Feb
05
2025
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HSA for Retirement: Rules, Benefits, and Getting Started

By | Budgeting & Goals, invest | No Comments

A health savings account, or HSA, not only provides a tax-free way to pay for medical expenses now, those tax savings can extend to retirement as well.

An HSA provides triple tax benefits to the account holder. You set aside money pre-tax (similar to a 401(k) or IRA), it grows tax free, and withdrawals for qualified medical expenses are also tax free.

HSAs can be a boon in retirement because you always have access to the account, even if you change jobs, and you never have to “use it or lose it,” so your savings can grow over time. Thus, you can use HSA funds to pay for qualified medical expenses at any time, tax free, now or when you retire.

The other good news is that after age 65 you can use the funds for non-qualified expenses, too; you just have to pay income tax on the funds you withdraw.

What Is an HSA?

A health savings account is a type of tax-advantaged savings account for individuals with a high-deductible health care plan (HDHP). For 2025, this means it has an annual deductible of at least $1,650 for self-only coverage and $3,300 for family coverage. In addition, its out-of-pocket maximum (including annual deductible) can’t exceed $8,300 for individuals and $16,600 for families.

Anyone who fits the criteria is eligible to open an HSA and save pre-tax dollars: up to $4,300 a year for individuals and up to $8,550 for families for the 2025 tax year. If you’re 55 or older at the end of the tax year, you can contribute an additional $1,000 — similar to the catch-up contributions allowed with an IRA.

An employer can also make a matching contribution into your HSA, though it’s important to note that total employer and employee contributions can’t exceed the annual limits. So if you’re single, and your employer contributes $1,500 to your HSA each year, you can’t contribute more than $2,800 for 2025.

Rules and Restrictions on HSA Contributions

You have until the tax-filing deadline to make your annual HSA contribution.

•   For tax year 2024, you have until April 15, 2025.

•   For tax year 2025, you have until April 15, 2026.

It’s important to know the amount you can contribute to your account, both so you can take advantage of your HSA and to make sure you’re not penalized for excess contributions. If the amount you deposit for the year in your HSA is over the defined limit, including any employer contributions and catch-up contributions, you’ll owe ordinary income tax on that amount, plus a 6% penalty.

Another caveat: Once you enroll in or become eligible for Medicare Part A benefits, you can no longer contribute money to an HSA.

What Are HSA Withdrawals?

You can withdraw funds from your HSA to pay for qualified medical and dental health care expenses, including copays for office visits, diagnostic tests, supplies and equipment, over-the-counter medications, and menstrual care products. Health insurance premiums are not included as qualified expenses, however.

One significant benefit of HSA accounts is that, unlike flexible spending accounts (FSAs), the money in an HSA doesn’t have to be used by the end of the year. Any money in that account remains yours to access, year after year. Even if you change jobs, the account comes with you.

Before age 65, there is a 20% penalty for withdrawing funds from an HSA for non-medical expenses, on top of ordinary income tax. After age 65, HSA holders can also make non-medical withdrawals on their account, though ordinary income tax applies.

How Do Health Savings Accounts Work?

HSAs are designed to help consumers play for medical expenses when they have a high-deductible health plan (HDHP). That’s because typically an HDHP only covers preventive care before the deductible, so most types of medical care would have to be paid out of pocket as they’re applied to the deductible amount.

Having a tax-advantaged plan like an HSA gives people a bit of a break on medical expenses because they can save the money pre-tax (meaning any money you save in an HSA lowers your taxable income), and it grows tax-free, and you withdraw the money tax-free as well, as long as you’re paying for qualified expenses.

As noted above, you can withdraw your HSA funds at any time. But if you’re under age 65 and paying for non-qualified expenses, you’ll owe taxes and a 20% penalty on the amount you withdraw.

After age 65, you simply owe taxes on non-qualified withdrawals, similar to withdrawal rules for a 401(k) or traditional IRA.

💡 Quick Tip: It’s smart to invest in a range of assets so that you’re not overly reliant on any one company or market to do well. For example, by investing in different sectors you can add diversification to your portfolio, which may help mitigate some risk factors over time.

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1Terms and conditions apply. Roll over a minimum of $20K to receive the 1% match offer. Matches on contributions are made up to the annual limits.

Can an HSA Be Used for Retirement?

HSAs are not specifically designed to be a retirement planning vehicle, but you can use HSA funds in retirement, since the money accumulates in your account until you withdraw it tax-free for qualified medical expenses.

There’s no “use it or lose it” clause with an HSA account, so any unused funds simply roll over to the following year. This offers some potential for growth over time.

That said, the investment options in an HSA account, unlike other designated retirement accounts, tend to be limited. And the contribution caps are lower with an HSA.

You could also use your HSA funds to pay for other retirement expenses after age 65 — you’ll just have to pay income tax on those withdrawals.

Recommended: How to Set Up a Health Savings Account

3 Reasons to Use an HSA for Retirement

Though they aren’t specifically designed to be used in retirement planning, it’s possible to use an HSA for retirement as a supplement to other income or assets. Because you can leave the money you contribute in your account until you need it for qualified medical expenses, the funds could be used for long-term care, for example.

Or, if you remain healthy, you could tap your HSA in retirement to pay for everyday living expenses.

There are several advantages to including an HSA alongside a 401(k), Individual Retirement Account (IRA), and other retirement savings vehicles. An HSA can yield a triple tax benefit since contributions are tax-deductible, they grow tax-deferred, and assuming you withdraw those funds for qualified medical expenses, distributions are tax-free.

If you’re focused on minimizing your tax liability as much as possible prior to and during retirement, an HSA can help with that.

Using an HSA for retirement could make sense if you’ve maxed out contributions to other retirement plans and you’re also investing money in a taxable brokerage account. An HSA can help create a well-rounded, diversified financial plan for building wealth over the long term. Here’s a closer look at the top three reasons to consider using HSA for retirement.

1. It Can Lower Your Taxable Income

You may not be able to make contributions to an HSA in retirement, but you can score a tax break by doing so during your working years. The money an individual contributes to an HSA is deposited pre-tax, thus lowering their taxable income.

Furthermore, any employer contributions to an HSA are also excluded from a person’s gross income. Meaning: You aren’t taxed on your employer’s contributions.

The money you’ve deposited in an HSA earns interest and contributions are withdrawn tax-free, provided the funds are used for qualified medical expenses. In comparison, with a Roth IRA or 401(k), account holders are taxed either when they contribute (to a Roth IRA) or when they take a distribution (from a tax-deferred account like a traditional IRA or 401(k)).

Using HSA for retirement could help you manage your tax liability.

2. You Can Save Extra Money for Health Care in Retirement

Unlike flexible spending accounts that allow individuals to save pre-tax money for health care costs but require them to use it the same calendar year, there is no “use it or lose it” rule with an HSA. If you don’t use the money in your HSA, the funds will be available the following year. There is no time limit on spending the money.

