Apr
02
2025

Social Workers Student Loan Forgiveness Guide

By | Financial Topics, Student Loans | Comments Off on Social Workers Student Loan Forgiveness Guide

A career as a social worker requires a bachelor’s degree, and many individuals go on to pursue a Master of Social Work (MSW). Student loan forgiveness programs for social workers can be a valuable repayment strategy for those with student loan debt.

There are a number of federal and state programs that offer student loan forgiveness for social workers, as well as resources dedicated to helping social workers manage their loans. Read on to learn what you may be eligible for.

Key Points

•   Social workers may qualify for federal and state student loan forgiveness programs.

•   Average student loan debt for social workers ranges from $27,183 for a bachelor’s degree to $46,850 for a doctoral degree.

•   Public Service Loan Forgiveness for social workers requires 120 qualifying payments and full-time employment at an eligible government or nonprofit organization.

•   Income-Driven Repayment plans typically offer lower monthly payments and may also provide forgiveness after 20 to 25 years.

•   Many states have State Loan Repayment Assistance Programs (LRAPs) for those who qualify. These programs generally require a specific service commitment.

Overview of Student Loan Debt in Social Work

The student loan debt among social work graduates today has increased compared to a decade ago, according to the latest survey by the Council on Social Work Education (CSWE).

Average Debt Levels Among Social Workers

Nearly half (48%) of Bachelor of Social Work graduates had an average of $27,183 in student loan debt at graduation, according to the CSWE report. About 35% of MSW graduates had an average student loan debt of $38,500, while the average student loan debt for social workers who earned a Doctor of Social Work (DSW) was $46,850.

Impact on Career Choices and Financial Stability

The Bureau of Labor Statistics (BLS) projects a 7% increase in social work employment between 2023 and 2033. This is higher than the projected average growth for all professions during the same period. However, the median annual wage among social workers is $58,380, with the lowest 10% of earners making just $38,400, according to the BLS.

Shouldering student debt that’s almost as much as their annual salary in some cases can be financially challenging and stressful for social workers. Student loan forgiveness for social workers can help manage the cost.

Federal Loan Forgiveness Programs

There are federal student loan forgiveness programs that social workers may be able to enroll in. To be eligible, they must have qualifying student loans and be enrolled in a qualifying repayment plan. Borrowers who aren’t on an eligible forgiveness repayment plan have the option of changing student loan repayment plans.

Public Service Loan Forgiveness (PSLF)

Social workers who are employed by a government agency — whether federal, state, local, or tribal — or a qualifying nonprofit organization may be eligible for Public Service Loan Forgiveness. Participants must be employed full-time and have qualifying federal Direct Loans.

While serving under an eligible employer, borrowers must enroll in an income-driven repayment (IDR) plan or the Standard Repayment Plan. After completing 120 qualifying payments, any remaining Direct Loan balance is forgiven, tax-free.

In March 2025, President Trump signed an executive order to limit eligibility for PSLF and requested an update to the program’s regulations. The executive order is being reviewed, and the PSLF program remains unchanged for now, according to the Federal Student Aid website.

Income-Driven Repayment (IDR) Plan Forgiveness

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 don’t qualify for PSLF because you don’t work for a qualifying employer, forgiveness through an IDR plan might be an option. Monthly payments on these plans are determined by borrowers’ discretionary income and family size. At the end of the repayment term, any remaining balance is typically forgiven.

However, while borrowers can still fill out and submit the online application for these plans, forgiveness is paused as of March 2025 on all but one of the IDR plans:

•  Pay As You Earn (PAYE) Repayment: Payments are set at 10% of discretionary income over 20 years.

•  Income-Based Repayment (IBR): Payments for loans borrowed after July 1, 2014 are 10% of discretionary income over 20 years. On the IBR plan, forgiveness after the repayment term has been met is still proceeding at this time since IBR was separately enacted by Congress.

