Can You Open a Roth IRA For Your Child?

A Roth IRA for minors, called a Custodial Roth IRA, can be opened by any adult—whether a grandparent, parent, or family friend—for a minor who earns income.

Who Can Contribute to a Custodial Roth IRA for Your Child?

Unlike a 529, which anyone can contribute to, only the custodian of the Roth IRA account can contribute funds into the account. But it’s important to be mindful of how much your child has earned during the year and only contribute up to that limit.

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Jan

2025

Custodial Roth IRA: How to Open a Roth IRA For Kids

By SoFi Editors | Growing Wealth, invest, Investing, Preparing for Retirement | Comments Off

A Roth IRA can be a retirement savings tool for children as well as adults. Funded with after-tax dollars, a Roth IRA grows tax-free, so account holders won’t need to pay taxes when they withdraw money in retirement as long as the account has been open for at least five years. Plus, the money in a Roth IRA will have many decades to grow if you open it when your child is young.

And while a Roth IRA has an early distribution penalty, that penalty is generally waived for certain expenses, such as paying for qualified college expenses, if your child needs to access those funds. That flexibility can make a Roth IRA appealing.

Can you open a Roth IRA for a child? Yes! A Roth IRA for kids, called a Custodial Roth IRA, can be opened by a parent, grandparent, or other adult for a child of any age, as long as the child earns income (more on that later).

Here’s everything you need to know about a Roth IRA for kids.

🛈 Currently, SoFi does not offer custodial banking or investment products.

What Is a Roth IRA for Kids?

A Roth IRA for kids, also known as a custodial Roth IRA, is an IRA opened by an adult (usually a parent), who manages the account until the child gets full control of it, which is at age 18 or 21 in most states.

A custodial Roth IRA for kids generally operates in the same way a Roth IRA for adults does. The account holder contributes after-tax dollars toward their retirement savings and the money grows tax-free in the account.

In order to open and contribute to a Roth IRA, your child must have earned income.

Who’s Eligible for a Roth IRA for Kids?

A child of any age can have a Roth IRA for kids. However, to be eligible, a child must have an earned income. Earned income can include the compensation earned from jobs like babysitting, dog walking, or working for an employer.

Custodial Roth IRA Rules

In addition to the standard rules for a Roth IRA, there are specific rules for custodial Roth IRAs. These rules include:

No Minimum Age Limit

A child of any age can have a custodial Roth IRA as long as he or she has earned income.

A Child Must Have Earned Income

In order to open a custodial Roth IRA, a child must have earned income. The IRS generally defines earned income as taxable income, wages, and tips. This can also include self-employment, such as yard work or babysitting. Cash gifts given to a child do not count as earned income.

There Are Contribution Limits

The contribution limit for a Roth IRA in both 2024 and 2025 is $7,000 per year ($8,000 for those 50 and older), or the total of the individual’s earned income for the year, whichever is less.

In addition, a child (or an adult on behalf of a child) cannot contribute an amount greater than the child’s earned income. So if a child earned $2,000 as a lifeguard at the local swimming pool, for example, the most that can be contributed to the child’s custodial IRA that year, including contributions from parents, is $2,000.

Certain Early Withdrawals Are Allowed

In general, you can withdraw contributions from a Roth IRA at any time without penalty. Earnings typically can’t be withdrawn before age 59 ½ without penalty except in certain circumstances. Allowable exceptions include withdrawals up to certain limits to pay for qualified college expenses, cover certain medical bills, and to buy a first home.

Eventual Conversion to a Regular Roth IRA

When the child reaches the legal age in their state (typically 18 or 21, depending on the state), the custodial Roth IRA will need to be converted to a regular Roth IRA in the child’s name.

How to Open a Custodial Roth IRA for a Kid

A Roth IRA for kids can be opened by any adult, such as a parent or grandparent, for instance. While the child is a minor, the adult will have sole access to the account; once the child comes of age (the timing of which varies by state), the account will transfer over to the child.

As with any Roth IRA, investment options within the account can include stocks, bonds, and mutual funds.

A Roth IRA can be opened through a financial institution or brokerage firm. You can typically open the account online by providing some basic information about yourself and your child. Choosing the right institution and Roth IRA offering depends on the investor and their preferences, so be sure to do some research.

Benefits of Starting a Roth IRA for a Child

Flexibility in how to use the funds can be one benefit of opening a custodial Roth IRA as part of an investment plan for your child. A Roth IRA can provide flexibility not only for potential expenses in early adulthood — such as college expenses or buying a home — but can be an investment vehicle throughout your child’s lifetime.

Another benefit is that a Roth IRA typically gives you more control over investments than an education-focused 529 college savings plan, and it may allow you to create a diversified portfolio of different asset classes.

A Roth IRA is a gift that can keep growing, since investors can potentially maximize compounding returns to get the most out of their investment. Here’s how a Roth IRA may unlock the power of compounding: As an example, let’s say you open a custodial Roth IRA when the child is 10 years old, and contribute $2,000 annually. At a certain point, your child might take over contributing $2,000 annually.

Assuming a 7% rate of return, the account will be worth $928,000 by the time your child is 60 years old — even though the amount you and your child contributed would be $100,000 in total. In comparison, if that same money was put in a taxable savings account over the same time period, the total of the account would be approximately $515,764.

And unlike a traditional IRA, there is no required minimum distribution (RMD) on a Roth IRA once the account owner reaches retirement age. A Roth IRA also allows people to continue contributing throughout their lifetime, as long as they’re earning income.

Alternatives to a Roth IRA for a Kid

If you’re looking for other possible investments for your child, some options to consider include the following.

• Savings account: A parent can open a savings account for a child, as long as the parent is a joint account holder. Savings accounts typically have low interest rates (the average rate for a savings account is 0.41% APY as of December 16, 2024), so you might want to look for a high-yield savings account instead. These accounts may have average rates of more than 3.00% APY.

