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It’s easy to forget about an old 401(k) plan when changing to a new job because it’s such a busy time. But by not rolling over your 401(k), you might be losing some serious cash.

Read on to learn some key reasons to prioritize a 401(k) rollover — and how to transfer a 401(k) to a new job.

Why Should I Consider Moving My 401(k)?

Rolling over a 401(k) may have some significant benefits. For example, if your new employer’s plan offers a broader range of investment choices, moving a 401(k) might gain you access to investment vehicles that better align with your financial goals.

Not only that, if you leave your 401(k) where it is, you may forget about it. There are 31.9 million forgotten 401(k) accounts in the U.S., according to one 2025 estimate. By rolling over a 401(k) to a new plan, you’ll know where your money is.

Also, when you forget about a 401(k), your portfolio may no longer have your desired asset allocation as time goes on. It’s generally important to keep tabs on investments to ensure they are on track and appropriate for your time horizon and goals.

And finally, leaving your 401(k) may cost you in fees. Here’s why: Certain fees go into effect when you open a 401(k), which typically include administrative, investment, and custodial fees. Employers may cover some of these fees until you leave the company. Once you’re gone, that entire cost might shift to you.

If the fees are high, rolling over a 401(k) to a plan with your new employer that has lower fees, or to a traditional IRA, may be advantageous.

Recommended: IRA Deduction Rules

4 Options For Your 401(k) When You Change Jobs

When you get a new job and you have a 401(k) from your previous employer, you have several options to consider, including the following:

1. Leave It With Your Former Employer

You aren’t required to roll over your 401(k) to a new employer’s plan. If you have more than $7,000 in the old 401(k) account, you can leave the funds where they are. But keep in mind that you will no longer be able to make 401(k) contributions to the account.

What happens to your 401(k) when you leave your job and you have between $1,000 and $7,000 in your account is that your former employer may not allow you to keep it there. Instead, they might roll over the 401(k) into an IRA in your name. If you have less than $1,000 in your 401(k), the employer will often cash out the funds and send you a check for the amount.

2. Roll Over a 401(k) to Your New Employer’s Plan

If your new employer offers a 401(k) plan and you are eligible to participate, you can roll the money over from your old plan to the new plan as long as the plan allows it. Consolidating your 401(k)s could help you manage all of your retirement savings in one place.

The process to move a 401(k) to a new employer is usually relatively simple. You can request that the 401(k) administrator at your old company move the funds into your new employer’s plan through what’s known as a direct transfer (see more about this below).

3. Roll Over a 401(k) to an IRA

An IRA is another option for your 401(k) funds. A rollover IRA can give you more control over your investment options, and you can do it through a direct transfer of funds from your old employer to a new IRA account you set up.

If you choose to roll over the money into a Roth IRA or traditional IRA you can make annual contributions. In 2026, individuals under age 50 can contribute up to $7,500 in an IRA, and those 50 and older can contribute up to $8,600.

The type of IRA you open typically depends on whether you have a traditional 401(k) or a Roth 401(k). If you have a Roth 401(k) you’ll need to roll it over into a Roth IRA.

You can open an IRA online and roll over your 401(k) into it. Just keep in mind that IRAs don’t come with employer-provided benefits, such as matching contributions.

Recommended: IRA Transfer vs Rollover

4. Cash Out Early

You can also choose to cash out your 401(k). However, if you’re younger than 59 ½, you will typically have to pay taxes on the money, and perhaps an additional 10% early withdrawal penalty.

Under some qualifying circumstances, the 10% fee may be waived, such as when the funds will be used for eligible medical expenses. But if there are no qualifying circumstances in your situation, think carefully about cashing out your 401(k) to make sure it’s the right choice for you.

Pros and Cons of Transferring a 401(k) to a New Job

Rolling over your 401(k) to your new employer’s plan has potential benefits and drawbacks. Here are the possible advantages and disadvantages to consider.

Pros:

•   More convenience. Transferring your 401(k) to your new employer’s plan can consolidate your tax-deferred dollars into one account. Keeping track of and managing one 401(k) account may simplify your money management efforts.

•   Streamlining investment decisions. Not only does consolidating your old 401(k) with your new 401(k) make money management more straightforward, it can also streamline your investments. Having one account may make it easier to coordinate your investment strategies, target your asset allocations, monitor your progress, and make any adjustments as needed.

•   Maintaining the value of the account. With a direct rollover, there are no taxes or penalties to pay. The funds are typically moved tax-free.

