• Establishing the habit of investing in a retirement plan early, even small amounts, may help you benefit from compounding returns.
• Aim to contribute enough to your 401(k) to get the full employer match, so you don’t leave money on the table.
• Automating contributions can make it easier to consistently build retirement funds over time.
• If you’re over 50, making catch-up contributions can boost your retirement savings.
• Paying attention to asset allocations, investment performance, and fees can help you make regular adjustments to target your goals.
What’s the Average 401(k) Balance?
The average 401(k) balance for all ages is $134,128, according to Vanguard’s How America Saves Report 2024. However, the average 401(k) balance by age of someone in their 20s is very different from the balance of someone in their 50s and 60s. That’s why it’s helpful to know how much you should have saved in your 401(k) at different ages.
Seeing what others are saving in their 20s, 30s, 40s, 50s, and beyond can be a useful way to gauge whether you’re on track with your own retirement plans and what else you can do to maximize this critical, tax-deferred form of savings.
Average and Median 401(k) Balance by Age Group
Pinning down the average 401(k) account balance can be challenging, as only a handful of sources collect information on retirement accounts, and they each have their own methods for doing so.
Vanguard is one of the largest 401(k) providers in the U.S., with nearly 5 million participants. For this review of the average and median 401(k) balance by age, we use data from Vanguard’s How America Saves Report 2024.
It’s important to look at both the average balance amounts, as well as the median amounts. Here’s why: Because there are people who save very little, as well as those who have built up very substantial balances, the average account balance only tells part of the story. Comparing the average amount with the median amount — the number in the middle of the savings curve — provides a reality check as to how other retirement savers in your age group may be doing.
• Key Challenges for Savers: Because they are new to the workforce, this age group is likely to be making lower starting salaries than those who have been working for several years. They may not have the income to put towards a 401(k). In addition, debt often presents a big challenge for younger savers, many of whom may be paying down student loan debt, credit card debt, or both.
• Tips for Savers: While being debt-free is a priority, it’s also crucial to establish the habit of saving now — even if you’re not saving a lot. The point is to save steadily, whether that’s by contributing to your 401(k) or an investment account, and to automate your savings.
By starting early, even small contributions have the potential to grow over time because of the power of compounding returns.
Average 401(k) for Ages 25 to 34
• Average 401(k) Balance: $37,557
• Median 401(k) Balance: $14,933
• Key Challenges for Savers: At this stage, savers may still be repaying student loans, which can take a chunk of their paychecks. At the same time, they may also be making big — and expensive — life changes like getting married or starting a family.
• Tips for Savers: You’ve got a lot of competing financial responsibilities right now, but it’s vital to make saving for your future a priority. Contribute as much as you can to your 401(k). If possible, aim to contribute at least the amount needed to get your employer’s matching contribution, which is essentially free money. And when you get a raise or bonus at work, direct those extra funds into your 401(k) as well.
Average 401(k) for Ages 35 to 44
• Average 401(k) Balance: $91,281
• Median 401(k) Balance: $35,537
• Key Challenges for Savers: While your late 30s and early 40s may be a time when salaries range higher, it’s also typically a phase of life when there are many demands on your money. You might be buying a home, raising a family, or starting a business, and it could feel more important to focus on the ‘now’ rather than the future.
• Tips for Savers: Even if you can’t save much more at this stage than you could when you were in your early 30s, you still may be able to increase your savings rate a little. Many 401(k) plans offer the opportunity to automatically increase your contributions each year. If your plan has this feature, take advantage of it. A 1% or 2% increase in savings annually can add up over time. And because the money automatically goes directly into your 401(k), you won’t miss it.
Average 401(k) for Ages 45 to 54
• Average 401(k) Balance: $168,646
• Median 401(k) Balance: $60,763
• Key Challenges for Savers: These can be peak earning years for some individuals. However, at this stage of life, you may also be dealing with the expense of sending your kids to college and helping ailing parents financially.
• Tips for Savers: The good news is, that starting at age 50, the IRS allows you to start making catch-up contributions to your 401(k). For 2025, the regular contribution limit is $23,500, but individuals ages 50 and up can make an additional $7,500 in 401(k) catch-up contributions for a total of $31,000. For 2026, while those under age 50 can contribute up to $24,500, individuals who are 50 and up can contribute an additional $8,000 for a total of $32,500.
Under a new law that went into effect on January 1, 2026 as part of SECURE 2.0, individuals aged 50 and older who earned more than $150,000 in FICA wages in 2025 are required to put their 401(k) catch-up contributions into a Roth 401(k) account, meaning they’ll pay taxes on catch-up contributions upfront, but can make qualified withdrawals tax-free in retirement.
While money may be tight because of family obligations, this may be the perfect moment — and the perfect incentive — to renew your commitment to retirement savings because you can save so much more.
If you max out your 401(k) contributions, you may also want to consider opening an IRA. An individual retirement account is another vehicle to help you save for your future, and depending on the type of IRA you choose, there are potential tax benefits you could take advantage of now or after you retire.
Average 401(k) for Ages 55 to 64
• Average 401(k) balance: $244,750
• Median 401(k) balance: $87,571
• Key Challenges for Savers: As retirement gets closer, this is the time to save even more for retirement than you have been. That said, you may still be paying off your children’s college debt and your mortgage, which can make it tougher to allocate money for your future.
• Tips for Savers: In your early 60s, it may be tempting to consider dipping into Social Security. At age 62, you can begin claiming Social Security retirement benefits to supplement the money in your 401(k). But starting at 62 gives you a lower monthly payout for the rest of your life. Waiting until the full retirement age, which is 66 or 67 for most people, will allow you to collect a benefit that’s approximately 30% higher than what you’d get at 62. And if you can hold off until age 70 to take Social Security, that can increase your benefit as much as 32% versus taking it at 66.
In 2025 and 2026, those in their early 60s can also take advantage of an additional catch-up to their 401(k). Specifically, those aged 60 to 63 can contribute an additional $11,250 in catch-up contributions (instead of $7,500) to their 401(k) in 2025, and an additional $11,250 in 2026 (instead of $8,000), thanks to SECURE 2.0. Again, because of the new law regarding catch-up contributions, individuals aged 50 and older with FICA wages exceeding $150,000 in 2025 are required to put their catch-up contributions into a Roth 401(k) account.
Average 401(k) for Ages 65 and Older
• Average 401(k) balance: $272,588
• Median 401(k) balance: $88,488
• Key Challenges for Savers: It’s critical to make sure that your savings and investments will last over the course of your retirement, however long that might be. You may be underestimating how much you’ll need. For instance, healthcare costs can rise in retirement since medical problems can become more serious as you get older.
• Tips for Savers: Draw up a retirement budget to determine how much you might need to live on. Be sure to include healthcare, housing, and entertainment and travel. In addition, consider saving money by downsizing to a smaller, less costly home, and continue working full-time or part-time to supplement your retirement savings. And finally, keep regularly saving in retirement accounts such as a traditional or Roth IRA, if you can.
The amount you should have in your 401(k) depends on a number of factors, including your age, income, financial obligations, and other investment accounts you might hold. According to Fidelity’s research on how much is needed to retire , an individual should aim to save about 15% of their income a year (including an employer match) starting at age 25.
To get a sense of how this looks at various ages, the chart below shows the average 401(k) balance by age, according to Vanguard’s research, as well as Fidelity’s rule of thumb for what your target 401(k) balance should roughly be at that age. Note that these are just guidelines, but they can give you a goal to work toward.
If your savings aren’t where they should be for your stage of life, take a breath — there are ways to catch up. These seven strategies can help you build your nest egg.
1. Automate your savings.
Automating your 401(k) contributions ensures that the money will go directly from your paycheck into your 401(k). You may also be able to have your contribution amount automatically increased every year, which can help accelerate your savings. Check with your employer to see if this is an option with your 401(k) plan.
2. Maximize 401(k) contributions.
The more you contribute to your 401(k), the more growth you can potentially see. At the very least, aim to contribute enough to qualify for the full employer matching contribution if your company offers one.
3. Make catch-up contributions if you’re eligible.
As mentioned, once you turn age 50, you can contribute even more money to your 401(k). If you can max out the regular contributions each year, making additional catch-up contributions to your 401(k) may help you grow your account balance faster.
4. Consider opening an IRA.
If you’ve maxed out all your 401(k) contributions, you could open a traditional or Roth IRA to help save even more for retirement. For 2025, those under age 50 can contribute up to $7,000 to an IRA or up to $8,000 if they’re 50 and older. For 2026, they can contribute up to $7,500 to an IRA or up to $8,600 if they’re 50 or older.
5. Make sure you have the right asset allocations.
The younger you are, the more time you have to recover from market downturns, so you may choose to be a little more aggressive with your investments. On the other hand, if you have a low risk capacity, you may opt for more conservative investments.
