Benchmarking a 401(k) retirement plan refers to how a company assesses their plan’s design, fees, and services to ensure they meet industry and ERISA (Employee Retirement Income Security Act) standards.
Benchmarking 401(k) plans is important for a few reasons. First, the company offering the plan needs to be confident that they are acting in the best interests of employees who participate in the 401(k) plan. And because acting in the best interests of plan participants is part of an employer’s fiduciary duty, benchmarking can help reduce an employer’s liability if fiduciary standards aren’t met.
If a company’s plan isn’t meeting industry benchmarks, it may be wise for an employer to change plan providers. Learn more about how benchmarking works and why it’s important.
Key Points
• Benchmarking evaluates 401(k) plan design, fees, and services to meet ERISA standards.
• Annual benchmarking can ensure compliance and help reduce employer liability.
• Administrative, investment, and transaction fees must be evaluated to make sure they are reasonable.
• Service quality of the plan, including customer support and investment guidance, is assessed.
• Optimizing 401(k) plan features may enhance employee retention and satisfaction.
How 401(k) Benchmarking Works
While a 401(k) plan is a convenient and popular way for participants to invest for retirement, the company offering the plan has many responsibilities to make sure that its plan is competitive. That is where 401(k) benchmarking comes into play.
An annual checkup is typically performed whereby a company assesses its plan’s design, evaluates fees, and reviews all the services offered by the plan provider. The 401(k) plan benchmarking process helps ensure that the retirement plan reduces the risk of violating ERISA rules. For the firm, a yearly review can help reduce an employer’s liability and it can save the firm money.
ERISA, the Employee Retirement Income Security Act, requires that the plan sponsor verifies that the 401(k) plan has reasonable fees. ERISA is a federal law that mandates minimum standards that retirement plans must meet. It helps protect plan participants and beneficiaries.
The Importance of 401(k) Plan Benchmarking
It is important that an employer keep its 401(k) plan up to today’s standards. Making sure the plan is optimal compared to industry averages is a key piece of retirement benchmarking. It’s also important that your employees have a quality plan to help them save and invest for retirement. Most retirement plan sponsors conduct some form of benchmarking planning, and making that a regular event — such as annually — is important so that the employer continuously complies with ERISA guidelines.
Employers have a fiduciary responsibility to ensure that fees are reasonable for services provided. ERISA also states that the primary responsibility of the plan fiduciaries is to act in the best interest of their plan participants. 401(k) benchmarking facilitates the due diligence process and reduces a firm’s liability.
How to Benchmark Your 401(k) Plan: 3 Steps
So, as an employer, how exactly do you go about benchmarking 401(k) plans? There are three key steps that plan sponsors should take so that their liability is reduced, and the employees get the best service for their money. Moreover, 401(k) benchmarking can help improve your service provider to make your plan better.
1. Assess Your 401(k) Plan Design
It’s hard to know if your retirement plan’s design is optimal. Two gauges used to figure its quality are plan asset growth and the average account balance. If workers are continuously contributing and investments are performing adequately compared to market indexes, then those are signs that the plan is well designed.
Benchmarking can also help assess if a Roth 401(k) feature should be added. Another plan feature might be to adjust the company matching contribution or vesting schedule. Optimizing these pieces of the plan can help retain workers while meeting ERISA requirements.
2. Evaluate Your 401(k) Plan Fees
A 401(k) plan has investment, administrative, and transaction fees. Benchmarking 401(k) plan fees helps ensure total costs are reasonable. It can be useful to take an “all-in” approach when assessing plan fees. That method can better compare service providers since different providers might have different terms for various fees.
But simply selecting the cheapest plan does not account for the quality and depth of services a plan renders. Additional benchmarking is needed to gauge a retirement plan’s quality. Here are the three primary types of 401(k) plan fees to assess:
• Administrative: Fees related to customer service, recordkeeping, and any legal services.
• Investment: Amounts charged to plan participants and expenses related to investment funds.
• Transaction: Fees involved with money movements such as loans, 401(k) withdrawals, and advisory costs.
3. Evaluate Your 401(k) Provider’s Services
There are many variables to analyze when it comes to 401(k) benchmarking of services. A lot can depend on what your employees prefer. Reviewing the sponsor’s service model, technology, and execution of duties is important.
Also, think about it from the point of view of the plan participants: Is there good customer service available? What about the quality of investment guidance? Evaluating services is a key piece of 401(k) plan benchmarking. A solid service offering helps employees make the most out of investing in a 401(k) account.
The Takeaway
Investing for retirement is more important than ever as individuals live longer and pension plans are becoming a relic of the past. With today’s technology, and clear rules outlined by ERISA, it may be easier for workers to take advantage of high-quality 401(k) plans to help them save and invest for the long term.
For the company offering the plan, establishing a retirement benchmarking process is crucial to keeping pace with the best 401(k) plans. Reviewing a plan’s design, costs, and services helps workers have confidence that their employer is working in their best interests. Benchmarking can also protect employers.
If your company already has a 401(k) plan that you contribute to as an employee, you might also consider other individual retirement accounts to open. You can learn more about various options available, such as IRAs. There are different types of IRAs, including traditional and Roth IRAs. You may want to explore them as an option to help reach your retirement savings goals.
Prepare for your retirement with an individual retirement account (IRA). It’s easy to get started when you open a traditional or Roth IRA with SoFi. Whether you prefer a hands-on self-directed IRA through SoFi Securities or an automated robo IRA with SoFi Wealth, you can build a portfolio to help support your long-term goals while gaining access to tax-advantaged savings strategies.
Help build your nest egg with a SoFi IRA.
🛈 While SoFi does not offer 401(k) plans at this time, we do offer individual retirement accounts (IRAs).
FAQ
How often should a 401(k) be benchmarked?