• Savings bonds: If your child doesn’t have earned income, you may want to consider savings bonds. However, savings bonds don’t offer the same potential tax advantages a Roth IRA does since you have to pay federal income tax on the bonds when they mature or you cash them. You won’t pay income taxes on Roth IRA earnings unless you take a non-qualified distribution.

• 529 plans: These plans can help you save for your child’s education. You can typically invest the money you contribute to a 529 plan and choose from a wide range of investment options. While these plans aren’t tax deductible at the federal level, your state may offer tax breaks for contributions made to them. And funds can be withdrawn tax-free for qualified education expenses. As of 2024, money left in a 529 may be rolled over to a Roth IRA for your child, although certain conditions and limits may apply.

• UGMA/UTMA accounts: A Uniform Gifts to Minors Act (UGMA) account and a Uniform Transfers to Minors Act (UTMA) account are custodial accounts in which an adult can invest on behalf of a child. These accounts are typically used to invest in stocks, bonds, mutual funds, and so on. There are no contribution or income limits, and gifts below the annual gift threshold do not need to be reported. However, there are no tax benefits when contributions are made, and earnings are made to these accounts, and earnings are subject to taxes. When the child reaches legal age, they take over control of the account.

The Takeaway

For a child with earned income, a custodial Roth IRA may be a good way to help them prepare for their future and get started on the path to investing. A child does need to have an earned income to open a custodial Roth IRA, and contributions cannot exceed their income. If your child qualifies, a Roth IRA for kids could potentially give them years of tax-free growth on their money.

FAQ

Can you open a Roth IRA for a child if they don’t earn income?

No. A child must have earned income — which the IRS defines as wages, salaries, tips and other taxable employee compensation, as well as net earnings from self-employment — in order to open a custodial Roth IRA.

Can you open a Roth IRA for a baby?

It’s possible to open an IRA for a baby. As long as a baby earns an income — modeling baby clothes, for instance — you can open a custodial Roth IRA for them. There is no minimum age to open a custodial Roth IRA, but the child must have earned income.

Is it a good idea to open a Roth IRA for a child?

It may be a good idea to open a Roth IRA for a child for several reasons. A Roth IRA can help a child save up for and cover certain expenses in early adulthood, such as qualified college expenses. Also, a Roth IRA typically has higher returns than a savings account. And because kids have a low tax rate now, when contributions are made, it makes sense to open a Roth IRA, which is taxed upfront. At retirement, as long as they are at least age 59 ½, they can withdraw the money tax-free.

Can I give my child money for a Roth IRA?

Yes, you can contribute to your child’s IRA. However, annual contributions to the account cannot exceed the child’s annual earned income. Also, per IRS rules, the overall amount you can contribute to a Roth IRA is to $7,000 in 2024 for individuals under age 50, or the total annual earned income, whichever is less.

What is the disadvantage of a Roth IRA for kids?

One potential disadvantage of an IRA for kids is that your child must earn an income in order to open and contribute to an account. In addition, you can only contribute the amount the child earns. So if the child makes $500 for the year babysitting, that is the most you can contribute to their custodial Roth IRA.

Can I open a Roth IRA for my 2 year old?

As long as your 2-year-old earns an income, you can open a custodial Roth IRA for them. There is no minimum age requirement for a Roth IRA for kids.

How do I prove my child’s income for a Roth IRA?

If your child receives a W-2 or 1099 form for work they did for an employer, you can use those documents to prove your child’s income. However, if they are self-employed and do work like babysitting, dog walking or yard work to earn money, you should keep receipts or records of the type of work they did, the amount they earned, when the work was done, and who it was for, as proof of their income.

What happens to a custodial Roth IRA when the child turns 18?

Once a child is of legal age, which is typically 18 or 21, depending on your state, the IRA must be converted to a regular Roth IRA in the child’s name that they then own and manage.

Do children need to file a tax return to fund their Roth IRA?

As long as their income is below the threshold that requires them to file a tax return, children are typically not required to file a tax return just because they have a custodial IRA. However, you may want to consult with a tax professional about your specific situation.

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.

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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Jan

2025

Understanding How Income Based Repayment Works

All You Need to Know About Income-Based Student Loan Repayment

By Jody McMaster | Debt Payoff, Fresh Out of School, Student Loans, student_loan | No Comments

March 26, 2025: The SAVE Plan is no longer available after a federal court blocked its implementation in February 2025. However, applications for other income-driven repayment plans and for loan consolidation are available again. We will update this page as more information becomes available.

If you’re on the standard 10-year repayment plan and your federal student loan payments are high relative to your income, a student loan income-based repayment plan may be an option for you.

The newest plan, called SAVE, which was introduced by the Biden Administration, is currently on hold due to legal challenges. Read on to learn what the alternatives are in the meantime.

What Is Income-Based Student Loan Repayment?

Income-based student loan repayment plans were conceived to ease the financial hardship of government student loan borrowers and help them avoid default when struggling to pay off student loans.

Those who enroll in the plans tend to have large loan balances and/or low earnings. Graduate students, who usually have bigger loan balances than undergrads, are more likely to enroll in a plan.

The idea is straightforward: Pay a percentage of your monthly income above a certain threshold for 20 or 25 years. You are then eligible to get any remaining balance forgiven. (The SAVE plan would forgive balances after 10 years for borrowers with original loans of $12,000 or less.)

In mid-2024, 13 million borrowers were enrolled in an income-based repayment plan, according to the Institute for College Access and Success. But borrowers have often failed to recertify their income each year, as required, and are returned to the standard 10-year plan.

💡 Quick Tip: Often, the main goal of refinancing is to lower the interest rate on your student loans — federal and/or private — by taking out one loan with a new rate to replace your existing loans. Refinancing makes sense if you qualify for a lower rate and you don’t plan to use federal repayment programs or protections.

