A money purchase pension plan or MPPP is an employer-sponsored retirement plan that requires employers to contribute money on behalf of employees each year. The plan itself defines the amount the employer must contribute. Employees may also have the option to make contributions from their pay.
Money purchase pension plans have some similarities to more commonly used retirement plans such as 401(k)s, traditional pension plans, and corporate profit-sharing plans. If you have access to a MPPP plan at work, it’s important to understand how it works and where it might fit into your overall retirement strategy.
Key Points
• A Money Purchase Pension Plan (MPPP) is an employer-sponsored retirement plan in which employers make fixed, pre-determined contributions to the plan on behalf of all employees.
• MPPP contribution limits are $70,000 annually in 2025, or 25% of compensation, whichever is less.
• Contributions to MPPPs grow tax-free for employees and are tax-deductible for employers.
• MPPP distribution options include a lifetime annuity and a lump sum distribution.
• MPPP advantages include large account balances and tax benefits, but disadvantages include no hardship withdrawals and no catch-up contributions.
What Is a Money Purchase Pension Plan?
Money purchase pension plans are a type of defined contribution plan. That means they don’t guarantee a set benefit amount at retirement. Instead, these retirement plans allow employers and/or employees to contribute money up to annual contribution limits.
Like other retirement accounts, participants can make withdrawals when they reach their retirement age, which can be an important part of their retirement planning. In the meantime, the account value can increase or decrease based on investment gains or losses.
Money purchase pension plans require the employer to make predetermined fixed contributions to the plan on behalf of all eligible employees. The company must make these contributions on an annual basis as long as the plan is maintained.
Contributions to a money purchase plan grow on a tax-deferred basis. Employees do not have to make contributions to the plan, but they can choose to do so.
What Are the Money Purchase Pension Plan Contribution Limits?
Each money purchase plan determines what its own contribution limits are, though the amount can’t exceed maximum limits set by the IRS. For example, an employer’s plan may specify that they must contribute 5% or 10% of each employee’s pay into that employee’s MPPP plan account.
Annual money purchase plan contribution limits are similar to SEP IRA contribution limits. For 2025, the maximum contribution amount allowed is the lesser of:
• 25% of the employee’s compensation, OR
• $70,000
The IRS routinely adjusts the contribution limits for money purchase pension plans and other qualified retirement accounts based on inflation. The amount of money an employee will have in their money purchase plan upon retirement depends on the amount that their employer contributed on their behalf, the amount the employee contributed, and how their investments performed. Your account balance may be one factor in determining when you can retire.
Rules for money purchase plan distributions are the same as other qualified plans — you can begin withdrawing money penalty-free starting at age 59 ½. If you take out money before that, you may owe an early withdrawal penalty.
Like a pension plan, money purchase pension plans must offer the option to receive distributions as a lifetime annuity. Money purchase plans can also offer other distribution options, including a lump sum. Participants do not pay taxes on their accounts until they begin making withdrawals.
The Pros and Cons of Money Purchase Pension Plans
Money purchase pension plans have some benefits, but there are also some drawbacks that participants should keep in mind.
Pros of Money Purchase Plans
Here are some of the advantages for employees and employers who have a money purchase pension plan.
• Tax benefits. For employers, contributions made on behalf of their workers are tax deductible. Contributions grow tax-free for employees, allowing them to defer taxes on investment growth until they begin withdrawing the money.
• Loan access. Employees may be able to take loans against their account balances if the plan permits it.
• Potential for large balances. Given the relatively high contribution limits, employees may be able to accumulate account balances higher than they would with a 401(k) retirement plan, depending on their pay and the percentage their employer contributes on their behalf.
• Reliable income in retirement. When employees retire and begin drawing down their account, the regular monthly payments through a lifetime annuity may help with budgeting and planning.
Disadvantages of Money Purchase Pension Plan
Most of the disadvantages associated with money purchase pension plans impact employers rather than employees.
• Expensive to maintain. The administrative and overhead costs of maintaining a money purchase plan can be higher than those associated with other types of defined contribution plans.
• Heavy financial burden. Since contributions in a money purchase plan are required (unlike the optional employer contributions to a 401(k)), a company could run into issues in years when cash flow is lower.
• Vesting schedules may be long. Employees who leave the company before they are fully vested in an MPPP may forfeit some or all of their employer’s contributions.
• No catch-up contributions for older employees. Unlike a 401(k), employees ages 50 and up do not have the option to make an additional annual catch-up contribution to an MPPP.
Money Purchase Pension Plan vs 401(k)
The main differences between a pension vs 401(k) have to do with their funding and the way the distributions work. In a money purchase plan, the employer provides the funding with optional employee contribution.
With a 401(k), employees fund accounts with elective salary deferrals and optional employer contributions. For both types of plans, the employer may implement a vesting schedule that determines when the employee can keep all of the employer’s contributions if they leave the company. Employee contributions always vest immediately.
The total annual contribution limits (including both employer and employee contributions) for these defined contribution plans are the same, at $70,000 for 2025. But 401(k) plans allow for catch-up contributions made by employees aged 50 or older. For 2025, the total employee contribution limit is $23,500 with an extra catch-up contribution of $7,500, and for those aged 60 to 63, there’s a catch-up contribution of $11,250 (instead of $7,500), thanks to SECURE 2.0.
Both plans may or may not allow for loans, and it’s possible to roll amounts held in a money purchase pension plan or a 401(k) over into a new qualified plan or an Individual Retirement Account (IRA) if you change jobs or retire.
Employees may also be able to take hardship withdrawals from a 401(k) if they meet certain conditions, but the IRS does not allow hardship withdrawals from a money purchase pension plan.