Either way, you want to save and invest your money wisely. Consider using a mix of investment vehicles, such as stocks, bonds, exchange-traded funds (ETFs), and mutual funds, to help diversify your portfolio. Just be aware that investing always involves some risk.
6. Pay Attention to Fees.
Fees can erode your investment returns over time and ultimately reduce the size of your nest egg. As you choose investments for your 401(k), consider the cost of different funds. Specifically, look at the expense ratio for any mutual funds or ETFs offered by the plan. This reflects the cost of owning the fund annually, expressed as a percentage. The higher this percentage, the more you’ll pay to own the fund.
7. Conduct an Annual Financial Checkup.
It can be helpful to check in with your goals periodically to see how you’re doing. For example, you might plan an annual 401(k) checkup at year’s end to review how your investments have performed, what you contributed to the plan, and how much you’ve paid in fees. This can help you make smarter investment decisions for the upcoming year.
The Takeaway
The average and median 401(k) balances and the target amounts noted above reflect some important realities for different age groups. Some people can save more, others less — and it’s crucial to understand that many factors play into those account balances. It’s not simply a matter of how much money you have, but also the choices you make.
For instance, starting early and saving regularly can help your money grow. Contributing as much as possible to your 401(k) and getting an employer match are also smart strategies to pursue, if you’re able to. And opening an IRA or an investment account are other potential ways to help you save for the future.
With forethought and planning, you can put, and keep, your retirement goals on track.
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FAQ
What is a good 401(k) balance?
A good 401(k) balance is different for everyone and depends on their age, specific financial situation, and goals. The general rule of thumb is to have 401(k) savings that’s equivalent to your salary by age 30, three times your salary by age 40, six times your salary by age 50, 8 times your salary by age 60, and 10 times your salary by age 67.
How much do most people retire with?
According to the Federal Reserve’s most recent Survey of Consumer Finances, the average 401(k)/IRA account balance for adults ages 55 to 64 was $204,000. Keep in mind, however, that when it comes to savings, one rule of thumb, according to Fidelity, is for an individual to have 8 times their salary saved by age 60 and 10 times their salary saved by age 67.
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.
Photo credit: iStock/kate_sept2004
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Buying a multifamily home — like a duplex, triplex, or fourplex — can be a smart way to enter the housing market while generating rental income and building long-term wealth. Unlike single-family homes, these properties offer multiple units under one roof, allowing owners to live in one unit and rent out the others or manage the entire property as an investment.
Understanding the unique financing, management responsibilities, and potential cash-flow benefits is key before taking the leap into multifamily ownership.
• Multifamily homes allow buyers to own multiple units in one property, offering the potential to live in one unit while renting out the others.
• Rental income from additional units can help offset mortgage payments and improve overall affordability.
• Financing requirements may be more complex than for single-family homes, with different down payment and qualification rules depending on occupancy and loan type.
• Owning a multifamily property comes with added responsibilities, including property management, maintenance, and tenant relationships.
• Multifamily homes can be a long-term investment opportunity, offering potential cash flow, appreciation, and diversification within real estate ownership.
What Is a Multifamily Property?
Multifamily property consists of multiple units in a single building. This includes duplexes, triplexes, fourplexes, condominium buildings, student housing, apartment complexes, age-restricted communities, low-income housing, and townhomes. The units in a full multifamily housing property must have separate entrances, kitchens, bathrooms, and utility meters.
Individual investors may tend to gravitate toward two- to four-unit properties due to ease of management compared to other multifamily properties and residential home loan options. Residential loans of 30 years with a fixed rate are available for properties with one to four dwelling units. FHA, VA, and USDA loans are available for those properties if they are owner-occupied.
For five or more units, a commercial loan is required. Commercial loans usually come with a higher down payment requirement, higher interest rate, and a shorter term, meaning significantly higher mortgage payments.
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Why Buy a Multifamily Property?
Buying a multifamily home can jump-start your own real estate portfolio and investment portfolio. Here’s how.
Income From Flipping
Multifamily homes can be improved and then resold for a profit, or ”flipped.” Buying a multifamily property, remodeling, and then reselling can be even more profitable than flipping single-family homes because as you remodel, you can increase rents.
Once you increase rents, the property becomes more valuable, both in terms of monthly income, cash flow, and overall worth.
The ‘BRRRR’ Method
BRRRR stands for buy, rehab, rent, refinance, repeat. An investor buys a property, renovates it, and rents out the newly refurbished units for more money. After that, they can refinance the property to take out extra cash to buy a new property to renovate.
This method works well with larger multifamily properties because the rehabbing of multiple units can be done while other units that are not being renovated can still bring in some income.
Cash Flow
Multifamily homes were designed for cash flow. Space and amenities are optimized to bring in money for the investor. On the other hand, single-family homes are designed for comfort. The added space of a single-family home may not bring as high of a return as a multifamily property.
Quick Portfolio Expansion
Buying multifamily properties allows investors to acquire multiple units with one transaction, so they may have a favorite in the single-family vs. multifamily comparison. Additionally, investing in multifamily properties can allow an investor to quickly generate income, which could be enough to acquire more properties.
Reduced Risk
A multifamily property lessens risk exposure. When you have single-family homes, vacancies may have a bigger effect on your monthly cash flow. With one or more multifamily properties, the risk is spread across a number of properties. In other words, there may be units still rented that can help cover the costs of the units that are vacant.
Analyzing the Investment Potential of a Multifamily Property
Investors can use a number of methods to determine if it makes sense to buy a multifamily property or not. Here are some of the most common calculations you can use to make that determination for yourself.
Cash Flow
In real estate investing, cash flow is money that’s generated by the property and money spent on the property. Positive cash flow, also known as profit, means income exceeds expenses.
Investors have differing amounts that they consider acceptable. Some real estate investors bank on the appreciation of the property instead of the amount of cash flow.
The 1% Rule
The 1% rule states that the gross rents should be 1% or more of the purchase price. The 1% rule is hard to apply in high-income areas where the purchase price of a property is high relative to the rents it generates.
Gross Rent Multiplier
The gross rent multiplier (GRM) is a ratio: the fair market value of a property divided by its gross annual rents. It doesn’t take expenses into consideration and is meant to be a simple calculation to determine if a property is worth exploring further. If you’re comparing two properties for purchase, the one with the lower GRM may be the better investment.
Cash on Cash Return
The cash on cash return is the annual amount earned compared with the amount of cash invested. It’s expressed as a formula: annual net cash flow divided by cash investment. This is helpful for investors who want to know how much cash is brought in by their cash investment each year.
Capitalization Rate
The capitalization rate, or cap rate, is the amount of net operating income divided by the purchase price. This number indicates how long it will take to get back all your money in an investment.
You may be able to use 75% of documented rental income to help finance mortgage interest on your loan. And again, multifamily homes with four or fewer units can be financed more traditionally, while five or more units require a commercial mortgage.
Getting preapproved for a mortgage for your multifamily investment property is one of the best things you can do to get started. After a mortgage officer has examined your finances and greenlighted an amount, you can go shopping for your multifamily investment properties.
Find a Multifamily Home
To narrow your search for a new multifamily property here, you’ll want to decide what it is you’re looking for. Keep a few of these factors in mind:
• Location: Do you have an area that you have expertise in? Are you going to manage the property yourself? These are some questions you’ll want to ask yourself to determine if you can buy a multifamily property near or far.
• Price range: After you’ve looked at where you want to potentially invest, you’ll get a good sense of what properties will cost by looking at real estate listings. Keep in mind that you can count 75% of documented rents toward the purchase price for many loan types, so the price you’ll be looking at will be much different than if you were looking for a single-family home.
• Type of property: Are you looking for a fourplex or an apartment complex? Duplex or 55+ community? There are many choices to make between different property types and whether or not they’ll bring you a profit.
• Profit potential: Are you looking to invest for appreciation or cash flow? Many properties with a lower price tag in the Midwest may be better for cash flow, while properties on the West Coast may appreciate more. Take a look at both and decide on your investment strategy.
• Condition: Do you have the resources and team in place to take on a multifamily property that needs a lot of work? Or would you rather have something turnkey? You’ll want to be sure you know what resources you can commit to the project before you get in over your head.
Choose a Loan
The type of rental property used may determine what type of loan you’re able to get. If this is your first rental, you may want to consider living in one of the units so you can qualify for owner-occupied financing, which usually comes with lower rates and down payment requirements.
Working with a real estate agent, you’ll submit a competitive offer for the property you’ve chosen. Some buyers use cash to make the most competitive offer, while others need financing.
Renovate and Get Ready for Your Tenants
No matter what class of property you buy, the rental units will almost always require some work. Whether it’s a simple clean or a major renovation, these things are both tax-deductible and will improve the value, not to mention rentability, of your property.
Create a Management Plan
To make sure you’re running a business, and it’s not running you, you need to have a solid plan in place for how the rentals will be managed. How are repairs going to be taken care of? What’s your process when a rental turns over? How are you going to keep up with laws and ordinances?