Income-Driven Student Loan Repayment Plans

While people often use the term “income-based repayment” generically, the Department of Education calls them income-driven repayment (IDR) plans. There are four, but two plans recently stopped accepting new borrowers. We’ll focus on the two that are still open to you:

• Income-Based Repayment (IBR)

• Saving on a Valuable Education (SAVE), which replaces the previous Revised Pay As You Earn (REPAYE) plan

Your payment amount is a percentage of your discretionary income, defined for IBR as the difference between your annual income and 150% of the poverty guideline for your family size.

For the SAVE plan, discretionary income is the difference between your annual income and 225% of the poverty line for your family size. This plan could substantially reduce borrowers’ monthly payment amounts compared to other IDR plans. For IBR and SAVE, the payment is 5% to 10% of your discretionary income.

Got it? But wait; there’s more. Note the number of years in which consistent, on-time payments must be made and after which a balance may be forgiven, as well as who qualifies.

Plan	Monthly Payment	Term (Undergrad)	Term (Graduate)	Who Qualifies
IBR	10% of discretionary income (but never more than 10-year plan)	20 years	20 years	Borrowers who took out their first loans after July 1, 2014
SAVE	5% of discretionary income, with no cap	20 years (10 years for borrowers with original loan balances of $12,000 or less)	25 years (10 years for borrowers with original loan balances of $12,000 or less.)	Any borrower

How Income-Based Student Loan Repayment Works

In general, borrowers qualify for lower monthly loan payments if their total student loan debt at graduation exceeds their annual income.

To figure out if you qualify for a plan, you must apply at StudentAid.gov and submit information to have your income certified. Your monthly payment will then be calculated. If you qualify, you’ll make your monthly payments to your loan servicer under your new income-based repayment plan.

You’ll generally have to recertify your income and family size every year. Your calculated payment may change as your income or family size changes.

💡 Quick Tip: When rates are low, refinancing student loans could make a lot of sense. How much could you save? Find out using our student loan refi calculator.

What Might My Student Loan Repayment Plan Look Like?

Here’s an example:

Let’s say you are single and your family size is one. You live in one of the 48 contiguous states or the District of Columbia. Your adjusted gross income is $40,000, and you have $45,000 in eligible federal student loan debt.

The 2025 government poverty guideline amount for a family of one in the 48 contiguous states and the District of Columbia is $15,650, and 150% of that is $23,475. The difference between $40,000 and $20,385 is $16,525. That is your discretionary income.

If you’re repaying under the IBR plan, 10% of your discretionary income is about $1,652. Dividing that amount by 12 results in a monthly payment of $138.

Under the SAVE Plan, however, your discretionary income is the difference between your gross income and 225% of the poverty line, which comes out to $35,213. The difference between $40,000 and $35,213 is $4,787, which is your discretionary income; 5% of your discretionary income is about $239. That amount divided by 12 results in a monthly payment of $20.

The Federal Student Aid office recommends using its loan simulator to compare estimated monthly payment amounts for both repayment plans.

Which Loans Are Eligible for Income-Based Repayment Plans?

Most federal student loans are eligible for at least one of the plans.

Federal Student Aid lays out the long list of eligible loans, ineligible loans, and eligible if consolidated loans under each plan.

Of course, private student loans are not eligible for any federal income-driven repayment plan, though some private loan lenders will negotiate new payment schedules if needed.

Serious savings. Save thousands of dollars
thanks to flexible terms and low fixed or variable rates.

Pros and Cons of Income-Based Student Loan Repayment

Pros

• Borrowers gain more affordable student loan payments.

• Any remaining student loan balance is forgiven after 20 or 25 years of repayment.

• An economic hardship deferment period counts toward the 20 or 25 years.

• The plans provide forgiveness of any balance after 10 years for borrowers who meet all the qualifications of the Public Service Loan Forgiveness (PSLF) program.

• The government pays all or part of the accrued interest on some loans in some of the income-driven plans.

• Low-income borrowers may qualify for payments of zero dollars, and payments of zero still count toward loan forgiveness.

• New federal regulations will curtail instances of interest capitalization and suspend excess interest accrual when monthly payments do not cover all accruing interest.

Cons

• Stretching payments over a longer period means paying more interest over time.

• Forgiven amounts of student loans are free from federal taxation through 2025, but usually the IRS treats forgiven balances as taxable income (except for the PSLF program).

• Borrowers in most income-based repayment plans need to recertify income and family size every year.

• On some plans, if a borrower gets married and files taxes jointly, the combined income could increase loan payments. (This is not the case with the SAVE Plan.)

• The system can be confusing to navigate, especially while the SAVE plan is in legal limbo.

Student Loan Refinancing Tips From SoFi

Income-driven repayment plans were put in place to tame the monthly payments on federal student loans for struggling borrowers. For instance, the SAVE Plan offers the lowest monthly payments of all IDR plans. (Those who have private student loans don’t qualify for IDR plans.)

If your income is stable, your credit is good, and you don’t need federal programs like income-driven repayment plans or deferment, refinancing your student loans is an option. (To be clear, refinancing federal student loans makes them ineligible for federal protections and programs like income-driven repayment and loan forgiveness for public service.) With refinancing, the goal is to pay off your existing loans with one new private student loan that ideally has a lower interest rate.

Looking to lower your monthly student loan payment? Refinancing may be one way to do it — by extending your loan term, getting a lower interest rate than what you currently have, or both. (Please note that refinancing federal loans makes them ineligible for federal forgiveness and protections. Also, lengthening your loan term may mean paying more in interest over the life of the loan.) SoFi student loan refinancing offers flexible terms that fit your budget.

With SoFi, refinancing is fast, easy, and all online. We offer competitive fixed and variable rates.

FAQ

Is income-based repayment a good idea?

For borrowers of federal student loans with high monthly payments relative to their income, income-based repayment can be a good idea. Just be aware that legal challenges have put the SAVE plan on hold.

What is the income limit for income-based student loan repayment?

There is no limit. If your loan payments under the 10-year standard repayment plan are high for your income level, you may qualify for income-based student loan repayment.

What are the advantages and disadvantages of income-based student loan repayment?

