couple doing taxes

How to Pay Less Taxes: 9 Simple Steps

Taxes are part of life, but many people would like to know if there are any ways to lower their tax bill.

While paying no taxes isn’t likely, there are ways you can use the tax code to reduce your taxable income and tax liability. These range from knowing the right filing status to maxing out your retirement contributions to understanding which deductions and credits you may qualify for.

Read on to learn some smart strategies for lowering your tax bill without running afoul of the IRS.

Key Points

•   Selecting the most appropriate filing status for your situation can lower tax bills.

•   Maximizing contributions to retirement accounts can reduce taxable income.

•   Withdrawals from a 529 savings plan are tax-free when used for qualifying educational expenses.

•   Contributions to a Health Savings Account are tax-deductible, and distributions used for qualifying medical expenses are tax-free.

•   With investments, tax-loss harvesting may help reduce the taxes owed on capital gains.

1. Choosing the Right Filing Status

If you’re married, you have a choice to file jointly or separately. In many cases, a married couple will come out ahead by filing taxes jointly.

Typically, this will give them a lower tax rate, and also may help make them eligible for certain tax breaks, such as the Earned Income Tax Credit (EITC), the American Opportunity Tax Credit (AOTC), and the Lifetime Learning Credit (LLC) for education expenses. But there are certain circumstances where couples may be better off filing separately.

Some examples include: when both spouses are high-income earners and earn the same, when one spouse has high medical bills, and if your income determines your student loan payments.

Seeking advice from a tax professional or preparing returns both ways can help you assess the pros and cons of filing jointly or separately.

2. Maxing Out Your Retirement Account

Generally, the lower your income, the lower your taxes. However, you don’t have to actually earn less money to lower your tax bill.

Instead, you can reduce your gross income (which is your income before taxes are taken out) by making contributions to a 401(k) retirement plan, a 403(b) retirement plan, a 457 plan, or an IRA.

The more you contribute to a pre-tax retirement account, the more you can reduce your adjusted gross income (AGI), which is the baseline for calculating your taxable income. A lower taxable income may also put you into different tax brackets. It’s important to keep in mind, however, that there are annual limitations to how much you can put aside into retirement, which depend on your income and your age.

Even if you don’t have access to a retirement plan at work, you may still be able to open and contribute to an IRA. And, you can do this even after the end of the year.

While the tax year ends on December 31st, you may still be able to contribute to your IRA or open up a Roth IRA or traditional IRA (if you meet the eligibility requirements) up until the tax deadline in mid-April.

Increase your savings
with a limited-time APY boost.*


*Earn up to 4.00% Annual Percentage Yield (APY) on SoFi Savings with a 0.20% APY Boost (added to the 3.80% APY as of 7/10/25) for up to 6 months. Open a new SoFi Checking & Savings account and enroll in SoFi Plus by 8/12/25. Rates variable, subject to change. Terms apply here. SoFi Bank, N.A. Member FDIC.

3. Adding Up Your Health Care Costs

Health care expenses are typically only deductible once they exceed 7.5% of your AGI (and only for those who itemize their deductions). But with today’s high cost of medical care and, in some cases, insurance companies passing more costs onto consumers, you might be surprised how much you’re actually spending on health care.

In addition to the obvious expenses, like copays and coinsurance, it’s key to also consider things like dental care, prescription medications, prescription eyeglasses, and even the mileage to and from all medical appointments.

4. Saving for Private School and College

If you have children who may attend college in the future, or who attend or will attend private school, it can pay off to open a 529 savings plan.

Even if your children are young, it’s never too early to start setting aside money for their education. In fact, because of the power compounding returns with long-term investing, starting early could help make college a lot more affordable.

A 529 savings plan is a type of investment account designed to help parents save for educational expenses (such as for private schools or colleges) in a tax-advantaged way. While you won’t typically get a federal tax deduction for the money you put into a 529, many states offer a state tax deduction for these contributions.

The big tax advantage is that no matter how much your investments grow between now and when you need the money, you won’t pay taxes on those gains, and any withdrawals you take out to pay for qualified education expenses will be tax-free.

Recommended: Compound vs. Simple Interest

5. Putting Estimated Tax Payments on Your Calendar

While this move won’t technically lower your taxes, it could help you avoid a higher-than-necessary tax bill at the end of the year.

That’s because income tax in the United States works on a pay-as-you-go system. If you are a salaried employee, the federal government typically collects income taxes throughout the year via payroll taxes.

If you’re self-employed or a freelancer, however, it’s up to you to pay as you go. You can do this by paying the IRS taxes in quarterly installments throughout the year.

If you don’t pay enough, or if you miss a quarterly payment due date, you may have to pay a penalty to the IRS. The penalty amount depends on how late you paid and how much you underpaid.

The deadlines for quarterly estimated tax payments are typically in mid-April, mid-June, mid-September, and mid-January.

For help calculating your estimated payments, individuals can use the Estimated Tax Worksheet from the IRS .

6. Saving Your Donation Receipts

You may be able to claim a deduction for donating to charities that are recognized by the IRS. So it’s a good idea to always get a receipt whenever you give, whether it’s cash, clothing and household items, or your old car.