Cons:

•   Loss of certain investment options: Your new employer’s plan may offer different investment options than your old plan, and you may lose some options you liked. The new plan might also offer fewer investment options, limiting your ability to diversify your portfolio.

•   Increased fees: The new employer’s plan may have higher fees associated with it, which could eat into your investments over time.

•   Possible plan restrictions: Some employer 401(k) plans don’t allow rollovers or they might have a waiting period.

How to Roll Over Your 401(k) to a New Employer

If you’ve decided to roll your funds into your new employer’s 401(k), these are the steps to take:

1.    Contact your new plan’s administrator to get what’s known as the account address for the new 401(k) plan, and then give that information to your old plan’s administrator.

2.    Complete any necessary paperwork required by your old and new employers for the rollover.

3.    Request that your former plan administrator send the funds directly to the new plan via a direct rollover.

You could also have them send a check to you, which you then give to the new plan’s administrator, but you will need to send the money to the new plan administrator within 60 days of receipt or you might face taxes and penalties.

4.    Confirm that the money arrived in the new 401 (k) and choose investments.

Recommended: Rollover IRA vs. Traditional IRA: What’s the Difference?

The Takeaway

There are benefits to rolling over a 401(k) after switching jobs, including streamlining your retirement accounts and making it easier to manage them. You may choose to roll over your 401(k) into a new employer’s plan, or into an IRA that you manage yourself, which might give you more investment options to choose from. Be sure to weigh the pros and cons of the different choices, and perhaps consult a financial professional, to help decide which option may be best to help you save for retirement.

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.

FAQ

How long do I have to move my 401(k) after leaving a job?

If the balance in your 401(k) is $7,000 or more, you can typically leave it there as long as you like. However, if you choose to roll over the 401(k) through an indirect rollover, you generally have 60 days from the date of distribution to deposit the funds into the new 401(k) or an IRA. Otherwise, it may be considered a taxable distribution and may be subject to penalties.

If your 401(k) balance is less than $7,000, your former employer may not allow you to leave it there and might roll it over into an IRA. If the balance is less than $1,000, they may cash it out and send you a check for the amount.

What happens to my 401(k) if I am fired?

If you’re fired, you will still have access to the money you’ve contributed to your 401(k) as well as the fully vested employer contributions. And as long as you have more than $7,000 in the account, you’ll generally have four options: You can keep the 401(k) where it is, roll it over to your new employer’s plan, roll it over to an IRA, or cash it out. If you have less than $1,000 in your 401(k), your employer may close the account and send you a check for the amount you had in it.

Do I have to pay taxes when moving a 401(k)?

You generally don’t have to pay taxes when moving a 401(k) as long as you do a direct rollover into another tax-deferred account like an employer’s 401(k) or a traditional IRA. However, if you do an indirect rollover in which the funds are sent to you, you typically have 60 days from the date you receive the funds to deposit them into the new account. Otherwise, the funds may be considered a distribution and they’ll be subject to taxes and penalties if you are under the age of 59 ½.

Can I merge multiple old 401(k)s into one account?

You can generally merge multiple old 401(k)s into a single account by rolling them over into an IRA. You may also be able to roll old 401(ks) into your current employer’s plan, as long as the plan allows it. Check with the plan administrator.

Are there penalties for cashing out a 401(k) early?

If you’re younger than age 59 ½, there are penalties for cashing out a 401(k) early. An early cash-out of a 401(k) will typically trigger federal, state and local income taxes. Plus, you may also be subject to a 10% early withdrawal penalty from the IRS (the penalty may be waived in some circumstances, such as certain financial hardships).

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An investment risk pyramid is an illustration used to help investors understand the risk/reward profile of various assets. The investment risk pyramid uses a base, middle, and top to rank investments by the likelihood of losing money or seeing big returns. The tool is useful when getting started with investing.

Building a portfolio is no easy task. It requires due diligence and an assessment of your risk tolerance and return goals. The investment risk pyramid may help you determine what approaches work best for you.

What Are Investment Pyramids?

Investment pyramids are practical tools for gauging how risky certain asset types are. The pyramid model has been used in many areas for a long time, and it’s useful when learning what your risk tolerance is.

An investment risk pyramid has three levels grouped by risk/return profile. The least-risky securities are found in the large base; growth and moderately risky assets are in the middle; then the most speculative strategies are at the top.

Again, this could be helpful to investors who are looking to buy and sell stocks or other securities, and also get a sense of how much associated risk they’re introducing or jettisoning from their portfolio.

How Investing Pyramids Work

There are many investing risk need-to-knows, and the pyramid of investment risk works by helping investors understand the connection between their asset allocation and their risk tolerance.