Because the money is allowed to accumulate, using an HSA for retirement can be a good way to stockpile money to pay for health care, nursing care, and long-term care costs (all of which are qualified expenses) if needed.

While Americans can enroll in Medicare starting at age 65, some health care needs and services aren’t covered under Medicare. Having an HSA to tap into during retirement can be a good way to pay for those unexpected out-of-pocket medical expenses.

3. You Can Boost Your Retirement Savings

Beyond paying for medical expenses, HSAs can be used to save for retirement. Unlike a Roth IRA, there are no income limits on saving money in an HSA.

Some plans even allow you to invest your HSA savings, much like you would invest the funds in a 401(k).

The investments available in any given HSA account depend on the HSA provider. And the rate of return you might see from those investments, similar to the return on a 401(k), depends on many factors.

Investing can further augment your retirement savings because any interest, dividends, or capital gains you earn from an HSA are nontaxable. Plus, in retirement, there are no required minimum distributions (RMDs) from an HSA account — you can withdraw money when you want or need to.

Some specialists warn that saving for retirement with an HSA really only works if you’re currently young and healthy, rarely have to pay health care costs, or can easily pay for them out of your own pocket. This would allow the funds to build up over time.

If that’s the case, come retirement (or after age 65) you’ll be able to use HSA savings to pay for both medical and non-medical expenses. While funds withdrawn to cover medical fees won’t be taxed, you can expect to pay ordinary income tax on non-medical withdrawals, as noted earlier.

HSA Contribution Limits

If you are planning to contribute to an HSA — whether for immediate and short-term medical expenses, or to help supplement retirement savings — it’s important to take note of HSA contribution limits. If your employer makes a contribution to your account on your behalf, your total contributions for the year can’t exceed the annual contribution limit.

2024 Tax Year HSA Contribution Limits: Remember that you can contribute to your HSA for tax year 2024 until April 15, 2025.

•   $4,150 for individual coverage

•   $8,300 for family coverage

•   Individuals over age 55 can contribute an additional $1,000 over the annual limit

As with opening an IRA, you have until the tax filing deadline to make a contribution for the current tax year. So if you wanted to contribute money to an HSA for tax year 2024, you’d have until April 15, 2025 to do so.

2025 Tax Year HSA Contribution Limits: Remember that you can contribute to your HSA for tax year 2025 until April 15, 2026.

•   $4,300 for individual coverage

•   $8,550 for family coverage

•   Individuals over age 55 can contribute an additional $1,000 over the annual limit

How to Invest Your HSA for Retirement

An HSA is more than just a savings account. It’s also an opportunity to invest your contributions in the market to grow them over time. Similar to a 401(k) or IRA, it’s important to invest your HSA assets in a way that reflects your goals and risk tolerance.

That said, one of the downsides of investing your HSA funds is that these accounts may not have the wide range of investment options that are typically available in other types of retirement plans. Investment fees are another factor to keep in mind.

It’s also helpful to consider the other ways you’re investing money to make sure you’re keeping your portfolio diversified. Diversification is important for managing risk. From an investment perspective, an HSA is just one part of the puzzle and they all need to fit together so you can make your overall financial plan work.

HSA for Retirement vs Other Retirement Accounts

Although you can use an HSA as part of your retirement plan, it’s not officially a retirement vehicle. Here are some of the differences between HSAs and other common types of retirement accounts. Note: All amounts reflect rules/ limits for the 2024 tax year.

HSA

 Traditional IRA

 401(k)
2025 annual contribution limit $4,300 (individual)
$8,550 (family) 		$7,000 $23,500
Catch up contribution + $1,000 for those 55 and older + $1,000 for those 50 and older (total: $8,000) + $7,500 for those over 50 (total: $31,000)
Contributions & tax Pre-tax Pre-tax Pre-tax
Withdrawals Can withdraw funds at any age, tax free, for qualified medical expenses. After age 59 ½ withdrawals are taxed as income. After age 59 ½ withdrawals are taxed as income.
Penalties/taxes Withdrawals before age 65 for non-qualified expenses incur a 20% penalty and taxes.

Withdrawals after age 65 for non-qualified expenses are only taxed as income.

 Before age 59 ½ withdrawals are taxed, and may incur an additional 10% penalty.

Some exceptions apply.

Before age 59 ½ withdrawals are taxed, and may incur an additional 10% penalty.

Some exceptions apply.

RMDs No Yes Yes

As you can see, an HSA is fairly similar to other common types of retirement accounts, like traditional IRAs and 401(k)s, with some key differences. For example, you can generally contribute more to an IRA and to a 401(k) than you can to an HSA, as an individual.

While contributions are made pre-tax in all three cases, an HSA offers the benefit of tax-free withdrawals, at any time, for qualified medical expenses.

Note that Roth IRAs also have a tax-free withdrawal structure for contributions, but not earnings, unless the account holder has had the Roth for at least 5 years and is over 59 ½. The rules governing Roth accounts, including Roth IRAs and Roth 401(k)s can be complicated, so be sure you understand the details.

In addition, HSA rules allow the account holder to maintain the account even if they leave their job. There is no need to do a rollover IRA, as there is when you leave a company and have to move your 401(k).

💡 Quick Tip: Before opening an investment account, know your investment objectives, time horizon, and risk tolerance. These fundamentals will help keep your strategy on track and with the aim of meeting your goals.

What Happens to an HSA When You Retire?

An HSA doesn’t go away when you retire; instead, the money remains available to you until you need to use it. As long as withdrawals pay for qualified medical expenses, you’ll pay no taxes or penalties on the withdrawals. And your invested contributions can continue to grow as long as they remain in the account.

One advantage of using an HSA for retirement versus an IRA or 401(k) is that there are no required minimum distributions. In other words, you won’t be penalized for leaving money in your HSA.

How Much Should I Have in an HSA at Retirement?

The answer to this question ultimately depends on how much you expect to spend on health care in retirement, how much you contribute each year, and how many years you have to contribute money to your plan.

Say, for example, that you’re 35 years old and making contributions to an HSA for retirement for the first time. You plan to make the full $4,300 contribution allowed for individual coverage for the next 30 years.

Assuming a 5% rate of return and $50 per month in HSA medical expenses, you’d have just over $242,195 saved in your HSA at age 65. Using an HSA calculator to play around with the numbers can give you a better idea of how much you could have in your HSA for retirement if you’re saving consistently.

When Can I Use My HSA Funds?

Technically your HSA funds are available to you at any time. So if you have to pick up a prescription or make an unscheduled visit to the doctor, you could tap into your HSA to pay for any out-of-pocket costs not covered by insurance.