If your total charitable contributions and other itemized deductions, including unreimbursed medical expenses, mortgage interest, and state and local taxes, are greater than your available standard deduction, you may wind up with a lower tax bill.

Note: For any contribution of $250 or more, you must obtain and keep a record.

7. Adding to Your HSA

If you have a high deductible health plan, you may be eligible for or already have a health savings account (HSA), where you can set aside funds for medical expenses.

HSA contributions are made with pre-tax dollars, so any money you put into an HSA is income the IRS will not be able to tax. And, you can typically add money until mid-April to deduct those contributions on the prior year’s taxes.

Distributions from your HSA are tax-free as long as they’re used for yourself, your spouse, and your dependents for qualifying medical expenses. If you don’t end up needing the money to pay for health care, you can simply leave it in your HSA until you reach age 65, at which point you can withdraw money from an HSA for any reason.

HSAs typically allow you to invest your funds, and in that case, the interest, dividends, and capital gains from an HSA are also nontaxable for qualified distributions.

Recommended: How to Switch Banks

8. Making Student Loan Payments

You may be able to lower your tax bill by deducting up to $2,500 of student loan interest paid per year, even if you don’t itemize your deductions.

There are certain income requirements that must be met, however. The deduction is phased out when an individual’s income reaches certain thresholds.

Even so, it’s worth plugging in the numbers to see if you qualify.

9. Selling Off Poorly Performing Investments

If you have investments in your portfolio that have been down for quite some time and aren’t likely to recover, selling them at a loss might benefit you tax-wise.

The reason: You can use these losses to offset capital gains, which are profits earned from selling an investment for more than you purchased it for. If you profited from an investment that you held for one year or less, those gains can be highly taxed by the IRS.

This strategy, known as tax-loss harvesting, needs to be done within the tax year that you owe, and may be used to reduce capital gains on both short-term and long-term investments (short-term gains are taxed at a higher rate than long-term gains). Tax-loss harvesting can help a taxpayer who has made money from investments avoid a large, unexpected tax bill.

The Takeaway

The key to saving on taxes is to get to know the tax code and make sure you’re taking advantage of all the deductions and credits you’re entitled to.

It can also be helpful to look at tax planning as a year-round activity. If you gradually make tax-friendly financial decisions like saving for retirement, college, and health care throughout the year, you could easily reduce your tax burden and potentially score a refund at the end of the year. If you do score a tax refund, you can put it to good use, paying down debt or earning interest in a bank account.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.


Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.80% APY on SoFi Checking and Savings.

FAQ

How can I lower my tax payments?

Filing jointly, when applicable, can often get you a lower tax rate and a higher standard deduction. Other common ways to reduce taxes include contributing the maximum amount to retirement accounts, such as 401(k)s and IRAs, making tax-deductible contributions to an HSA account, deducting charitable contributions, and deducting up to $2,500 in student loan interest payments.

With investments, tax-loss harvesting may also help reduce the amount of taxes owed on capital gains.

How can saving for retirement help me lower my taxes?

Contributing to traditional, pre-tax retirement accounts like 401(k)s, 403(b)s, 457 plans, or IRAs can lower your taxable income for the year. These pre-tax contributions reduce the income you report to the IRS, which can result in a smaller tax bill now, while also allowing your retirement investments to grow tax-deferred until retirement.

Are there tax advantages to saving for health care expenses?

Yes, if you have a high-deductible health plan, you may be eligible for a Health Savings Account (HSA). HSAs offer a few different tax advantages: your contributions are tax-deductible, the money, if invested, may grow tax-free, and withdrawals for qualified medical expenses are also tax-free. In addition, non-medical withdrawals made after turning 65 are also tax-free.



SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2025 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.


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.

SoFi members with Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below).

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.

As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Eligible Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Eligible Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.

Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 1/24/25. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.

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.


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

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

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

SOBNK-Q225-099

Read more

What Is UCITS?

What Are UCITS Funds?

UCITS, or Undertakings for Collective Investment in Transferable Securities, refers to a set of guidelines that allow pooled securities, similar to mutual funds, to be traded across borders within the European Union.

As such, UCITS is essentially a framework or directive that governs the composition and trading of UCITS funds.

UCITS funds are registered in individual EU countries and must comply with European Commission rules. Investors in the U.S. may also access these funds via authorized brokers. UCITS may be available in other regions, like Asia, as well.

Key Points

•   UCITS refers to a set of guidelines that allows a certain type of mutual fund to be traded freely across country borders within the EU.

•   UCITS funds are a type of mutual fund that complies with European Union regulations and holds securities from throughout the region.

•   The rules for UCITS funds are periodically updated, with each new version noted by a Roman numeral.

•   Although these are considered EU securities, U.S. investors can purchase these funds through an authorized broker.

•   UCITS funds are highly regulated, and investors outside the EU may face tax events when trading these funds.

What Is a UCITS Fund?

UCITS funds are a type of mutual fund that complies with European Union regulations. These securities can be traded across the borders of EU member states.

The EU launched UCITS for two primary reasons:

1.    To structure a type of security under the EU umbrella that allowed for the cross-border sale of mutual funds throughout the EU, and across other markets.