Here’s a side-by-side comparison of a MPPP and a 401(k):
MPPP Plan
401(k) Plan
Funded by
Employer contributions, with employee contributions optional
Employee salary deferrals, with employer matching contributions optional
Tax status
Contributions are tax-deductible for employers, growth is tax-deferred for employees
Contributions are tax-deductible for employers and employees, growth is tax-deferred for employees
Contribution limits (2025)
For 2025, lesser of 25% of employee’s pay or $70,000
For 2025, $23,500, with catch-up contribution of $7,500 for employees 50 or older, and $11,250 SECURE 2.0 catch-up for those 60 to 63
Catch-up contributions allowed
No
Yes, for employers 50 and older
Loans permitted
Yes, if the plan allows
Yes, if the plan allows
Hardship withdrawals
No
Yes, if the plan allows
Vesting
Determined by the employer
Determined by the employer
The Takeaway
Money purchase pension plans can be a valuable tool for employees to reach their retirement goals. They’re similar to 401(k)s, but there are some important differences.
Whether you save for retirement in a money purchase pension plan, a 401(k), or another type of account, the most important thing is to get started. The sooner you begin saving for retirement, the more time your money will potentially have to grow.
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FAQ
What is a pension money purchase plan?
A money purchase pension plan or money purchase plan is a defined contribution plan that allows employers to save money on behalf of their employees. These plans are similar to profit-sharing plans, and companies may offer them alongside a 401(k) plan as part of an employee’s retirement benefits package.
Can I cash in my money purchase pension?
You can cash in a money purchase pension at retirement in place of receiving lifetime annuity payments. Otherwise, early withdrawals from a money purchase pension plan are typically not permitted, and if you do take money early, taxes and penalties may apply. However, if you leave your job, you can roll over the amount of money for which you are fully vested into an IRA or a new employer’s 401(k).
Is a final salary pension for life?
A final salary pension is a defined benefit plan. Unlike a defined contribution plan, defined benefit plans pay out a set amount of money at retirement, typically based on your earnings and number of years of service. Final salary pensions can be paid as a lump sum or as a lifetime annuity, meaning you get paid for the remainder of your life.
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SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.
For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
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Maxing out your 401(k) involves contributing the maximum allowable amount to your workplace retirement account to increase the benefit of compounding and appreciating assets over time.
All retirement plans come with contribution caps, and when you hit that limit it means you’ve maxed out that particular account.
There are a lot of things to consider when figuring out how to max out your 401(k) account, including whether maxing out your account is a good idea in the first place. Read on to learn about the pros and cons of maxing out your 401(k).
Key Points
• Maxing out your 401(k) contributions can help you save more for retirement and take advantage of tax benefits.
• If you want to max out your 401(k), strategies include contributing enough to get the full employer match, increasing contributions over time, utilizing catch-up contributions if eligible, automating contributions, and adjusting your budget to help free up funds for additional 401(k) contributions.
• Diversifying your investments within your 401(k) and regularly reviewing and rebalancing your portfolio can optimize your returns.
• Seeking professional advice and staying informed about changes in contribution limits and regulations can help you make the most of your 401(k).
What Exactly Does It Mean to ‘Max Out Your 401(k)?’
Maxing out your 401(k) means that you contribute the maximum amount allowed in a given year, as specified by the established 401(k) contribution limits. But it can also mean that you’re maxing out your contributions up to an employer’s percentage match.
If you want to max out your 401(k) in 2025, you’ll need to contribute $23,500. If you’re 50 or older, you can contribute an additional $7,500, for an annual total of $31,000. In addition, in 2025, those aged 60 to 63 may contribute an additional $11,250 instead of $7,500, thanks to SECURE 2.0, for an annual total of $34,750.
Should You Max Out Your 401(k)?
Generally speaking, yes, it’s a good thing to max out your 401(k) so long as you’re not sacrificing your overall financial stability to do it. Saving for retirement is important, which is why many financial experts would likely suggest maxing out any employer match contributions first.
But while you may want to take full advantage of any tax and employer benefits that come with your 401(k), you also want to consider any other financial goals and obligations you have before maxing out your 401(k).
That doesn’t mean you should put other goals first, and not contribute to your retirement plan at all. That’s not wise. Maintaining a baseline contribution rate for your future is crucial, even as you continue to save for shorter-term aims or put money toward debt repayment.
Other goals might include:
• Is all high-interest debt paid off? High-interest debt like credit card debt should be paid off first, so it doesn’t accrue additional interest and fees.
• Do you have an emergency fund? Life can throw curveballs — it’s smart to be prepared for job loss or other emergency expenses.
• Is there enough money in your budget for other expenses? You should have plenty of funds to ensure you can pay for additional bills, like student loans, health insurance, and rent.
• Are there other big-ticket expenses to save for? If you’re saving for a large purchase, such as a home or going back to school, you may want to put extra money toward this saving goal rather than completely maxing out your 401(k), at least for the time being.
Once you can comfortably say that you’re meeting your spending and savings goals, it might be time to explore maxing out your 401(k). There are many reasons to do so — it’s a way to take advantage of tax-deferred savings, employer matching (often referred to as “free money”), and it’s a relatively easy and automatic way to invest and save, since the money gets deducted from your paycheck once you’ve set up your contribution amount.
How to Max Out Your 401(k)
Only a relatively small percentage of people max out their 401(k)s, but that doesn’t mean you can’t be one of them. Here are some strategies for how to max out your 401(k).
1. Max Out 401(k) Employer Contributions
Your employer may offer matching contributions, and if so, there are typically rules you will need to follow to take advantage of their match.
An employer may require a minimum contribution from you before they’ll match it, or they might match only up to a certain amount. They might even stipulate a combination of those two requirements. Each company will have its own rules for matching contributions, so review your company’s policy for specifics.
For example, suppose your employer will match your contribution up to 3%. So, if you contribute 3% to your 401(k), your employer will contribute 3% as well. Therefore, instead of only saving 3% of your salary, you’re now saving 6%. With the employer match, your contribution just doubled. Note that employer contributions can range from nothing at all up to a certain limit. It depends on the employer and the plan.
Since saving for retirement is one of the best investments you can make, it’s wise to take advantage of your employer’s match. Every penny helps when saving for retirement, and you don’t want to miss out on this “free money” from your employer.
If you’re not already maxing out the matching contribution and wish to, you can speak with your employer (or HR department, or plan administrator) to increase your contribution amount, you may be able to do it yourself online.
2. Max Out Salary-Deferred Contributions
While it’s smart to make sure you’re not leaving free money on the table, maxing out your employer match on a 401(k) is only part of the equation.