If you’re interested in using an HSA in retirement, though, it’s better to leave the money alone if you can, so that it has more opportunity to grow over time.

The Takeaway

A health savings account can be a valuable tool to help pay for qualified out-of-pocket medical costs, tax-free right now. But an HSA can also be used to accumulate savings (and interest) tax-free, to be used on medical and non-medical expenses in retirement.

While an HSA can be useful for retirement, especially given the rising cost of long-term care and other medical needs, note that the annual contribution limit for individuals is much lower than other retirement accounts. Also, the investment options in an HSA may be limited compared with other retirement plans.

Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

Easily manage your retirement savings with a SoFi IRA.

🛈 While SoFi does not offer Health Savings Accounts (HSAs) at this time, SoFi Invest offers a range of Individual Retirement Accounts (IRAs) to help members prepare for retirement..

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

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

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.

SOIN-Q125-013

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Feb
03
2025
At What Age Should You File for Social Security? 62 vs 65 vs 67?

What Age Should You File for Social Security? 62 vs 65 vs 67?

By | Budgeting & Goals, money, Preparing for Retirement | Comments Off on What Age Should You File for Social Security? 62 vs 65 vs 67?

Social Security is a critical part of most people’s retirement plans, and knowing when to start drawing on those benefits is important. Having an idea of how much you could ultimately receive from Social Security can help you determine other parts of your plan, and help you reach your retirement goals, particularly when you rope in a retirement plan like a 401(k) or IRA.

Americans can start drawing Social Security benefits at age 62, but there can be benefits to waiting until full retirement age (67), or longer. Deciding when to apply for Social Security can be complicated, and there’s likely a different answer for each person depending on their circumstances. The earlier you file, the lower your benefit amount, but the more payments you receive over time. There are many other factors to consider when choosing your retirement date, but thinking early about your potential Social Security benefits, and how they can pair with a retirement plan like an IRA or 401(k) long before you need to tap those benefits, may be beneficial.

Key Points

•   Social Security benefits can be claimed at 62, but increase if delayed until 67 or 70.

•   Claiming at 62 results in reduced benefits – about 70% of full benefits.

•   Full retirement age is 67, offering 100% of benefits. Delaying benefits until age 70 increases monthly payments by approximately 25%.

•   Factors influencing when to claim include health, life expectancy, marital status, and financial situation.

•   It may be wise to supplement your Social Security benefits by investing in a retirement account, such as an IRA.

How Might Social Security Impact When You Retire?

As noted, Social Security is likely an important part of your retirement plan. But it’s important to keep in mind that it’s only one part, as most people will likely need more savings and investments to fund their retirement. Knowing your potential Social Security benefits can, however, help you figure out what your additional or supplemental savings or investments need to amount to to give you the best chance of making them last.

With all of that in mind, you’ll want to give some thought to additional factors, such as your health and family situation, to help you figure out when you should start or plan to start drawing your Social Security benefits. For many people, it may be best to wait until full retirement age, rather than at the first opportunity. But again, thinking ahead is key, and giving consideration to how a retirement plan like a 401(k) or IRA can work in tandem with Social Security can be wise.

What Is Full Retirement Age (FRA)?

Full retirement age, as outlined by the Social Security Administration, is 67, assuming you were born in 1960 or later. As such, “full retirement age,” as it stands, is 67. That’s the age at which you’d be eligible for your full Social Security benefit. But as noted, that doesn’t mean you can’t start drawing Social Security benefits before that, and for some people, that may be a good idea.

The earliest you can apply for Social Security is age 62, but your benefits will be diminished. Conversely, if you wait longer (up to age 70), you could get more. So, if it’s possible to start drawing from a retirement plan without tapping your Social Security benefits, that may be a tactic to delay, and potentially receive more later on.

Here’s a look at the percentage of Social Security benefits that you could be paid monthly depending on the age at which you decide to retire (assuming you were born in 1960 or later):

Retirement age

 Percentage of full Social Security benefit paid out*
62 70%
63 75%
64 80%
65 86.7%
66 93.3%
67 100%
68 108%
69 116%
70 124%


*Data reflects percentages for those born in 1960 or later, with a full retirement age of 67.

Source: Social Security Administration

Claiming Social Security at 62 (Early Retirement)

The earliest most people can apply for Social Security is age 62. The greater the difference between when you apply and when you reach full retirement age, the more the Social Security Administration will reduce the amount of your benefit.

How Much Social Security Will You Get at 62?

As discussed, for those born in 1960 or later, full retirement age is 67. Taking retirement at 62 will cause your benefit to be reduced by about 30%.

If your benefit at full retirement would be $1,000 a month, and you file for benefits at 62, you will only receive about $700 or 70% of the amount you would have received at full retirement. For each month you wait past the age of 62, that amount rises a little bit. At $700 a month starting at 62, if you lived to the average U.S. lifespan of about 80 years old, you would receive $151,200 over your lifetime.

Benefits of Claiming Early

The benefit of claiming early is that you’d start seeing money sooner – potentially years sooner than if you had waited. Depending on numerous factors (health issues, etc.), this may be more advantageous to some people.

When Claiming Social Security at 62 Might Be a Good Idea

It may be a good idea to start claiming benefits early if you have health issues, or are unable to work or otherwise find a source of income. Again, you’ll take a hit in the form of a reduced benefit, but for some people, it may be worth it. However, it bears repeating: It all depends on your individual circumstances.

Claiming Social Security at 67 (Full Retirement Age)

Claiming Social Security at age 67, which is the full retirement age for people born after 1960, means you’re eligible for your entire, or 100%, of your benefits.

How Much Social Security Will You Get at 67?

If you wait to apply for benefits until full retirement, you will get the full amount of your benefit. In the example used above, that would be $1,000 a month. In this scenario, if you live to age 80, you would receive $156,000 over those retirement years, which is close to $5,000 more than if you filed five years earlier.

Benefits of Waiting Until Full Retirement Age

The most obvious benefit of retiring at 67 is that you get your complete Social Security benefit, without reduction. If you continue to work between 62 and 67 as well, you may also have more time to add to your savings and investments, too, to help you stretch your retirement accounts.

When Claiming Social Security at 67 Might Be a Good Idea

Claiming Social Security at 67 might be a good idea if you don’t have any immediate need to retire early. Waiting to get your entire benefit can be helpful, especially since retiring at, say, 62, would reduce that benefit by up to 30% – a decent percentage. So, if you have no immediate concerns about your health or ability to continue earning income, waiting may be a good idea.

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Delaying Social Security Until Age 70

Every month you delay applying for benefits causes the monthly benefit amount to grow, up until age 70. If you file at age 70, your monthly Social Security retirement payment is close to 25% higher than it would have been if you filed at full retirement.

How Much Social Security Will You Get at 70?