The visual should ultimately lead individuals to better grasp what percentage of their investable assets should go to which types of investments based on risk level and return potential.

Using a risk pyramid investment strategy provides a basic framework for analyzing portfolio construction. The investment risk pyramid is structured so that it suggests people hold a higher percentage of lower-risk assets, and relatively little in the way of ultra-high-risk, speculative assets.

Base of the Pyramid

Managing investment risk is among the most fundamental aspects of investing, and risk is controlled by ensuring an allocation to some safe securities. The base of the investment risk pyramid, which is the bulk of total assets, contains low-risk assets and accounts. Investments such as government bonds, money markets, savings and checking accounts, certificates of deposit (CDs), and cash are included in the base.

While these securities feature relatively low risk, you might lose out to inflation over time if you hold too much cash, for example.

Middle of the Pyramid

Let’s step up our risk game a bit by venturing into the middle of the investment risk pyramid. Here we will find medium-risk assets. In general, investments with some growth potential and a lower risk profile are in this tier. Growth and income stocks and capital appreciation funds are examples.

Other holdings might include real estate, dividend stock mutual funds, and even some higher-risk bond funds.

Top of the Pyramid

At the top of the investment risk pyramid is where you’ll find the most speculative asset types and even margin investing strategies. Options, futures, and collectibles are examples of high-risk investments.

You will notice that the top of the pyramid of investment risk is the smallest – which suggests only a small portion of your portfolio should go to this high-risk, high-reward niche.

Sample Investment Pyramid

Here’s what a sample investment risk pyramid might contain:

Top of the pyramid, high risk: Speculative growth stocks, put and call options, commodities, collectibles, cryptocurrency, and non-fungible tokens (NFTs). Generally, just a small percentage of an overall portfolio should be allocated to the top of the pyramid.

Middle of the pyramid, moderate risk: Dividend mutual funds, corporate bond funds, blue-chip stocks, and variable annuities. Small-cap stocks and foreign funds can be included, too. A 30-40% allocation could make sense for some investors.

Base of the pyramid, low risk: U.S. government Treasuries, checking and savings accounts, CDs, AAA-rated corporate bonds. This might comprise 40-50% of the portfolio.

Pros and Cons of Investment Pyramids

The investment risk pyramid has advantages and disadvantages. Let’s outline those to help determine the right investing strategy for you.

Pros

The investment risk pyramid is useful as a quick introduction to asset allocation and bucketing. Another upside is that it is a direct way to differentiate asset types by risk.

Cons

While the investment risk pyramid is helpful for beginners, as you build wealth, you might need more elaborate strategies beyond the pyramid’s simplicity. Moreover, in the end, you determine what securities to own – the pyramid is just a suggestion.

Examples of Low-Risk Investments

Let’s describe some low-risk investments in more detail since these are including the investment risk pyramid’s biggest tier.

Bonds

Bonds are essentially a loan you make to the government or other entity for a set amount of time. In return for lending your money, the debtor promises to pay you back at maturity along with periodic coupon payments, like interest.

Lower-risk bonds include short-term Treasury bills while riskier bonds are issued by speculative companies at a higher yield.

Cash

Cash feels like a low-risk asset, but ideally you would store it in an interest-bearing savings account in order to keep up with inflation.

Also consider that holding too much cash can expose you to inflation risk, which is when cash loses value relative to the cost of living.

Bank Accounts

You might earn a rate of return through a bank account with FDIC insurance. Keeping an emergency fund in a checking account can be a prudent move so you can pay expenses without having to sell assets like stocks and bonds or take on debt.

Examples of High-Risk Investments

At the top of the pyramid, you will find assets and strategies that may generate large returns, but also expose you to serious potential losses. Margin trading is a method often employed by some investors to try and increase their returns.

Margin Trading

Margin trading is using borrowed funds in an attempt to amplify returns. A cash account vs. margin account has key differences to consider before you go about trading. Trading with leverage offers investors the possibility of large short-term gains as well as the potential for outsize losses, so it is perhaps best suited for sophisticated investors.

Options

Options on stocks and exchange-traded funds (ETFs) are popular these days. Options, through calls and puts, are derivative instruments that offer holders the right but not the obligation to buy shares at a specific price at a predetermined time. These are risky since you can lose your entire premium if the option contract strategy does not work out for the holder.

Collectibles

Collectibles, such as artwork or wine, are alternative investment types that may provide some of the benefits of diversification, but it’s hard to know what various items are worth since they are not valued frequently. Consider that stocks and many bonds are priced at least daily.