2.    To better regulate investment asset transactions among all EU member countries, giving investors inside and outside of the EU access to more tightly regulated investment funds.

Fundamentally, UCITS rules give EU regulators a powerful tool to centralize key financial services issues like types of investments allowed, asset liquidity, investment disclosures, and investor safeguards. By rolling the new rules and regulations into UCITS, EU regulators sought to make efficient and secure investment funds available to a broad swath of investors.

For investors, UCITS funds offer flexibility and security. Not only are the funds widely viewed as safe and secure owing to the level of regulation, but UCITS funds offer a diversified fund option to investors who might otherwise have to depend on single public companies for the bulk of their investment portfolios.


💡 Quick Tip: The best stock trading app? That’s a personal preference, of course. Generally speaking, though, a great app is one with an intuitive interface and powerful features to help make trades quickly and easily.

A Brief History of UCITS

The genesis of UCITS funds dates back to the mid-1980’s, with the rollout of the European Directive legislation, which set a new blueprint for financial markets across the continent. The new law introduced UCITS funds on an incremental basis and has been used as a way to regulate financial markets with regular updates and revisions over the past three decades.

In 2002, the EU issued a pair of new directives related to mutual fund sales — Directives 2001/107/EC and 2001/108/EC, which expanded the market for UCITS across the EU and loosened regulations on the sale of index funds in the region.

The fund initiative accelerated in 2009 and 2010, when the Directive 2009/65/EC of the European Parliament and of the Council of 13 July 2009 clarified the use of UCITS in European investment markets, especially in coordination of all laws, regulations, and administrative oversight. The next year, the European Union reclassified UCITS w as investment funds regulated under Part 1 of the Law of 17 December 2010.

In recent years, “Alt UCITS” or alternative UCITS funds have grown in popularity, along with other types of alternative investments.

Get up to $1,000 in stock when you fund a new Active Invest account.*

Access stock trading, options, alternative investments, IRAs, and more. Get started in just a few minutes.


*Customer must fund their Active Invest account with at least $50 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.026%. See full terms and conditions.

How Does a UCIT Fund Work?

Structurally, UCITS are built like mutual funds, with many of the same features, regulatory requirements, and marketing models.

Individual and institutional investors, who form a collective group of unit holders, put their money into a UCIT, which, in turn, owns investment securities (mostly stocks and bonds) and cash. For investors, the primary goal is to invest their money into the fund to capitalize on specific market conditions that favor the stocks or bonds that form the UCITS.

UCITS funds may provide one way for American investors to get more international diversification within their portfolios.

A professional money manager, or group of managers, run the fund, and they are singularly responsible for choosing the securities that make up the fund. The UCITS investor understands this agreement before investing in the fund, thus allowing the fund managers to choose investments on their behalf.

An investor may leave the fund at any point in time, and do so by liquidating their shares of the fund on the open market. American investors should know that the Internal Revenue Service may classify UCITS as passive foreign investment companies, which could trigger more onerous tax treatments, especially when compared to domestic mutual funds.


💡 Quick Tip: How to manage potential risk factors in a self-directed investment account? Doing your research and employing strategies like dollar-cost averaging and diversification may help mitigate financial risk when trading stocks.

UCITS Rules and Regulations

UCITS do have some firm regulatory and operational requirements to abide by in the European Union, as follows:

•   The fund and its management team are usually based on a tax-neutral EU country (Ireland would be a good example).

•   A UCITS fund operates under the laws mandated by the member state of its headquarters. After the fund is licensed in the EU state of origin, it can then be marketed to other EU states, and to investors around the world. The fund must provide proper legal notification to the state or nation where it wants to do business before being allowed to market the fund to investors.

•   A UCITS fund must provide proper notice to investors in the form of a Key Investor Information Document, usually located on the fund’s website. The fund must also be approved.

•   A UCITS fund must also provide a fund prospectus to investors (also normally found on the fund’s web site) and must file both annual and semiannual reports.

•   Any time a UCITS company issues, sells, or redeems fund shares, it must make pricing notification available to investors.

The Takeaway

Undertakings for Collective Investment in Transferable Securities (UCITS) is a category of investment funds primarily available in the EU, but investors in the U.S. may access these funds through authorized brokers.

UCITS may be an interesting type of investment for U.S. investors looking to diversify their portfolios. As with any investment, investors must conduct thorough due diligence on a UCITS security, which should include a review of fund holdings, past performance, management stability, fees, and tax consequences.

FAQ

What is UCITS in simple terms?

UCITS is a set of guidelines governing a type of mutual fund in the EU. It stands for: “undertaking for collective investment in transferable securities.” This means it’s a type of pooled investment, similar to a U.S. mutual fund, that invests in securities like stocks, bonds, short-term government bonds, and cash.

What is a non-UCITS fund?

A non-UCITS fund does not comply with UCITS guidelines. For example, a non-UCITS fund might not be open-ended or it might be illiquid — two primary UCITS requirements.

What are the disadvantages of UCITS?

UCITS funds may have higher costs, owing to the regulatory requirements governing securities in the EU. Also, because the UCITS standards can be restrictive, these funds may not be able to take advantage of certain market conditions. UCITS funds can also have higher tax consequences for U.S. investors.