Continuing with our hypothetical scenario, rather than receiving $1,000 a month you would receive about $1,300 a month. If you live to age 80, that comes to $156,000 which is the same total amount you would receive if you filed at full retirement age. This brings into the equation one of the factors that influences at what age you may want to file for Social Security benefits: how long you expect to live.

Benefits of Delaying Your Social Security

The biggest benefit of delaying your Social Security benefits is, again, a larger benefit. If you stand to draw a significantly bigger benefit at 70 than you would at 62 or 67, it may be worth it to wait — so long as you’re able.

When Claiming Social Security at 70 Might Be a Good Idea

Your benefits won’t increase after age 70, so it may be a good idea to start claiming that at 70 whether you need to or not. And even if you are taking Social Security at 70, it doesn’t mean you need to stop working or generating income otherwise, either. But again, everything comes down to an individual’s specific circumstances.

What Factors Should You Consider When Deciding to Take Social Security?

Besides your age, there are some other key factors and variables you should keep in mind when deciding when to start drawing Social Security, or affect your retirement plan. Those include your health, life expectancy, whether you’re married or not, and your overall financial situation.

Health and Life Expectancy

No one knows for certain how long they will live. But if you expect to live only to age 75 for one reason or another, you might be inclined to take your Social Security benefit early so that you could enjoy it for a longer time. But if you live until age 90, taking Social Security retirement benefits early could cost you a lot of money. Here’s how your lifetime benefit would be impacted by filing at different ages if your full retirement benefit is $1,000 a month:

•   At age 62, you would receive a total of $235,000 over your retirement years.

•   At age 65, you would receive $260,100.

•   At 67 that jumps to $276,000.

•   If you wait until age 70 it is $312,000.

So, if you expect to live a long life, waiting a few years to file could make a big difference in your total benefit.

Financial Situation and Other Retirement Income

A lot, and perhaps a majority of the money spent after retirement goes toward typical retirement expenses of housing and healthcare. The average Social Security benefit as of 2024 was a little less than $1,800 per month. So an average married couple would receive around $3,600 in benefits.

Consequently, many people have to rely on other forms of income including wages from a job, pensions, dividends, interest or capital gains in addition to their Social Security benefit. In fact, having access to other forms of income may impact when you can retire.

If you do have income besides your Social Security benefit, you might want to delay claiming your benefit. If you earn income from working, and you claim your benefit before full retirement age, your benefit may be reduced. If you have other types of income, such as pensions or interest on the money you’ve saved in your retirement account, your benefit will not be reduced; these don’t count as earnings. However, you may have to pay taxes on it.

Spousal Benefits

There are many myths around Social Security benefits, so it’s important to delve into your particular situation. Spouses may be eligible for half of the benefit their spouse would receive at full retirement age. That amount is reduced if the primary beneficiary files early.

For instance, if the primary beneficiary or spouse were to apply for Social Security benefits before you reach full retirement age, you would automatically be deemed as applying for spousal benefits as well if your spouse is already receiving benefits. The maximum spousal benefit you can qualify for is typically 50% of your partner’s benefits calculated at full retirement age.

One option for spouses is to file for one spouse’s benefit early, say at 62, and postpone filing for the other spouse’s benefit until age 70. This can provide money now and more money later. If one partner dies, the surviving partner is automatically assigned the higher benefit between their own and their late spouse.

How Social Security Fits Into Your Retirement Plan

When it comes to how Social Security benefits ultimately slot in with your retirement plan, including your investments, it’s important to try and take a holistic, top-down view of your situation. The fact is, most people are not going to be able to get by during their retirement years on their Social Security benefits alone, so they’ll likely need some investments and savings to augment that income.

With that in mind, it may be a good idea to invest in, or consider opening up, a retirement plan if you haven’t already.

401(k)s and IRAs

To supplement your Social Security benefits, you may consider opening a retirement plan, which can include either a 401(k), if your employer offers one, or an IRA. There are differences and pros and cons between those two types of retirement plans, and it may be worth speaking with a financial professional to get a sense of what may work best for you.

But the goal should be to think about what you’ll need to supplement your Social Security benefits during retirement, and plan – save and invest – accordingly.

The Takeaway

For most people, their Social Security benefit is unlikely to sustain them through their retirement years; they need to have another source of income. The earlier they retire, the smaller their benefit will be and the more they may need a second or third source of income. Gaining that income through wages can reduce your benefit if you retire before full retirement age.

Ready to invest for your retirement? It’s easy to get started when you open a traditional or Roth IRA with SoFi. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

Help build your nest egg with a SoFi IRA.

FAQ

Is it better to take Social Security at 62, 67, or 70?

The best time to take Social Security depends on your specific circumstances. But in a broad sense, waiting until 70 may be the best thing to do in order to maximize your benefits.

How much do you lose if you retire at 62 instead of 67?

If you retire at 62, you could see your benefits reduced by as much as 30% compared to what you would have received at age 67.

Photo credit: iStock/FG Trade

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

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

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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SOIN-Q424-083

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Feb
02
2025

Average Cost of Gas Per Month for 2025

By | Budgeting & Goals, Family Finances, relay | Comments Off on Average Cost of Gas Per Month for 2025

The average natural gas bill in the United States is $80 to $100 per month. Your monthly gas bills could vary significantly, depending on the time of year, where you live, the size and age of your home, and other factors.

Read on for a breakdown of what can cause your gas bill to go up and down from one month to the next, how to budget for those price changes, and how you might be able to lower your costs in the future.

Key Points

•   The average monthly natural gas bill in the U.S. can be between $80 and $100.

•   Factors like home size, age, location, and appliance use significantly impact monthly gas costs.

•   Natural gas prices are influenced by commodity costs and distribution expenses.

•   Households can manage gas expenses by adjusting home energy use and appliance settings.

•   Assistance programs are available to help manage high energy costs for low-income households.

How Much Does a Gas Bill Cost Per Month on Average?

The average cost of gas per month in the U.S. has hovered around $80 in recent years. Your household’s cost could be much lower or higher, depending on your location and its cost of living by state, the size and age of your home, the appliances you use, inflation, and the ever-fluctuating cost of natural gas. Your bill might be much higher, for example, than that of a friend who has the same size house in a state with a warmer climate. And it could be less than what your next door neighbor pays, if your home is smaller or more energy efficient.

Recommended: Does Net Worth Include Home Equity?

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Why Is My Gas Bill Higher Than Usual?

If your gas bill seems higher than usual, it could be that your provider is charging a higher rate. (You can check that by comparing two or more months’ worth of gas bills, or credit card statements if that’s how you pay your bills.) It could also be that you’re simply using more gas because it’s colder outside. Or maybe you’ve been taking more hot showers or running the dishwasher, clothes dryer, or gas fireplace more often. Working from home is a common reason that utility bills are sometimes higher.

