMPLE IRA Plan

Eligibility and Participation in a SIMPLE IRA

Who Can Establish and Participate in a SIMPLE IRA?

Employees’ Eligibility and Participation Criteria

Investment Choices and Account Maintenance

Investment Choices for a SIMPLE IRA

Understanding SIMPLE IRA Distributions

Withdrawal Rules and Tax Consequences

The 2-Year Rule and Early Withdrawal Penalties

The Takeaway

What Is a Mega Backdoor Roth IRA?

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

How Does a Mega Backdoor Roth Work?

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

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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