It’s considered a best practice to benchmark a 401(k) annually to make sure the plan complies with ERISA (Employee Retirement Income Security Act) guidelines. Making sure that the plan’s fees are reasonable and acting in the best interests of plan participants is part of an employer’s fiduciary duty. Benchmarking facilitates the due diligence process and reduces an employer’s liability if fiduciary standards aren’t met.
How do I benchmark my 401(k) fees?
To benchmark your 401(k) fees, take an “all-in” approach by calculating the service provider fees plus the investment expenses for the plan. This helps you compare your plan’s fees to fees charged by other service providers. In addition, assess the plan’s quality by looking at administrative fees (fees related to customer service and recordkeeping, for instance), investment fees (expenses related to investment funds and amounts charged to participants in the plan), and transaction fees (fees related to moving money, such as withdrawals or loans).
Why is 401(k) benchmarking important?
The process of 401(k) benchmarking is important for making sure a 401(k) plan is a quality plan and that it is in compliance with ERISA rules. An employer has a fiduciary duty to act in the best interest of their employees, and ensuring that a 401(k) plan has reasonable fees is part of that due diligence. Benchmarking can also help protect an employer and reduce their liability.
Photo credit: iStock/MicroStockHub
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.
This article is not intended to be legal advice. Please consult an attorney for advice.
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.
Learning how to save for retirement at 30 is an ideal time to start because you may have a steady salary and access to a workplace retirement plan. It can also be complicated: You may have more expenses and new choices to think about.
The main reason to start saving for retirement in your 30s, though, is that time is on your side. Setting aside even a small amount on a regular basis can help grow your nest egg over time.
While an employer-sponsored plan can make saving easier, you can also set up and manage a retirement plan using an IRA.
Key Points
• Saving for retirement at 30 is crucial because this is when time is on your side, and can help your nest egg grow.
• At the same time, the onset of adult financial responsibilities may make it hard to set aside money for the future.
• If you have access to a workplace retirement plan, like a 401(k), this can get you started. Setting aside even small amounts on a steady basis can add up over time.
• Even without a 401(k), it’s possible to open your own IRA and start saving and investing now.
• Remember that saving for retirement comes with certain tax advantages that may be useful in the present and down the road.
5 Ways to Start Saving for Retirement at 30
You can set yourself on a path to healthy retirement savings by using the following strategies. First up, putting money into a designated retirement plan.
1. Contribute to a Workplace Account or an IRA
Saving in tax-advantaged retirement accounts available through work, such as a 401(k), is one of the best things you can do to start saving for retirement.
• Annual contributions
Your 401(k) allows you to contribute up to $23,500 a year in 2025, and $24,500 in 2026. Contributions come directly from your paycheck as pre-tax dollars, which lowers your taxable income in the year you make them.
Regular, automatic contributions, coupled with the benefits of compounding returns, can help your savings grow. Starting a 401(k) at 30 gives you a few decades for your funds to grow over time.
• Employer matching funds
Also, many 401(k)s allow employers to contribute to your retirement, and many will offer matching funds as part of your compensation package. Aim to save at least as much as is required to receive your employer’s match.
Many workplace plans offer pre-set portfolios, like target-date funds, as well as a wide selection of other investments.
In some cases, your employer may select a basic option for you. It’s important to check so that you can make the best choice for your financial goals. You may be able to invest online directly through the plan sponsor.
You can access the funds penalty-free once you reach age 59 ½, but you will owe taxes on the money at that time.
An IRA is a retirement account that anyone with earned income can open. If you don’t have a 401(k) at work, you can open an IRA, which will give you access to a tax-advantaged account to save for retirement.
Even if you already have a 401(k), opening an IRA can be a good way to save even more, though you may not be able to deduct your contributions. The contribution limit for an IRA 2025 is $7,000 per year, and the limit is $7,500 per year in 2026.
IRAs come in two different types: traditional and Roth IRAs. If you don’t have a 401(k), you can make contributions to a traditional IRA with pre-tax dollars. Like a 401(k), money in these accounts grows tax-deferred, and you’ll pay the taxes on it when you make withdrawals in retirement.
If you meet certain income restrictions, you may be able to contribute to a Roth IRA instead or in addition to these tax-deferred accounts. With a Roth, you make the contributions with after-tax dollars, but your money will grow tax-free inside the account, and you do not have to pay taxes when you make withdrawals.
Diversification is a strategy whereby you spread your money across different asset classes. To minimize risk from a decline in one type of asset, it typically makes sense to create a diversified portfolio, including a mix of asset classes, such as stocks, bonds and other assets.
Understanding Mutual Funds
Owing to the difficulty of researching, choosing, and managing multiple securities, most retirement savers choose to invest in mutual funds or exchange-traded funds (ETFs) within their retirement plans. These funds are a type of pooled investment that holds hundreds of different securities.
For example, if you buy shares in an ETF that tracks the S&P 500 index, you’ll be investing in the 500 stocks included in that index.
You may want to invest in stock mutual funds or ETFs, bond mutual funds or ETFs, or hybrid funds that include some of each type of asset.
Understanding Asset Allocation
Your asset allocation refers to the proportion of each asset class that you hold. Your asset allocation will reflect your goals, risk tolerance, and time horizon. Given the relatively long period until your retirement, you might consider a relatively aggressive portfolio consisting mostly of stocks in your retirement account.
Stocks typically provide the most potential for growth, but they also fluctuate more than some other asset classes, and they can be risky. Since you have three decades or more before you retire, you have time to ride out the natural ups and downs of the market.
Bonds tend to be less volatile than stocks but also offer lower returns, and may balance out the riskier equity allocation. As you approach retirement, you may consider rebalancing your asset allocation to include more conservative investments to help protect the income you will need to draw upon soon.
Target-date funds are a type of mutual fund that automatically readjusts your portfolio as you near your target date, often the year in which you wish to retire.
4. Diversify Within Asset Classes
Just as a portfolio with different types of assets offers some downside protection, so too, does diversification within those asset classes. If you invest the entire stock portion of your portfolio shares in just one fund and the share price drops, the value of your entire portfolio drops as well.