Photo credit: iStock/kupicoo

SoFi Invest®

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

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.
For a full listing of the fees associated with Sofi Invest please view our fee schedule.

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

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



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.


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

Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.
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.

SOIN-Q225-098

Read more
overhead view of businessman working, looking at business charts and graphs

How to Find the Right Fixed Index Annuity Rate for Your Needs

Annuities are a type of insurance contract that investors can use to fund their retirement or help meet other financial goals. When someone purchases an annuity, they pay premiums to the annuity issuer. The annuity company then makes regular payments back to the annuitant as agreed in the annuity contract.

Annuities can provide a steady stream of income in retirement, which may help support people’s investment goals. What’s important to keep in mind, however, is that rates of return generated can vary from one annuity to the next. It’s helpful to understand how to compare index annuity rates side by side to find the best one for your needs.

Key Points

•   Fixed index annuities offer a guaranteed minimum return and potential for higher returns linked to a market index.

•   Key factors affecting rates are cap rate, participation rate, and fees.

•   These annuities may help balance safety with market growth opportunities.

•   A good rate considers minimum return, cap, participation, fees, and the company’s financial health.

•   Evaluate companies by financial ratings and compare rates, fees, and terms to direct market investments.

What Is an Indexed Annuity?

An indexed annuity, or fixed index annuity, is a specific type of annuity product that can yield a minimum guaranteed rate of return along with a rate of return that’s linked to a stock market index.

For example, the annuity’s performance may be based on the performance of the S&P 500 Composite Price Index. This is a market capitalization-weighted index that represents 500 of the largest publicly traded U.S. companies.

Generally, annuities are indexed, fixed, or variable. With a fixed annuity, you’re guaranteed to earn a minimum rate of return, making them relatively safe investments. Variable annuity returns hinge on how underlying annuity investments, such as mutual funds, perform which can make them riskier. Indexed annuities strike a middle ground in terms of their risk/reward profile.

This type of annuity may be suitable to investors who seek upside potential with built-in downside protection, while enjoying the benefits of tax-deferred growth. Indexed annuities may also be favorable among investors who lean toward a passive versus active investing strategy.

What Are Fixed Index Annuity Rates?

Fixed index annuity rates are the guaranteed minimum rate of return on an annuity. Rather than tracking interest rates, the fixed index annuity rate is benchmarked against a particular index.

How Fixed Index Annuities Work

Fixed index annuities have two phases: the accumulation phase and the income phase.

Once you purchase a fixed indexed annuity, the accumulation phase begins. This is the period during which your annuity earns interest on a tax-deferred basis. The amount of money you have in the annuity, also referred to as the contract value, can fluctuate over time based on how the underlying index that the annuity tracks is performing.

Annuity returns are typically recalculated every 12 months, though the annuity contract should spell out how and when return calculations occur. It’s important to keep in mind that the contract may specify a cap rate, which represents the maximum positive rate of return an indexed annuity can earn.

The income or annuity phase is when payments are made back to you from the contract. These payments can be made periodically or be delivered in a single lump sum. Additionally, they can last for a specified time frame or for the duration of your natural life. If you’re married, indexed annuity payments can also continue to be paid to your spouse after you pass away. The annuity contract will detail the payment schedule.

For example, in the accumulation phase, an annuity might pay out a minimum of 3% with a 7% rate cap (even if the index is tracking at 11%). In the income phase, the fixed index annuity might be paid monthly starting at a predetermined date, and pay out across the lifetime of you and/or your spouse.

How Are Fixed Index Annuity Rates Set?

Broadly speaking, index annuity rates are tied to the index they track. So again, this could be an index like the S&P 500 Composite Price Index or the Nasdaq 100.

With a fixed index annuity, the annuity company guarantees a minimum interest rate alongside the interest rate generated by the underlying index.

When setting fixed index annuity rates, annuity contract providers typically use several factors to determine how much of a return is credited to the contract owner. The actual rate of return realized from an indexed annuity can depend on:

•  Cap rate

•  Participation rate

•  Margin/spread fees

•  Riders

Here’s more on how each one affects fixed index annuity rates.

Cap Rate

Cap rate represents the upper limit on returns that an annuity can earn over time. For instance, an indexed annuity that has a 3.5% cap rate would limit the returns credited to the annuity owner to that amount — even when the underlying index produces a higher rate of return. Generally, cap rates fall somewhere between 3 and 7% per year.

Participation Rate

If the index an annuity tracks goes up, the participation rate determines how much of that gain is credited to an annuity owner. For instance, if the index increases by 10% and the participation rate is 80%, an 8% return would be credited.

Margin/Spread Fees

Also referred to as an administrative fee, this fee can deduct a set percentage from index gains. An indexed annuity that realizes a 10% gain and has a 3% spread fee, for example, would yield a net credited return of 7%.

Riders

Riders can be used to enhance fixed indexed annuity benefits. For instance, you might choose to add a rider that would guarantee lifetime income payments to your spouse if you’re married. Expanding the annuity’s coverage can result in added premium costs, which may reduce credited returns.

What Is a Good Fixed Index Annuity Rate?

