Ways to Fund an IRA

February 01, 2022 · 5 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

Ways to Fund an IRA

You may have heard that saving for retirement is important, but it can be easy to put good advice on the back burner with so many other responsibilities and financial commitments to tend to. Many Americans admit they are struggling to save enough money to retire comfortably.

According to the 2018 Northwestern Mutual Planning & Progress Study , one in three Americans have saved less than $5,000 toward retirement. While nearly eight in 10 Americans said they are “extremely” or “somewhat” concerned about being able to retire.

Not sure where you stand on your preparedness for retirement? The SoFi retirement calculator can be a useful tool in helping you determine if you’re on the right track or if you need to step up your savings a bit.

Regardless of your current situation, the good news is that it’s not too late to start saving for retirement.

No matter what stage of your life you’re in, you can create a plan to help you achieve your retirement goals. One good idea to kickstart your retirement savings is by opening an Individual Retirement Account, more commonly referred to as an IRA.

A Quick Review on IRAs

An IRA is an account designed specifically to help you save for retirement. Unlike a traditional savings account, most IRAs are investment accounts, which allow you to buy investments like stocks or mutual funds.

It also offers tax breaks that can be extremely beneficial in the long run. Unlike a 401(k) which is an employee-sponsored retirement plan, anyone earning taxable income can open an IRA.

There are contribution limits to consider when using an IRA. In 2022, you can contribute up to $6,000 a year into your IRA if you are under age 50. If you’re over the age of 50, you can contribute an additional $1,000 in catch up contributions. Even if you’re already saving for retirement with a 401(k), saving with an IRA as well could have benefits.

IRAs also come with tax benefits, which vary depending on the type of IRA you have. In a traditional IRA, contributions may be tax-deductible. For instance, if you and your spouse don’t have access to an employer-sponsored retirement plan, you can deduct the full amount contributed to a traditional IRA on your tax return regardless of your income.

And, even if you or your spouse are covered by an employer-sponsored retirement, the IRS still allows you to deduct a portion of your contribution. You’ll likely pay income tax on the money when you withdraw it in retirement.

With a Roth IRA, the contributions are made with after-tax money, which means they are not tax deductible. You can only fund a Roth IRA in years when your income falls below a certain limit. But you can withdraw the money in retirement tax free. Though you may still be subject to a 10% penalty if the funds are withdrawn from an account less than 5 years old or before age 59 ½.

After you decide which IRA is right for you, your next step will be to figure out how to fund your account. Here are some suggestions to jumpstart your retirement savings.

Starting an IRA with Your Tax Refund

If you expect to get, or have received a tax refund, consider contributing the money to fund an IRA. If you don’t want to contribute the entire refund to an IRA, you could contribute just a portion. Account minimums vary by institution, so do a bit of research to find the right account for the amount of money you are currently able to contribute.

If you have any other cash windfalls throughout the year, you could contribute that money to your IRA as well as long as you stay below the annual maximum throughout the course of the year.

Making a Monthly Contribution

You can contribute to your IRA throughout the year so if you open an account with $50, you can make a monthly contribution to the account. Even if you put only $50 a month into the account, by the end of the year you would have $600. Increase that monthly contribution to $100 and you’re up to $1,200.

Setting Up Automatic Contributions

If you are serious about making a monthly contribution to your IRA, one good idea is to set up automatic contributions. This will allow you to save for retirement without thinking about it.

You can even set up your automatic contribution so that it comes out of your bank account on payday. Setting up automatic contributions can make it easier to pay yourself first, plus you won’t be tempted to spend money that you don’t actually see in your checking account.

Rolling Over Your 401K When You Leave a Job

When you change jobs, you generally have three options for your old 401(k). You could leave it with your old employer, roll it over to your new 401(k) if that’s available to you, or rollover your 401(k) plan into an IRA account.

You may want to review the fees associated with your 401(k) in order to understand what you are paying by leaving it with your old plan or rolling it over into your new 401(k).

The benefits of rolling your old 401(k) over to an IRA could be things like lower fees, expanding investment options, or a managed solution that invests your money for you based on your goals and risk tolerance.

Opening Your First IRA

When it comes to opening your IRA, you have options. There are a variety of financial institutions that offer IRAs, so take the time to look around and see what’s out there. One option to consider is SoFi Invest®.

When you open an account with SoFi Invest, you’ll have access to a team of financial planners who can help guide you in setting your financial goals and create a plan to help you get there.

Invest your way. If you are interested in a hands-on approach, you can buy and sell stocks and ETFs at no cost with active investing. If you are interested in a hands-off approach, you can let SoFi invest your money for you based on your goals without paying any management fees using automated investing.

Ready to kick your retirement savings into higher gear? Find out more about SoFi Invest today.

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.

SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.

Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“SoFi Securities”).
Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.


All your finances.
All in one app.

SoFi QR code, Download now, scan this with your phone’s camera

All your finances.
All in one app.

App Store rating

SoFi iOS App, Download on the App Store
SoFi Android App, Get it on Google Play

TLS 1.2 Encrypted
Equal Housing Lender