Having a plan helps. Even so, you’ll learn as you go and will need to adjust this plan.
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The Takeaway
To buy a multifamily property, do your research and choose a property that you’ll have the ability to finance and manage. Investing in rental properties and multifamily investing is not easy, but it can generate cash flow and create family wealth.
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FAQ
Is buying a multifamily property a good investment?
Finding a multifamily property that is a good investment will depend on the investor’s analysis of the property. This can include the price, condition, gross rent multiplier, capitalization rate, and a number of other factors that will make renting the units successful.
What are the different kinds of multifamily properties?
• Duplexes, triplexes, fourplexes
• Townhouses
• Apartment buildings
• Condominiums
• Bungalow courts
• Mixed-use buildings
• Student housing
• Age-restricted housing units
• Low-income housing units
What is the best way to finance a multifamily home?
Some would argue that an FHA loan with 3.5% down is one of the best ways to finance a home with up to four units. The owner must live in one of the units to qualify for this type of financing.
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Retirement will likely be the most significant expense of your lifetime, which means saving for retirement is a big job. This is especially true if you envision a retirement that is rich with experiences such as traveling through Europe or spending time with your grown children and grandkids. A retirement savings plan may help you achieve these financial goals and stay on track.
There are all types of retirement plans you may consider to help you build your wealth, from 401(k)s to Individual Retirement Accounts (IRAs) to annuities. Understanding the nuances of these different retirement plans, like their tax benefits and various drawbacks, may help you choose the right mix of plans to achieve your financial goals.
Key Points
• There are various types of retirement plans, including traditional and non-traditional options, such as 401(k), IRA, Roth IRA, SEP IRA, and Cash-Balance Plan.
• Employers offer defined contribution plans (e.g., 401(k)) where employees contribute and have access to the funds, and defined benefit plans (e.g., Pension Plans) where employers invest for employees’ retirement.
• Different retirement plans have varying tax benefits, contribution limits, and employer matches, which should be considered when choosing a plan.
• Individual retirement plans like Traditional IRA and Roth IRA provide tax advantages but have contribution restrictions and penalties for early withdrawals.
• It’s possible to have multiple retirement plans, including different types and accounts of the same type, but there are limitations on tax benefits based on the IRS regulations.
🛈 SoFi does not offer employer-sponsored plans, such as 401(k) or 403(b) plans, but we do offer a range of individual retirement accounts (IRAs).
Types of Retirement Accounts
There are several different types of retirement plans, including some traditional plan types you may be familiar with as well as non-traditional options.
Traditional retirement plans can be IRA accounts or 401(k). These tax-deferred retirement plans allow you to contribute pre-tax dollars to an account. With a traditional IRA or 401(k), you only pay taxes on your investments when you withdraw from the account.
Non-traditional retirement accounts can include Roth 401(k)s and IRAs, for which you pay taxes on funds before contributing them to the account and withdraw money tax-free in retirement.
Here’s information about some of the most common retirement plan types:
There are typically two types of retirement plans offered by employers:
• Defined contribution plans (more common): The employee invests a portion of their paycheck into a retirement account. Sometimes, the employer will match up to a certain amount (e.g. up to 5%). In retirement, the employee has access to the funds they’ve invested. 401(k)s and Roth 401(k)s are examples of defined contribution plans.
• Defined benefit plans (less common): The employer invests money for retirement on behalf of the employee. Upon retirement, the employee receives a regular payment, which is typically calculated based on factors like the employee’s final or average salary, age, and length of service. As long as they meet the plan’s eligibility requirements, they will receive this fixed benefit (e.g. $100 per month). Pension plans and cash balance accounts are common examples of defined benefit plans.
Let’s get into the specific types of plans employers usually offer.
401(k) Plans
A 401(k) plan is a type of work retirement plan offered to the employees of a company. Traditional 401(k)s allow employees to contribute pre-tax dollars, where Roth 401(k)s allow after-tax contributions.
• Income Taxes: If you choose to make a pre-tax contribution, your contributions may reduce your taxable income. Additionally, the money will grow tax-deferred and you will pay taxes on the withdrawals in retirement. Some employers allow you to make after-tax or Roth contributions to a 401(k). You should check with your employer to see if those are options.
• Contribution Limit: $23,500 in 2025 and $24,500 in 2026 for the employee; people 50 and older can contribute an additional $7,500 in 2025 and $8,000 in 2026. However, in 2025 and 2026, under the SECURE 2.0 Act, a higher catch-up limit of $11,250 applies to individuals ages 60 to 63.
And under a new law that went into effect on January 1, 2026 (as part of SECURE 2.0), individuals aged 50 and older who earned more than $150,000 in FICA wages in 2025 are required to put their 401(k) catch-up contributions into a Roth 401(k) account. Because of the way Roth accounts work, these individuals will pay taxes on their catch-up contributions upfront, but can make eligible withdrawals tax-free in retirement.
• Pros: Money is deducted from your paycheck, automating the process of saving. Some companies offer a company match. There is a significantly higher limit than with Traditional IRA and Roth IRA accounts.
• Cons: With a 401(k) plan, you are largely at the mercy of your employer — there’s no guarantee they will pick plans that you feel are right for you or are cost effective for what they offer. Also, the value of a 401(k) comes from two things: the pre-tax contributions and the employer match, if your employer doesn’t match, a 401(k) may not be as valuable to an investor. There are also penalties for early withdrawals before age 59 ½, although there are some exceptions, including for certain public employees.
• Usually best for: Someone who works for a company that offers one, especially if the employer provides a matching contribution. A 401(k) retirement plan can also be especially useful for people who want to put retirement savings on autopilot.
• To consider: Sometimes 401(k) plans have account maintenance or other fees. Because a 401(k) plan is set up by your employer, investors only get to choose from the investment options they provide.
403(b) Plans
A 403(b) retirement plan is like a 401(k) for certain individuals employed by public schools, churches, and other tax-exempt organizations. Like a 401(k), there are both traditional and Roth 403(b) plans. However, not all employees may be able to access a Roth 403(b).
• Income Taxes: With a traditional 403(b) plan, you contribute pre-tax money into the account; the money will grow tax-deferred and you will pay taxes on the withdrawals in retirement. Additionally, some employers allow you to make after-tax or Roth contributions to a 403(b); the money will grow tax-deferred and you will not have to pay taxes on withdrawals in retirement. You should check with your employer to see if those are options.
• Contribution Limit: $23,500 in 2025 and $24,500 in 2026 for the employee; people 50 and older can contribute an additional $7,500 in 2025 and $8,000 in 2026. In 2025 and 2026, under the SECURE 2.0 Act, those ages 60 to 63 can contribute a higher catch-up amount of $11,250. As noted above with 401(k) plans, as of January 1, 2026, individuals aged 50 and older with FICA wages exceeding $150,000 in 2025 are required to put their catch-up contributions into a Roth account.
The maximum combined amount both the employer and the employee can contribute annually to the plan (not including the catch-up amounts) is generally the lesser of $70,000 in 2025 and $72,000 in 2026 or the employee’s most recent annual salary.
• Pros: Money is deducted from your paycheck, automating the process of saving. Some companies offer a company match. Also, these plans often come with lower administrative costs because they aren’t subject to Employee Retirement Income Security Act (ERISA) oversight.
• Cons: A 403(b) account generally lacks the same protection from creditors as plans with ERISA compliance.
• To consider: 403(b) plans offer a narrow choice of investments compared to other retirement savings plans. The IRS states these plans can only offer annuities provided through an insurance company and a custodial account invested in mutual funds.
Solo 401(k) Plans
A Solo 401(k) plan is essentially a one-person 401(k) plan for self-employed individuals or business owners with no employees, in which you are the employer and the employee. Solo 401(k) plans may also be called a Solo-k, Uni-k, or One-participant k.
• Income Taxes: The contributions made to the plan are tax-deductible.
• Contribution Limit: $23,500 in 2025 and $24,500 in 2026, or 100% of your earned income, whichever is lower, plus “employer” contributions of up to 25% of your compensation from the business. The 2025 total cannot exceed $70,000, and the 2026 total cannot exceed $72,000. (On top of that, people 50 and older are allowed to contribute an additional $7,500 in 2025 and $8,000 in 2026. In 2025 and 2026, those ages 60 to 63 can contribute a higher catch-up amount of $11,250 under the SECURE 2.0 Act .)
• Pros: A solo 401(k) retirement plan allows for large amounts of money to be invested with pre-tax dollars. It provides some of the benefits of a traditional 401(k) for those who don’t have access to a traditional employer-sponsored 401(k) retirement account.
• Cons: You can’t open a solo 401(k) if you have any employees (though you can hire your spouse so they can also contribute to the plan as an employee — and you can match their contributions as the employer).
• Usually best for: Self-employed people with enough income and a large enough business to fully use the plan.