A “good” fixed index annuity rate is one that results in a rate of return that aligns with your objectives and needs. Index annuity rates can also vary based on the length of the contract term. Cost is also an important consideration, as indexed annuities can charge a variety of fees, including administrative fees and surrender charges, which may apply if you decide to cancel an annuity contract.

The top index annuities are the ones that offer the best combination of high rates and low fees. It’s also important to consider an annuity company’s ratings before purchasing an indexed annuity.

Is an Indexed Annuity Right for You?

Fixed index annuities can offer the potential to earn higher rates of return compared to traditional fixed annuities. At the same time, they may be less risky than a variable annuity product since they track an index rather than investing in the market directly.

Investment risk management is an important part of any strategy for growing wealth, even when you’re starting from scratch with building an investment portfolio. Indexed annuities aim to help with balancing that risk while creating an ongoing stream of income to rely on in retirement.

That said, it’s also important to consider how fixed index annuity rates compare to the rate of return one could earn by investing in the market directly. For example, you may see better returns by investing in individual stocks. That does involve taking more risk but individuals with a longer timeline until retirement generally have a broader window to recover from market downturns.

The Takeaway

A fixed index annuity offers investors a minimum guaranteed rate of return along with a rate of return that’s linked to a stock market index. While fixed indexed annuities do offer some advantages, they may not suit every investor and it’s important to research index annuity rates to find the right one.

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

Opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.

FAQ

What is a fixed annuity?

Fixed annuities are a type of insurance contract that investors can use to fund their retirement or meet other financial goals. When someone purchases an annuity, they pay premiums to the annuity issuer, and the annuity company then makes regular payments back to the annuitant as agreed in the annuity contract.

What is an indexed annuity?

An indexed annuity, or fixed index annuity, is a specific type of annuity product that can yield a minimum guaranteed rate of return along with a rate of return that’s linked to a stock market index.

What determines fixed index annuity rates?

Annuity contract providers typically use several factors to determine how much of a return is credited to the contract owner. The actual rate of return realized from an indexed annuity can depend on the cap rate, participation rate, margin and spread fees, and riders.


About the author

Rebecca Lake

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.




SoFi Invest®

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

SoFi Invest encompasses two distinct companies, with various products and services offered to investors as described below: Individual customer accounts may be subject to the terms applicable to one or more of these platforms.
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.
For a full listing of the fees associated with Sofi Invest please view our fee schedule.

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

Claw Promotion: Customer must fund their Active Invest account with at least $50 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.026%. See full terms and conditions.

Disclaimer: The projections or other information regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results, and are not guarantees of future results.
S&P 500 IndexThe S&P 500 Index is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S. It is not an investment product, but a measure of U.S. equity performance. Historical performance of the S&P 500 Index does not guarantee similar results in the future. The historical return of the S&P 500 Index shown does not include the reinvestment of dividends or account for investment fees, expenses, or taxes, which would reduce actual returns.
Mutual Funds (MFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or clicking the prospectus link on the fund's respective page at sofi.com. You may also contact customer service at: 1.855.456.7634. Please read the prospectus carefully prior to investing.Mutual Funds must be bought and sold at NAV (Net Asset Value); unless otherwise noted in the prospectus, trades are only done once per day after the markets close. Investment returns are subject to risk, include the risk of loss. Shares may be worth more or less their original value when redeemed. The diversification of a mutual fund will not protect against loss. A mutual fund may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.


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.

SOIN-Q225-135

Read more
Understanding Seller Concessions_780x440

Understanding Seller Concessions

Buying a new home requires managing a lot of moving parts, from mortgage preapproval to closing. Even after an offer is accepted, buyers and sellers are still at the negotiating table. If closing costs or surprise expenses become too much for the buyer, a seller concession could help seal the deal.

Although seller concessions can work to a buyer’s advantage, they are neither a guaranteed outcome nor a one-size-fits-all solution for every real estate transaction.

To determine if seller concessions are the right move from a buyer’s perspective, here are some key things to know, including what costs they can cover and when to consider asking for them.

Note: SoFi does not offer seller concessions at this time.

Key Points

•   Seller concessions help buyers cover closing costs, including prepaid expenses and discount points.

•   Concessions differ from price reductions, and buyers don’t receive them as cash.

•   The maximum amounts allowed for concessions can vary by loan type and whether the property is an investment or a residence.

•   Some typical seller’s concessions include expenses like property taxes, appraisal fees, loan origination fees, homeowners insurance costs, attorney fees, and title insurance fees, among others.

•   Asking for seller’s concessions might result in a higher overall purchase price or in the seller rejecting the offer altogether.

What Are Seller Concessions?

Seller concessions represent a seller’s contribution toward the buyer’s closing costs, which include certain prepaid expenses and discount points. A seller concession is not the equivalent of a price reduction; nor is it received as cash or a loan discount.

Closing costs usually range from 2% to 5% of the loan principal on your mortgage. When that’s combined with a down payment, the upfront expense of buying a home can be burdensome, especially for first-time homebuyers.

Buyers can ask for concessions on the initial purchase offer or later if the home inspection reveals problems that require repairs.

Although this can be a helpful tool to negotiate a house price, there are rules about eligible costs and limits to how much buyers can ask for.