Now imagine that you own shares in 500 different companies. When one stock fares poorly, it will have a relatively small effect on the rest of your portfolio. Diversification helps limit the negative effects that any asset class, sector, or company could have on your portfolio.
You can further diversify your portfolio by including companies from different sectors and of all sizes from different parts of the globe. This same idea is true for other asset classes. For example, you could hold funds with a mix of government and corporate bonds, and the corporate bonds could represent companies from various sectors and locations.
5. Don’t Cash Out Your 401(k) When You Get a New Job
If you’re only in your 30s, it’s likely that you’ll change jobs a couple of times or more, over the course of your career. When you change jobs, you’ll have a number of options for what to do with the 401(k) you hold with your previous employer.
One of these options is to cash out your 401(k). But this is typically not a great idea from a personal finance perspective. If you take a lump sum payment and you’re younger than 59 ½, you will owe income taxes on the withdrawal, and also a 10% early withdrawal penalty. What’s more, your money will no longer be working for you in a tax-advantaged account, potentially setting you back in your retirement savings goals.
A better option is to roll over your 401(k) into another tax-advantaged retirement account, such as your new employer’s plan, if they offer one, without paying income taxes. Or you can roll your 401(k) into an IRA without paying taxes. IRA accounts offer the added benefit of additional investment options, and they may have lower fees than your 401(k).
6. Protect Your Earnings with Disability Insurance
An injury or an illness that keeps you from going to work can hamper your retirement savings plan. However, disability insurance can help cover a portion of your lost income — usually between 50% and 70% — for a period of time.
Most employers offer some sort of short-term disability insurance, with a benefit period of three to six months. Some employers may offer long-term policies that cover periods of five, 10, or 20 years, or even through retirement age.
Check with your employer to see if you are covered by a disability policy and whether it provides enough coverage for your needs. If your employer’s plan falls short, or you don’t have access to one, you might consider purchasing a policy on your own.
The Takeaway
The earlier you can start saving for retirement the better. A long time horizon gives you the opportunity to take advantage of compounding growth for a longer period of time, which can help you increase the amount you’re able to save. Pay attention to the fees you’re paying on investments, which can eat away at returns over time.
Prepare for your retirement with an individual retirement account (IRA). It’s easy to get started when you open a traditional or Roth IRA with SoFi. Whether you prefer a hands-on self-directed IRA through SoFi Securities or an automated robo IRA with SoFi Wealth, you can build a portfolio to help support your long-term goals while gaining access to tax-advantaged savings strategies.
Easily manage your retirement savings with a SoFi IRA.
FAQ
Is starting to save for retirement in your 30s too late?
Not at all. Being in your 30s is often the best time to start, because you may have a steady salary and access to a workplace retirement plan. Even if you don’t, you can still set up your own retirement plan using an IRA. Setting aside money on a regular basis can build a nest egg over time, because time is what helps money to grow.
How much should a 30-year-old have saved for retirement?
One rule of thumb is to aim to save an amount that’s equivalent to your salary. But that’s just a benchmark. It’s far more important to start saving even small amounts, but on a regular basis, using automatic transfers.
Can I save for retirement if I have debt?
Being in debt makes it harder to save for the future, no doubt. And while it’s difficult to save when you’re paying down bills, saving even a little bit can make a big difference to your nest egg over time.
Photo credit: iStock/AJ_Watt
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.
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.
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.
Exchange Traded Funds (ETFs): 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 by emailing customer service at [email protected]. Please read the prospectus carefully prior to investing.
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
S&P 500 Index: The 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.
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®
One of the most popular retirement accounts is an IRA, or Individual Retirement Account. IRAs allow individuals to put money aside over time to save up for retirement, with tax benefits similar to those of other retirement plans.
Two common IRAs are the SIMPLE IRA and the Traditional IRA, both of which have their own benefits, downsides, and rules around who can open an account. For investors trying to decide which IRA to open, it helps to know the differences between SIMPLE IRAs and Traditional IRAs.
SIMPLE IRA vs Traditional IRA: Side-by-Side Comparison
Although there are many similarities between the two accounts, there are some key differences. This chart details the key attributes of each plan:
SIMPLE IRA
Traditional IRA
Offered by employers
Yes
No
Who it’s for
Small-business owners and their employees
Individuals
Eligibility
Earn at least $5,000 per year
No age limit; must have earned income in the past year
Tax deferred
Yes
Yes
Tax deductible contributions
Yes, for employers and sole proprietors only
Yes
Employer contribution
Required
No
Fee for early withdrawal
10% plus income tax, or 25% if money is withdrawn within two years of an employer making a deposit
10% plus income tax
Contribution limits
$16,500 in 2025 $17,000 in 2026
$7,000 in 2025 $7,500 in 2026
Catch-up contribution
$3,500 additional per year for people 50 and over in 2025
$4,000 additional per year for those 50 and older in 2026
$5,250 additional per year for those aged 60 to 63 in both 2025 and 2026, thanks to SECURE 2.0
$1,000 additional per year in 2025 for people 50 and over
$1,100 additional per year in 2026 for those 50 and older
SIMPLE IRAs Explained
The SIMPLE IRA, which stands for Savings Incentive Match Plan for Employees, is set up to help small-business owners help both themselves and their employees save for retirement. It’s a retirement plan that small businesses with fewer than 100 employees can offer employees who earn at least $5,000 per year.
A SIMPLE IRA is similar to a Traditional IRA, in that a plan participant can make tax-deferred contributions to their account, so that it grows over time with compound interest. When the individual retires and begins withdrawing money, then they must pay income taxes on the funds.
With a SIMPLE IRA, both the employer and the employee contribute to the employee’s account. Employers are required to contribute in one of two ways: either by matching employee contributions up to 3% of their salary, or by contributing a flat rate of 2% of the employee’s salary, even if the employee doesn’t contribute. With the matching option, the employee must contribute money first.