SIMPLE IRA Plans (Savings Incentive Match Plans for Employees)
A SIMPLE IRA plan is set up by an employer, who is required to contribute on employees’ behalf, although employees are not required to contribute.
• Income Taxes: Employee contributions are made with pre-tax dollars. Additionally, the money will grow tax-deferred and employees will pay taxes on the withdrawals in retirement.
• Contribution Limit: $16,500 in 2025 and $17,000 in 2026. Employees aged 50 and over can contribute an extra $3,500 in 2025 and $4,000 in 2026, bringing their total to $20,000 in 2025 and $21,000 in 2026. In 2025 and 2026, under the SECURE 2.0 Act, people ages 60 to 63 can contribute a higher catch-up amount of $5,250.
• Pros: Employers contribute to eligible employees’ retirement accounts at 2% their salaries, whether or not the employees contribute themselves. For employees who do contribute, the company will match up to 3%.
• Cons: The contribution limits for employees are lower than in a 401(k) and the penalties for early withdrawals — up to 25% for withdrawals within two years of your first contribution to the plan — before age 59 ½ may be higher.
• To consider: Only employers with less than 100 employees are allowed to participate.
This is a retirement account established by a small business owner or self-employed person for themselves (and if applicable, any employees).
• Income Taxes: Your contributions will reduce your taxable income. Additionally, the money will grow tax-deferred and you will pay taxes on withdrawals in retirement.
• Contribution Limit: For 2025, $70,000 or 25% of earned income, whichever is lower; for 2026, $72,000 or 25% of earned income, whichever is lower.
• Pros: Higher contribution limit than IRA and Roth IRAs, and contributions are tax deductible for the business owner.
• Cons: These plans are employer contribution only and greatly rely on the financial wherewithal and available cash of the business itself.
• Usually best for: Self-employed people and small business owners who wish to contribute to an IRA for themselves and/or their employees.
• To consider: Because you’re setting up a retirement plan for a business, there’s more paperwork and unique rules. When opening an employer-sponsored retirement plan, it generally helps to consult a tax advisor.
Profit-Sharing Plans (PSPs)
A Profit-Sharing Plan is a retirement plan funded by discretionary employer contributions that gives employees a share in the profits of a company.
• Income taxes: Deferred; assessed on distributions from the account in retirement.
• Contribution Limit: The lesser of 25% of the employee’s compensation or $70,000 in 2025 (On top of that, people 50 and older are allowed to contribute an additional $7,500 in 2025. And people ages 60 to 63 can make a higher contribution of $11,250 in 2025 under SECURE 2.0.) In 2026, the contribution limit is $72,000 or 25% of the employee’s compensation, whichever is less. Those 50 and up can contribute an extra $7,500 in 2025 and $8,000 in 2026. And people ages 60 to 63 can once again make a higher contribution of $11,250 in 2026 under SECURE 2.0.
• Pros: An employee receives a percentage of a company’s profits based on its earnings. Companies can set these up in addition to other qualified retirement plans, and make contributions on a completely voluntary basis.
• Cons: These plans put employees at the mercy of their employers’ profits, unlike retirement plans that allow employees to invest in securities issued by other companies.
• Usually best for: Companies who want the flexibility to contribute to a PSP on an ad hoc basis.
• To consider: Early withdrawal from the plan is subject to penalty.
Defined Benefit Plans (Pension Plans)
These plans, more commonly known as pension plans, are retirement plans provided by the employer where an employee’s retirement benefits are calculated using a formula that factors in age, salary, and length of employment.
• Income taxes: Deferred; assessed on distributions from the plan in retirement.
• Contribution limit: Determined by an enrolled actuary and the employer.
• Pros: Provides tax benefits to both the employer and employee and provides a fixed payout upon retirement that many retirees find desirable.
• Cons: These plans are increasingly rare, but for those who do have them, issues can include difficulty realizing or accessing benefits if you don’t work at a company for long enough.
• Usually best for: Companies that want to provide their employees with a “defined” or pre-determined benefit in their retirement years.
• To consider: These plans are becoming less popular because they cost an employer significantly more in upkeep than a defined contribution plan such as a 401(k) program.
Employee Stock Ownership Plans (ESOPs)
An Employee Stock Ownership Plan is a qualified defined contribution plan that invests in the stock of the sponsoring employer.
• Income taxes: Deferred. When an employee leaves a company or retires, they receive the fair market value for the stock they own. They can either take a taxable distribution or roll the money into an IRA.
• Contribution limits: Allocations are made by the employer, usually on the basis of relative pay. There is typically a vesting schedule where employees gain access to shares in one to six years.
• Pros: Could provide tax advantages to the employee. ESOP plans also align the interests of a company and its employees.
• Cons: These plans concentrate risk for employees: An employee already risks losing their job if an employer is doing poorly financially, by making some of their compensation employee stock, that risk is magnified. In contrast, other retirement plans allow an employee to invest in stocks in other securities that are not tied to the financial performance of their employer.
457(b) Plans
A 457(b) retirement plan is an employer-sponsored deferred compensation plan for employees of state and local government agencies and some tax-exempt organizations.
• Income taxes: If you choose to make a pre-tax contribution, your contributions will reduce your taxable income. Additionally, the money will grow tax-deferred and you will pay taxes on the withdrawals in retirement. Some employers also allow you to make after-tax or Roth contributions to a 401(k).
• Contribution limits: The lesser of 100% of employee’s compensation or $23,500 in 2025 and $24,500 in 2026; some plans allow for “catch-up” contributions. For those plans that do allow catch-ups, under the new law that went into effect on January 1, 2026, individuals aged 50 and older with FICA wages above $150,000 in 2025 are required to put their catch-up contributions into a Roth account.
• Pros: Plan participants can withdraw as soon as they are retired at any age, they do not have to wait until age 59 ½ as with 401(k) and 403(b) plans.
• Cons: 457 plans do not have the same kind of employer match as a 401(k) plan. While employers can contribute to the plan, it’s only up to the combined limit for individual contributions.
• Usually best for: Employees of governmental agencies.
Federal Employees Retirement System (FERS)
The Federal Employees Retirement System (FERS) consists of three government-sponsored retirement plans: Social Security, the Basic Benefit Plan, and the Thrift Savings Plan.
The Basic Benefit Plan is an employer-provided pension plan, while the Thrift Savings Plan is most comparable to what private-sector employees can receive.
• Income Taxes: Contributions to the Thrift Savings Plan are made before taxes and grow tax-free until withdrawal in retirement.
• Contribution Limit: The contribution limit for employees is $23,500 in 2025, and the combined limit for all contributions, including from the employer, is $70,000. In 2026, the employee contribution limit is $24,500, and the combined limit for contributions, including those from the employer, is $72,000. Also, those 50 and over are eligible to make an additional $7,500 in “catch-up” contributions in 2025 and an additional $8,000 in 2026. And in both 2025 and 2026, those ages 60 to 63 can make a higher catch-up contribution of $11,250 under the SECURE 2.0 Act.
• Pros: These government-sponsored plans are renowned for their low administrative fees and employer matches.
• Cons: Only available for federal government employees.
• Usually best for: Federal government employees who will work at their agencies for a long period; it is comparable to 401(k) plans in the private sector.
Cash-Balance Plans
This is another type of pension plan that combines features of defined benefit and defined contribution plans. They are sometimes offered by employers that previously had defined benefit plans. The plans provide an employee an “employer contribution equal to a percent of each year’s earnings and a rate of return on that contribution.”
• Income Taxes: Contributions come out of pre-tax income, similar to 401(k).
• Contribution Limit: The plans combine a “pay credit” based on an employee’s salary and an “interest credit” that’s a certain percentage rate; the employee then gets an account balance worth of benefits upon retirement that can be paid out as an annuity (payments for life) or a lump sum. Limits depend on age, but for those over 60, they can be more than $250,000.
• Pros: Can reduce taxable income.
• Cons: Cash-balance plans have high administrative costs.
• Usually best for: High earners, business owners with consistent income.
Nonqualified Deferred Compensation Plans (NQDC)
These are plans typically designed for executives at companies who have maxed out other retirement plans. The plans defer payments — and the taxes — you would otherwise receive as salary to a later date.
• Income Taxes: Income taxes are deferred until you receive the payments at the agreed-upon date.
• Contribution Limit: None
• Pros: The plans don’t have to be entirely geared around retirement. While you can set dates with some flexibility, they are fixed.
• Cons: Employees are not usually able to take early withdrawals.
• Usually best for: Highly-paid employees for whom typical retirement plans would not provide enough savings compared to their income.
Multiple Employer Plans
A multiple employer plan (MEP) is a retirement savings plan offered to employees by two or more unrelated employers. It is designed to encourage smaller businesses to share the administrative burden of offering a tax-advantaged retirement savings plan to their employees. These employers pool their resources together to offer a defined benefit or defined contribution plan for their employees.