•  Income-Contingent Repayment (ICR) Plan: ICR payments are 20% of a borrower’s discretionary income divided by 12, or the amount they would pay on a repayment plan with a fixed payment over 12 years, whichever is less. The repayment term is 25 years.

•  Saving on a Valuable Education (SAVE): As of March 2025, the SAVE plan is no longer available after being blocked by a federal court. Forgiveness has been paused for borrowers who were already enrolled in the plan, and they have been placed in interest-free forbearance.

National Health Service Corps Loan Repayment Program (NHSC LRP)

Licensed Clinical Social Workers (LCSWs) with federal or private student loans may be eligible for loan repayment assistance through the National Health Service Corps Loan Repayment Program. Participants must agree to serve in a preapproved health professional shortage area for a two-year half- or full-time service contract.

In exchange for their service commitment, LCSWs can receive up to $25,000 in forgiveness for half-time service, or up to $50,000 in loan forgiveness for a full-time contract.

State-Specific Loan Forgiveness Programs

Some states that are experiencing a shortage of certain skilled professionals, like health care providers and social workers, sponsor their own loan repayment assistance programs (LRAP). These programs may offer forgiveness for federal and private student loans. Program requirements vary, but typically, you must meet citizenship and state licensing requirements, and agree to a service commitment, among other criteria.

For example, Tennessee offers an LRAP for social workers that provides up to $50,000 in loan repayment assistance for a two-year service obligation with a service extension option.

Check your state’s government or state health department website to see if it offers a loan repayment program for social workers.

Eligibility Criteria for Loan Forgiveness

All student loan forgiveness programs for social workers set specific requirements that participants must adhere to. The criteria for loan forgiveness varies between programs, but generally, you’ll find the following common features.

Employment Requirements

Many programs establish guidelines regarding qualifying employment. For example, under PSLF, loan forgiveness is only available to social workers who work for a government agency or nonprofit. You might need to maintain this employment type for the duration you’re pursuing loan forgiveness.

Loan Types and Repayment Plans

Certain student loan forgiveness programs restrict the types of student loans that are eligible for forgiveness. For example, PSLF and forgiveness through an IDR plan only permit qualifying federal Direct Loans. Private student loans and other federal student loan types are ineligible.

However, if you have a noneligible federal student loan, consolidating student loans into a Direct Consolidation Loan could help you gain access to these forgiveness plans.

Additionally, check whether the program requires you to be enrolled in a particular repayment plan to qualify, like an income-driven repayment plan.

Another option some borrowers might consider is student loan refinancing. With refinancing, you trade your current student loans for a new loan from a private lender. If you qualify, the new loan might have a lower interest rate or more favorable loan terms, which could make loans easier to manage.
But there are some drawbacks. For example, if you refinance federal student loans, you lose access to federal benefits such as IDR plans. Be sure to consider this option carefully to make sure it’s right for you.

Recommended: Student Loan Refinancing Calculator

Service Commitments and Obligations

Loan repayment assistance programs can be a valuable forgiveness option for social workers, especially if they have private loans. However, a key criterion for these opportunities is typically a service obligation.

To qualify, you might be required to work in an approved shortage area at least 30 hours per week over a predetermined number of years.

Application Processes

The steps you need to take to apply for loan forgiveness vary by program. With federal loan forgiveness for social workers like PSLF, you submit the formal application after successfully making 120 qualifying payments, in addition to meeting all other eligibility criteria. By contrast, the NHSC loan repayment program requires an application upfront.

Additional Resources and Support

If navigating your student loan debt feels overwhelming, there are other resources available to social workers.

National Association of Social Workers (NASW) Initiatives

The NASW supports the well-being of the social worker community at the national level through advocacy, events, initiatives, and its podcast, “NASW Social Work Talks Podcast.” You’ll find discussions on a range of important topics, like mental health and student loan forgiveness.

Financial Counseling Services

If you’re struggling to pay your loans, financial counseling support may be helpful. Through organizations like the National Foundation for Credit Counseling (NFCC), you can connect with a certified credit counselor. Services include a complete financial review, customized repayment strategy, and additional resources to help you feel confident about tackling your student debt.