Recommended: Homebuyer Guide

What Costs Can Seller Concessions Cover?

A buyer’s closing costs can vary case by case. Generally, buyers incur fees related to the mortgage loan and other expenses to complete the real estate transaction.

There are also types of prepaid expenses and home repairs that can be requested as a seller concession.

Some common examples of eligible costs include the following:

•   Property taxes: If the sellers have paid their taxes for the year, the buyer may be required to reimburse the sellers for their prorated share.

•   Appraisal fees: Determining the estimated home value may be required by a lender to obtain a mortgage. Appraisal costs can vary by geography and home size but generally run between $300 and $400 for a single-family home and a conventional loan.

•   Loan origination fees: Money paid to a lender to process a mortgage, origination fees, can be bundled into seller concessions.

•   Homeowners insurance costs: Prepaid components of closing costs like homeowners insurance premiums can be included in seller concessions.

•   Title insurance costs: A title insurance company will search to see if there are any liens or claims against the property. This verification, which varies widely in price, but generally costs between 0.1% to 2% of the loan principal, protects both the homeowner and lender.

•   Funding fees: One-time funding fees for federally guaranteed mortgages, such as FHA and VA loans, can be paid through seller contributions. Rates vary based on down payment and loan type.

•   Attorney fees: Many states require a lawyer to handle real estate closings. Associated fees can run from about $750 to $1,250 or more, based on location.

•   Recording fees: Some local governments may charge a fee to document the purchase of a home.

•   HOA fees: If a home is in a neighborhood with a homeowners association, there will likely be monthly dues to pay for maintenance and services. A portion of these fees may be covered by the seller.

•   Discount points: Buyers may pay an upfront fee, known as a discount point, to lower the interest rate they pay over the life of the mortgage loan. (The cost of one point is typically 1% of the loan amount and may lower your mortgage rate by as much as 0.25%.)

•   Home repairs: If any issues emerge during a home inspection, the repair costs can be requested as a seller concession.

Closing costs can also be influenced by the mortgage lender. When shopping for a mortgage, evaluating expected fees and closing costs is a useful way to compare lenders. Factoring in these costs early on can give buyers a more accurate idea of what they can afford and better inform their negotiations with a seller.

Recommended: How Much Are Closing Costs on a New Home?

Rules and Limits for Seller Concessions

Determining how much to ask for in seller concessions isn’t just about negotiating power. For starters, the seller’s contributions can’t exceed the buyer’s closing costs.

Other factors can affect the allowable amount of seller concessions, including the type of mortgage loan and whether the home will serve as a primary residence, vacation home, or investment property.

Here’s a breakdown of how concessions work for common types of loans.

Conventional Loans

Guidance on seller concessions for conventional loans is set by Fannie Mae and Freddie Mac. These federally sponsored enterprises buy and guarantee mortgages issued through lenders in the secondary mortgage market.

With conventional loans, the limit on seller concessions is calculated as a percentage of the home sale price based on the down payment and occupancy type.

If it’s an investment property, buyers can only request up to 2% of the sale price in seller concessions.

For a primary or secondary residence, seller concessions can add up to the following percentages of the home sale price:

•   Up to 3% when the down payment is less than 10%

•   Up to 6% when the down payment is between 10% and 25%

•   Up to 9% when the down payment is greater than 25%

FHA Loans

FHA loans, which are insured by the Federal Housing Administration, are a popular financing choice because down payments may be as low as 3.5%, depending on a borrower’s credit score.

For this type of mortgage, seller concessions are limited to 6% of the home sale price.

VA Loans

Active service members, veterans, and some surviving spouses may qualify for a mortgage loan guaranteed by the Department of Veterans Affairs. For buyers with this type of mortgage, seller concessions are capped at 4% of the home sale price.

VA loans also dictate what types of costs may qualify as a seller concession. Some eligible examples: paying property taxes and VA loan fees or gifting home furnishings, such as a television.

Recommended: Guide to Buying, Selling, and Updating Your Home

Seller Concession Advantages

There are a few key ways seller concessions can benefit a homebuyer. For starters, they can reduce the amount paid out of pocket for closing costs. This can make the upfront costs of a home purchase more affordable and avoid depleting savings.

Reducing closing costs could help a buyer make a higher offer on a home, too. If it’s a seller’s market, this could be an option to be a more competitive buyer.

Buyers planning significant home remodeling may want to request seller concessions to keep more cash on hand for their projects.

Seller Concession Disadvantages

Seller concessions can also come with some drawbacks. If sellers are looking for a quick deal, they may view concessions as time-consuming and decline an offer.

When sellers agree to contribute to a buyer’s closing costs, the purchase price can go up accordingly. The deal could go awry if the home is appraised at a value less than the agreed-upon sale price. Unless the seller agrees to lower the asking price to align with the appraised value, the buyer may have to increase their down payment to qualify for their original financing.

Another potential downside is that buyers could ultimately pay more over the loan’s term if they receive seller concessions than they would otherwise. If a buyer offers, say, $350,000 and requests $3,000 in concessions, the seller may counteroffer with a purchase price of $353,000, with $3,000 in concessions.