In order to make sure you’re setting aside an adequate amount for retirement, consider contributing as much as your budget will allow. As noted earlier, individuals younger than age 50 can contribute up to $23,500 in 2025, while those 50 and over can contribute $7,500 more in catch-up contributions. And those aged 60 to 63 may contribute an additional $11,250 instead of $7,500, thanks to SECURE 2.0.
Those contributions aren’t just an investment in your future lifestyle in retirement. Because they are made with pre-tax dollars, they lower your taxable income for the year in which you contribute. For some, the immediate tax benefit is as appealing as the future savings benefit.
3. Take Advantage of Catch-Up Contributions
As mentioned, 401(k) catch-up contributions allow investors aged 50 and over to increase their retirement savings — which is especially helpful if they’re behind in reaching their retirement goals.
Individuals 50 and over can contribute an additional $7,500 for a total of $31,000 in 2025. And again, in 2025, those aged 60 to 63 can contribute an additional $11,250, instead of $7,500, for a total of $34,750. Putting all of that money toward retirement savings can help you truly max out your 401(k).
As you draw closer to retirement, catch-up contributions can make a difference, especially as you start to calculate when you can retire. Whether you have been saving your entire career or just started, this benefit is available to everyone who qualifies.
And of course, this extra contribution will lower taxable income even more than regular contributions. Although using catch-up contributions may not push everyone to a lower tax bracket, it will certainly minimize the tax burden during the next filing season.
4. Reset Your Automatic 401(k) Contributions
When was the last time you reviewed your 401(k)? It may be time to check in and make sure your retirement savings goals are still on track. Is the amount you originally set to contribute each paycheck still the correct amount to help you reach those goals?
With the increase in contribution limits most years, it may be worth reviewing your budget to see if you can up your contribution amount to max out your 401(k). If you don’t have automatic payroll contributions set up, you could set them up.
It’s generally easier to save money when it’s automatically deducted; a person is less likely to spend the cash (or miss it) when it never hits their checking account in the first place.
If you’re able to max out the full 401(k) limit, but fear the sting of a large decrease in take-home pay, consider a gradual, annual increase such as 1% — how often you increase it will depend on your plan rules as well as your budget.
5. Put Bonus Money Toward Retirement
Unless your employer allows you to make a change, your 401(k) contribution may be deducted from any bonus you might receive at work. Some employers allow you to determine a certain percentage of your bonus check to contribute to your 401(k).
Consider possibly redirecting a large portion of a bonus to 401k contributions, or into another retirement account, for example, if you open an IRA. Because this money might not have been expected, you won’t miss it if you contribute most of it toward your retirement.
You could also do the same thing with a raise. If your employer gives you a raise, consider putting it directly toward your 401(k). Putting this money directly toward your retirement can help you inch closer to maxing out your 401(k) contributions.
6. Maximize Your 401(k) Returns and Fees
Many people may not know what they’re paying in investment fees or management fees for their 401(k) plans. By some estimates, the average fees for 401(k) plans are between 0.5% and 2%, but some plans may have higher fees.
Fees add up — even if your employer is paying the fees now, you’ll have to pay them if you leave the job and keep the 401(k).
Essentially, if an investor has $100,000 in a 401(k) and pays $1,000 or 1% (or more) in fees per year, the fees could add up to thousands of dollars over time. Any fees you have to pay can chip away at your retirement savings and reduce your returns.
It’s important to ensure you’re getting the most for your money in order to maximize your retirement savings. If you are currently working for the company, you could discuss high fees with your HR team.
One way to potentially lower your costs is to find more affordable investment options. Generally speaking, index funds often charge lower fees than other investments. If your employer’s plan offers an assortment of low-cost index funds, you may want to consider investing in these funds to save some money and help build a diversified portfolio.
If you have a 401(k) account from a previous employer, you might consider moving your old 401(k) into a lower-fee plan. It’s also worth examining what kind of funds you’re invested in and if the plan is meeting your financial goals and risk tolerance.
What Happens If You Contribute Too Much to Your 401(k)?
After you’ve maxed out your 401(k) for the year — meaning you’ve hit the contribution limit corresponding to your age range — then you’ll need to stop making contributions or risk paying additional taxes on your overcontributions.
In the event that you do make an overcontribution, you’ll need to take some additional steps such as letting your plan manager or administrator know, and withdrawing the excess amount. If you leave the excess in the account, it’ll be taxed twice — once when it was contributed initially, and again when you take it out.
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What to Do After Maxing Out a 401(k)?
If you max out your 401(k) this year, pat yourself on the back. Maxing out your 401(k) is a financial accomplishment. But now you might be wondering, what’s next? Here are some additional retirement savings options to consider if you have already maxed out your 401(k).
Open an IRA
An individual retirement account (IRA) can be a good complement to your employer’s retirement plans. With a traditional IRA, you can contribute pre-tax dollars up to the annual limit, which is $7,000 in 2025. If you’re 50 or older, you can contribute an extra $1,000, for an annual total of $8,000 in 2025.
You may also choose to consider a Roth IRA. As with a traditional IRA, the annual contribution limit for a Roth IRA in 2025 is $7,000, and $8,000 for those 50 or older. Roth IRA accounts have income limits, but if you’re eligible, you can contribute with after-tax dollars, which means you won’t have to pay taxes on earnings withdrawals in retirement as you do with traditional IRAs.
You can open an IRA at a brokerage, mutual fund company, or other financial institution. If you ever leave your job, you can typically roll your employer’s 401(k) into your IRA without facing tax consequences as long as both accounts are similarly taxed, such as rolling funds from a traditional 401(k) to a traditional IRA, and funds are transferred directly from one plan to the other. Doing a 401(k) to IRA rollover may allow you to invest in a broader range of investments with lower fees.
Boost an Emergency Fund
Experts often advise establishing an emergency fund with at least three to six months of living expenses before contributing to a retirement savings plan. Perhaps you’ve already done that — but haven’t updated that account in a while. As your living expenses increase, it’s a good idea to make sure your emergency fund grows, too. This will cover you financially in case of life’s little curveballs: new brake pads, a new roof, or unforeseen medical expenses.