If you can’t come up with a reasonable answer for the cost increase, you may want to talk to your gas provider or check your statement to see if your usage is up. But be prepared: The calculations that go into determining your monthly gas bill can be complicated.

Recommended: What Percentage of Income Should Go to Rent and Utilities?

Understanding the Monthly Cost of Gas

In the U.S., natural gas can be priced in a few different ways, including dollars per therm, dollars per British thermal unit (BTU), and dollars per cubic foot.

Here’s what you really need to know: According to the U.S. Energy Information Administration, the price residential customers pay for natural gas is determined by two major factors:

•   Commodity Cost: The actual cost of the gas.

•   Transmission and Distribution Costs: The costs involved with moving the natural gas from where it’s produced or stored to a local natural gas distribution utility, plus whatever it costs to deliver the gas to customers.

If you live in a state with easy access to residential gas (Alaska, Utah, Washington, Colorado), the monthly rate you pay may be lower than if your utility has to transport the gas a long distance to reach you (in say, Hawaii).

The price you ultimately pay for natural gas in your state, city, or subdivision also may be affected by state regulations, taxes and other charges, availability, seasonal consumer demand, and the amount of competition in your location. (By the way, there’s no relation between the cost of natural gas and the price of gasoline.)

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Average Gas Bill Based on Household Size

Knowing the natural gas rates in your area can help you understand why your bills might be higher or lower than you expected. But the size of your home and the number of people who live there can also influence your average monthly gas bill. Keeping these things in mind can help you predict your gas usage when you make a budget.

Prices can vary significantly by season, with costs rising if you need to stay warm in cold winter months. According to HomeGuide.com, monthly gas costs in winter can be $120 to $200 versus $35 to $50 in summer.

Here’s a rough estimate of what the average monthly cost of gas could be for various apartment size, according to ApartmentList.com. Apartment costs may well be less than the cost for gas for a house, given that a house is likely to be larger and have more appliances, among other factors.

Average Monthly Bill Average Annual Bill
Studio apartment $17.14 $205.68
1 bedroom $19.71 $236.52
2 bedroom $38.11 $457.32
2-bdrm, 2 residents $56 $672
3 bedroom $54.34 $652.08

Remember that your costs may be much different depending on how many gas appliances you have in your home, how warm you keep your home in the winter, what you keep the temperature set to on your water heater, and other factors.

Recommended: Should I Sell My House Now or Wait?

What Uses the Most Gas in a Home?

The top uses for natural gas in U.S. households are heating and water heating. But many homes also use gas for cooking, indoor or outdoor fireplace, clothes dryer, or heating a pool. (Worth noting: Replacing home appliances can lead to greater energy efficiency.)

How Can I Lower My Gas Bill?

Even if you earn the average salary in the U.S., it may be challenging to afford your gas bill at times.

There are several steps you can take to lower your natural gas bill. (You may be interested in lowering your car’s gas bill, too.)

Get a Home Energy Assessment

A professional home energy auditor looks at your past bills for information about your energy use, and inspects your home to pinpoint problem areas and offer money-saving suggestions. Your gas company may offer assessments to its customers, or you may be able to get help finding an energy audit program through your state or local government.

Balance Costs Across the Year

If your local utility offers a yearly budget plan, you may be able to spread out your costs so that your bill is roughly the same amount each month. This can keep bills from becoming overwhelming in months when you use more gas. Or you can use a money tracker app to determine your average monthly cost of gas and set aside the appropriate amount.

Lower Your Water Heater Temperature

When was the last time you even looked at your water heater? Lowering the temperature to 120 degrees can help you save money, prevent family members from accidentally scalding themselves, and protect your pipes. You can also purchase a special blanket or “jacket” to insulate your water heater and make it more efficient.

Look for Leaks

If your doors and windows are getting older, check whether cold air is coming in and warm air escaping. Clear plastic film or weather stripping may be all you need to fix the problem.

Lower the Thermostat

The U.S. Department of Energy recommends setting your thermostat at 68 degrees when you’re home during the winter, and turning it down a few degrees more when you’re away. If you keep pretty standard hours, a programmable thermostat can ensure the house is comfortable when you get home from school or work. And if you work from home, you can lower the temp when you go to bed, or pull on a sweater during the day.

One note: If you get hit with a super-high bill one month (say, due to a polar vortex triggering frigid temperatures), that may be a time to dip into your emergency fund. It’s there to help you cover unexpected expenses

Assistance Programs to Help with Your Gas Bill

If you’re struggling to pay your gas bill, you may be able to get some help from a federal, state, or local government assistance program or from a nonprofit agency. Here are a few options to consider:

Low Income Home Energy Assistance Program

The Low Income Home Energy Assistance Program (LIHEAP), operated through the U.S. Department of Health and Human Services, was created to help low-income households pay high home energy bills. Each state has its own rules regarding who is eligible for help and when and how to apply. (Assistance isn’t made directly to households.) For more information, go to the LIHEAP website.

Low Income Home Energy Assistance Program

The Low Income Home Energy Assistance Program (LIHEAP), operated through the U.S. Department of Health and Human Services, was created to help low-income households pay high home energy bills. Each state has its own rules regarding who is eligible for help and when and how to apply. (Assistance isn’t made directly to households.) For more information, go to the LIHEAP website or call 202-401-9351.

Local Utility Company Programs

Some utility companies offer limited bill-paying assistance programs on their own or working alongside state agencies or nonprofit organizations. Check your local gas company’s website to see if they offer help, or try giving them a call. Your gas company may take special circumstances into consideration when it comes to paying your bill.

SoCalGas, for example, offers past-due bill forgiveness, discounted rates, and extended payment dates for certain qualifying customers. The utility also works to provide one-time grants through their Gas Assistance Fund.

Recommended: Free Credit Score Monitoring

The Takeaway

The average cost of gas per month for a house is $80 to $100. The location, size, and age of your home — and, of course, the time of year — can affect your gas bill from one month to the next. So can the number of people in your household and the appliances you use. The rate you pay each month for gas may also fluctuate based on factors over which you have no control. All those things combined can mean that budgeting for your monthly gas bill requires some careful oversight.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

See exactly how your money comes and goes at a glance.

FAQ

How much does the average person pay for gas each month?

The average household pays about $80 to $100 per month for natural gas. Your bill could vary significantly, however, based on location, home size, number of residents, your appliances, whether you work from home, and more.

How much should you budget for gas a month?

One way to determine how much to budget for gas each month is to track your spending, then calculate the average monthly amount based on past bills. You may want to budget an amount that’s a bit higher than in the past, just in case the winter is especially cold or gas rates go up. (If you don’t end up needing the extra funds, you can put the money toward your emergency fund or another bill.)

What’s the average price of natural gas in San Francisco?