The Takeaway

Seller concessions can make a home purchase more affordable for buyers by reducing closing costs and expenses, but whether it’s a buyer’s or seller’s market will affect a buyer’s potential to negotiate. A real estate agent can offer guidance on asking for seller concessions.

FAQ

How do you explain seller concessions?

Seller concessions are the costs and fees that a seller may agree to pay on behalf of a buyer to sweeten the deal. These could include expenses like property taxes, appraisal fees, loan origination fees, homeowners insurance costs, attorney fees, title insurance fees, recording fees, funding fees, HOA fees, mortgage point costs, and even repair costs.

Can seller concessions exceed closing costs?

Seller concessions cannot be greater than closing costs. The maximum amount of seller concessions you can get with a given mortgage depends on a number of factors, including the type of loan it is, but the amount will never exceed the amount of the closing costs.

What is the most a seller can pay in closing costs?

The maximum a seller can pay in closing costs depends on the type of mortgage that’s involved. For a conventional loan, the maximum for an investment property is 2% of the sale price. For a primary or secondary residence, it depends on the down payment: up to 3% when the down payment is less than 10%; up to 5% when the down payment is between 10% and 25%; and up to 9% when the down payment is more than 25%. The amount sellers can pay in closing costs is capped at 6% for FHA loans and 4% for VA loans.


SoFi Loan Products
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 Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.



*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.

SOHL-Q225-172

Read more

Savings Goals by Age: Smart Financial Targets by Age Group

Mapping out your financial future can be daunting, especially if you only have a vague sense of what you want to accomplish.

It can be useful to consider financial milestones to help you chart your journey from college graduation through retirement. Here’s a look at some common savings goals by age to help you orient yourself and build a plan.

Key Points

•   In your 20s, consider prioritizing paying off high-interest debt, building an emergency fund with three to six months’ expenses, and starting to save for retirement.

•   In your 30s, you may prioritize saving for a home down payment, increasing retirement contributions, and setting up a 529 college plan for children.

•   In your 40s, think about growing your emergency fund, protecting assets with insurance, and continuing to save for retirement.

•   In your 50s, take advantage of catch-up contributions to increase retirement savings and consider paying off or refinancing your mortgage.

•   In your 60s, you may continue to fund retirement accounts, assess savings, and plan a retirement income strategy.

Savings Goals for Your 20s

In your 20s, people are often just out of school, starting a career, and getting their life in order. As if that weren’t enough, they may face challenges like student loan debt or credit debt. Now is the time to set financial goals, consider an investment strategy, and start building healthy financial habits.

Paying Off High Interest Debt

If you have any high-interest debt — typically debts close to 8% or more — you might focus on paying it off. High-interest payments can cost you a lot over the life of a loan.

Credit cards, which often allow minimum payments that are much less than the total balance due, can be particularly costly as interest on the balance accrues. The more money going toward high-interest debt, the less you can focus on your savings goals.

Building Emergency Savings

At this age, people are often just getting on their own feet and might not have a lot of extra cash to stock away. Establishing a rainy day fund can be a useful savings goal. Generally, emergency funds contain at least three to six months’ worth of living expenses.

This fund can help cover emergencies like unexpectedly needing to replace a car transmission, a trip to urgent care, or losing your income. Since you never know when you’ll need to access your emergency fund, consider saving it in an easily accessible vehicle, such as a high-yield savings account.

Putting your money into interest-bearing accounts can help your money grow exponentially over time through the power of compound interest. Compound interest allows you to earn interest on the interest you earn as well as the principal, so higher interest rates can translate into higher savings over time.

Recommended: Planning your emergency fund? Our emergency fund calculator can assist you in setting the right target.

Increase your savings
with a limited-time APY boost.*


*Earn up to 4.00% Annual Percentage Yield (APY) on SoFi Savings with a 0.20% APY Boost (added to the 3.80% APY as of 7/10/25) for up to 6 months. Open a new SoFi Checking & Savings account and enroll in SoFi Plus by 8/12/25. Rates variable, subject to change. Terms apply here. SoFi Bank, N.A. Member FDIC.

Saving for Retirement

The earlier you start investing for retirement, the longer you can take advantage of the returns you may earn on your investments.

Compound returns refers to the gains investors may see on both their initial investments and any profits they may generate, assuming they’re reinvested. Unlike compound interest, the rate of return on investments can vary significantly depending on market performance, and investors may experience losses on their initial principal, as well. Over the long-term, however, a well-diversified portfolio has the potential to see substantial growth, and this is true of investments in retirement plans, as well.

Consider taking advantage of any retirement accounts your employers offer, such as a 401(k). If your employer doesn’t offer a retirement plan, there are other options, such as setting up an individual retirement account (IRA), where you can save for retirement in a tax-advantaged way on your own.

Savings Goals for Your 30s

In your 30s, people are often more settled into a career path and may be thinking about other goals, such as purchasing a house or having kids.

More Saving for Retirement

As your income grows and retirement gets a little bit closer, consider increasing the amount you’re setting aside for retirement. If your employer offers a match to your 401(k) contributions, taking advantage of the match can be a wise move, since this is essentially free money.