Administrative and fiduciary responsibilities of the MEP are performed by a third party (known as the MEP Sponsor), which may be a trade group or an organization that specializes in human resources management.
This article is part of SoFi’s Retirement Planning Guide, our coverage of all the steps you need to create a successful retirement plan.
Compare Types of Retirement Accounts Offered by Employers
To recap retirement plans offered by employers:
Retirement Plans Offered by Employers
Type of Retirement Plan
May be Funded By
Pro
Con
401(k)
Employee and Employer
Contributions are deducted from paycheck
Limited investment options
Solo 401(k)
Employee and Employer
Good for self-employed people
Not available for business owners that have employees
403(b)
Employee and Employer
Contributions are deducted from paycheck
Usually offer a narrow choice of investment options
SIMPLE IRA
Employer and Employee
Employer contributes to account
High penalties for early withdrawals
SEP Plan
Employer
High contribution limits
Employer decides whether and how much to contribute each year
Profit-Sharing Plan
Employer
Can be paired with other qualified retirement plans
Plan depends on an employer’s profits
Defined Benefit Plan
Employer
Fixed payout upon retirement
May be difficult to access benefits
Employee Stock Ownership Plan
Employer
Aligns interest of a company and its employees
May be risky for employees
457
Employee
You don’t have to wait until age 59 ½ to withdraw
Does not have same employer match possibility like a 401(k)
Federal Employees Retirement System
Employee and Employer
Low administrative fees
Only available for federal government employees
Cash-Balance Plan
Employer
Can reduce taxable income
High administrative costs
Nonqualified Deferred Compensation Plan
Employer
Don’t have to be retirement focused
Employees are not usually able to take early withdrawals
With an IRA, you open and fund the IRA yourself. As the name suggestions, it is a retirement plan for individuals. This is not a plan you join through an employer.
• Income Taxes: You may receive an income tax deduction on contributions (depending on your income and access to another retirement plan through work). The balance in the IRA is tax-deferred, and withdrawals will be taxed (the amount will vary depending on whether contributions were deductible or non-deductible).
• Contribution Limit: In 2025, the contribution limit is $7,000, or $8,000 for people 50 and older. In 2026, the contribution limit is $7,500, or $8,600 for people 50 and older.
• Pros: You might be able to lower your tax bill if you’re eligible to make deductible contributions. Additionally, the money in the account is tax-deferred, which can make a difference over a long period of time. Finally, there are no income limits for contributing to a traditional IRA..
• Cons: Traditional IRAs come with a number of restrictions, including how much can be contributed and when you can start withdrawals without penalty. Traditional IRAs are also essentially a guess on the tax rate you will be paying when you begin withdrawals after age 59 ½, as the money in these accounts are tax-deferred but are taxed upon withdrawal. Also, traditional IRAs generally mandate withdrawals starting at age 73.
• Usually best for: People who can make deductible contributions and want to lower their tax bill, or individuals who earn too much money to contribute directly to a Roth IRA. Higher-income earners might not get to deduct contributions from their taxes now, but they can take advantage of tax-deferred growth between now and retirement. An IRA can also be used for consolidating and rolling over 401(k) accounts from previous jobs.
• To consider: You may be subject to a 10% penalty for withdrawing funds before age 59 ½. As a single filer, you cannot deduct IRA contributions if you’re already covered by a retirement account through your work and earn more (according to your modified gross adjusted income) than $89,000 or more in 2025, with a phase-out starting at more than $79,000, and $91,000 or more in 2026, with a phase-out starting at more than $81,000.
Roth IRAs
A Roth IRA is another retirement plan for individuals that is managed by the account holder, not an employer.
• Income Taxes: Roth IRA contributions are made with after-tax money, which means you won’t receive an income tax deduction for contributions. But your balance will grow tax-free and you’ll be able to withdraw the money tax-free in retirement.
• Contribution Limit: In 2025, the contribution limit is $7,000, or $8,000 for those 50 and up. In 2026, the contribution limit is $7,500, or $8,600 for those 50 and up.
• Pros: While contributing to a Roth IRA won’t lower your tax bill now, having the money grow tax-free and being able to withdraw the money tax-free down the road could provide value in the future.
• Cons: Like a traditional IRA, a Roth IRA has tight contribution restrictions. Unlike a traditional IRA, it does not offer tax deductions for contributions. As with a traditional IRA, there’s a penalty for taking some kinds of distributions before age 59 ½.
• Usually best for: Someone who wants to take advantage of the flexibility to withdraw from an account during retirement without paying taxes. Additionally, it can be especially beneficial for people who are currently in a low income-tax bracket and expect to be in a higher income tax bracket in the future.
• To consider: To contribute to a Roth IRA, you must have an earned income. Your ability to contribute begins to phase out when your income as a single filer (specifically, your modified adjusted gross income) reaches $150,000 in 2025, and $153,000 in 2026. As a married joint filer, your ability to contribute to a Roth IRA begins to phase out at $236,000 in 2025, and $242,000 in 2026.
Payroll Deduction IRAs
This is either a traditional or Roth IRA that is funded through payroll deductions.
• Income Taxes: For a Traditional IRA, you may receive an income tax deduction on contributions (depending on income and access to a retirement plan through work); the balance in the IRA will always grow tax-deferred, and withdrawals will be taxed (how much is taxed depends on if you made deductible or non-deductible contributions). For a Roth IRA, contributions are made with after-tax money, your balance will grow tax-free and you’ll be able to withdraw the money tax-free in retirement.
• Contribution Limit: In 2025, the limit is $7,000, or $8,000 for those 50 and older. In 2026, the limit is $7,500, or $8,600 for those 50 and older.
• Pros: Automatically deposits money from your paycheck into a retirement account.
• Cons: The employee must do the work of setting up a plan, and employers can not contribute to it as with a 401(k). Participants cannot borrow against the retirement plan or use it as collateral for loans.
• Usually best for: People who do not have access to another retirement plan through their employer.
• To consider: These have the same rules as a Traditional IRA, such as a 10% penalty for withdrawing funds before age 59 ½. Only employees can contribute to a Payroll Deduction IRA.
Guaranteed Income Annuities (GIAs)
Guaranteed Income Annuities are products sold by insurance companies. They are similar to the increasingly rare defined benefit pensions in that they have a fixed payout that will last until the end of life. These products are generally available to people who are already eligible to receive payouts from their retirement plans.
• Income Taxes: If the annuity is funded by 401(k) benefits, then it is taxed like income. Annuities purchased with Roth IRAs, however, have a different tax structure. For “non-qualified annuities,” i.e. annuities purchased with after-tax income, a formula is used to determine the taxes so that the earnings and principal can be separated out.
• Contribution Limit: Annuities typically do not have contribution limits.
• Pros: These are designed to allow for payouts until the end of life and are fixed, meaning they’re not dependent on market performance.
• Cons: Annuities can be expensive, often involving significant fees or commissions.
• Usually best for: People who have high levels of savings and can afford to make expensive initial payments on annuities.
Cash-Value Life Insurance Plan
Cash-value life insurance typically covers the policyholder’s entire life and has tax-deferred savings, making it comparable to other retirement plans. Some of the premium paid every month goes to this investment product, which grows over time.
• Income Taxes: Taxes are deferred until the policy is withdrawn from, at which point withdrawals are taxed at the policyholder’s current income tax rate.
• Contribution Limit: The plan is drawn up with an insurance company with set premiums.
• Pros: These plans have a tax-deferring feature and can be borrowed from.
• Cons: While you may be able to withdraw money from the plan, this will reduce your death benefit.
• Usually best for: High earners who have maxed out other retirement plans.
Compare Types of Retirement Accounts Not Offered by Employers
To recap retirement plans not offered by employers:
Retirement Plans Not Offered by Employers
Type of Retirement Plan
Pro
Con
IRA
Contributions may be tax deductible
Penalty for withdrawing funds before age 59 ½
Roth IRA
Distributions are not taxed
Not available for individuals with high incomes
Payroll Deduction IRA
Automatically deposits money from your paycheck into the account
Participants can’t borrow against the plan
Guaranteed Income Annuity
Not dependent on market performance
Expensive fees and commissions
Cash-Value Life Insurance Plan
Tax-deferred savings
May be able to withdraw money from the plan, but this will reduce death benefit
Specific Benefits to Consider
As you’re considering the different types of retirement plans, it’s important to look at some key benefits of each plan. These include:
• the tax advantage
• contribution limits
• whether an employer will add funds to the account
• any fees associated with the account
💡 Quick Tip: Before opening any investment account, consider what level of risk you are comfortable with. If you’re not sure, start with more conservative investments, and then adjust your portfolio as you learn more.
Determining Which Type of Retirement Plan Is Best for You
Depending on your employment circumstances, there are many possible retirement plans in which you can invest money for retirement. Some are offered by employers, while other retirement plans can be set up by an individual. Brian Walsh, a CFP® at SoFi, says “a mixture of different types of accounts help you best plan your retirement income strategy down the road.”