The main advantage is lowering your monthly payments, with the promise of eventual loan forgiveness if all the rules are followed. A disadvantage is that you have to wait for 10, 20, or 25 years depending on the plan you’re on and how much you owe.

How does income-based repayment differ from standard repayment?

With the standard repayment plan, your monthly payments are a fixed amount that ensures your student loans will be repaid within 10 years. Under this plan, you’ll generally save money over time because your monthly payments will be higher. With income-based repayment, your monthly loan payments are based on your income and family size. These plans are designed to make your payments more affordable. After a certain amount of time ranging from 10 to 25 years, depending on the plan, any remaining balance you owe is forgiven.

Who is eligible for income-based repayment plans?

With the PAYE and IBR plans, in order to be eligible, your calculated monthly payments, based on your income and family size, must be less than what you would pay under the standard repayment plan. Under the ICR plan, any borrower with eligible student loans may qualify. Parent PLUS loan borrowers are also eligible for this plan.

How is the monthly payment amount calculated in income-based repayment plans?

With income-based repayment, your monthly payment is calculated using your income and family size. Your payment is based on your discretionary income, which is the difference between your gross income and an income level based on the poverty line. The income level is different depending on the plan. For IBR, your monthly payment is 10% of your discretionary income.

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Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE. SoFi Private Student loans are subject to program terms and restrictions, such as completion of a loan application and self-certification form, verification of application information, the student's at least half-time enrollment in a degree program at a SoFi-participating school, and, if applicable, a co-signer. In addition, borrowers must be U.S. citizens or other eligible status, be residing in the U.S., and must meet SoFi’s underwriting requirements, including verification of sufficient income to support your ability to repay. Minimum loan amount is $1,000. See SoFi.com/eligibility for more information. Lowest rates reserved for the most creditworthy borrowers. SoFi reserves the right to modify eligibility criteria at any time. This information is subject to change. This information is current as of 04/24/2024 and is subject to change. SoFi Private Student loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org).

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

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Jan

2025

When Should You Start Saving for Retirement?

By Melanie Mannarino | Budgeting & Goals, Growing Wealth, invest, Preparing for Retirement | No Comments

If you ask any financial advisor when you should start saving for retirement, their answer would likely be simple: Now, or in your 20s if possible.

It’s not always easy to prioritize investing for retirement. If you’re in your 20s or 30s, you might have student loans or other goals that seem more “immediate,” such as a down payment on a house or your child’s tuition. But starting early is important because it can allow you to save much more. In fact, setting aside a little every year starting in your 20s could mean an additional hundreds of thousands of dollars of accumulated investment earnings by retirement age.

No matter what age you are, putting away money for the future is a good idea. Read on to learn more about when to start saving for retirement and how to do it.

Key Points

• Starting to save for retirement in your 20s is ideal, as it gives your money more time to potentially grow and benefit from compounding. Compounding occurs when any earnings received are added to your principal balance, so future earnings are calculated on this updated, larger amount.

• Assessing personal financial situations and retirement goals is crucial when determining how much to save for retirement, regardless of age.

• Individuals in their 30s, 40s, 50s, or 60s can still successfully start saving for retirement, with different strategies tailored to each age group.

• Regular contributions and taking advantage of employer-sponsored plans are key steps in building a solid retirement savings strategy at any age.

This article is part of SoFi’s Retirement Planning Guide, our coverage of all the steps you need to create a successful retirement plan.

What Is the Ideal Age to Start Saving for Retirement?

Ideally, you should start saving for retirement in your 20s, if possible. By getting started early, you could reap the benefits of compound interest. That’s when money in savings accounts earns interest, that interest is added to the principal amount in the account, and then interest is earned on the new higher amount.

Starting to save for retirement in your 20s can allow you to save much more. In fact, setting aside a little every year starting in your 20s could mean an additional hundreds of thousands of dollars of accumulated investment earnings by retirement age.

That said, if you are older than your 20s, it’s not too late to start saving for retirement. The important thing is to get started, no matter what your age.

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.

The #1 Reason to Start Early: Compound Interest

If you start saving early, you could reap the benefits of compound interest.

CFP^®, Brian Walsh says, “Time can either be your best friend or your worst enemy. If you start saving early, you make it a habit, and you start building now, time becomes your best friend because of compounded growth. If you delay — say 5, 10, 15 years to save — then time becomes your worst enemy because you don’t have enough time to make up for the money that you didn’t save.”

Here’s how compound interest works and why it can be so valuable: The money in a savings account, money market account, or CD (certificate of deposit) earns interest. That interest is added to the balance or principle in the account, and then interest is earned on the new higher amount.

Depending on the type of account you have, interest might accrue daily, weekly, monthly, quarterly, twice a year, or annually. The more frequently interest compounds on your savings, the greater the benefit for you.

Investments — including investments in retirement plans, such as an employee-sponsored 401(k) plan or a traditional or Roth IRA — likewise benefit from compounding returns. Over time, you can see returns on both the principal as well as the returns on your contributions. Essentially, your money can work for you and potentially grow through the years, just through the power of compound returns.

The sooner you start saving and investing, the more time compounding has to do its work.

💡 Quick Tip: If you’re opening a brokerage account for the first time, consider starting with an amount of money you’re prepared to lose. Investing always includes the risk of loss, and until you’ve gained some experience, it’s probably wise to start small.

Saving Early vs Saving Later

To understand the power of compound returns, consider this:

If you start investing $7,000 a year at age 25, by the time you reach age 67, you’d have a total of $2,129,704.66. However, if you waited until age 35 to start investing the same amount, and got the same annual return, you’d have $939,494.76.

Age	Annual Return	Savings
25	8%	$2,129,704.66
35	8%	$939,494.76

As you can see, starting in your 20s means you may save double the amount you would have if you waited until your 30s.

Starting Retirement Savings During Different Life Stages

Retirement is often considered the single biggest expense in many peoples’ lives. Think about it: You may be living for 20 or more years with no active income.