Educational Workshops and Webinars

You can look for student loan workshops in your community and webinars to familiarize yourself with your student loan repayment options. You can also check to see if your employer offers access to financial education workshops that cover student loan resources as an employee benefit.

The Takeaway

Although the cost of earning a degree in social work is significant, a number of student loan forgiveness programs for social workers offer some relief. Many have specific requirements to qualify, such as employment or service criteria, or the stipulation that you have a specific type of student loan.

Successfully achieving student loan forgiveness for social workers often takes years, but getting a portion of your student loans forgiven can be worthwhile.

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

What types of loans are eligible for forgiveness under federal programs?

Social workers must have eligible federal Direct Loans to qualify for most student loan forgiveness programs. Borrowers with Federal Family Education Loans (FFELs) and Perkins Loans can undergo a Direct Consolidation Loan to qualify. Private student loans are ineligible for federal loan forgiveness.

How do I apply for state-specific loan forgiveness programs?

See if your state offers a loan repayment assistance program (LRAP). State-sponsored programs might be featured on your state’s government website, higher education site, or state Department of Health website.

Where can I find support and resources for managing student loan debt as a social worker?

Social workers can access additional resources and support for managing their student debt through StudentAid.gov and the National Association of Social Workers.

What documentation is required when applying for loan forgiveness?

Documentation needed to apply for student loan forgiveness for social workers varies by program. Examples of documentation you might need include proof of qualifying employer and employment status, income, student loan statements, and payment history.

How can social workers qualify for Income-Driven Repayment (IDR) Plan Forgiveness?

Social workers must have qualifying federal Direct Loans to be eligible for IDR. There is an income cap for the Pay As You Earn (PAYE) and Income-Based Repayment (IBR) plans. Additionally, borrowers must recertify their income and family size annually. Upon completing the terms of the IDR plan, any remaining loan balance is forgiven.

photo credit: iStock/Ginnet Delgado
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Apr
02
2025
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Simple Interest vs Compound Interest

By | Growing Wealth, Investing | No Comments

Interest rates are very much in the news, and rightly so: The interest earned on an investment, like bonds or bond funds, can help your investments generate returns. Simple interest refers to the simple accrual of interest on your principal; compound interest refers to the interest accrued on that principal plus the interest already earned.

Note that interest is different from investment gains, which depend on market returns and other factors.

Key Points

•   Simple interest applies to the initial principal alone. Most bonds pay simple interest in the form of coupon payments, for example.

•   Compound interest accumulates on both the principal and the previously earned interest. If the interest in a bond fund is reinvested, rather than distributed to investors, that creates compound interest.

•   Over time, compound interest results in a higher total interest paid. More frequent compounding periods accelerate compound interest growth.

•   Simple interest provides a steady increase in the total amount. Compound interest generates more rapid growth in the total amount over time.

•   Continuous compounding calculates interest assuming compounding over an infinite number of periods.

What Is Simple Interest?

Simple interest is the amount of money you are able to earn upon your initial investment. Simple interest works by adding a percentage of the principal — the interest — to the principal, which increases the amount of your initial investment over time.

In the case of buying a bond, which is a debt instrument, the investor loans money to the bond issuer, who agrees to repay the principal amount, plus a fixed amount of interest. Most traditional bonds make periodic payments (coupon payments) of a fixed rate of interest on the original amount.

Simple Interest Formula

Calculating interest is important to figure out how much an interest-earning and compounding investment could generate.

The simple interest formula is I = Prt, where I = interest to be paid, P is the principal, r is the interest rate (as a decimal), and t is the time in years.

So if you’re investing $200 in an interest-earning security, such as a bond or bond fund, at a 10% rate over one year, then the interest earned would be 200 x .1 x 1 = $20.