Likewise, the benefits for each of the available retirement plans differ. Here are some specific benefits and disadvantages of a few different plans to consider.
With employer-offered plans like a 401(k) and 403(b), you have the ability to:
Take them with you. If you leave your job, you can roll these plans over into a plan with a new employer or an IRA.
Possibly get an employer match. With some of these plans, an employer may match a certain percentage or amount of your contributions.
With retirement plans not offered by employers, like a SEP IRA, you may get:
A wider variety of investment options. You might have more options to choose from with these plans.
You may be able to contribute more. The contribution limits for some of these plans may be higher.
Despite their differences, the many different types of retirement accounts all share one positive attribute: utilizing and investing in them is an important step in saving for retirement.
Because there are so many retirement plans to choose from, it may be wise to talk to a financial professional to help you decide your financial plan.
Can You Have Multiple Types of Retirement Plans?
You can have multiple retirement savings plans, whether employer-provided plans like a 401(k), IRAs, or annuities. Having various plans can let you take advantage of the specific benefits that different retirement savings plans offer, thus potentially increasing your total retirement savings.
Additionally, you can have multiple retirement accounts of the same type; you may have a 401(k) at your current job while also maintaining a 401(k) from your previous employer.
Nonetheless, there are limitations on the tax benefits you may be allowed to receive from these multiple retirement plans. For example, the IRS does not allow individuals to take a tax deduction for traditional IRA contributions if they also have an employer-sponsored 401(k).
Opening a Retirement Investment Account With SoFi
Prepare for your retirement with an individual retirement account (IRA). It’s easy to get started when you open a traditional or Roth IRA with SoFi. Whether you prefer a hands-on self-directed IRA through SoFi Securities or an automated robo IRA with SoFi Wealth, you can build a portfolio to help support your long-term goals while gaining access to tax-advantaged savings strategies.
Easily manage your retirement savings with a SoFi IRA.
FAQ
Why is it important to understand the different types of retirement plans?
Understanding the different types of retirement plans is important because of the nuances of taxation in these accounts. The various rules imposed by the Internal Revenue Service (IRS) can affect your contributions, earnings, and withdrawals. And not only does the IRS have rules around taxation, but also about contribution limits and when you can withdraw money without penalties.
Additionally, the various types of retirement plans differ regarding who establishes and uses each account and the other plan rules. Ultimately, understanding these differences will help you determine which combination of retirement plans is best for you.
How can you determine which type of retirement plan is best for you?
The best type of retirement plan for you is the one that best meets your needs. Many types of retirement plans are available, and each has its own benefits and drawbacks. When choosing a retirement plan, some factors to consider include your age, investing time horizon, financial goals, risk tolerance, and the fees associated with a retirement plan.
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The monthly payments on a $400,000 mortgage could range from about $2,300 to more than $3,700, depending on the loan’s interest rate, term, and other factors. But hopeful homebuyers would be wise to consider how much that mortgage could cost over time as well as what the monthly payments might be.
Read on for a breakdown of what some of your home-buying costs might be, and how they could affect the total cost of a $400,000 mortgage.
• Monthly payments on a $400,000 mortgage vary widely depending on the interest rate and loan term.
• Longer loan terms lower monthly payments but increase total interest, while shorter terms raise monthly costs but reduce overall interest paid.
• Closing costs like lender fees, appraisal costs, taxes, and optional mortgage points can add 3%–6% of the loan amount upfront.
• Interest costs over the life of the loan are significant, potentially totaling hundreds of thousands of dollars on a 15‑ or 30‑year mortgage.
• Shopping around for different lenders, loan types, and rates helps borrowers find the best fit.
What Will a $400,000 Mortgage Cost?
There are several different costs you may run into when taking out a mortgage. Most of the time, they can be divided into three main categories.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Questions? Call (888)-541-0398.
Closing Costs
Closing costs are expenses you’ll pay upfront when you get a loan. They can include things like loan processing fees, third-party services such as appraisals and title insurance, and government fees and taxes. You also may decide to pay mortgage points (also called discount points) upfront on your loan to lower the interest rate.
Closing costs can vary significantly from one loan type and lender to the next, but they generally range from 3% to 6% of the mortgage amount.
Monthly Payments
Monthly mortgage payments, which are paid over the life of your loan, typically include two main parts:
• Principal: This portion of your mortgage payment goes directly toward paying back the amount you borrowed.
• Interest: This is the fee the lender will charge you for borrowing money. The amount of interest you pay each month will be calculated by multiplying your interest rate by your remaining loan balance.
Escrow
Some homebuyers may also have a third amount, called escrow, included in their closing costs and/or monthly payments. Lenders often collect and hold money in an escrow account so they can be sure critical bills like homeowners insurance and property taxes are paid on time. (Curious about the most budget-friendly places to buy? Check out this list of the most affordable cities in each state.)
What Would the Payment Be on a $400,000 Mortgage?
We’ll keep things simple and eliminate the costs associated with an escrow account to calculate what the payment on a $400,000 mortgage’s monthly payments might be.
Let’s say you wanted to purchase a home for $500,000, and you had $100,000 for a down payment. If your lender offered you a 7% annual percentage rate (APR) on a 15-year loan for $400,000, you could expect your monthly payment — principal and interest — to be about $3,595. If you had a 30-year loan with a 7% APR, your payment could be about $2,661.
Here are some more examples that show the difference between a 15-year loan vs. a 30-year loan, using SoFi’s Mortgage Calculator:
APR
Payment with 15-year Loan
Payment with 30-year Loan
5.5%
$3,268
$2,271
6.5%
$3,484
$2,528
7.5%
$3,708
$2,796
Where Can You Get a $400,000 Mortgage?
Homebuyers may have a few different options when deciding where to go for a mortgage, including online banks and lenders, and traditional banks and credit unions. Because the rates and terms lenders offer may vary, it can be a good idea to shop around for a mortgage that’s the right fit for your individual needs.
Before you start looking for quotes, though, you may want to sit down and review the different types of mortgages you can qualify for. How would a 15-, 20-, or 30-year mortgage affect your monthly payments? Are you looking for a fixed or adjustable mortgage rate? Would you be better off with a conventional mortgage or a government-backed loan? (Some loans may have more flexible requirements for down payment amounts or a borrower’s credit score.)
Once you start comparison shopping, you can note the pros and cons of various offers and narrow down your choices. You also may want to read some online reviews of the lenders you’re considering.
How Much Interest Will You Pay on a $400,000 Mortgage?
The interest rate your lender offers can make a big difference to the overall cost of your mortgage. So can the mortgage term you choose.
On a $400,000 mortgage at a 7% APR, for example, your total interest costs could range from $247,156 to $558,036, depending on the length of the loan you choose (15 vs. 30 years).
Spreading out your mortgage payments over a longer term can lower your monthly payment, but you can expect to pay more for the loan overall. Your financial circumstances at the time you take out your loan may dictate which is a priority for you. (If you go for a longer loan, and your situation changes, you may decide to refinance your home mortgage to a shorter term down the road.)
How Does Amortization Work on a $400,000 Mortgage?
Though your payment will remain the same every month (if you have a fixed-rate loan), the amount you’ll pay toward interest vs. principal will change over the life of your home loan. In the first years, the majority of your payment will go toward interest. But as your balance goes down, more of your payment will go toward principal.
Your lender can provide you with a mortgage amortization schedule that shows you how the proportions will change as you make payments on your loan.
Here’s what the amortization schedules for a $400,000 mortgage with 30- and 15-year terms might look like. (Keep in mind that your payments may include other costs besides principal and interest.)