Plus, while your parents or grandparents likely had a pension plan that kicked off right at the age of 65, that may not be the case for many workers in younger generations. Instead, the 401(k) model of retirement that’s more common these days requires employees to do their own saving.

As you get started on your savings journey, do a quick assessment of your current financial situation and goals. Be sure to factor in such considerations as:

• Age you are now

• Age you’d like to retire

• Your income

• Your expenses

• Where you’d like to live after retirement (location and type of home)

• The kind of lifestyle you envision in retirement (hobbies, travel, etc.)

To see where you’re heading with your savings you could use a retirement savings calculator. But here are more basics on how to get started on your retirement savings strategy, at any age.

Starting in Your 20s

Starting to save for retirement in your 20s is something you’ll later be thanking yourself for.

As discussed, the earlier you start investing, the better off you’re likely to be. No matter how much or little you start with, having a longer time horizon till retirement means you’ll be able to handle the typical ups and downs of the markets.

Plus, the sooner you start saving, the more time you’ll be able to benefit from compound returns, as noted.

Start by setting a goal: At what age would you like to retire? Based on current life expectancy, how many years do you expect to be retired? What do you imagine your retirement lifestyle will look like, and what might that cost?

Then, create a budget, if you haven’t already. Document your income, expenses, and debt. Once you do that, determine how much you can save for retirement, and start saving that amount right now.

💡 Learn more: Savings for Retirement in Your 20s

Starting in Your 30s

If your 20s have come and gone and you haven’t started investing in your retirement, your 30s is the next-best time to start. While there may be other expenses competing for your budget right now — saving for a house, planning for kids or their college educations — the truth remains that the sooner you start retirement savings, the more time they’ll have to grow.

If you’re employed full-time, one easy way to start is to open an employer-sponsored retirement savings plan, like a 401(k). We’ll get into details on that below, but one benefit to note is that your savings will come out of your paycheck each month before you get taxed on that money. Not only does this automate retirement savings, but it means after a while you won’t even miss that part of your paycheck that you never really “had” to begin with. (And yes, Future You will thank you.)

💡 Learn more: Savings for Retirement in Your 30s

Starting in Your 40s

When it comes to how much you should have saved for retirement by 40, one general guideline is to have the equivalent of your two to three times your annual salary saved in retirement money.

Once you have high-interest debt (like debt from credit cards) paid off, and have a good chunk of emergency savings set aside, take a good look at your monthly budget and figure out how to reallocate some money to start building a retirement savings fund.

Not only will regular contributions get you on a good path to savings, but one-off sources of money (from a bonus, an inheritance, or the sale of a car or other big-ticket item) are another way to help catch up on retirement savings faster.

Starting in Your 50s

In your 50s, a good ballpark goal is to have six times your annual salary in your retirement savings by the end of the decade. But don’t panic if you’re not there yet — there are a few ways you can catch up.

Specifically, the government allows individuals aged 50 and older to make “catch-up contributions” to 401(k), traditional IRA, and Roth IRA plans. That’s an additional $7,500 in 401(k) savings, and an additional $1,000 in IRA savings for 2024 and 2025. (Note that in 2025, those aged 60 to 63 may contribute an additional $11,250, instead of $7,500.)

The opportunity is there, but only you can manage your budget to make it happen. Once you’ve earmarked regular contributions to a retirement savings account, make sure to review your asset allocation on your own or with a professional. A general rule of thumb is, the closer you get to retirement age, the larger the ratio of less risky investments (like bonds or bond funds) to more volatile ones (like stocks, mutual funds, and ETFs) you should have.

Starting in Your 60s

It’s never too late to start investing, especially if you’re still working and can contribute to an employer-sponsored retirement plan that may have matching contributions. If you’re contributing to a 401(k), or a Roth or traditional IRA, don’t forget about catch-up contributions (see the information above).

In general, when you’re this close to retirement it makes sense for your investments to be largely made up of bonds, cash, or cash equivalents. Having more fixed-income securities in your portfolio helps lower the odds of suffering losses as you get closer to your target retirement date.

💡 Learn more: Savings for Retirement in Your 60s

The Takeaway

Investing in retirement and wealth accounts is a great way to jump-start saving and investing for your golden years, whether you invest $10,000 or just $100 to get started.

The first step is to open an account or use the one that’s already open. You could also increase your contribution. If you’re opening an account, you may want to consider one without fees, to help maximize your bottom line.

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.

FAQ

Is 20 years enough to save for retirement?

It’s never too late to start investing for retirement. If you’re just starting in your 40s, consider contributing to an employer-sponsored plan if you can, so that you can take advantage of any employer matching contributions. In addition to regular bi-weekly or monthly contributions, make every effort to deposit any “windfall” lump sums (like a bonus, inheritance, or proceeds from the sale of a car or house) into a retirement savings vehicle in an effort to catch up faster.

Is 25 too late to start saving for retirement?

It’s not too late to start saving for retirement at 25. Take a look at your budget and determine the max you can contribute on a regular basis — whether through an employer-sponsored plan, an IRA, or a combination of them. Then start making contributions, and consider them as non-negotiable as rent, mortgage, or a utility bill.

Is 30 too old to start investing?

No age is too old to start investing for retirement, because the best time to start is today. The sooner you start investing, the more advantage you can take of compound returns, and potentially employer matching contributions if you open an employer-sponsored retirement plan.

Should I prioritize paying off debt over saving for retirement?

Whether you should prioritize paying off debt over saving for retirement depends on your personal situation and the type of debt you have. If your debt is the high-interest kind, such as credit card debt, for instance, it could make sense to pay off that debt first because the high interest is costing you extra money. The less you owe, the more you’ll be able to put into retirement savings.

And consider this: You may be able to pay off your debt and save simultaneously. For instance, if your employer offers a 401(k) with a match, enroll in the plan and contribute enough so that the employer match kicks in. Otherwise, you are essentially forfeiting free money. At the same time, put a dedicated amount each week or month to repaying your debt so that you continue to chip away at it. That way you will be reducing your debt and working toward saving for your retirement.