Collectibles might also go through fad periods and booms and bust cycles, which could add to the risk factors in this category.

Discovering Your Risk Tolerance

The investment risk pyramid is all about helping you figure out your ability and willingness to accept risk. It is a fundamental piece of being an investor. You should consider doing more research and even speaking with a financial advisor for a more detailed risk assessment along with an analysis of what your long-term financial goals are.

The Takeaway

Using an investment risk pyramid may make sense for many investors. It’s an easy, visual way to decide which asset classes you might want to hold in your portfolio, so that the percentage of each (i.e. your asset allocation) is aligned with your risk tolerance.

The other helpful aspect of the investment risk pyramid is that it presumes a bigger foundation in lower-risk investments (the bottom tier), with gradually smaller allocations to moderate risk and higher-risk assets, as you move up the pyramid. This might be helpful for a long-term strategy. In a nutshell, the investment risk pyramid helps you figure out how to allocate investments based on your risk tolerance and return objectives.

If you’re an experienced trader and have the risk tolerance to try out trading on margin, consider enabling a SoFi margin account. With a SoFi margin account, experienced investors can take advantage of more investment opportunities, and potentially increase returns. That said, margin trading is a high-risk endeavor, and using margin loans can amplify losses as well as gains.

FAQ

What are the levels of an investment pyramid?

The levels of an investment risk pyramid are low-risk at the base, moderate-risk in the middle, and high-risk at the top. The risk/return investment pyramid helps investors understand how to think about various assets they may want to own.

What does investment risk refer to?

Investment risk can be thought of as the variance in return, or how great the chance is that an investment will experience sharp losses. While the risk investment pyramid helps you build a portfolio, you should also recognize that a diversified stock portfolio performs well over time, while cash generally loses out due to the risk of inflation.

What are some examples of high-risk investments?

High-risk investments include speculative assets like options, trading securities on margin, and even some collectibles that might be hard to accurately value since they are based on what someone might be willing to pay for them. The low-risk to high-risk investments pyramid can include virtually any asset.

Photo credit: iStock/MicroStockHub

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What do you do with your stocks when the market drops? If you’re like most people, your first instinct is to sell. It’s human nature. But when they decline, selling everything might seem like a viable strategy. However, instinctively selling when stocks drop is often counterproductive, and it may make more sense to invest while the market is down.

Should You Invest When the Market Is Down?

It’s generally a good idea to invest when the stock market is down as long as you’re planning to invest for the long term. Seasoned investors know that investing in the market is a long-term prospect. Stock market dips, corrections, or even bear markets are usually temporary, and, given enough time, your portfolio may recover.

When the market is down, it provides an opportunity to buy shares of stock through your online investing account at a lower price, which means you could potentially earn a higher return on your investment when the market recovers.

For example, in late 2007, stocks began one of the most dramatic plunges in their history. From October 2007 to March 2009, the S&P 500 Index fell 57%. During that time, many investors panicked and sold their holdings for fear of further losses.

However, the market bottomed out on March 9, 2009, and started a recovery that would turn into the longest bull market in history. Four years later, in 2013, the S&P 500 surpassed the high it reached in 2007. While that historic plunge of over 50% was terrifying, if you panicked and sold, rather than employ bear market investing strategies, you would have locked in your losses – and missed the subsequent recovery.

If, on the other hand, you had kept your investments, you would have seen stock values fall at first, but as the market reversed course, you may have seen portfolio gains again.

Consider the recent example of how the markets performed during the early stages of the Covid-19 pandemic in 2020. The S&P 500 fell about 34% from February 19, 2020, to March 23, 2020, as the pandemic ravaged the globe. However, stocks rebounded and made up the losses by August. As of September 2026, markets are hovering near record highs.

These examples illustrate why timing the market is rarely successful, but holding stock over the long term tends to be a smart strategy. It’s still important to keep in mind that the stock market may be volatile in the short term. Therefore, you must be prepared for short-term losses and have a long-term investment horizon.

Recommended: Bull vs. Bear Market: What’s the Difference?

4 Things to Consider Doing During a Market Downturn

When the stock market is down, it could be a worrying time for investors. But it’s important to remember that market downturns are a normal part of the investing process and that the market may eventually recover. Here are a few things to consider doing during a market downturn.

1. Stay Calm and Avoid Making Impulsive Decisions

It’s natural to feel worried or concerned when the stock market is down, but it’s essential to maintain a long-term perspective and not make rash decisions based on short-term market movements.

Buying and selling stocks based on gut reactions to temporary volatility could derail your investment plan, potentially setting you back.