Buying a Home

If you’re thinking about buying a home, you’ll want to focus on saving for a down payment. The amount you will need to save will depend on housing prices in the area where you’re looking to buy. A larger down payment can make it easier to secure a mortgage, and can also mean that you pay less interest over the life of the loan.

Also, lenders may require borrowers to have mortgage insurance if they’re making a down payment smaller than 20%, which is an added expense to the home-buying process.

Setting up College Funds

If you have children, another consideration is saving for their college education. One way you can do this is to open a 529 college savings plan that helps you save for your child’s tuition and other education-related expenses. Just be sure not to neglect other long-term goals, such as retirement, while saving for your child’s college education.

Savings Goals for Your 40s

As you enter your forties, you are likely entering your highest earning years. If you have your high-interest debts behind you, you can devote your attention to building your net worth.

Keeping an Eye on Your Emergency Fund

The amount of money you needed to cover six months’ worth of expenses in your 20s is likely far less than what you need now, especially if you have a mortgage to pay and children to support. You’ll want to make sure that your emergency fund grows with you.

Protecting Your Assets

Now that you may have a more substantial income and own some valuable things, such as a home and a car, you’ll want to make sure you protect those assets with adequate insurance. Home and auto insurance protect you in the event that something happens to your house or your car.

You may also want to consider getting life insurance if you haven’t already. This can provide a cash cushion to help your family replace your income or cover other expenses should you die. The younger you are when you purchase life insurance, generally the less expensive it will be.

Savings Goals for Your 50s

In your 50s, you’re likely still in your top earning years. You may still be paying off your mortgage, and your kids may now be preparing for college or out of the house.

Taking a Closer Look at Retirement Savings

As retirement age approaches, you’ll want to continue contributing as much as you can to your retirement account. When you turn 50, you are eligible to make catch-up contributions to your 401(k) and IRAs.

These contributions provide an opportunity to boost your retirement savings if you haven’t been able to save as much as you hoped up to this point. Even if you have been meeting your savings goals, the contributions allow you to throw some weight behind your savings and take full advantage of tax-advantaged accounts in the decade before you may retire.

Continuing to Pay Off a Mortgage

If you think your monthly mortgage payments may be too high to manage on a fixed income, you might consider paying off or refinancing your mortgage before you retire.

Goals for Your 60s

As you enter your 60s, you may be nearing your retirement. However, when it comes to saving, you don’t have to slow down. As long as you are earning income, you might want to keep funding your retirement accounts.

Thinking Long-Term

Now is a good time to assess how much you have saved for retirement and perhaps adjust what you are contributing (based on how much you’ve already put aside and how much you can afford). At the same time, you may want to plan out a retirement income strategy to determine when you’ll start withdrawing funds and how much you’ll take each month or year. You’ll also want to decide when to take Social Security retirement benefits. Delaying benefits until age 70 could increase the monthly payments you receive.

The Takeaway

Everyone’s personal timeline is different. The milestones you hit and when you hit them may vary depending on your personal situation. For example, someone graduating from college with $50,000 in student loan debt is at a very different starting point than someone who graduates with no debt. And while someone might be able to buy a house in their early 30s, others may live in a more expensive area and need more time to save.

No matter your starting point and situation, a simple way to manage your finances at any age is to open a checking and savings account where you can spend, save, and earn all in one product.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.


Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.80% APY on SoFi Checking and Savings.

FAQ

What primary savings goal should I focus on in my 20s?

The top priority in your 20s is building a solid financial foundation. This may mean creating a plan to pay off high-interest debt, establishing an emergency fund that can cover three to six months of living expenses if a financial emergency arises, and starting to save for retirement.

What are the benefits of starting to save for retirement early?

Starting to save for retirement early allows you to take full advantage of compound returns. While all investments are subject to the risk of loss, compound returns may lead to substantial growth over the long term. Even small contributions can grow significantly over decades, making it easier to meet your retirement goals.

Besides retirement, what other major savings goals should I consider?

Beyond retirement, important financial goals include building an emergency fund to cover unexpected expenses, saving for a down payment on a home, and setting aside funds for children’s college education. It’s also wise to regularly review insurance coverage to help protect your assets.

What should I consider when planning my retirement income strategy?

The first step in planning your retirement income strategy is to assess how much you have saved. You may need to adjust your contributions to your retirement accounts or other investments to help you reach your goals. You should also decide when you want to start withdrawing money from your accounts, along with when you want to start taking Social Security benefits.



SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2025 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.


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.

SoFi members with Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below).

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.

As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

SoFi Bank shall, in its sole discretion, assess each account holder’s Eligible Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Eligible Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Eligible Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.

Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 1/24/25. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Checking & Savings Fee Sheet for details at sofi.com/legal/banking-fees/.

1SoFi Bank is a member FDIC and does not provide more than $250,000 of FDIC insurance per depositor per legal category of account ownership, as described in the FDIC’s regulations. Any additional FDIC insurance is provided by the SoFi Insured Deposit Program. Deposits may be insured up to $3M through participation in the program. See full terms at SoFi.com/banking/fdic/sidpterms. See list of participating banks at SoFi.com/banking/fdic/participatingbanks.


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

*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

SOBNK-Q225-097

Read more
TLS 1.2 Encrypted
Equal Housing Lender