There are yearly employee contribution limits to a SIMPLE IRA: In 2025, the annual limit is $16,500, with an additional $3,500 in catch-up contributions permitted for people age 50 and older, and an additional $5,250 for those ages 60 to 63, thanks to SECURE 2.0.
In 2026 the annual limit is $17,000, with an additional $4,000 in catch-up contributions permitted for people age 50 and older, and an additional $5,250 for those ages 60 to 63.
Benefits and Drawbacks of SIMPLE IRAs
It’s important to understand both the benefits and downsides of the SIMPLE IRA to make an informed decision about retirement plans.
SIMPLE IRA Benefits
There are several benefits — for both employers and employees — to choosing a SIMPLE IRA:
• For employers, it’s easy to set up and manage, with online set-up available through most banks.
• For employers, management costs are low compared to other retirement plans.
• For employees, taxes on contributions are deferred until the money is withdrawn.
• Employers can take tax deductions on contributions. Sole proprietors can deduct both salary and matching contributions.
• For employees, there is an allowable catch-up contribution for those over 50.
• For employers, the IRA plan providers send tax information to the IRS, so there is no need to do any reporting.
• Employers and employees can choose how the money in the account gets invested based on what the plan offers. Options may include mutual funds aimed toward growth or income, international mutual funds, or other assets.
SIMPLE IRA Drawbacks
Although there are multiple benefits to a SIMPLE IRA, there are some downsides as well:
• Employers must follow strict rules set by the IRS.
• Other employer-sponsored retirement accounts have higher limits, such as the 401(k), which allows for $23,500 per year in 2025 and $24,500 in 2026. (Check out our IRA calculator to see what you can contribute to each type of IRA.)
• If account holders withdraw money before they reach age 59 ½, they must pay a 10% fee and income taxes on the withdrawal. That penalty jumps to 25% if money is withdrawn within two years of an employer making a deposit.
• There is no option for a Roth contribution to a SIMPLE IRA, which would allow account holders to contribute post-tax money and avoid paying taxes later.
What Is a Traditional IRA?
The Traditional IRA is set up by an individual to contribute to their own retirement. Employers are not involved in Traditional IRAs in any way. The main requirements to open an IRA are that the account holder must have earned some income within the past year, and they must be younger than 70 ½ years old at the end of the year.
Pros and Cons of Traditional IRAs
When it comes to benefits and downsides, there’s not too much of a difference between Traditional vs. SIMPLE IRAs, given what an IRA is. That being said, there are a few that are unique to this type of plan.
Traditional IRA Pros
Some of the upsides of a Traditional IRA include:
• It allows for catch-up contributions for those over age 50.
• One can choose how the money in the account gets invested based on what the plan offers. Options may include mutual funds aimed toward growth or income, international mutual funds, or other assets.
• Contributions are tax-deferred, so taxes aren’t paid until funds are withdrawn. If you’re hoping to pay taxes now instead of later, you might weigh a Traditional vs. Roth IRA.
Traditional IRA Cons
Meanwhile, downsides to a Traditional IRA include:
• They have much lower contribution limits than a 401(k) or a SIMPLE IRA, at $ $7,000 in 2025, and $7,500 in 2026.
• Penalties for early withdrawal are also the same: if you withdraw money before age 59 ½, you’ll pay a 10% fee plus income taxes on the withdrawal.
Is a SIMPLE IRA or Traditional IRA Right for You?
The SIMPLE IRA and Traditional IRA are both individual retirement accounts, but the SIMPLE is set up through one’s employer — typically a small business of 100 people or less. The Traditional IRA is set up by an individual. In other words, whether a SIMPLE IRA is an option for you will depend on if you have an employer that offers it.
There are many similarities in the attributes of the plans, if you’re choosing between a SIMPLE IRA vs. Traditional IRA. However, two major distinctions are that the SIMPLE IRA requires employer contributions (though not necessarily employee contributions) and allows for a higher amount of employee contributions per year.
Can I Have Both a SIMPLE IRA and a Traditional IRA?
Yes, it is possible for an individual to have both a SIMPLE IRA through their employer and also a Traditional IRA on their own — though they may not be able to deduct all of their Traditional IRA contributions. The IRS sets a cap on deductions per calendar year.
In 2025, single people covered by an employer-sponsored retirement plan at work who have a MAGI (modified adjusted gross income) of more than $79,000 are restricted to a partial deduction; those with a MAGI of $89,000 or more may not take a deduction at all. Those with an employer-sponsored plan at work who are married filing jointly with an MAGI of more than $126,000 but less than $146,000 may take a partial deduction; those with a MAGI of $146,000 or more may not take a deduction at all.
In 2026, single people covered by an employer-sponsored retirement plan at work who have a MAGI of more than $81,000 and less than $91,000 are restricted to a partial deduction; those with a MAGI of $91,000 or more may not take a deduction at all. Those who are covered by an employer-sponsored retirement plan at work and are married filing jointly with a MAGI of more than $129,000 and less than $149,000 may take a partial deduction; those with a MAGI of $149,000 or more may not take a deduction at all.
Can You Convert a SIMPLE IRA to a Traditional IRA?
If you’re hoping to convert a SIMPLE IRA to a Traditional IRA, you’re in luck — you can roll over a SIMPLE IRA into a Traditional IRA. However, you can’t roll over the funds from a SIMPLE IRA to a Traditional IRA within the first two years of opening a SIMPLE IRA. Otherwise, you’ll get hit with a 25% penalty in addition to the regular income tax you must pay on your withdrawal.
Once that two-year period is up, however, you can roll over the money from your SIMPLE IRA — even if you’re still working for that employer. Just note that you can only roll over money from a SIMPLE IRA one time within a 12-month period.
Can You Max Out a Traditional and SIMPLE IRA the Same Year?