The money in an emergency fund should be accessible at a moment’s notice, which means it needs to comprise liquid assets such as cash. You’ll also want to make sure the account is FDIC insured, so that your money is protected if something happens to the bank or financial institution.
Save for Health Care Costs
Contributing to a health savings account (HSA) can reduce out-of-pocket costs for expected and unexpected health care expenses, though you can only open and contribute to an HSA if you are enrolled in a high-deductible health plan (HDHP).
For tax year 2025, those eligible can contribute up to $4,300 pre-tax dollars for an individual plan or up to $8,550 for a family plan. Those 55 or older can make an additional catch-up contribution of $1,000 per year.
The money in this account can be used for qualified out-of-pocket medical expenses such as copays for doctor visits and prescriptions. Another option is to leave the money in the account and let it grow for retirement. Once you reach age 65, you can take out money from your HSA without a penalty for any purpose. However, to be exempt from taxes, the money must be used for a qualified medical expense. Any other reasons for withdrawing the funds will be subject to regular income taxes.
Increase College Savings
If you’re feeling good about maxing out your 401(k), consider increasing contributions to your child’s 529 college savings plan (a tax-advantaged account meant specifically for education costs, sponsored by states and educational institutions).
College costs continue to creep up every year. Helping your children pay for college helps minimize the burden of college expenses, so they hopefully don’t have to take on many student loans.
Open a Brokerage Account
After you max out your 401(k), you may also consider opening an online brokerage account. Brokerage firms offer various types of investment accounts, each with different services and fees. A full-service brokerage firm may provide different financial services, which include allowing you to trade securities.
Many brokerage firms require you to have a certain amount of cash to open accounts and have enough funds for trading fees and commissions. While there are no limits on how much you can contribute to the account, earned dividends are taxable in the year they are received. Therefore, if you earn a profit or sell an asset, you must pay a capital gains tax. On the other hand, if you sell a stock at a loss, that becomes a capital loss. This means that the transaction may yield a tax break by lowering your taxable income.
Pros and Cons of Maxing Out Your 401(k)
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Pros:
• Increased Savings: Your retirement savings account will be bigger, which could lead to more growth over time.
• Simplified Saving and Investing: Maxing out your 401(k) can also make your saving and investing relatively easy, as long as you’re taking a no-lift approach to setting your money aside thanks to automatic contributions.
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Cons:
• Affordability: Maxing out a 401(k) may not be financially feasible for everyone. It may be challenging due to existing debt or other savings goals.
• Opportunity Costs: Money invested in retirement plans could be used for other purposes. During strong stock market years, non-retirement investments may offer more immediate access to funds.
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The Takeaway
Maxing out your 401(k) involves matching your employer’s maximum contribution match, and also, contributing as much as legally allowed to your retirement plan in a given year. If you have the flexibility in your budget to do so, maxing out a 401(k) can be an effective way to build retirement savings.
And once you max out your 401(k)? There are other smart ways to direct your money. You can open an IRA, contribute more to an HSA, or to a child’s 529 plan.
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).
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FAQ
What happens if I max out my 401(k) every year?
Assuming you don’t overcontribute, you may see your retirement savings increase if you max out your 401(k) every year, and hopefully, be able to reach your retirement and savings goals sooner.
Will you have enough to retire after maxing out a 401(k)?
There are many factors that need to be considered to determine if you’ll have enough money to retire if you max out your 401(k). Start by getting a sense of how much you’ll need to retire by using a retirement expense calculator. Then you can decide whether maxing out your 401(k) for many years will be enough to get you there, assuming an average stock market return and compounding built in.
First and foremost, you’ll need to consider your lifestyle and where you plan on living after retirement. If you want to spend a lot in your later years, you’ll need more money. As such, a 401(k) may not be enough to get you through retirement all on its own, and you may need additional savings and investments to make sure you’ll have enough.
What is the best way to max out a 401(k)?
Some effective ways to max out a 401(k) include contributing up to the allowable amount for the year (for 2025, that’s $23,500 for those under age 50); using catch-up contributions if you’re aged 50 or older ($7,500 in 2025, or $11,250 if you’re ages 60 to 63); contributing enough to get your employer’s matching contributions if offered; automating your contributions and increasing them yearly, if possible; and directing a percentage of any bonus you receive into your 401(k).
About the author
Ashley Kilroy
Ashley Kilroy is a seasoned personal finance writer with 15 years of experience simplifying complex concepts for individuals seeking financial security. Her expertise has shined through in well-known publications like Rolling Stone, Forbes, SmartAsset, and Money Talks News. Read full bio.
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There are many important decisions to make when starting a new job, including what to do with your old 401(k) account. Depending on the balance of the old account and the benefits offered at your new job, you may have several options, including keeping it where it is, rolling it over into a brand new account, or cashing it out.
A 401(k) may be an excellent way for workers to build a retirement fund, as it allows them to save for retirement on a tax-advantaged basis, and many employers offer matching contributions.
Key Points
When leaving a job, you have options for your 401(k) account, including leaving it with your former employer, rolling it over into a new account, or cashing it out.
If your 401(k) balance is less than $7,000, your former employer may cash out the funds or roll them into another retirement account in your name.
If you have more than $7,000 in your 401(k), your former employer cannot force you to cash out or roll over the funds without your permission.
If you quit or are fired, you may lose employer contributions that are not fully vested.
It is important to consider the tax implications, penalties, and long-term financial security before making decisions about your 401(k) when leaving a job.
A Quick 401(k) Overview
A 401(k) is a type of retirement savings plan many employers offer that allows employees to save and invest with tax advantages. With a 401(k) plan, an employer will automatically deduct workers’ contributions to the account from their paychecks before taxes are taken out.
In 2025, employees can contribute up to $23,500 a year in their 401(k)s, up from $23,000 in 2024. Employees aged 50 and older can make catch-up contributions of $7,500 a year for a total of $31,000 in 2025, up from $30,500 in 2024. Also in 2025, those aged 60 to 63 may contribute an additional $11,250 instead of $7,500, for an annual total of $34,750.[1]
Employees will invest the funds in a 401(k) account in several investment options, depending on what the employer and their 401(k) administrator offer, such as stocks, bonds, mutual funds, and target date funds.