Amortization Schedule, 30-Year Loan at 7% APR
Year
Amount Paid
Interest Paid
Principal Paid
Remaining Balance
1
$31,934.52
$27,871.28
$4,063.24
$395,936.76
2
$31,934.52
$27,577.55
$4,356.97
$391,579.79
3
$31,934.52
$27,262.58
$4,671.94
$386,907.85
4
$31,934.52
$26,924.85
$5,009.67
$381,898.18
5
$31,934.52
$26,562.70
$5,371.82
$376,526.36
6
$31,934.52
$26,174.37
$5,760.15
$370,766.21
7
$31,934.52
$25,757.97
$6,176.55
$364,589.66
8
$31,934.52
$25,311.46
$6,623.06
$357,966.60
9
$31,934.52
$24,832.68
$7,101.84
$350,864.76
10
$31,934.52
$24,319.29
$7,615.23
$343,249.53
11
$31,934.52
$23,768.78
$8,165.74
$335,083.80
12
$31,934.52
$23,178.48
$8,756.04
$326,327.76
13
$31,934.52
$22,545.51
$9,389.01
$316.938.75
14
$31,934.52
$21,866.78
$10,067.74
$306,871.01
15
$31,934.52
$21,138.98
$10,795.54
$296,075.46
16
$31,934.52
$20,358.57
$11,575.95
$284,499.51
17
$31,934.52
$19,521.74
$12,412.78
$272,086.73
18
$31,934.52
$18,624.42
$13,310.10
$258,776.63
19
$31,934.52
$17,662.23
$14,272.29
$244,504.35
20
$31,934.52
$16,630.49
$15,304.03
$229,200.31
21
$31,934.52
$15,524.16
$16,410.36
$212,789.95
22
$31,934.52
$14,337.85
$17,596.67
$195,193.28
23
$31,934.52
$13,065.79
$18,868.73
$176,324.55
24
$31,934.52
$11,701.76
$20,232.76
$156,091.79
25
$31,934.52
$10,239.14
$21,695.38
$134,396.41
26
$31,934.52
$8,670.78
$23,263.74
$111,132.66
27
$31,934.52
$6,989.04
$24,945.48
$86,187.18
28
$31,934.52
$5,185.73
$26,748.79
$59,438.39
29
$31,934.52
$3,252.05
$28,682.47
$30,755.92
30
$31,934.52
$1,178.60
$30,755.92
$0
Amortization Schedule, 15-Year Loan at 7% APR
Year
Amount Paid
Interest Paid
Principal Paid
Remaining Balance
1
$43,143.76
$27,504.57
$15,639.19
$384,360.81
2
$43,143.76
$26,374.01
$16,769.75
$367,591.06
3
$43,143.76
$25,161.72
$17,982.04
$349,609.02
4
$43,143.76
$23,861.80
$19,281.96
$330,327.06
5
$43,143.76
$22,467.90
$20,675.85
$309,651.21
6
$43,143.76
$20,973.24
$22,170.51
$287,480.69
7
$43,143.76
$19,370.54
$23,773.22
$263,707.47
8
$43,143.76
$17,651.97
$25,491.79
$238,215.68
9
$43,143.76
$15,809.16
$27,334.59
$210,881.09
10
$43,143.76
$13,833.14
$29,310.61
$181,570.48
11
$43,143.76
$11,714.28
$31,429.48
$150,141.00
12
$43,143.76
$9,442.24
$33,701.52
$116,439.48
13
$43,143.76
$7,005.95
$36,137.80
$80,301.67
14
$43,143.76
$4,393.55
$38,750.21
$41,551.47
15
$43,143.76
$1,592.29
$41,551.47
$0
How to Get a $400,000 Mortgage
If you’re feeling intimidated by the whole home-buying process, breaking it down into some manageable steps may make things a little less overwhelming.
1. Determine What You Can Afford
Reviewing your income, debts, monthly spending, and how much you’ve saved for a down payment can be a good place to start. This will help you decide how much of a down payment you can handle and how much house you can afford.
2. Compare Different Loans and Lenders
Once you know what you can afford, you can start looking for the loan type, interest rate, loan term, and lender that meet your needs.
3. Consider Getting Preapproved
If you’ve decided on a loan and lender, it can be a good idea to go through the preapproval process. Getting a letter from your lender that says you’re preapproved for a certain loan amount lets sellers know you’re a serious buyer. (And it can come in handy if you get into a bidding war for your dream home.)
4. Get Ready to Go House Hunting
When you have your loan lined up, you can look for and potentially make an offer on a house. And since you already know how much you can afford, you can target homes in that range.
5. Submit a Full Mortgage Application
Once your offer is accepted and you’re ready to move forward, your lender will ask you to complete a more formal loan application and provide additional financial information and documentation.
6. Prepare for Closing
While you’re waiting for a final loan approval and a closing date, you can shop for homeowners insurance, get a home inspection, and make sure you have all the money you need for your down payment and closing costs.
7. Take Ownership of Your New Home
At the closing you can sign all the necessary paperwork, hand over the funds needed to make the purchase, and — congratulations! — get the keys to your new home.
Researching the different costs you might have to pay if you plan to take out a $400,000 mortgage can help you stick to your budget and avoid unpleasant surprises.
The choices you make about the type of loan you get, the interest rate, loan term, and other costs, will all play part in how much you pay every month — and over the length of the loan. So it can be a good idea to run the numbers before you decide on a particular lender or loan.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
SoFi Mortgages: simple, smart, and so affordable.
FAQ
How much is a $400,000 mortgage a month?
The monthly payment for a $400,000 mortgage could range from about $2,300 to more than $3,700, depending on several factors, including the interest rate and loan term.
How much income is required for a $400,000 mortgage?
Lenders will look at several factors besides your income to determine if you can afford a $400,000 mortgage. You can expect to be asked about your debt, credit history, assets, and the down payment you plan to make.
How much is a down payment on a $400,000 mortgage?
Your down payment may vary depending on the price of the house you choose, the type of loan you get, and if you want to avoid paying private mortgage insurance as part of your borrowing costs. Traditionally, lenders like to see a 20% down payment, which on a $500,000 home would be a $100,000 down payment and a $400,000 mortgage. But many lenders accept lower down payments.
Can I afford a $400,000 mortgage with a $70,000 salary?
Since your housing costs (monthly payments, insurance, etc.) would likely be more than half your monthly salary, it could be a challenge to afford a $400,000 mortgage on a $70,000 salary.
Photo credit: iStock/svetikd
SoFi Mortgages
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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
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Thanks to high demand and inflation, the cost of home repairs has been on the rise. In 2025, the average household spent $2,041 on maintenance and $1,143 on emergency repairs, according to Angi’s State of Home Spending Report. The report also found Millennials led all generations in spending, with an average total home spend of $14,199, including the highest maintenance ($2,601) and emergency ($1,519) expenditures.
The most common home repairs include the usual suspects: electrical, plumbing, HVAC, water damage, and termite damage. Keep reading to learn more about these issues and the cost of repair or replacement, so you can pick up tips on maintaining the value of your home and be prepared for repairs when reality bites.
• Common home repairs include foundation issues, electrical problems, roof repairs, water heater replacements, water damage, plumbing, septic system repairs, HVAC issues, mold removal, and termite damage, with costs ranging from a few hundred to tens of thousands of dollars.
• The average household spending on home repairs in 2025 was $2,041 on maintenance and $1,143 on emergency repairs.
• High-cost repairs include foundation repair (up to $8,129), roof replacement (up to $13,223), and septic system replacement (up to $12,000), highlighting the need for a strong emergency fund.
• Budgeting for home repairs can be guided by rules of thumb, such as setting aside 1% of your home’s value annually, $1 per square foot of living space, or 10% of main monthly expenses.
Estimated Cost of the Most Common Home Repairs
Low-cost preventive measures — like cleaning your gutters or getting your heating and cooling systems serviced annually — can help keep common home repair costs down. But even with the best preparation, surprises (like a busted pipe or roof leak) happen, and when they do, you can be on the hook for thousands of dollars. Whether you’re a new or longtime homeowner, it’s a good idea to plan for — and budget for — home repairs.
Below is a roundup of the most common home repairs and average costs.
Foundation Repair
A number of different issues can occur with foundations, some of which are more serious (aka, costly) than others. Among the most common problems are foundation cracks, which can be caused by house settling or changes in soil pressure around the home. Cracks can lead to water damage or cause the walls in your foundation or home to bow. Foundations can also begin to sink, due to changing weather patterns, nearby tree roots, or erosion.
Since the foundation is the footprint of your home, repairs can be complicated and expensive. According to Angi, foundation repair costs can range anywhere from $2,224 to $8,129.
Average cost of foundation repair: $5,172
Electrical Issues
While there are many home repairs you can safely DIY, electrical issues and wiring are generally best left to professional electricians. Working with live wires can be dangerous and faulty electrical work can be a significant fire hazard. Some signs you may need to call an electrician include:
• Burning smell coming from an outlet
• Buzzing or sizzling noises coming from an outlet
• Flickering lights
• Outlets feel hot to the touch
• You have 2- rather than 3-prong outlets
• Circuit breaker continually trips
• Appliances spark when plugged in
Depending on the length and complexity of the job, the cost of hiring an electrician ranges between $163 and $536. Installing a new outlet can run $100 to $450, while replacing a breaker panel can cost anywhere from $519 to $2,187.
Your roof protects your home from the elements, so it’s important to keep it in top condition. If you notice any damage or signs of wear and tear, you’ll want to address them sooner rather than later. This can help prevent small problems from becoming serious and expensive. Signs that your roof may be compromised include broken, cracked, curling, or missing shingles, and any interior signs of water damage (such as dark spots or discoloration on walls or ceiling and/or mold or rotting wood in the attic).
The cost of a roof repair will depend on your home’s location, roofing material, size of your home, and the type of roof. On average, costs run between $393 and $1,939. By contrast, a full roof replacement can run between $5,870 to $13,223. Due to the significant price difference, you would generally only invest in a new roof if the damage to your existing roof is extensive or the roof is near the end of its life.