While you cannot max out a SIMPLE IRA and another employer-sponsored retirement plan like a 401(k), you can max out both a Traditional IRA and a SIMPLE IRA.
The maximum contribution for a SIMPLE IRA in 2025 is $16,500 (plus $3,500 in catch-up contributions), while the maximum for a Traditional IRA is $7,000 (plus $1,000 in catch-up contributions). This means that you could contribute a total of $23,500 across both plans in a year — or $28,000 if you’re 50 or older.
The maximum contribution for a SIMPLE IRA in 2026 is $17,000 (plus $4,000 in catch-up contributions), while the maximum for a Traditional IRA is $7,500 (plus $1,100 in catch-up contributions). This means that you could contribute a total of $24,500 across both plans for the year — or $29,600 if you’re 50 or older.
Are SIMPLE IRAs Most Similar to 401(k) Plans?
There are a lot of similarities between SIMPLE IRAs and 401(k) plans given that they are both employer-sponsored retirement plans. However, while any employer with one or more employees can offer a 401(k), SIMPLE IRAs are reserved for employers with 100 or fewer employees. Additionally, contribution limits are lower with SIMPLE IRAs than with 401(k) plans.
Another key difference between the two is that while employers can opt whether or not to make contributions to employee 401(k), employer contributions are mandatory with SIMPLE IRAs. On the employer side, SIMPLE IRAs generally have fewer account fees and annual tax filing requirements.
Opening an IRA With SoFi
Understanding the differences between retirement accounts like the SIMPLE and Traditional IRA is one more step in creating a personalized retirement plan that works for you and your goals. While a SIMPLE IRA is only an option if your employer offers it, you’ll want to weigh the pros and cons of a SIMPLE IRA vs. Traditional IRA if both are on the table for you. As we’ve covered, the two types of IRAs share many similarities, but a SIMPLE IRA is not the same as a Traditional IRA.
If you’re looking to start saving for retirement now, or add to your investments for the future, SoFi Invest® online retirement accounts offer both Traditional and Roth IRAs that are simple to set up and manage. By opening an IRA with SoFi, you’ll gain access to a broad range of investment options, member services, and a robust suite of planning and investment tools.
Find out how to further your retirement savings goals with SoFi Invest.
FAQ
Do you pay taxes on SIMPLE IRA?
Yes, you will pay taxes on a SIMPLE IRA, but not until you withdraw your funds in retirement. You’ll generally have to pay income tax on any amount you withdraw from your SIMPLE IRA in retirement. However, if you make a withdrawal prior to age 59 ½, or if money is withdrawn within two years of an employer making a deposit, you’ll have to pay income taxes then, alongside an additional tax penalty.
Is a SIMPLE IRA better than a Traditional IRA?
When comparing a SIMPLE IRA vs. traditional IRA, it’s important to understand that each has its pros and cons. If your employer offers a SIMPLE IRA, they require employer contributions, and they have higher contributions. At the end of the day, though, both allow you to save for retirement through tax-deferred contributions.
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.
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.
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.
A self-directed IRA, or SDIRA, is a type of individual retirement account that allows the account holder to invest in securities other than stocks, bonds, and mutual funds: e.g., real estate, private equity, precious metals, and other alternative assets.
Nonetheless, self-directed IRAs are still subject to basic IRA rules, like annual contribution limits and withdrawal restrictions. SDIRAs are available as regular tax-deferred IRAs as well as Roth IRAs.
The main difference is that a custodian administers a self-directed IRA, but the account holder manages their investments and assumes the risk in doing so.
Key Points
• A self-directed IRA (SDIRA) allows individuals to buy, sell, and hold alternative assets, including real estate, cryptocurrency, and precious metals, which conventional IRAs don’t permit.
• Nonetheless, SDIRAs are subject to ordinary IRA withdrawal rules, tax structures, and annual contribution limits.
• Account holders of SDIRAs research and manage their investments independently, thus increasing their responsibility and potential risk exposure.
• While SDIRAs may offer potential returns, they also carry higher fees and risks, particularly due to the illiquidity of many alternative investments.
• Opening a SDIRA requires finding an approved custodian, selecting investments, completing transactions through a reputable dealer, and planning for less liquid transactions.
What Is a Self-Directed IRA (SDIRA)?
Self-directed IRAs and self-directed Roth IRAs allow account holders to buy and sell a wider variety of investments than regular traditional IRAs and Roth IRAs. Experienced investors who are familiar with sophisticated or risky investments may be more comfortable managing a SDIRA, compared with less experienced investors.
While a custodian or a trustee administers the SDIRA, the account holder typically manages the portfolio themselves, taking on the risk and responsibility for researching investments and due diligence. Because these accounts are not as heavily regulated, they may see a higher incidence of fraud.
These accounts may also come with higher fees than regular IRAs, which can cut into the size of the investor’s retirement nest egg over time.
What Assets Can You Put in a Self-Directed IRA or a Self-Directed Roth IRA?
Individuals can hold a number of unique alternative investments in their SDIRA, including but not limited to:
There are specific kinds of SDIRAs customized for certain types of retirement savers looking for certain types of investments.
Self-directed SEP IRAs
Simplified Employee Pension IRAs (SEP IRAs) are for small business owners or those who are self-employed, and who can make contributions that are tax deductible for themselves and any eligible employees they might have. Using a self-directed SEP IRA gives them the flexibility to invest in alternative investments.
Self-directed SIMPLE IRAs
A Savings Incentive Match Plan IRA (or SIMPLE IRA) is a tax-deferred retirement plan for employers and employees of small businesses. Both the employer and the employees can make contributions to this plan. It allows for some alternative kinds of investments.
Self-directed Precious Metal IRAs
Similarly, there are self-directed IRAs for those who would like to invest in precious metals like gold. However, be aware that some precious metal IRAs may charge higher fees than the market price for precious metals.