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Jan

2025

Do You Pay Capital Gains on Roth IRAs and IRAs?

By Dan Miller | Growing Wealth, invest, Investing, Preparing for Retirement | Comments Off

You don’t have to pay capital gains tax on investment profits while they are held in a traditional or a Roth IRA account. In most cases, the question of taxes comes into play when you withdraw money from a traditional or Roth IRA.

Each type of IRA is subject to a different set of tax rules, and it’s essential to know how these accounts work, as the tax implications are significant now as well as in the future.

IRAs, Explained

An Individual Retirement Account (IRA) is a tax-advantaged account typically used for retirement savings. There are two main types of IRAs — traditional IRAs and Roth IRAs — and the tax advantages of each are quite distinct.

Generally speaking, all IRAs are subject to contribution limits and withdrawal rules, but Roth IRAs have strict income caps as well as other restrictions.

Contribution Limits

For tax years 2024 and 2025, the annual contribution limit for both Roth and traditional IRAs is $7,000, and $8,000 for those 50 or older.

It’s important to know that you can only contribute earned income to an IRA; earned income refers to taxable income like wages, tips, commissions. If you earn less than the contribution limit, you can only deposit up to the amount of money you made that year.

One exception is in the case of a spousal IRA, where the working spouse can contribute to an IRA on behalf of a spouse who doesn’t have earned income. Like ordinary IRAs, spousal IRAs can be traditional or Roth in style.

Traditional IRAs

All IRAs are tax advantaged in some way. When you invest in a traditional IRA, you may be able to take a tax deduction for the amount you contribute in the tax year that you make the contribution.

The contributions you make may be fully or partially tax-deductible, depending on whether you or your spouse are covered by a workplace retirement plan. If you’re not sure, you may want to check IRS.gov for details.

The money inside the account grows tax-deferred, meaning any capital appreciation of those funds is not subject to investment taxes, i.e. capital gains tax, while held in the account over time. But starting at age 59 ½ , qualified withdrawals are taxed at regular income tax rates.

If you think about it, this makes sense because you make contributions to a traditional IRA on a pre-tax basis. When you take withdrawals, you then owe income tax on the contributions and any earnings.

With some exceptions, early withdrawals from a traditional IRA prior to age 59 ½ are subject to income tax and a 10% penalty.

Recommended: IRA Tax Deduction Rules

Roth IRAs

Roth IRAs follow a different set of rules. You contribute to a Roth IRA with after-tax money. That means you won’t get a tax deduction for contributions you make in the year that you contribute.

Your contributions grow inside your Roth IRA tax-free, along with any earnings. When you reach retirement age and start to make withdrawals, you won’t owe income tax on money you withdraw because you already paid tax on the principal (i.e. your original contribution amounts) — and the earnings are not taxed on qualified withdrawals.

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.

What Are Capital Gains Taxes?

Capital gains refer to investment profits. In a taxable investment account you would owe capital gains tax on the profits you made from selling investments: e.g., stocks, bonds, real estate, and so on.

You don’t owe capital gains tax just for owning these assets — it only applies if you profit from selling them. Depending on how long you held an investment before you sold it, you would owe short- or long-term capital gains.

Retirement accounts, however, are subject to their own set of tax rules, and traditional and Roth IRAs each handle capital gains taxes differently.

Are Gains Taxed in Traditional IRAs?

Traditional IRA plans, as noted above, are tax-deferred, which essentially means that investment profits are not subject to capital gains tax while they remain in the account. Given this, the sale of individual investments like stocks inside an IRA is not considered a taxable event.

However, with tax-deferred accounts like traditional IRAs, you do have to pay ordinary income tax on withdrawals (meaning, you’re taxed at your marginal income rate).

So when you take withdrawals from a traditional IRA, you will owe income tax on the amount you withdraw, including any investment gains (i.e., earnings) in the account.

Are Gains Taxed in Roth IRAs?

The same principle applies to Roth IRAs, even though these are after-tax accounts: You don’t have to pay taxes on investment income or any assets that you buy or sell inside your Roth IRA.

Because you contribute to a Roth IRA with after-tax money, your money grows tax-free inside your IRA. Also, the earnings in the account grow tax-free over time and those gains are not taxed within the account.

In addition, qualified withdrawals of contributions and earnings from a Roth IRA are tax free. But remember: early or non-qualified withdrawal of earnings from a Roth IRA would be subject to taxes and a penalty (with some exceptions; for details see IRS.gov).

Roth IRA Penalties

Because you contribute to a Roth IRA with after-tax money, you can always withdraw your contributions (meaning your principal) without paying any tax or penalties.

If you wait to withdraw money from your Roth IRA until you reach age 59 ½, you can also withdraw your earnings without tax or penalties — as long as you’ve had the account for at least five years.

If you withdraw Roth IRA earnings before age 59 ½ or before you’ve held the account for five years, you may be charged a 10% early withdrawal penalty, though there are IRA withdrawal rules that may help you avoid the penalty in certain situations.

Are Gains Taxed in 401(k)s?

An IRA and a 401(k) work in a similar way when it comes to capital gains tax. Just as there are traditional and Roth IRAs, there are also traditional and “designated” Roth 401(k) plans, and they work similarly to their corresponding IRA equivalents.

So, generally speaking, you do not owe any capital gains tax on the sale of any investments held inside either type of 401(k) account.

Opening an IRA With SoFi

Most people are familiar with the basic tax advantages of using an IRA to save for retirement. Traditional IRAs are tax-deferred accounts and may provide a tax deduction in the years you make contributions. Roth IRAs are after-tax accounts that can provide tax-free income in retirement.

But the fact that you don’t have to pay capital gains tax is also worth noting. With both a traditional IRA and a Roth IRA, buying and selling stocks or other investments is not considered a taxable event. That means that you will not owe capital gains tax when you sell investments inside your IRA.