According to UtilitiesLocal.com, residential natural gas prices in San Francisco rose slowly but significantly from September 2021 to September 2022. Rates increased by approximately 34% year over year.

Photo credit: iStock/DGLimages

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*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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

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2025
Should I Buy a New or Used Car in 2021?

Should I Buy a New or Used Car? Pros and Cons

By | Budgeting & Goals, Financial Independence, money | Comments Off on Should I Buy a New or Used Car? Pros and Cons

If you’re wondering whether to get a new or used car in the year ahead, there isn’t one single answer. Each car shopper’s situation is likely to vary, and you need to make the decision that best suits your needs and your budget. Factors like the features you’re seeking in a car, price, insurance costs, and depreciation may come into play.

To help you decide where to spend your cash if you plan to buy some wheels, read on. You’ll learn the pros and cons of new and used cars, plus tips for making your choice.

Key Points

•   Choosing between a new or used car involves evaluating multiple factors like features, price, depreciation, and insurance.

•   New cars provide the latest features and warranties but depreciate quickly and are costly.

•   Used cars are more budget-friendly and depreciate more slowly, though they might have reliability issues.

•   The purchase decision often hinges on price and depreciation, with new cars losing value faster.

•   Personal preferences can dictate the better value; new cars for features and warranties, used cars for cost savings.

Pros and Cons of Buying a New Car

For some people, there’s nothing that can compete with the allure of a bright and shiny new car. However, it’s important to consider the pluses and minuses before making your purchase.

thumb_up

Pros:

•   Pristine condition

•   Latest features

•   Warranty and service benefits

•   Multiple financing choices

thumb_down

Cons:

•   Immediate depreciation

•   Higher price

•   Higher insurance costs

•   Limited ability to negotiate

Pros

•   Pristine condition: With a new car, you don’t have to kick as many tires. New vehicles arrive on dealer showroom floors (and at online auto sales platforms) in pristine condition with very few miles on the odometer, so you don’t have to spend time checking for vehicle inefficiencies and maintenance or repair issues.

•   Latest features: Some people may feel “the newer the car, the better.” Here’s why: The auto industry is doing wonders with new vehicle construction, with features like better gas mileage, longer ranges in the case of EV vehicles, and technological advancements that improve vehicle performance. Those upgrades come most notably in car safety, cleaner emissions, and digital dashboards that improve driving enjoyment.

•   Warranty and service benefits: New car owners are typically offered a manufacturer’s warranty when they buy a new car, which typically grades out better than third-party warranty coverage on a used car. Additionally, extended car warranties may be available, and auto dealers are more likely to offer services like free roadside assistance or free satellite radio to lock down a new car sale. Those services and features are harder to get with used vehicles.

•   Multiple financing choices: It’s often easier to get a good financing deal with a new car vs. a used car. That’s because the vehicle hasn’t been driven and should have no structural problems, maintenance, or repair issues. That’s important to auto loan financers, who place a premium on avoiding risk.

Next, learn about the potential downsides of buying a new car.

Cons

Some disadvantages of a new car purchase might sway a buyer’s decision.

•   Immediate depreciation: The moment you drive a new car off the dealer lot, it loses several thousand dollars in value, plus an estimated 20% in the first year of ownership and then 15% annually for the next few years afterward, which is not a fun fact when you are making car payments at the same level month after month.

•   Higher price: Saving up for a car is a big undertaking, and you may owe a lot of money on a new vehicle. The average price for a new car is $47,452 as of late 2024, which is a significant figure.

•   Higher insurance costs: Auto insurers typically deem new cars as being more valuable than used cars and assign auto insurance premiums accordingly. Also, since new cars cost more, auto insurers prefer to see new auto drivers get full coverage and not minimum coverage.

•   Less room to negotiate: New car models may be less negotiable in price than used ones. Because they are the latest shiny new thing, demand may be higher and inventory lower. A dealership may be less likely to knock down the price for this reason, while they might do so on a used car sitting on the same lot.

Recommended: 10 Personal Finance Basics

Pros and Cons of Buying a Used Car

Used cars offer buyers value and savings, which are attractive benefits to drivers who may not have a big budget, but still want to drive a quality vehicle. However, there are other benefits and downsides to consider as well.

thumb_up

Pros:

•   Lower price

•   Slower depreciation rate

•   Your down payment may go further

thumb_down

Cons:

•   Reliability issues

•   Fewer options

•   Maintenance costs

Pros

•   Lower price: No doubt about it, most used cars sell for significantly less than a new car with the same make and model. You learned above that the average new car is retailing for just under $50,000. How about used cars? The average is currently about $25,571, a considerable savings.

•   Slower depreciation rate: New cars tend to lose value quickly, as noted above, especially if they’re not properly cared for. But used cars tend to depreciate more slowly, especially if they’ve had regular maintenance, and their sustained value makes them a good resale candidate if the owner wants another vehicle, but still wants to make a good deal when selling the vehicle.

•   Your down payment may go farther: Buyers who can manage a robust down payment on a used vehicle can bypass a good chunk of the debt incurred in purchasing the vehicle. It comes down to simple math — if a buyer purchases a $25,000 used vehicle with a down payment of $15,000, there’s only $10,000 left to pay on the vehicle. If a buyer purchases a new vehicle for $48,000, and puts $15,000 down, that buyer still owes $33,000 on the auto loan. Buying a used car could leave more money in your budget to put in a high-yield savings account for emergencies or another purpose.

Cons

When deciding whether to buy a used car or not, these potential disadvantages may also be worth considering.

•   Reliability issues: With a used car, an owner may be getting a quality vehicle — or maybe not. A used car may have spent years on the roads and highways, incurring a fair share of dings, dents, and general wear and tear that may have aged it prematurely, particularly if it hasn’t been maintained well.

•   Fewer options: You may not get the exact make and model you want. The options can dwindle when it comes to buying a used car. Whereas auto dealers can offer a wide range of makes, models, and colors for a new vehicle, those choices can be significantly limited with a used car, truck, or SUV. That could mean that a used vehicle buyer may have to compromise on different factors, in contrast to someone who is buying new and can often get their dream car, down to the last detail.

•   Maintenance costs: You may pay more for vehicle maintenance. Auto repairs often cost more over time and become more frequent, too, as a car ages. So you may well pay more for maintenance and repairs with a used car. With a very old car, finding parts to complete repairs may also be a challenge. In other words, it may take more time and have you spending more from your checking account to keep the car running.

Is It a Better Value to Buy a New or Used Car?

As noted above, there’s no one-size-fits-all answer to whether a new or used car is the better value, but often, a used car is considered a better value. This is because, with a used car, depreciation has already occurred, meaning the price is lower. In this way, you may be able to get more car for the money you’ve earmarked for this purchase, and the car could have a better resale value. Insurance costs may be lower as well.

Is It Easier to Get Approved for a New or Used Car?