Aside from their ability to hold alternative investments, SDIRAs work much like their conventional IRA counterparts. SDIRAs are tax-advantaged retirement accounts, and they can come in two flavors: traditional SDIRAs and Roth SDIRAs. But investors learning toward an online IRA generally need to find a qualified custodian to set up a SDIRA.
Traditional IRA Contributions and Withdrawal Rules
IRA contributions to traditional accounts goes in before taxes, which reduces investors’ taxable income, lowering their income tax bill in the year they make the contribution. For 2025, individuals can contribute up to $7,000 in total across accounts. Those age 50 and up can make an extra $1,000 catch-up contribution for a total of $8,000. For 2026, individuals can contribute a total of up to $7,500 across accounts. Those age 50 and up can make an additional contribution of $1,100 for a total of $8,600. Investments inside the account grow tax-deferred.
It’s important to pay close attention to self-directed IRA rules, particularly rules for IRA withdrawals. Account holders who make withdrawals before age 59 ½ may owe taxes and a possible 10% early withdrawal penalty. Traditional SDIRA account holders must begin making required minimum distributions (RMDs) after age 73.
Roth IRA Contributions and Withdrawal Rules
Roth SDIRAs have the same contribution limits as traditional SDIRAs. However, retirement savers contribute to Roths with after-tax dollars. Investments inside the account grow tax-free, and withdrawals after age 59 ½ aren’t subject to income tax.
Roth accounts are also not subject to RMD rules. As long as an individual has had the account for at least five years (according to the five-year rule), they can withdraw Roth contributions at any time without penalty, though earnings may be subject to tax if withdrawn before age 59 ½.
There are also rules restricting who can contribute to a Roth IRA, based on their income. In 2025, Roth eligibility begins phasing out at $150,000 for single people, and $236,000 for people who are married and file their taxes jointly. In 2026, Roth eligibility starts to phase out at $153,000 for single filers, and $242,000 for for piople who are married and filing jointly.
Individuals can maintain both traditional and Roth IRA accounts, however, contribution limits are cumulative across accounts, and cannot exceed $7,000, or $8,000 for those 50 and over, in 2025, and $7,500 or $8,600 for those 50 and over, in 2026.
Pros and Cons of Self-Directed IRAs
Self-directed IRAs offer unique perks for the right investor. However, those interested must weigh those benefits against potential drawbacks.
Benefits of Self-Directed IRAs
• Tax advantages
As noted above, self-directed IRAs offer the same tax advantages as ordinary IRA accounts (along with the same rules and restrictions).
• Diversification
A SDIRA also allows investors to branch out into different types of investments to which they might otherwise not have access. This allows investors to seek out potentially higher returns and diversify their portfolios beyond the offerings in traditional IRAs.
Alternative investments have the potential to offer higher returns than investors might achieve with conventional stock market investments. However, these opportunities come at the price of higher risk.
• Potential risk management
Also, investors’ ability to hold a broader spectrum of investments that may help them manage risks, such as inflation risk or longevity risk (the chance an investor will run out of money before they die). For example, some SDIRAs allow investors to hold gold, a traditional hedge against inflation.
Drawbacks of Self-Directed IRAs
While there are some advantages to using SDIRAs, these must be weighed against their disadvantages.
• Liquidity
For starters, investments like stocks and shares of ETFs are highly liquid. Investors who need their money quickly can sell them in a relatively short period of time, usually a matter of days.
However, some of the investments available in SDIRAs are illiquid. For example, real estate and real assets like precious metals may take quite a bit of time to sell. Individuals who need to sell these assets quickly may find themselves in a situation in which they must accept less than they believe the asset is worth.
• Cost
SDIRAs may also carry higher fees. Individuals who hold regular IRA accounts may not have to pay management or investment fees. However, SDIRA holders may have to pay fees associated with holding the account and with the purchase and maintenance of certain assets.
• Risks
Finally, SDIRAs place a lot of responsibility in the hands of their account holders. Investors must research investments themselves and perform due diligence to make sure that whatever they’re buying is legitimate and matches their risk tolerance.
What’s more, investors must make sure the assets they hold meet IRS rules. Running afoul of these rules can be costly, in some cases causing investors to pay taxes and penalties.
Here’s a look at the pros and cons of SDIRAs at a glance:
Pros
Cons
Tax-advantaged growth. Contributions to traditional accounts are tax deductible. Investments grow tax-deferred in traditional accounts and tax-free in Roth accounts.
Not liquid. Selling alternative investments may be slow and difficult.
Same contribution limits as regular IRAs. In 2025, individuals can contribute up to $7,000 a year, or $8,000 for those age 50 and up; in 2026, they can contribute $7,500, or $8,600 for those age 50 and up.
Higher fees. Individuals may be on the hook for account fees and fees associated with alternative investments.
Potential for higher returns. Alternative investments may offer higher returns than those available in the stock market.
Increased responsibility. Investors must research investments carefully themselves and ensure they stay within rules for approved IRA investments.
Diversification. SDIRAs offer investors the ability to invest in assets beyond the stock and bond markets.
Higher risk. Alternative investments tend to be riskier than more traditional investments.
4 Steps to Opening a Self-Directed IRA
Investors who want to open an SDIRA will need to take the following steps:
1. Find a custodian or trustee.
This can be a bank, trust company, or another IRS-approved entity. You’ll need to follow their requirements for opening an IRA account. Some SDIRAs specialize in certain asset classes, so look for a custodian that allows you to invest in the asset classes in which you’re interested.
2. Choose investments.
Decide which investments you want to hold in your SDIRA. Perform necessary research and due diligence.
3. Complete the transaction.
Find a reputable dealer from which your custodian can purchase the assets, and ask them to complete the sale.
4. Plan withdrawals carefully.
Because alternative assets have less liquidity than other types of investments, you may need to plan sales well in advance of needing retirement income or meeting any required minimum distributions.
The Takeaway
There are advantages and disadvantages to self-directed IRAs. Benefits include the fact that you can make alternative types of investments you might not otherwise be able to. That could help you diversify your portfolio and potentially increase your returns.