You likely built your investment plan with specific goals in mind, and your diversified portfolio was probably based on your time horizon and risk tolerance preferences. Impulsive selling (or buying) may throw off this balance.

Instead of letting emotions rule the day, consider having a plan that includes investing more when the market is down (aka buying the dip). These strategies involve buying stocks on sale, and the hope is that the downturn is temporary and you’ll be able to ride any upturn to potential earnings.

So, when markets take a tumble, your best move is often to stay calm and stick to your predetermined strategy.

That said, any investment decisions you make should be based on your own needs. Just because the market is down doesn’t mean you have to buy anything. Buying stocks on impulse just because they’re cheaper might throw a wrench in your plan, just like rushing to sell. Taking time to consider your long-term needs and doing research typically pays off.

2. Evaluate Your Portfolio

Review your portfolio and make sure it’s properly diversified. Portfolio diversification may reduce the overall risk of your portfolio by spreading your investments across different asset classes, like stocks, bonds, real estate, and cash. Investing in various assets and industries could help preserve value in your portfolio during a market downturn, though nothing is guaranteed.

However, even if you have a well-diversified portfolio, you may also need to pay attention to your portfolio’s asset allocation during volatile markets. For example, during a down stock market, your stock holdings may become a lower percentage of your portfolio than desired, while bonds or cash become a more significant part of your overall holdings. If your portfolio has become heavily weighted in a particular asset class or sector, it could be strategic to sell some of those holdings and use the proceeds to buy securities to rebalance your portfolio at your desired asset allocation.

Recommended: How Often Should You Rebalance Your Portfolio?

3. Take Advantage of Low Prices With Dollar-Cost Averaging

To help curb your impulse to pull out of the market when it is low — and continue investing instead — you may want to consider dollar cost averaging.

Here’s how it works: On a regular schedule — say every month — you invest a set amount of money in the stock market. While the amount you invest each month will remain the same, the number of shares you’ll be able to purchase will vary based on the current cost of each share.

For example, let’s say you invest $100 a month. In January, that $100 might buy ten shares of a mutual fund at $10 a share. Suppose the market dips in April, and the fund’s shares are now worth $5. Instead of panicking and selling, you continue to invest your $100. That month, your $100 buys 20 shares.

In June, when the market rises again, the fund costs $25 a share, and your $100 buys four shares. In this way, dollar cost averaging helps you buy more shares when the markets are down, essentially allowing you to buy low and limiting the number of shares you could buy when markets are up. This helps protect from “buying high.”

After ten years of investing $100 a month, the value of each share is $50. Even if some shares you bought cost more than that, your average cost per share is likely lower than the fund’s current price.

Steady investments over time are more likely to give you a favorable return than dumping a large amount of money into the market and hoping you timed it right.

4. Consider Tax-Loss Harvesting

If you’ve already experienced losses, you may want to consider tax-loss harvesting – the practice of selling investments that experienced a loss to offset your gains from other investments.

Imagine that you invest $10,000 in a stock in January. Over the year, the stock decreases in value, and at the end of the year, it is only worth $7,500. Instead of wishing you’d had better luck, you could sell that position and reinvest the money in a similar (but not identical) stock or mutual fund.

You get the benefit of maintaining a similar investment profile that will hopefully increase in value over time, and you could write off the $2,500 loss for tax purposes. You could write off the total amount against any capital gains you may have in this year or any future year, helping to lower your tax bill. This is tax-loss harvesting.

You could also deduct up to $3,000 of capital losses each year from your ordinary income. However, you must deduct your losses against capital gains first before using the excess to offset income. Losses beyond $3,000 may be rolled over into subsequent years, known as tax loss carryforward.

During major market downturns, this technique might ease the pain of potential capital losses – but it’s important to consider reinvesting the money you raise when you sell, or you’ll risk missing the recovery. But remember that with investing comes risk, so there’s no assurance that a recovery will occur.

4 Things to Avoid When the Market Is Down

Feeling anxious when the stock market is down is natural, but it’s important to remain calm and not let fear drive your investment decisions. Here are a few things to avoid when the stock market is down.

1. Trying to Time the Market

Timing the market is the idea that you will somehow beat the market by attempting to predict future market movements and buying and selling accordingly. However, it’s difficult to predict with certainty when the stock market will go up or down, so trying to time the market is generally a futile endeavor.

However, it’s difficult to predict with certainty when the stock market will go up or down, so trying to time the market is generally a futile endeavor. As they say: No one has a crystal ball in this business.

As a result, timing the market is not a strategy that works for most investors. Even during a down market, you should not wait until the market hits bottom to start investing in stocks again.