The money in a 401(k) account grows tax-free until the employee withdraws it, typically after reaching age 59 ½. At that point, the employee must pay taxes on the money withdrawn. However, if the employee withdraws money before reaching 59 ½, they will typically have to pay 401(k) withdrawal taxes and penalties.
Some employers also offer matching contributions, which are additional contributions to an employee’s account based on a certain percentage of the employee’s own contributions. Employers may use 401(k) vesting schedules to determine when employees can access these contributions.
Generally, the more you can save in a 401(k), the better. If you can’t max out your 401(k) contributions, start by contributing at least enough money to qualify for your employer’s 401(k) match if they offer one.
What Happens to Your 401(k) When You Quit Your Job?
When you quit your job, you generally have several options for your 401(k) account. You can leave the money in the account with your former employer, roll it into a new employer’s 401(k) plan, move it over to an IRA rollover, or cash it out.
However, if your 401(k) account has less than $7,000, your former employer may not allow you to keep it open. If there is less than $1,000 in your account, your former employer may cash out the funds and send them to you via check. If there is between $1,000 and $7,000 in the account, your employer may roll it into another retirement account in your name, such as an IRA. You may also suggest a specific IRA for the rollover.
With most 401(k) plans, if you have more than $7,000 in your account, your funds can usually remain in the account indefinitely.
Also, if you quit your job and you are not fully vested, you forfeit your employer’s contributions to your 401(k). But you do get to keep your vested contributions.
Is There Any Difference if You’re Fired?
If you are fired from your job, your 401(k) account options are similar to those if you quit your job. As noted above, you can leave the money in the account with your former employer, roll it into a new employer’s 401(k) plan, roll it over into an IRA, or cash it out. The same account limits mentioned above apply as well.
Additionally, if you are fired from your job, you may be eligible for a severance package, which may include a lump sum payment or continuation of benefits, including a 401(k) plan. But these benefits depend on your company and the circumstances surrounding your termination. And, like with quitting your job, you do not get to keep any employer contributions that are not fully vested.
How Long Do You Have to Move Your 401(k)?
If you leave your job, you don’t necessarily have to move your 401(k). Depending on the amount you have in the 401(k), you can usually keep it with your previous employer’s 401(k) administrator.
But if you do choose to roll over your 401(k) as an indirect rollover, you typically have 60 days from the date of distribution to roll over your 401(k) account balance into an IRA or another employer’s 401(k) plan. If you fail to roll over the funds within 60 days, the distribution will be subject to taxes and penalties, and if you are under 59 ½ years old, an additional 10% early withdrawal penalty.
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Next Steps for Your 401(k) After Leaving a Job
As you decide what to do with your funds, you have several options, from cashing out to rolling over your 401(k)s to expanding your investment opportunities.
Cash Out Your 401(k)
You can cash out some or all of your 401(k), but in most cases, there are better choices than this from a personal finance perspective. As noted above, if you are younger than 59 ½, you may be slammed with income taxes and a 10% early withdrawal penalty, which can set you back in your ability to save for your future.
If you are age 55 or older, you may be able to draw down your 401(k) penalty-free thanks to the Rule of 55. But remember, when you remove money from your retirement account, you no longer benefit from tax-advantaged growth and reduce your future nest egg.
Roll Over Your 401(k) Into a New Account
Your new employer may offer a 401(k). If this is the case and you are eligible to participate, you may consider rolling over the funds from your old account. This process is relatively simple. You can ask your old 401(k) administrator to move the funds from one account directly to the other in what is known as a direct transfer.
Doing this as a direct transfer rather than taking the money out yourself is important to avoid triggering early withdrawal fees. A rollover into a new 401(k) has the advantage of consolidating your retirement savings into one place; there is only one account to monitor.
Keep Your 401(k) With Your Previous Employer
If you like your previous employer’s 401(k) administrator, its fees, and investment options, you can always keep your 401(k) where it is rather than roll it over to an IRA or your new employer’s 401(k).
However, keeping your 401(k) with your previous employer may make it harder to keep track of your retirement investments because you’ll end up with several accounts. It’s common for people to lose track of old 401(k) accounts.
Moreover, you may end up paying higher fees if you keep your 401(k) with your previous employer. Usually, employers cover 401(k) fees, but if you leave the company, they may shift the cost onto you without you realizing it. High fees may end up eating into your returns, making it harder to save for retirement.
If you don’t love the investment options or fees in your new 401(k), you may roll the funds over into an IRA account instead. Rolling assets into a traditional IRA is relatively simple and can be done with a direct transfer from your 401(k) plan administrator. You also may be allowed to roll a 401(k) into a Roth IRA, but you’ll have to pay taxes on the amount you convert.
The advantage of rolling funds into an IRA is that it may offer a more comprehensive array of investment options. For example, a 401(k) might offer a handful of mutual or target-date funds. In an IRA, you may have access to individual securities like stocks and bonds and a wide variety of mutual funds, index funds, and exchange-traded funds.
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The Takeaway
Changing jobs is an exciting time, whether or not you’re moving, and it can be a great opportunity to reevaluate what to do with your retirement savings. Depending on your financial situation, you could leave the funds where they are or roll them over into your new 401(k) or an IRA. You can also cash out the account, but that may harm your long-term financial security because of taxes, penalties, and loss of a tax-advantaged investment account.
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FAQ
How long can a company hold your 401(k) after you leave?
A company can hold onto an employee’s 401(k) account indefinitely after they leave, but they are required to distribute the funds if the employee requests it or if the account balance is less than $7,000.
Can I cash out my 401(k) if I quit my job?
You can cash out your 401(k) if you quit your job. However, experts generally do not advise cashing out a 401(k), as doing so will trigger taxes and penalties on the withdrawn amount. Instead, it is usually better to either leave the funds in the account or roll them over into a new employer’s plan or an IRA.
What happens if I don’t rollover my 401(k)?