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 grow your nest egg with a SoFi IRA.

FAQ

Are Roth IRAs subject to capital gains tax?

No, buying and selling stocks or other investments inside a Roth IRA is not considered a taxable event. This means that you will not owe capital gains tax for buying or selling investments inside your Roth IRA. And because contributions to Roth IRAs are made with after-tax money, you also won’t owe income tax on qualified withdrawals.

Do you have to pay taxes if you sell stocks in a Roth IRA?

Selling stocks inside a Roth IRA is not considered a taxable event. So whether you regularly buy and sell stocks inside your Roth IRA, or just have unrealized gains and losses, you won’t need to worry about capital gains tax.

What happens when you sell a stock in your Roth IRA?

Buying and selling stocks inside an IRA is not considered a taxable event. So you won’t owe capital gains tax on stock you sell, but you also won’t be able to offset gains with a loss you capture from a stock sale inside your IRA.

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SoFi Invest®

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

SOIN0523004

Jan

2025

11 Financial Tips for College Students

By Timothy Moore | Budgeting & Goals, Financial Independence, Going to College, money | Comments Off

Managing money in college isn’t easy, but building strong financial habits now can make a huge difference in the long run. With the cost of tuition, textbooks, and daily expenses, it’s important to make smart financial decisions to avoid unnecessary debt and stress. Whether you’re living on campus or commuting, these 11 tips will help you stay in control of your finances, save money, and build a secure financial future.

Key Points

• Create a budget to track income and expenses.

• Open both a savings account and a checking account for better money management.

• Automate bill payments and savings transfers.

• Build an emergency fund for unexpected costs.

• To save money, buy used text books and take advantage of student discounts.

1. Create a College Budget

One of the most important financial habits you can develop in college is budgeting. A basic budget helps you track your income and expenses so you don’t overspend. To get started, simply list out how much you have to spend for the semester, including all sources of income, such as financial aid, income from a part-time job, and any parental support. Then subtract all your essential expenses, such as tuition, books, food, and housing. What’s leﬅ over can be used for nonessential (aka “fun”) spending and savings.

To make sure you don’t overspend on discretionary purchases, consider putting a budgeting app on your phone. These tools track your spending in real time and can help ensure you don’t run out of funds before you get to finals.

2. Open a Checking and a Savings Account

Even if you don’t have a lot of extra cash, it’s worth having a savings account along with a checking account. This allows you to separate everyday spending from money you want to save for a future expense, say a trip to Cabo for spring break.

When shopping for a bank or credit union, you’ll want to look for one that offers no-fee student accounts and a high-interest savings option to maximize your earnings. In addition to local institutions, you might also expand your search to online banks. While these banks don’t operate branches, they typically partner with large ATM networks, making it easy to access your funds at school as well as when you travel home without getting hit with a fee. Some offer student accounts and potentially better deals than traditional banks.

3. Automate Bill Payments and Transfers

If you’re new to paying bills, it’s easy to forget about due dates, especially if you are focused on doing class assignments or studying for an upcoming exam. But missing a billing deadline means you could rack up late fees (and potentially damage your credit). A simple solution is to set up automatic payments for recurring expenses like rent, utilities, and student loans. To avoid overdrafts, be sure you have enough in your checking account to cover the bills when they come due.

Now that you have a savings account (see tip #2), also consider setting up an automatic transfer from checking to savings for a set amount on the same day each month. It’s fine to start small — even siphoning $25 into savings each month can add up over time. Many banks also offer features that round up your purchases and deposit the spare change into your savings account, which is another way to save without even thinking about it.

4. Build an Emergency Fund

Unexpected expenses, such as a trip to urgent care or a car repair, can quickly derail your college finances. Having an emergency fund can help you cover these costs without relying on credit cards. You might aim to save at least $500 initially, then gradually increase it over time. Even setting aside a small amount each month can make a big difference. Consider keeping your emergency fund in a high-yield savings account so it grows over time while remaining easily accessible.

5. Take Advantage of Student Discounts

Being a college student comes with some financial perks, including discounts on a wide range of goods and services. Many major companies offer student deals on transportation, entertainment, digital music subscriptions, laptops, car insurance, and more. Websites like UNiDAYS and Student Beans also provide access to exclusive deals. All you typically need to qualify for the student rate is a .edu email account.

Shops and eateries located on and around campus also tend to offer student discounts. It’s a good idea to keep your student ID handy and always about any potential discounts before you make a purchase. Using student deals can significantly reduce your expenses and help stretch your college budget further.

6. Start Building Your Credit

Having good credit can help open doors after you graduate. Your scores can come into play when applying for loans, renting an apartment, or even getting a job. Fortunately, there are a number of ways to start building your credit while you’re still a student. Here are some to consider:

• Apply for a student credit card and use it responsibly. That means keeping your credit balance low and paying it off in full (and on time) each month

• If you’re new to credit, consider becoming an authorized user on a parent’s credit card or getting a secured credit card.

• If you have student loans, you might start making small payments of $25 to $50 per month while you’re still in school to pay down interest and have some positive repayment history on record.

7. Get a Part-Time Job

Getting a part-time job while you’re in school can help cover your expenses and/or build your savings. It can also give you valuable work experience that could give you a leg up when searching for employment after graduation. Many universities offer work-study programs or on-campus jobs that fit around your class schedule. If you prefer more flexibility, you might look into freelancing, tutoring, or gig economy jobs like rideshare driving or food delivery. You might also check online platforms for remote job opportunities, such as being a virtual assistant or helping a business manage their social media accounts.

Recommended: How to Make Money Fast

8. Seek Out Scholarships

Scholarships are not a one-time thing you can only apply for when you’re in high school, before you start college. Hundreds of companies and organizations offer scholarships for both new and returning students that may be awarded based on merit or financial need. In fact, dedicating some time to finding and applying for scholarships each year could net some significant cash. Some helpful resources:

• Your school’s financial aid office

• Online scholarships databases like Fastweb, Scholarships.com, and CareerOneStop

• Religious and community organizations

• Organizations related to your field of study

• Your employer (or parents’ employers)

• Ethnicity-based organizations

If you find scholarships you are eligible for, be sure you apply for them by the deadline.