However, there are drawbacks to SDIRAs, including higher risk because alternative investments tend to be riskier, and potentially higher fees for maintenance of investments in the plan, plus account fees.
If you’re opening your first IRA account, you’re likely best served with a traditional or Roth IRA. Because of the risk and responsibility involved in using an SDIRA, only experienced investors should consider these accounts.
Prepare for your retirement with an individual retirement account (IRA). It’s easy to get started when you open a traditional or Roth IRA with SoFi. Whether you prefer a hands-on self-directed IRA through SoFi Securities or an automated robo IRA with SoFi Wealth, you can build a portfolio to help support your long-term goals while gaining access to tax-advantaged savings strategies.
Help build your nest egg with a SoFi IRA.
FAQ
Are self-directed IRAs a good idea?
There are advantages and disadvantages to self-directed IRAs. Benefits include the fact that you can make alternative types of investments you might not otherwise be able to. That could help you diversify your portfolio and potentially increase your returns.
However, there are drawbacks to SDIRAs, including higher risk because alternative investments tend to be riskier, and potentially higher fees for maintenance of investments in the plan and account fees. In addition, investors need to research the investments themselves and follow the IRS rules carefully to make sure they comply. Finally, many alternative investments are not liquid, which means they could take longer and be more difficult to sell.
Can you set up a self-directed IRA yourself?
To set up a self-directed IRA, find a custodian or trustee such as a bank or trust company to open an account, research and choose your investments, find a reputable dealer for the investments you’d like to make, and have your custodian complete the transactions.
How much money can you put in a self-directed IRA?
For tax year 2025, you can contribute up to $7,000 to a traditional or Roth self-directed IRA, plus an additional $1,000 if you’re 50 or older. For tax year 2026, you can contribute up to $7,500, or $8,600 if you are 50 or older.
Photo credit: iStock/Andres Victorero
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.
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®
Exchange Traded Funds (ETFs): 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 by emailing customer service at [email protected]. Please read the prospectus carefully prior to investing.
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.
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
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.
An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. This and other important information are contained in the Fund’s prospectus. For a current prospectus, please click the Prospectus link on the Fund’s respective page. The prospectus should be read carefully prior to investing.
Alternative investments, including funds that invest in alternative investments, are risky and may not be suitable for all investors. Alternative investments often employ leveraging and other speculative practices that increase an investor's risk of loss to include complete loss of investment, often charge high fees, and can be highly illiquid and volatile. Alternative investments may lack diversification, involve complex tax structures and have delays in reporting important tax information. Registered and unregistered alternative investments are not subject to the same regulatory requirements as mutual funds.
Please note that Interval Funds are illiquid instruments, hence the ability to trade on your timeline may be restricted. Investors should review the fee schedule for Interval Funds via the prospectus.
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Turning 30 can bring a shift in the way you approach your finances. Investing in your 30s can look very different from the way you invest in your 20s or 40s, based on your goals, strategies, and needs.
At this stage in life you may be working on paying off the remainder of your student loan debt while focusing on saving. Your financial priorities may revolve around buying a home and starting a family. At the same time, you may be hoping to add investing for retirement into the mix (or increase the amount you’re already investing) as you approach your peak earning years.
Finding ways to make these goals and needs fit together is what financial planning in your 30s is all about. Knowing how to invest your money as a 30-something can help you start building wealth for the decades to come.
Key Points
• In your 30s, set specific, measurable, and actionable financial goals, such as contributing 10% of income to a 401(k) and aiming for a net worth of two times your annual salary by 40.
• Embracing a balanced level of risk that you feel comfortable with, is one tip for investing in your 30s. The longer you have to invest, generally the more risk you may be able to take.
• Diversifying investment portfolios across different assets such as stocks, bonds, and cash, for example, can help spread out risk.
• Leverage tax-advantaged accounts like 401(k)s and IRAs for retirement savings, and taxable accounts for flexibility and additional contributions.
• Prioritize building an emergency fund, achieving short-term goals, and paying off debt, while also saving for the future.
5 Tips for Investing in Your 30s
1. Define Your Investment Goals
Setting clear financial goals in your 30s or at any age is critical. Your goals are your end points, the things that you’re saving for.
So as you consider how to invest in your 30s, think about the result you’re hoping to achieve. Focus on goals that are specific, easy to measure, and actionable.
For example, your goals for investing as a 30-something may include:
• Contributing 10% of your income to your 401(k) plan each year
• Maxing out annual contributions to an Individual Retirement Account (IRA)
• Saving three times your salary for retirement by age 40
• Achieving a net worth of two times your annual salary by age 40
These goals work because you can define them using real numbers. Say for example, you make $50,000 a year. To meet each of these goals, you’d need to:
• Contribute $5,000 to your 401(k)
• Save $7,000 in an IRA in 2025 and $7,500 in 2026
• Have $150,000 in retirement savings by age 40
• Grow your net worth to $100,000 by age 40
Setting goals this way may require you to be a little more aggressive in your financial approach. But having hard numbers to work with can help motivate you to move forward.
2. Know Your Tolerance for Risk
If there’s one important rule to remember about investing in your 30s, it’s that time is on your side.
When retirement is still several decades away, you typically have time to recover from the inevitable bouts of market volatility that you’re likely to experience. The market moves in cycles; sometimes it’s up, others it’s down. But the longer you have to invest, the more risk you can generally afford to take.
The best investments for 30 somethings are the ones that allow you to achieve your goals while taking on a level of risk with which you feel comfortable. That being said, here’s another investing rule to remember: the greater the investment risk, the greater the potential rewards.