2. Selling All Your Stocks

You should resist the temptation to sell all of your stocks or make other rash decisions when the market is down. While it may be tempting to sell all of your stocks during a down market, it’s important to remember that the stock market usually recovers. If you sell all of your stocks when the market is down, you may miss out on the opportunity to participate in the market’s recovery.

3. Chasing After High-Risk Investments

When stocks are down, you may be inclined to try to earn quick profits by investing in high-risk assets – like commodities or cryptocurrencies – but these investments could be particularly volatile and are not suitable for everyone.

Moreover, riskier investment strategies like options and margin trading may be an appealing way to amplify returns in down markets. But if you are not comfortable using these strategies, you could end up with even bigger losses.

Recommended: Options Trading 101: An Introduction to Stock Options

4. Abandoning Your Long-Term Financial Plan

It’s important to remember that the stock market is just one part of your overall financial plan. Keep your long-term financial goals in mind, and don’t let short-term market movements distract you from your larger financial objectives.

Risks to Investing During Down Markets

While the stock market generally recovers after a decline, there are exceptions to the idea that the market tends to snap back quickly or always trends upward.

Take the stock market crash of 1929. Share prices continued to slide until 1932, as the Great Depression ravaged the economy. The Dow Jones Industrial Average didn’t reach its pre-crash high until November 1954.

In addition, as of early 2023, the Nikkei 225 — the benchmark stock index in Japan — has yet to reach the peak of over 38,000 it hit at the end of 1989. Back then, the index went on to lose half its value in three years as an economic bubble in the country burst. However, the Nikkei did touch the 30,000 level at various points in 2021 for the first time since 1990.

So, investors need to remember that just because stock markets have recovered in the past doesn’t mean that it will always be that way. As the saying goes, past performance is not indicative of future results.

The Takeaway

Almost everyone feels a sense of worry (or fear) when the market is down. It’s only natural to find yourself swamped with doubts: What if the market keeps sliding? What if I lose everything? What if it’s one of those rare occurrences when the recovery takes ten years?

Rather than succumb to panic, perhaps the best course of action is to stay the course, and not to give in to your impulses to sell or scrap your entire investment strategy, but to stay the course. Using strategies like dollar-cost averaging, which allow you to invest in a down market sensibly, may be a part of a balanced investment strategy that helps build wealth over time.

Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.

FAQ

What is tax-loss harvesting?

Tax-loss harvesting involves selling investments that have suffered losses in order to offset gains in other investments as a way of generating a write-off for tax purposes. It’s possible to deduct up to $3,000 in capital losses each year from ordinary income.

Is there anything good about market downturns?

While market downturns may lead to short-term reductions in security values, they could also offer opportunities to buy stocks and other securities at lower relative prices, but decisions should align with long-term goals and an investor’s risk tolerance.

Should I sell my stocks when the market declines?

Investment decisions should rely on an investor’s strategy and preferences, but it’s important to keep in mind that selling securities during a market downturn may be counterproductive as the market, historically, has always bounced back.

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What’s the Average 401(k) Balance?

The average 401(k) balance for all ages is $167,970 according to Vanguard’s How America Saves Report 2026. 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 could 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 2026.

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.

Average 401(k) Balance for Ages 25 and Under

•   Average 401(k) Balance: $7,259

•   Median 401(k) Balance: $2,234

•   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: $50,261

•   Median 401(k) Balance: $18,732

•   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: There are likely a lot of competing financial responsibilities for you right now, but it’s vital to make saving for the 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. 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: $120,742

•   Median 401(k) Balance: $46,919

•   Key Challenges for Savers: While the 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 401(k) 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: $214,991

•   Median 401(k) Balance: $78,730

•   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 2026, the regular contribution limit is $24,500, but individuals ages 50 and up can make an additional $8,000 in 401(k) catch-up contributions for a total of $32,500.

One thing to be aware of regarding catch-up contributions is that 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 2026 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 during these years 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: $305,006

•   Median 401(k) balance: $107,269

•   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 taking 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 30% versus taking it at 66.

In 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 $8,000) to their 401(k), 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 2026 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: $330,186

•   Median 401(k) balance: $103,202

•   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, health care 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 health care, 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.

Recommended: When Can I Retire?

How Much Should I Have in My 401(k)?

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.

Tips for Catching Up If You’re Behind

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 may 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 could 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 could 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 build 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 2026, those under age 50 can contribute up to $7,500 to an IRA or up to $8,600 if they’re 50 and older.