Average cost of roof repairs: $1,158
Repair or Replace a Water Heater
Due to mineral buildup and the routine breakdown of components, water heaters do not last forever. Depending on how extensive the repairs your water heater requires, you can be on the hook for a new unit entirely. And if you’ve ever taken a cold shower in the middle of winter, you know this is one repair that is essential to your quality of life.
On average, homeowners spend anywhere from $222 to $990 on water heater repairs. Your actual bill will depend on the cost of the part needed for the fix, how much your local water heater professional charges for labor, and the length of the job. Where you live and where the water heater is located in your home can also impact costs.
Average cost of water heater repairs: $606
Water Damage
Water damage is fairly common. It can result from a crack in an old pipe, a leaky roof, an unusually strong storm, or sewage backup. To prevent mold growth and further damage, it’s best to fix the issue and clear out moisture as soon as you spot it.
Water damage restoration can involve replacing wallboard, flooring, and/or ceilings, as well as ensuring that no mold spores are left behind to spread once the repairs are complete. Two important factors influencing price are the square footage affected and the type of water (i.e., whether it’s clean or has been contaminated with potentially harmful substances). The cost of water damage restoration generally ranges between $1,384 and $6,387.
Average cost to fix water damage: $3,867
Replacing Pipes
Replacing older pipes is a common home repair often needed after a home inspection. Common problems include dated construction materials with a known problem in their manufacturing, signs of corrosion, clogs, and leaks. And because pipes run behind walls and underground, repair costs often include patching up interior holes and dug-up yards.
The good news is that not all leaks, burst pipes, and signs of corrosion require replacing large amounts of plumbing. Often, a plumber can replace a small section of the pipe affected by the damage. The cost to install pipes for a repair ranges from $372 to $2,131, though it can run higher if the damaged pipes are difficult to access.
A septic tank contains and filters household wastewater. If it is damaged or not functioning properly, it’s important to deal with the problem quickly — otherwise, you could be dealing with a smelly and costly mess. Sewage backups can occur when the septic tank becomes clogged or full, there’s a problem with devices within the tank, or there’s a blockage in the home’s main drain line leading to the tank.
Depending on the type of repair, tank size, permits, and other factors, the cost of a septic tank repair runs, on average, between $628 and $3,039. A small fix like repairing a septic tank lid could cost less ($150 to $500); but if you need to replace the tank, you could be looking at a bill as high as $12,000.
Average cost to repair a septic system: $1,830
Heating or Air Conditioning Repair
Your home’s HVAC (which stands for heating, ventilation, and air conditioning) system plays a key role in keeping your home comfortable to live in. Though there are many different types of HVAC systems, they generally all work by using energy to heat or cool the air to a desired temperature. The system may also add/remove moisture and filter your home’s indoor air.
An HVAC system typically has two main components: a heater (which could be a furnace, boiler, or heat pump) and an air conditioning (AC) unit. The type of system you have and the component that’s broken will significantly influence the cost of repairs. For example, an AC system repair can run anywhere from $130 to $2,000, while a furnace repair tends to run between $132 and $503. On average, homeowners spend between $130 and $2,000 on HVAC repairs.
Average cost to fix a heating or air conditioning system: $350
Mold Removal
Mold develops inside homes as a result of moisture and can lead to health problems. Signs that you may have a mold problem include:
• Musty odor in a specific area
• Discoloration on the walls
• Peeling, cracking, or warping of floors or walls
• Leaks or water damage
• Darkening around tile grout
• Worsening of allergy symptoms
While you may be able to remove small amounts of mold yourself (provided you’re certain the mold isn’t toxic), often the best option is to hire a mold remediation professional.
The cost for mold removal will vary widely depending on where it is located in your home. Mold growth in hard-to-reach areas, like drywall or your HVAC system, generally costs more to remediate since it can require more time, materials, and labor. The size of the infestation and the type of mold that is growing also influence costs. On average, mold removal runs between $1,223 and $3,753.
Average cost of mold removal: $2,367
Termite Damage
The problem with termites is that they literally eat away at your house. They can also eat through your budget: The cost to repair termite damage can range anywhere from $1,000 to $10,000 or even more.
Generally, the longer termites chew on the wooden structure of your home, the more costly the repair will be, so it’s key to recognize — and deal with — any signs of a termite infestation early. If you catch a termite problem early, for example, you may only need to replace a few damaged boards or joists, which can run from $250 to $1,000. If the problem goes on for a while, however, you may need to replace damaged walls, framing, or floors — at a cost of $1,000 to $3,000. Worst-case scenario: Termites do enough damage to your home’s infrastructure (like beams or load-bearing walls) that it becomes structurally unsound. A major termite repair job can run you more than $37,000.
Average cost to repair termite damage: $3,000
Factors That Affect Home Repair Costs
Home repair costs can vary widely based on geographic location and other cost drivers. These are the things that might influence your bill:
Age of the Home
Not surprisingly, older homes will typically have higher repair costs. Sometimes the repair itself isn’t the driver of the increase, but rather the costs associated with postrepair restoration, such as repairing plaster walls or replacing intricate woodwork. The higher cost of buying a fixer upper can stick with you even after an initial renovation if the renovation is cosmetic and doesn’t address underlying mechanical issues such as dated wiring or plumbing.
Location and Labor Costs
The cost of living in the area where your home is located will help determine your repair costs. In higher-cost areas, labor costs also tend to be higher.
Materials and Permit Fees
Constructions materials costs have increased alongside labor costs and even outstripped them in some cases. Copper (used in wiring) and other electrical components have seen especially intense cost increases. Building permit costs vary widely by geography but high-cost areas often tend to have high permit costs. Moreover, this is one cost that is entirely out of the control of the homeowner or the contractor.
Average Cost of Home Repairs
Trying to predict — and budget for — home repairs can be challenging. However, there are several rules of thumb that can help homeowners. Being prepared for home repair costs is one of those personal finance basics you’ll want to have a handle on as a homeowner.
• The 1% Rule. One common guideline is to set aside approximately 1% of your home’s value annually for home maintenance.
• The Square Foot Rule. Another formula is to set aside $1 for every square foot of livable space.
• The 10% Rule. Put aside 10% of all your main monthly expenses.
If you don’t have enough savings to cover the cost of a necessary home repair, there are financing options, including a home equity line of credit (HELOC), a home equity loan, or a credit card (though this can be an expensive choice).
You can also use a personal loan to cover the cost of home repairs or improvements.
How to Budget for Home Repairs
One way to ensure you have cash on hand when home repair needs arise is to plan ahead and start budgeting and saving in advance.
Creating a Home Maintenance Fund
You can help ensure you’ve saved a cushion for repairs by creating a home maintenance fund.
Emergency vs. Planned Repairs
It’s one thing to create a maintenance fund and periodically do some preventive maintenance.
Home Warranty Considerations
Some homeowners choose to pay for a home warranty in order to ensure that repair costs are covered when the time comes.
Quick Tip: Check out SoFi’s home improvement loan rates to find competitive options for financing your next repair or renovation project.
The Takeaway
It’s tough to predict the cost of home repairs.
Think twice before turning to high-interest credit cards. Consider a SoFi personal loan instead. SoFi offers competitive fixed rates and same-day funding. See your rate in minutes.
SoFi’s Personal Loan was named a NerdWallet 2026 winner for Best Personal Loan for Large Loan Amounts.
FAQ
How do I estimate home repair costs?
As a general rule, experts estimate that your annual home repair costs will average either $1 per square foot or 10% of your housing costs.
What repairs are usually not covered by homeowners insurance?
Every homeowners insurance policy is slightly different.
When should I hire a professional instead of doing it myself?
Assuming you aren’t a licensed tradesperson, it’s best to hire a professional.
How much should I budget annually for home repairs?
There are several guidelines for budgeting for home repair.
What is the most expensive home repair?
The most expensive home repairs tend to be foundation repairs, full roof or septic tank replacements, or repairs due to extensive termite damage.
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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
²SoFi Bank, N.A. NMLS #696891 (Member FDIC), offers loans directly or we may assist you in obtaining a loan from SpringEQ, a state licensed lender, NMLS #1464945. All loan terms, fees, and rates may vary based upon your individual financial and personal circumstances and state.You should consider and discuss with your loan officer whether a Cash Out Refinance, Home Equity Loan or a Home Equity Line of Credit is appropriate. Please note that the SoFi member discount does not apply to Home Equity Loans or Lines of Credit not originated by SoFi Bank. Terms and conditions will apply. Before you apply, please note that not all products are offered in all states, and all loans are subject to eligibility restrictions and limitations, including requirements related to loan applicant’s credit, income, property, and a minimum loan amount. Lowest rates are reserved for the most creditworthy borrowers. Products, rates, benefits, terms, and conditions are subject to change without notice. Learn more at SoFi.com/eligibility-criteria. Information current as of 06/27/24.In the event SoFi serves as broker to Spring EQ for your loan, SoFi will be paid a fee. Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.
Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®
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.