If you don’t roll over your 401(k) when you leave a job, the funds will typically remain in the account and be subject to the rules and regulations of the plan. If the account balance is less than $7,000, the employer may roll over the account into an IRA or cash out the account. If the balance is more than $7,000, the employer may offer options such as leaving the funds in the account or rolling them into an IRA.
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Your vested 401(k) balance is the portion of your 401(k) you fully own and can take with you when you leave your employer. This amount includes your employee contributions, which are always 100% vested, any investment earnings, and your employer’s contributions that have passed the required vesting period.
Here’s a deeper look at what being vested means and the effect it can have on your retirement savings.
Key Points
• 401(k) vesting refers to when ownership of an employer’s contributions to a 401(k) account shifts to the employee.
• 401(k) contributions made by employees are always 100% vested; that means they own them outright.
• Vesting schedules vary, but employees become 100% vested after a specified number of years.
• 401(k) vesting incentivizes employees to stay with their current employer and to contribute to their 401(k).
• Companies may use immediate, cliff, or graded vesting schedules for their 401(k) plans.
What Does Vested Balance Mean?
The vested balance is the amount of money in your 401(k) that belongs to you and cannot be taken back by an employer when you leave your job — even if you are fired.
The contributions you make to your 401(k) are automatically 100% vested. Vesting of employer contributions typically occurs according to a set timeframe known as a vesting schedule. When employer contributions to a 401(k) become vested, it means that the money is now entirely yours.
Having a fully vested 401(k) means that employer contributions will remain in your account when you leave the company. It also means that you can decide to roll over your balance to a new account, start making withdrawals, or take out a loan against the account, if your plan allows it. However, keeping a vested 401(k) invested and letting it grow over time may be one of the best ways to save for retirement.
How 401(k) Vesting Works
401(k) vesting refers to the process by which employees become entitled to keep the money that an employer may have contributed to their 401(k) account. Vesting schedules can vary, but most 401(k) plans have a vesting schedule that requires employees to stay with the company for a certain number of years before they are fully vested.
For example, an employer may have a vesting schedule requiring employees to stay with the company for five years before they are fully vested in their 401(k) account. If an employee were to leave the company before reaching that milestone, they could forfeit some or all of the employer-contributed money in the 401(k) account. The amount an employee gets to keep is the vested balance. Other qualified defined contribution plans, such as 401(a) plans or 403(b) plans, may also be subject to vesting schedules.
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Importance of 401(k) Vesting
401(k) vesting is important because it determines when an employee can keep the employer’s matching contributions to their retirement account. Vesting schedules can vary, but typically after an employee has been with a company for a certain number of years, they will be 100% vested in the employer’s contributions.
401(k) Vesting Eligibility
401(k) vesting eligibility is the time an employee must work for their employer before they are eligible to receive the employer’s contribution to their 401(k) retirement account. The vesting period varies depending on the employer’s plan.
401(k) Contributions Basics
Before understanding vesting, it’s important to know how 401(k) contributions work. A 401(k) is a tax-advantaged, employer-sponsored retirement plan that allows employees to contribute a portion of their salary each pay period, usually on a pre-tax basis.
For tax year 2025, employees can contribute up to $23,500 annually in their 401(k), with an extra $7,500 in catch-up contributions allowed for those age 50 or older. For 2025, those aged 60 to 63 may contribute an additional $11,250 instead of $7,500, thanks to SECURE 2.0.
The Internal Revenue Service (IRS) also allows employers to contribute to their employees’ plans. Often these contributions come in the form of an employer 401(k) match. For example, an employer might offer matching contributions of 3% or 6% if an employee chooses to contribute 6% of their salary to the 401(k).
In 2025, the total contributions that an employee and employer can make to a 401(k) is $70,000 ($77,500 including standard catch-up contributions, and $81,250 with SECURE 2.0 catch-up for those aged 60 to 63).
Employer contributions are a way for businesses to encourage employees to save for retirement. They’re also an important benefit that job seekers look for when searching for new jobs.
There are several benefits of 401(k) vesting, including motivating employees to stay with a company for the long term because they know they will eventually vest and be able to keep the money they have contributed to their 401(k). Additionally, it incentivizes employees to contribute to a 401(k) because they know they will eventually be fully vested and be entitled to all the money in their account.
401(k) vesting also gives employees a sense of security, knowing they will not lose the money they have put into their retirement savings if they leave their job.
Drawbacks of 401(k) Vesting
While 401(k) vesting benefits employees, there are also some drawbacks. For one, vesting can incentivize employees to stay with their current employer, even if they want to leave their job. Employees may be staying in a job they’re unhappy with just to wait for their 401(k) to be fully vested.
Also, using a 401(k) for investing can create unwanted tax liability and fees. When you withdraw money from a 401(k) before age 59 ½, you’ll typically have to pay a 10% early withdrawal penalty and taxes. This can eat into the money you were hoping to use for retirement.
How Do I Know if I Am Fully Vested in my 401(k)?
If you’re unsure whether or when you will be fully vested, you can check their plan’s vesting schedule, usually on your online benefits portal.
Immediate Vesting
Immediate vesting is the simplest form of vesting schedule. Employees own 100% of contributions right away.
Cliff Vesting
Under a cliff vesting schedule, employer contributions are typically fully vested after a certain period of time following a job’s start date, usually three years.
Graded Vesting
Graded vesting is a bit more complicated. A percentage of contributions vest throughout a set period, and employees gain gradual ownership of their funds. Eventually, they will own 100% of the money in their account.
For example, a hypothetical six-year graded vesting schedule might look like this:
Years of Service
Percent Vested
1
0%
2
20%
3
40%
4
60%
5
80%
6
100%
What Happens If I Leave My Job Before I’m Fully Vested?
If you leave your job before being fully vested, you forfeit any unvested portion of their 401(k). The amount of money you’d lose depends on your vesting schedule, the amount of the contributions, and their performance. For example, if your employer uses cliff vesting after three years and you leave the company before then, you won’t receive any of the money your employer has contributed to their plan.