Stocks, for example, are riskier than bonds, but of the two, stocks are likely to produce better returns over time. If you’re not sure how to choose your first stock, you may have heard that it’s easiest to buy what you know. But there’s more to investing in stocks than just that. When comparing the best stocks to buy in your 30s, think about things like:
• How profitable a particular company is and its overall financial health
• Whether you want to invest in a stock for capital appreciation (i.e. growth) or income (i.e. dividends)
• How much you’ll need to invest in a particular stock
Past history isn’t an indicator of future performance, so don’t focus on returns alone when choosing stocks. Instead, consider what you want to get from your investments and how each type of investment can help you achieve that.
💡 Quick Tip: When people talk about investment risk, they mean the risk of losing money. Some investments are higher risk, some are lower. Be sure to bear this in mind when investing online.
3. Diversify, Diversify, Diversify
Investing in your 30s can mean taking risk but you don’t necessarily want to have 100% of your portfolio committed to just a handful of stocks. A diversified portfolio with multiple investments can help spread out the risk associated with each investment.
So why does portfolio diversification matter? It’s simple. A portfolio that’s diversified is better able to balance risk. Say, for example, you have 80% of your investments dedicated to stocks and the remaining 20% split between bonds and cash. If stocks experience increased volatility, your lower-risk investments could help smooth out losses.
Or say you want to allocate 90% of your portfolio to stocks. Rather than investing in just a few stocks, you could spread out risk by investing and picking one or more low-cost exchange-traded funds (ETFs) instead.
ETFs are similar to mutual funds, but they trade on an exchange like a stock. That means you get the benefit of liquidity and flexibility of a stock along with the exposure to a diversified collection of different assets. Your diversified portfolio might include an index ETF that tracks the performance of the S&P 500, an ETF that’s focused on growth stocks, a couple of bond ETFs, and some individual stocks.
This type of strategy allows you to be aggressive with your investments in your 30s without putting all of your eggs in one basket, so to speak. That can help with growing wealth without inviting more risk into your portfolio than you’re prepared to handle.
💡 Quick Tip: When you’re actively investing in stocks, it’s important to ask what types of fees you might have to pay. For example, brokers may charge a flat fee for trading stocks, or require some commission for every trade. Taking the time to manage investment costs can be beneficial over the long term.
4. Leverage Tax-Advantaged and Taxable Accounts
Asset allocation, or what you decide to invest in, matters for building a diversified portfolio. But asset location is just as important.
Asset location refers to where you keep your investments. This includes tax-advantaged accounts and taxable accounts. Tax-advantaged accounts offer tax benefits to investors, such as tax-deferred growth and/or deductions for contributions. Examples of tax-advantaged accounts include:
If you’re interested in investing for retirement in your 30s, your workplace plan might be the best place to start. You can defer money from your paychecks into your retirement account and may benefit from an employer-matching contribution if your company offers one. That’s free money to help you build wealth for the future.
You could also open an IRA to supplement your 401(k) or in place of one if you don’t have a plan at work. Traditional IRAs can offer a deduction for contributions while Roth IRAs allow for tax-free distributions in retirement. When opening an IRA, think about whether getting a tax break now versus in retirement would be more valuable to you.
If you’re not earning a lot in your 30s but expect to be in a higher tax bracket when you retire, then a Roth IRA could make sense. But if you’re earning more now, then you may prefer the option to deduct what you save in a traditional IRA.
You might also consider taxable accounts for investing in your 30s. With a taxable brokerage account, you don’t get any tax breaks, and you’ll owe capital gains tax on any investments you sell at a profit. But there are no contribution limits on taxable accounts as there are with 401(k)s and IRAs, so you can contribute as much as you like. And if you need money for a shorter-term goal, such as a down payment on a house, a taxable investment account doesn’t have restrictions on how much money you can withdraw and when you can withdraw it, unlike retirement accounts. So your money is easier to access.
5. Prioritize Other Financial Goals
Retirement is one of the most important financial goals to think about, but planning for it doesn’t have to sideline your other goals. Financial planning in your 30s should be more comprehensive than that, factoring in things like:
• Buying a home
• Marriage and children
• Saving for emergencies
• Saving for short-term goals
• Paying off debt
As you build out your financial plan, consider how you want to prioritize each of your goals. After all, you only have so much income to spread across them, so think about which ones need to be funded first.
That might mean creating an emergency fund, then working on shorter-term goals while also setting aside money for your child’s college education and contributing to your 401(k). And if you’re still paying off student loans or other debts, that may take priority over something like saving for college.
Looking at the bigger financial picture can help with balancing investing alongside your other goals.
The Takeaway
Your 30s are a great time to start investing and it’s important to remember that it doesn’t have to be complicated or overwhelming. Taking even small steps toward getting your money in order can help improve your financial security, both now and in the future.
Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.
Invest with as little as $5 with a SoFi Active Investing account.
FAQ
What is the best way to invest money in your 30s?
Some of the options to invest money in your 30s include participating in your employer’s 401(k) and contributing enough to get the employer match, if possible; opening an IRA and maxing out the contribution limit of $7,000 for those under age 50 in 2025, and $7,500 for those under age 50 in 2026; and diversifying your investments across different asset classes and sectors to help spread out the risk.
What is $1,000 a month invested for 30 years?
It depends how the money is invested and the rate of return on the investment. If you invest $1,000 a month for 30 years in an index fund that tracks the S&P 500, for example — where the average annual inflation-adjusted return is about 7% — you would have about $1.2 million. However, if your investment has a lower rate of return of, say, 4%, you would have about $700,000 after 30 years.
Is 30 too late to start investing?
No, 30 is not too late to start investing. In fact, it’s a good time to start. The earlier you begin investing, the more time your money has to grow. If you start at age 30 and retire at age 65, for instance, your money will potentially have 35 years to compound and grow. That stretch of years also helps you ride out ups and downs in the stock market.
About the author
Rebecca Lake
Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.
Photo credit: iStock/katleho Seisa
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.
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.
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.
Exchange Traded Funds (ETFs): 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 by emailing customer service at [email protected]. Please read the prospectus carefully prior to investing.
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
S&P 500 Index: The 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.
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.
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®