In general, it’s considered easier to get approved for a new car loan vs. one for a used car. That’s because new cars are thought to be less risky since they are new, without wear and tear issues. Their value is thought to be simpler to determine.

It’s worthwhile to consider how your credit score could impact which loan offers you might qualify for:

•   If you have very good or excellent credit (say, 781 or above), your interest rate as of late 2024 would typically be close to 5.08% APR (annual percentage rate) for a new car or 7.41% APR for a used car.

•   If you have good to very good credit (between 661 and 780), your APR for a new car would be close to 6.70% APR and 9.63% APR for a used car.

•   If you have a credit score that’s in the fair range to lower good range (between 601 and 660), you’d likely be assessed an APR of close 9.73% APR for a new car and a 14.07% APR for a used car.

•   If your credit score was between 501 and 600 (in the lower section of the fair range), you may have a more difficult time accessing financing and could expect to be charged close to 13.00% APR for a new car and 18.95% APR for a used car.

•   Have a lower score, in the 300 to 500 range (poor)? You might expect to face challenges getting financing. Those who do offer you a loan could charge close to 15.43% APR for a new car and 21.55% APR for a used car.

Consider Buying a New Car If…

As you make your decision between buying a new or used car, you likely will have your own set of needs and preferences. Here’s when buying new may be your best option:

•   If you can afford what is likely to be the higher price tag of buying a new car and loftier insurance costs (as noted above), then you may want to go ahead and buy the latest model.

•   You want the latest bells and whistles: If you feel you need an auto with certain new features (whether it’s the design or a safety system), then you may opt for this year’s model.

•   If you are financing your purchase, you may be able to get a more favorable APR when buying a new vs. used vehicle. Doing research on how to get a car loan can help you prepare for this path.

Consider Buying a Used Car If…

For some people, though, buying used can be the wiser choice. For instance:

•   If you have a fixed budget, a used car will generally offer a lower price and possibly lower insurance costs, too.

•   Is there a feature you need but can’t afford in a brand new car? A used car may suit your needs. For instance, if you really need a vehicle with a third row of seats but can’t afford one brand new, that may lead you to a used car.

•   If you want to avoid the steep depreciation that comes with buying a new car, a used car may work better for you. It may help to know your car will retain much of its purchase price in the coming years. This could be helpful if, say, you know you’ll be selling the car in a year or two and want to forecast how much you’ll net to put in an online bank account.

By weighing your choices on these fronts, you will likely be able to make the right move, both in terms of the car you buy and how well it fits into the type of budget you use.

As you would with any major purchase decision, you’ll want to shop around, check the book value of preferred vehicles, and look at the car’s maintenance and repair history to ensure it’s in good condition. You may also want to make sure it’s inspected by a trusted mechanic.

Recommended: How to Automate Your Finances

The Takeaway

The choice between a new and used car likely will depend upon your personal preferences and financial situation. New cars may have the latest features and lower maintenance and financing costs, but they tend to be pricier and trigger higher insurance costs. And they will depreciate rapidly. A used car will usually have a lower sticker price but maintenance costs and higher rates on financing should be noted.

As you think about car financing that best suits your needs, you may want to make sure that your banking partner is the right one, too, and is helping your money work harder for you.

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

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

FAQ

Do used cars require more maintenance vs. new cars?

You may pay more for maintenance on a used car vs. a new one. Typically, older cars need more work than their younger counterparts.

Are used cars a better deal than new cars?

Used cars can be more affordable than new ones, from the sticker price to the insurance costs, and because they don’t depreciate as rapidly as new cars, they can be a better deal.

What are options to buying a new or used car?

Buying a certified pre-owned car, which has been vetted to be in very good condition, or leasing a car are other options you might consider when thinking about buying a new or used car.

Photo credit: iStock/Ivanko_Brnjakovic

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

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

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.

This content is provided for informational and educational purposes only and should not be construed as financial advice.

Third Party Trademarks: Certified Financial Planner Board of Standards Inc. (CFP Board) owns the certification marks CFP®, CERTIFIED FINANCIAL PLANNER®, CFP® (with plaque design), and CFP® (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements.

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Jan
30
2025
frustrated woman paying bills

Understanding and Avoiding Common Bank Fees

By | Budgeting & Goals, Financial Independence | Comments Off on Understanding and Avoiding Common Bank Fees

Many people figure that paying bank fees is simply an unavoidable part of life. Recent surveys say the average American shells out anywhere from $167 to $288 per year in fees. But take note: Some or even all of those may be avoidable.

For many financial institutions, fees are a way that banks make money. They can help cover the cost of being in business, and they can also cover situations that require more of their team’s time (say, dealing with an overdrafted account).

However, these charges can become expensive for many customers, and they can eat away at any interest earned. That can foil a customer’s efforts to grow their wealth.

Next, learn about the specific fees that many banks assess and how you can lower or avoid them.

Costs vary by institution. Checking accounts may also charge other fees, including account inactivity fees, early account closure fees, check ordering fees, and debit card replacement fees. Before opening a new bank account, always read the fee schedule closely.

Key Points

•   Some checking accounts charge fees which can eat away at your money on deposit.

•   Strategies to avoid fees include maintaining minimum balances, using in-network ATMs, meeting direct deposit or debit card usage requirements, or choosing a fee-free bank.

•   Monthly maintenance fees can often range from $5 to $12.

•   Nonsufficient funds (NSF) fees average $17.72, while overdraft fees, averaging $27 in 2024, should be capped at $5 as of October 2025.

•   Out-of-network ATM fees average $4.77, while paper statements cost about $2 per month.

1. Monthly Maintenance Fees

Average monthly maintenance fee: $5 to $15

One of the most ubiquitous fees banks charge for checking and savings accounts is the monthly maintenance or service fee. This is a fee you pay each month to cover the cost of account management and customer service. These fees typically run between $5 and $15 per month and are usually automatically deducted from your account.

How to avoid monthly maintenance fees: Some banks offer account holders ways to get these monthly service fees waived. Common waiver requirements include: maintaining a certain minimum monthly balance, completing a certain number of debit card transactions per month, or receiving a specified amount of money via direct deposit for each statement period.

2. ATM Fees

Average out-of-network ATM fee: $4.73

Both traditional and online-only banks typically offer a network of ATMs where you can make deposits and withdrawals free of charge. If you deposit or withdraw money at an ATM outside your bank’s network, however, the bank will typically charge you am atm fee. On top of that, the owner of the ATM will likely also tack on a charge. On average, total combined ATM fees run close to $5.

How to avoid ATM fees: To reduce how much you could pay in ATM fees, planning ahead might help. You could research locations of in-network ATMs and only make withdrawals there. Or use an ATM that’s in-network to get cash before you go shopping or out to eat at a cash-only location so you don’t have to use whichever ATM is nearby.