If, on the other hand, your employer uses a graded vesting schedule, you will receive any portion of the employer’s contributions that have vested by the time they leave. For example, if you are 20% vested each year over six years and leave the company shortly after year three, you’ll keep 40% of the employer’s contributions.
Other Common Types of Vesting
Aside from 401(k)s, employers may offer other forms of compensation that also follow vesting schedules, such as pensions and stock options. These tend to work slightly differently than vested contributions, but pensions and stock options may vest immediately or by following a cliff or graded vesting schedule.
Stock Option Vesting
Employee stock options give employees the right to buy company stock at a set price at a later date, regardless of the stock’s current value. The idea is that between the time an employee is hired and their stock options vest, the stock price will have risen. The employee can then buy and sell the stock to potentially make a profit.
Pension Vesting
With a pension plan, vesting schedules determine when employees are eligible to receive their full benefits.
How Do I Find Out More About Vesting?
There are a few ways to learn more about vesting and your 401(k) vested balance. This information typically appears in the 401(k) summary plan description or the annual benefits statement.
Generally, a company’s plan administrator or human resources department can also explain the vesting schedule in detail and pinpoint where you are in your vesting schedule. Understanding this information can help you know the actual value of your 401(k) account.
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The Takeaway
While any employee contributions to 401(k) plans are immediately fully vested, the same is not always true of employer contributions. The employee may gain access to employer contributions slowly over time or all at once after the company has employed them for several years.
Understanding vesting and your 401(k)’s vesting schedule is one more piece of information that can help you plan for your financial future. A 401(k) and other retirement accounts like a traditional or Roth IRA can be essential components of a retirement savings plan. Knowing when you are fully vested in a 401(k) can help you understand how much money might be available when you retire.
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FAQ
What does 401(k) vesting mean?
401(k) vesting is when an employee becomes fully entitled to the employer’s matching contributions to the employee’s 401(k) account. Vesting typically occurs over a period of time, such as five years, and is often dependent on the employee remaining employed with the company.
What is the vesting period for a 401(k)?
The vesting period is the amount of time an employee must work for an employer before they are fully vested in the employer’s 401(k) plan. This period is different for each company, but generally, the vesting period is between three and five years.
How does 401(k) vesting work?
Vesting in a 401(k) plan means an employee has the right to keep the employer matching contributions made to their 401(k) account, even if they leave the company. Vesting schedules can vary, but most 401(k) plans have a vesting schedule of three to five years.
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
SoFi Invest is a trade name used by SoFi Wealth LLC and SoFi Securities LLC offering investment products and services. Robo investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser. Brokerage and self-directed investing products offered through SoFi Securities LLC, Member FINRA/SIPC.
For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.
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.
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.
Third Party Trademarks: Certified Financial Planner Board of Standards Center for Financial Planning, Inc. owns and licenses the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®
A nest egg can help you save for future goals, such as buying a home or for your retirement. Building a nest egg is an important part of a financial strategy, as it can help you cover any emergency costs that might crop up and allow you to become financially secure.
A financial nest egg requires some planning and commitment. In general, the sooner you start building a nest egg, the better.
Key Points
• A financial nest egg is important for securing long-term goals and handling unforeseen expenses.
• Setting SMART financial goals means they are specific, measurable, achievable, relevant, and time-bound.
• Managing finances through a budget helps in allocating resources towards building a nest egg.
• Automating savings allows for consistent contributions to a nest egg, which could help with achieving financial goals.
• Putting money in savings vehicles with compound interest potentially accelerates growth, supporting both long-term and short-term needs.
What Is a Nest Egg?
A financial nest egg is a large amount of money that an individual saves to meet financial goals. Usually, a nest egg focuses on longer-term goals such as saving for retirement, paying for a child’s college education, or buying a home.
A nest egg could also help you handle emergency costs, such as unexpected medical bills, pricey home fixes, or car repairs. There is no one specific thing a nest egg is for, as it depends on each person’s unique aims and circumstances.
Understanding How a Nest Egg Works
To successfully build a nest egg, there are a few factors to keep in mind.
• You have to have a plan. Unlike saving for short-term goals, building a nest egg takes time and you need a strategy to make it happen. A common technique is to save a certain amount of money each month or each week.
• You needa place to stash your savings. This may sound obvious, but in order to save money every week or month, you have to put it in a savings account of some sort, such as a high-yield savings account. If you “save” the money in your checking account, you may end up spending it instead.
• Make it untouchable. In order for your nest egg to grow so that you can reach your savings goals by a certain age, you have to protect it. Consider it hands-off.
How Much Money Should Be in Your Nest Egg?
There is no one correct amount a nest egg should be. The amount is different for each person, depending on their needs and what they are saving for. If you’re using your nest egg for a down payment on a house, for instance, you’ll likely need less money than if you are planning to use your nest egg for retirement.
If your nest egg is for retirement, one common rule of thumb is to save 80% of your annual income. However, the exact amount is different for each person, depending on the type of lifestyle they want to have in retirement. For instance, someone who plans to travel a lot may want to save 90% or more of their annual income.
What Are Nest Eggs Used for?
Nest eggs are typically used for future financial goals, such as retirement, a child’s education, or buying a house.
A nest egg can also be used to cover emergency costs, such as expensive home repairs, medical bills, or car repairs.
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5 Steps to Building a Nest Egg
1. Set a SMART Financial Goal
The SMART goal technique is a popular method for setting goals, including financial ones. The SMART method calls for goals to be (S)pecific, (M)easurable, (A)chievable, (R)elevant, and (T)ime bound.
With this approach, it’s not enough to say, “I want to learn how to build a nest egg for emergencies.” The SMART goal technique requires you to walk through each step:
• Be Specific: For example, if you’re saving for emergencies, target an amount to save in an emergency fund. One rule of thumb is to save at least three to six months’ worth of living expenses, in case of a crisis like an illness or a job layoff.
• Make it Measurable and Achievable: Once you decide on the amount that’s your target goal, your next task is to figure out how to reach that goal. If you want to save money from your salary to reach a total of, say, $3,000 for your emergency fund, you could put $200 a month into a high-yield savings account until you reach your goal. Be sure to create a plan that’s measurable and doable for your situation.