5. Make sure you have the right asset allocations.

The younger you are, the more time you typically 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, it’s important to save and invest your money wisely. You might 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 may 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.

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.

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 Vanguard’s How America Saves Report 2026, the average 401(k) account balance for adults ages 55 to 64 is 305,006. 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.

How can I catch up if my 401(k) balance is behind?

Ways to catch up if your 401(k) balance is behind include contributing enough to your 401(k) to get your employer match if one is offered, automating your contributions from your pay checks, having your contribution amount automatically increased every year (if your employer offers this option), and making catch-up contributions if you’re age 50 or older.

Photo credit: iStock/kate_sept2004

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To start investing, learn the basics, set clear goals, and choose a strategy that fits your timeline and risk tolerance. Even small, consistent investments can help build wealth over time.

Investing can help you work towards your financial goals for the future, but it can also feel like an intimidating minefield for the uninitiated. Fortunately, modern technology has made it easier to start an investment portfolio. You could get started today if you have an internet connection and a brokerage account.

But it’s important to understand both the potential risks and benefits before you put your money into the financial markets. You’ll want to learn the basics of investing, from the different types of investments to the various strategies you can use to try to build your wealth. With this knowledge, you can start to identify which investments may be right for you, and how to get started.

How to Start Investing

If you are ready to start investing and want to build a portfolio on your own, you can follow these steps to get started. Just remember that it’s important to do your homework first to identify whether an investment may be a good fit for your goals and tolerance for risk.

1. Determine Your Investment Goals

You’ll want to do your best to establish your financial goals before you start investing. Since investments offer the potential for growth over time, many people use portfolio gains to fund future financial goals, like purchasing a home or retirement. Figuring out which investment strategy is right for you starts by assessing and understanding your goals and time horizon, because they’re not the same for everyone.

2. Choose an Investment Account

You will also need to open a brokerage account and deposit money into it. Once your account is funded, you can buy and sell stocks, exchange traded funds (ETFs), mutual funds, and other securities.

You may also use an employer-sponsored retirement plan, like a 401(k), or an individual retirement account (IRA) – such as a Roth IRA – to make your investments. One benefit of some retirement investment accounts is that they are tax-advantaged, meaning your investments may grow tax-free or tax-deferred within the accounts.

It’s worth remembering that you may need to pay taxes when withdrawing money. A tax professional can help advise you on what options may be best for your personal circumstances. To get started, here’s a guide on how to open a brokerage account.

Start investing with up to $1,000 in stock.

Open and fund a SoFi Active Invest account and get up to $1,000 in stock.*

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3. Know Your Investment Options

There are numerous types of investments that you can explore and choose from. Here are some examples:

1. Stocks

When you think of investing, you probably think of the stock market. A stock gives an investor fractional ownership of a publicly traded company in units known as shares. Investing in stocks as a beginner — which may involve investing in and monitoring a small number of relatively low-risk companies — can be a good way to learn about the markets.

Stocks may generate returns for investors through capital appreciation, dividends, or both. Capital appreciation occurs when you buy a stock at one price, then sell it for a higher price in the future. The company may also pay dividends if it distributes part of its profits to shareholders.

Note, however, that it’s possible for investors to lose some of their initial investment if a company’s share price falls below their purchase price or all of that investment if the stock hits zero, making the stock worthless, which can happen. Investing in stocks carries some significant risks, and investors should be aware of those risks.

2. Bonds

Bonds are loans you make to a company or a government — federal or municipal — for a fixed period. In return for loaning them money, they promise to pay you, the investor, periodic interest and, eventually, your principal at the end of the period of the loan.

Bonds are often considered less risky investments than stocks. Bonds may be backed by the full faith and credit of the U.S. government, as is the case with U.S. Treasurys, or by state or local governments. They also may be backed by large companies.

However, the risk varies, and bonds are rated for quality and creditworthiness. Because the U.S. government is less likely to go bankrupt than an individual company, Treasury bonds are considered some of the least risky investments. However, they also tend to have lower returns. To start investing in bonds, a good first step is to learn about the options for buying bonds and the different types available..

3. Mutual Funds and ETFs

A mutual fund is a portfolio of assets either managed by a professional, or set up to track an index, such as the S&P 500. Funds typically focus on an asset class, industry, or region, and investors pay fees to the fund manager to buy and sell investments.

Exchange-traded funds (ETFs) are similar to mutual funds, though ETFs are traded on a stock exchange, giving investors the flexibility to buy and sell throughout the day. ETFs may also charge lower management fees than comparable mutual funds.