Here’s another idea for avoiding ATM fees: Many grocery stores and some big box stores will let you get cash back when you make purchases there. This could be another way to circumvent ATM fees.

3. Overdraft Fees

Average overdraft fee: $26.61

How to avoid overdraft fees: Many banks offer overdraft protection as an add-on service. If you choose to opt in, the bank will allow transactions to go through, even if you don’t have sufficient funds in your account to cover them. Depending on the type of overdraft protection you sign up for, the bank may lend you the money to cover the overage, or they may pull funds from a linked account. This can avoid NSF fees, late fees, and bounced check fees, but can trigger an overdraft fee.

Recommended: Overdraft vs. NSF Fees

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4. Nonsufficient Funds (NSF) Fees

Average nonsufficient funds fee: $20

Nonsufficient funds (NSF) fees, also known as insufficient funds or returned item fees, can occur when a bank declines to make an electronic payment or cash a check that would bring your checking account to a negative balance. Instead, the transaction gets denied or returned unpaid and the bank will typically charge you an NSF fee (also known as a returned item fee). The average NSF fee is currently around $20.

If you don’t opt in to have overdraft protection on an account, banks typically decline, or bounce, the transaction if there aren’t enough funds to cover a transaction.

Besides the problems associated with a bounced check (that is, the payee not getting their funds), there is typically a returned item fee, averaging around $30 for each occurrence. And, unfortunately, sometimes a returned item fee can take an account balance to the point where another check may bounce, causing the situation to become increasingly worse.

How to avoid nonsufficient funds fees: Many banks allow you to sign up for text alerts that let you know when your balance has fallen below a certain level. When you get the alert, you can avoid making a debit card purchase that will overdraw your account. You can also quickly transfer funds to cover any impending automatic payments or outstanding checks.

5. Wire Transfer Fees

Average wire transfer fee: $20+ for domestic; $35+ for international

If you use your checking account to send or receive a wire transfer, you’ll typically pay a wire transfer fee. Fees vary by institution, but they are usually at least $20 for domestic transfers and $35 or more for international transfers. Some banks don’t charge you for incoming wire transfers (when someone sends you money), but others charge a wire transfer fee whether you are sending or receiving funds.

How to avoid wire transfer fees: A few ideas on avoiding these fees, if your financial institution charges them: Ask your bank if they will waive the surcharge; in some cases, they may. Use a payment service like Zelle, or, if you often make and receive international payments, you might look into getting a multicurrency or foreign currency bank account.

6. Inactivity Fees

Average inactivity fee: $5-$20

If you have a bank account that you don’t use often, you might get charged what’s known as an inactivity fee or a dormancy if it sits untouched for a while. There are varying state laws that specify when a bank must turn dormant funds over to the state, as a form of unclaimed funds. Dormancy fees try to trigger account holders into action so that this handoff of funds to the government doesn’t happen.

Inactivity fees can typically range from $5 to $20, and the amount of time that must elapse before they are assessed will vary.

How to avoid inactivity fees: To avoid these fees, it’s wise to only have as many accounts as you can frequently manage. If you have an account you barely use, it can be a smart move to close it and transfer any funds to an active account.

7. International Transactions Fees

Average international transaction fee: 1% to 3% of the transaction amount

If you travel outside of the U.S. and use your debit card to make a purchase or withdraw funds at an ATM, you may get hit with an international (or foreign) transaction fee. These fees are typically up to 3% of the purchase or withdrawal amount.

How to avoid international transaction fees: To help mitigate or avoid these bank fees (especially if you are a frequent traveler), you could check with your bank to see if it charges these fees. If it does, you might consider opening an account at a financial institution that doesn’t.

Also, perhaps your bank has affiliate banks in regions where you’re traveling, and you could withdraw from those ATMs without paying the additional international fees. You could also ask if your bank reimburses fees that you’ve paid.

You could exchange US dollars to foreign currency before you leave the country, perhaps eliminating the need for ATM withdrawals while traveling. Your bank might do this with no fees. However, then you do risk loss or theft of your funds.

Recommended: Can You Use Your Debit Card in Another Country?

8. Paper Statement Fees

Average paper statement fee: $2 per statement

Many banks have shifted to e-statements in an effort to reduce waste and save on printing and mailing costs. If you choose to receive paper statements for your checking account, you may get hit with a monthly surcharge, which is often around $2.

How to avoid paper statement fees: Switching to electronic statements can help you avoid monthly paper statement fees. Banks typically allow you to sign up for this option through their online banking platforms. If you prefer a paper format, you can always print out your e-statements.

How Are Checking Account Fees Changing Over Time?

Along with the rising cost of many consumer goods and services, many checking account fees have also increased in recent years. This includes monthly account maintenance fees and ATM fees, along with higher balances required to avoid the fees. But there is some good news: Two common checking account fees — overdraft and NSF fees — have been moving in the other direction.

According to Bankrate’s annual checking account and ATM fee study, the average overdraft fee in 2023 was $26.61, down 11% from $29.80 in the previous year. In that same time period, the average NSF fee dropped a full 25%, from $26.58 in 2022 to a record low of $19.94 in 2023.

Despite the drop in average amounts, overdraft and NSF fees are still charged by 91% percent of accounts and 70% of accounts, respectively, according to the survey.

The Takeaway

Many checking accounts charge fees for everything from keeping your account open to overdrafts to ATM usage. Fortunately, you can avoid many of these charges by keeping a certain minimum balance in your account, signing up for direct deposits, going paperless, or looking for a bank that charges lower, or no, fees for checking accounts.

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


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

FAQs

Are there fees for checking accounts?

Yes, checking accounts often come with various fees, including monthly maintenance fees, overdraft fees, ATM fees, and fees for paper statements or nonsufficient funds. These fees vary by bank and can add up over time if you’re not careful. Some banks offer fee-free checking accounts, but these might have specific requirements like maintaining a minimum balance or setting up direct deposits.

How do you avoid checking account fees?

You may be able to avoid or minimize checking account fees by:

•   Maintaining the required minimum balance

•   Signing up for direct deposit

•   Using your debit card a certain number of times per month

•   Using in-network ATMs

•   Opting for electronic statements

•   Setting up low-balance alerts (to avoid overdraft and nonsufficient funds fees)

•   Choosing a bank that offers fee-free checking accounts

What is the most common checking account fee?

The most common checking account fees include:

•   Monthly maintenance fees (these may be avoidable by keeping a certain minimum balance or signing up for regular direct deposits).

•   Fees for using out-of-network automatic teller machines (ATMs)

•   Overdraft fees

•   Nonsufficient fund (NSF) fees

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

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

SoFi members with direct deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. 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 (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

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

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

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

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

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Checking & Savings Fee Sheet for details at sofi.com/legal/banking-fees/.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.

Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.

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