9. Save on Textbooks

Textbooks can take a major bite out of your college budget, but buying used or renting can save you hundreds of dollars each semester. There are numerous websites with low prices on used textbooks (such as Chegg, AbeBooks, and Amazon); many also offer 30- to 180-day rentals. Also look into purchasing the e-book version of a textbook, which typically costs a lot less than the hard copy. If you have friends who are taking the same class the next semester (or vice versa), consider splitting the cost of the required textbooks with them.

Recommended: 33 Ways to Save Money

10. Start Investing if You Can

A lot of employers provide 401(k) plans or other savings options, even while you’re still in college. If your employer offers a matching contribution, it’s wise to take advantage of this opportunity — it’s essentially free money. Enrolling in the plan can also help you learn about different types of investments, such as stocks, bonds, and mutual funds. If your employer doesn’t offer a plan, you might consider investing independently through a brokerage account, Traditional IRA, or Roth IRA. Each of these options has its own benefits and drawbacks, and understanding them early on can set you up for long-term financial success.

11. Take a Personal Finance Course

Your degree program may not be in finance or even math, but that doesn’t mean you can’t take a personal finance course as an elective. Ask your college advisor if there are any courses in personal finance available through the school to help you learn the basics of budgeting, borrowing, and investing.

If your school doesn’t offer classes in personal finance basics, you can teach yourself online. Some websites (like this one!) are designed to help improve your financial literacy with helpful articles and videos. You can also find personal finance courses that you can take online; consider taking one in between semesters or over the summer.

The Takeaway

College is a time of learning and growth, and developing smart money habits now can set you up for a secure future. By budgeting, saving, building credit, and seeking out cost-saving opportunities, you can manage your finances responsibly and minimize debt while you’re a student. This can help you save money and establish a strong financial foundation for life after college.

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.

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SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2025 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.
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SoFi members with Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Eligible Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below).

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

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

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

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

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

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

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

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

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/.

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SOBNK-Q125-001

Custodial Roth IRA: How to Open a Roth IRA For Kids

What Is a Roth IRA for Kids?

Who’s Eligible for a Roth IRA for Kids?

Custodial Roth IRA Rules

No Minimum Age Limit

A Child Must Have Earned Income

There Are Contribution Limits

Certain Early Withdrawals Are Allowed

Eventual Conversion to a Regular Roth IRA

How to Open a Custodial Roth IRA for a Kid

Benefits of Starting a Roth IRA for a Child

Alternatives to a Roth IRA for a Kid

The Takeaway

FAQ

Can you open a Roth IRA for a child if they don’t earn income?

Can you open a Roth IRA for a baby?

Is it a good idea to open a Roth IRA for a child?

Can I give my child money for a Roth IRA?

What is the disadvantage of a Roth IRA for kids?

Can I open a Roth IRA for my 2 year old?

How do I prove my child’s income for a Roth IRA?

What happens to a custodial Roth IRA when the child turns 18?

Do children need to file a tax return to fund their Roth IRA?

All You Need to Know About Income-Based Student Loan Repayment

What Is Income-Based Student Loan Repayment?

Income-Driven Student Loan Repayment Plans

How Income-Based Student Loan Repayment Works

What Might My Student Loan Repayment Plan Look Like?

Which Loans Are Eligible for Income-Based Repayment Plans?

Serious savings. Save thousands of dollars thanks to flexible terms and low fixed or variable rates.

Pros and Cons of Income-Based Student Loan Repayment

Pros

Cons

Student Loan Refinancing Tips From SoFi

FAQ

Is income-based repayment a good idea?

What is the income limit for income-based student loan repayment?

What are the advantages and disadvantages of income-based student loan repayment?

How does income-based repayment differ from standard repayment?

Who is eligible for income-based repayment plans?

How is the monthly payment amount calculated in income-based repayment plans?

When Should You Start Saving for Retirement?

What Is the Ideal Age to Start Saving for Retirement?

Get a 1% IRA match on rollovers and contributions.

Double down on your retirement goals with a 1% match on every dollar you roll over and contribute to a SoFi IRA.1

The #1 Reason to Start Early: Compound Interest

Saving Early vs Saving Later

Starting Retirement Savings During Different Life Stages

Starting in Your 20s

Starting in Your 30s

Starting in Your 40s

Starting in Your 50s

Starting in Your 60s

The Takeaway

FAQ

Is 20 years enough to save for retirement?

Is 25 too late to start saving for retirement?

Is 30 too old to start investing?

Should I prioritize paying off debt over saving for retirement?

Do You Pay Capital Gains on Roth IRAs and IRAs?

IRAs, Explained

Contribution Limits

Traditional IRAs

Roth IRAs

Get a 1% IRA match on rollovers and contributions.

Double down on your retirement goals with a 1% match on every dollar you roll over and contribute to a SoFi IRA.1

What Are Capital Gains Taxes?

Are Gains Taxed in Traditional IRAs?

Are Gains Taxed in Roth IRAs?

Roth IRA Penalties

Are Gains Taxed in 401(k)s?

Opening an IRA With SoFi

FAQ

Are Roth IRAs subject to capital gains tax?

Do you have to pay taxes if you sell stocks in a Roth IRA?

What happens when you sell a stock in your Roth IRA?

11 Financial Tips for College Students

1. Create a College Budget

2. Open a Checking and a Savings Account

Get up to $300 when you bank with SoFi.

Serious savings. Save thousands of dollars
thanks to flexible terms and low fixed or variable rates.

Double down on your retirement goals with a 1% match on every dollar you roll over and contribute to a SoFi IRA.¹

Double down on your retirement goals with a 1% match on every dollar you roll over and contribute to a SoFi IRA.¹

Student Loan
Refinancing

Personal
Loans

Online
Investments