• Keep it Relevant and Time-bound: The last actions in the SMART method are to keep your goal a priority, and to adhere to a set timeframe for achieving it. For example, if you commit to saving $200 per month for 15 months in order to have an emergency fund of $3,000, that means you can’t suddenly earmark that monthly $200 for something else.
2. Create a Budget
Saving money takes time and focus. Making a budget is a way to help you save the amount you need steadily over time. There are numerous budgeting methods, so find one that works for you as you build up your nest egg.
You could try the 50-30-20 plan, for instance, in which you allocate 50% of your money to musts like rent, utility payment, groceries, and so on; 30% to wants, such as eating out or going to the movies; and 20% to savings. You could also explore zero-based budgeting. Try out your selected method to ensure that you can live with it.
3. Pay Off Debt
Debt can be a major obstacle to building a nest egg, especially if it’s high-interest debt like credit card debt. If you’re struggling to pay down debt, making it a priority to repay what you owe can help save you money on interest and also reduce financial stress.
Adding debt payments into your monthly budget is one way to help keep your debt repayment plan on track. In addition, there are specific methods you can use to repay debt.
Debt Repayment Strategies
These are two popular debt repayment strategies you might want to explore — the avalanche method and the snowball method.
The avalanche method focuses on paying off the debt with the highest interest rate as fast as possible. You continue to pay the minimum monthly amount on all your other debt, but you direct any extra money you have the highest-interest debt. This method can generally save you the most money in the long run.
The other option is the snowball method, which focuses on paying off the smallest debt first while making minimum payments on all other debts. When one debt is paid off, you take the payment that went toward that debt and add it to the next-smallest one, “snowballing” as you go.
This method can be more psychologically motivating, as it’s easier and faster to eliminate smaller debts first, but it can cost more in interest over time, especially if the larger debts have higher interest rates.
Finally if you’re having trouble paying down a certain debt, like a credit card or medical bill, it might be worth calling the lender. In some cases, lenders may work with individuals to create a manageable debt repayment plan. Call the lender before the debt gets out of control.
4. Make Saving Automatic
Automating your savings simplifies the act of saving with automatic transfers of money from your paycheck directly into your savings account. It can be a steady way to build your savings over time, since you don’t even have to think about it or remember to do it.
Not only that, because the money isn’t hitting your checking account, you won’t be tempted to spend it.
Set up automatic transfers to your online bank account every week, or every month. While you’re at it, set up automatic payments for the bills you owe. Don’t assume you can make progress with good intentions alone. Technology can be your friend, so use it!
5. Start Investing in Your Nest Egg
In addition to a savings account, you might also want to explore options like putting some of your money in a money market account or certificate of deposit (CD). Both types of accounts tend to earn higher interest rates than traditional savings accounts.
CDs come with a fixed term length and a fixed maturity date, which can range from months to years. You generally need to leave the money in a CD untouched for the length of the term, or you’ll owe an early withdrawal fee. With a money market account, you can access your money at any time, though there may be some restrictions.
To help build retirement savings over time, consider participating in your employer’s 401(k). Some employers offer matching funds — if you can, contribute enough to your to get the employer match, since it is essentially free money.
The Power of Compounding Interest
When saving money to build a nest egg in certain savings vehicles such as a high-yield savings account or a money market account, the power of compound interest can work to your advantage.
Here’s how it works: Compound interest is earned on the initial principal in a savings vehicle and the interest that accrues on that principal. So, for instance, if you have $500 in a savings account and you earn $5 in interest, the $5 is added to the principal and you then earn interest on the new, bigger amount. Compound interest can help your savings grow. Use a compound interest calculator to see this in action.
Why Having a Nest Egg Is Important
A financial nest egg can help you save for retirement and/or achieve certain financial goals, such as buying a home or paying for your child’s education. By building a nest egg as early as you can, ideally starting in your 20s or 30s, and contributing to it regularly, the more time your money will potentially have to grow.
The Takeaway
Building a nest egg starts with setting financial goals and then creating a specific plan of action to reach them. Using a method like the SMART goal technique, it’s possible to build a nest egg for an emergency fund, a down payment on a house, or retirement. You can use a budgeting system to help stay on track, and automate your savings to make saving simpler.
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 3.60% APY on SoFi Checking and Savings.
FAQ
What is a financial nest egg?
A financial nest egg is a sum of money you save or invest to meet a certain financial goal. A nest egg typically focuses on future milestones, such as retirement, paying for a child’s college education, or buying a home.
How much money is a nest egg?
There is no one specific amount of money a nest egg should be. The amount is different for each person, depending on their needs and what they’re using the nest egg for. For instance, if a nest egg is for retirement, some financial professionals suggest saving at least 80% percent of your annual income.
Why is it important to have a nest egg?
A nest egg allows you to save a substantial amount of money for a financial goal, such as retirement or your child’s education, for instance. By starting to build a nest egg as early as you can, the more time your money has to grow.
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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.
Annual percentage yield (APY) is variable and subject to change at any time. Rates are current as of 11/12/25. There is no minimum balance requirement. Fees may reduce earnings. Additional rates and information can be found at https://www.sofi.com/legal/banking-rate-sheet
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 every 31 calendar days.
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 the APY for account holders with Eligible Direct Deposit, we encourage you to check your APY Details page the day after your Eligible Direct Deposit posts to your SoFi account. If your APY is not showing as the APY for account holders with Eligible Direct Deposit, 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 the APY for account holders with Eligible Direct Deposit from the date you contact SoFi for the next 31 calendar days. You will also be eligible for the APY for account holders with Eligible Direct Deposit 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, Wise, 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 Bank shall, in its sole discretion, assess each account holder's Eligible Direct Deposit activity to determine the applicability of rates and may request additional documentation for verification of eligibility.
See additional details at https://www.sofi.com/legal/banking-rate-sheet.
^Early access to direct deposit funds is based on the timing in which we receive notice of impending payment from the Federal Reserve, which is typically up to two days before the scheduled payment date, but may vary.
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 Bank Fee Sheet for details at sofi.com/legal/banking-fees/.
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