Mutual funds and ETFs can allow investors to diversify their holdings with a single investment vehicle. However, investors often invest in multiple funds for broader portfolio diversification.

4. Real Estate

Real estate is another type of investment which many people invest in by purchasing a home or a rental property.

If owning a home or becoming a landlord is out of reach for you, you can also invest in a real estate investment trust (REIT), or a company that operates in the real estate business. You can trade shares of a publicly listed REIT on a stock exchange like you would a stock. With a REIT, an investor buys a share of a real estate company that typically earns income through different types of property.

5. Robo Investing

For beginners who would be more comfortable with a hands-off approach, robo-investing uses automated, algorithm-driven technology to build and manage a diversified portfolio based on your financial goals and risk tolerance. These services typically have lower investment minimums and management fees compared to traditional human financial advisors, making them an accessible option for those just starting out. Some also offer varying degrees of human support for questions you may have about your investments.

To choose a robo advisor, investors may consider factors such as the range of investment products and portfolios offered, the types of investment accounts it supports (such as brokerage, retirement, and college saving accounts), how it handles portfolio rebalancing, and the level of support offered.

4. Decide Your Investment Style

Each individual investor will have different goals and concerns as it relates to their portfolio. You may want to work with a financial professional to help you zero in on what type of investments and overall portfolio may give you the best chance at reaching your goals.

With that in mind, you’ll want to think about your time frame, or time horizon — that is, how long you have to invest, and how long you might want to wait before selling your investments to see potential profits — assuming your investments accrued value.

Also think about your risk tolerance, or how much risk you’re willing to take with your money. Riskier investments may generate larger returns over time, but they can also lead to significant losses. This is something to consider when figuring out your specific investment style.

You’ll also want to think about how you allocate your investments, or the degree to which you diversify your portfolio. That means looking at the specific mix of investment types in your portfolio, and getting a sense of the risks and potential returns that each brings to the fold.

Quick Tips for Investing Beginners

An investment strategy is a plan for how you will invest your money. An investing strategy should consider your financial goals, risk tolerance, and time horizon. Here are three recommended tips and strategies for beginner investors.

•   Consider a buy-and-hold approach: Investors practicing buy-and-hold strategies tend to buy investments and hang on to them over the long term, regardless of short-term movements in the market. Doing so can help curb the tendency to panic sell, and it can also help minimize fees associated with trading, which may boost overall portfolio returns.

•   Utilize dollar-cost averaging: Dollar-cost averaging is a strategy that helps individuals regularly invest by making fixed investments on a regular schedule regardless of price. A dollar-cost averaging strategy can help individuals access a lower average share price and help them avoid emotional investing. On the flip side, dollar cost averaging may offer lower returns compared to lump sum investing in a rising market (and there is never a guarantee of seeing returns in investing).

•   Stay stoic: Remember to keep your emotions in check when investing. You may feel panicked every time the market dips, the economy slows, or a friend tells you that you need to shift your portfolio. But it may be wise to stick to your strategy and keep your goals in mind. There are no guarantees in investing, so don’t let the whims of the market give you whiplash.

Remember the Risks

It bears repeating that investing involves risk. There are all sorts of risks that investors assume when they put their money in the markets, and each individual investment may come with different types of associated risks. Some investment types are significantly riskier than others, too.

It’s important for beginner investors to keep in mind that there are no guarantees when investing. There’s a chance they could see negative returns, or lose all of their initial investment.

The Takeaway

For beginners, investing can seem complicated and intimidating — in many ways, it is. But if you take some simple initial steps to familiarize yourself with the markets, investing tools, and types of investments — and pair them with a sound strategy – you should set yourself up to be more confident and comfortable when you start investing.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest®. You can trade stocks, ETFs, or options through self-directed investing with SoFi Securities, or simply automate your investments with a robo advisor from SoFi Wealth. You'll gain access to alternative investments and upcoming IPOs, and can plan for retirement with a tax-advantaged IRA. With SoFi, you can manage all your investments, all in one place.

FAQ

How much money do you need to start investing?

It’s possible to start investing with very little money. Some brokerages allow investors to open accounts with as little as $0 to $5. At the same time, some investments may require a substantial minimum investment. Remember, however, that money is always needed in the account to purchase investments, such as stocks or funds.

What are the most popular investment options for beginners?

Some popular beginner investments include stocks, mutual funds, and exchange-traded funds (ETFs).

What are some simple investment strategies for beginners?

Some common investment strategies for beginners include buy and hold and dollar-cost averaging. Many beginners may also employ an index investing strategy, buying ETFs and mutual funds that track a benchmark index, like the S&P 500.

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