How Bond Interest Works

But let’s say you want to know how much interest you could realize before a bond matures, as that’s what you’re concerned about when initially investing. Then, you would use a different version of the formula:

P + I = P(1 + rt)

Here, P + I is the principal of the investment and the interest, which is the total amount you should earn. So to figure that out you would calculate 200 x (1 + .1 x 1), which is 200 x (1 + .1), or 200 x 1.1, which equals $220.

Benefits and Drawbacks of Simple Interest

Interest is advantageous to investors and savers, as they accrue a bit of money without any effort. If there is a drawback, perhaps it’s that simple interest tends to accrue much more slowly than compound interest.

Example of Simple Interest

For example, let’s say you were to purchase $1,000 in bonds that paid out a simple interest rate of 1%. At the end of a year, without adding or taking out any additional money, your investment would grow to $1,010.00.

In other words, multiplying the principal by the interest rate gives you a simple interest payment of $10. If you had a longer time frame, say five years, then you’d have $1,050.00.

Though these interest yields are nothing to scoff at, simple interest rates are often not the best way to see your wealth accumulate over time. Since simple interest is usually paid out as it’s earned, and isn’t compounded, it’s difficult to make headway. So each year you will continue to be paid interest, but only on your principal — not on the new amount after interest has been added.

What Is Compound Interest?

Most real-life examples of wealth increasing over time, especially in investing, are more complex. In those cases, interest may be applied to the principal multiple times in a given year, and you might have investments for a number of years. That’s compound interest at play.

Compound interest means the amount of interest you gain is based on the principal plus all the interest that has accrued. This makes the math more complicated, but in that case the formula would be:

A = P x (1 + r/n)^(nt)

Where A is the final amount, P is the principal or starting amount, r is the interest rate, t is the number of time periods, and n is how many times compounding occurs in that time period.

Example of Compound Interest

Let’s assume you invested $200 in a bond fund earning 10% interest, but have it compound quarterly, or four times a year.

So we have:

200 x (1 + .1 / 4)^(4×1)
200 x (1 + .025)^4
200 x (1.025)^4
200 x 1.10381289062

The final amount is $220.76, which is modestly above the $220 we got using simple interest. The amount earned changes as the compounding period increases.

More Examples of Compound Interest

Let’s look at two other examples: compounding 12 times a year and 265 times a year.

For monthly interest we would start at:

200 x (1 + .1/12)^(12×1)
200 x (1 + 0.0083)^12
200 x 1.00833^12
200 x 1.10471306744
220.94

If we were to compound monthly, or 12 times in the one year, the final amount would be $220.94, which is greater than the $220 that came from simple interest, above, and the $220.76 that came from the compound interest every quarter.

•   Simple interest: $220

•   Quarterly interest: $220.76

•   Monthly interest: $220.94

Notice how we get the biggest proportional jump when we go from simple interest to quarterly interest, compared to less than 20 cents when we triple the rate of interest to monthly.

Advantages of Compound Interest Over Simple Interest

The most obvious advantage of compound interest compared to simple interest is that it allows for exponential growth of the principal. Since interest compounds on the principal amount and interest previously accrued, a saver’s wealth will increase much faster than with simple interest, which only applies to the principal.

What Is Continuous Compounding?

Continuous compounding calculates interest assuming compounding over an infinite number of periods — which is not possible, but the continuous compounding formula can tell you how much an amount can grow over time at a fixed rate of growth.

Continuous Compounding Formula

Here is the continuous compounding formula:

A = P x e^rt

A is the final amount of money that combines the initial amount and the interest
P = principal, or the initial amount of money
e = the mathematical constant e, equal for the purposes of the formula to 2.71828
r = the rate of interest (if it’s 10%, r = .1; if it’s 25%, r = .25, and so on)
t = the number of years the compounding happens for, so either the term or length of the loan or the amount of time money is saved, with interest.

Example of Continuous Compounding

Let’s work with $200, gaining 10% interest over one year, and figure out how much money you would have at the end of that period.

Using the continuously compounding formula we get:

A = 200 x 2.71828^(.1 x 1)
A = 200 x 2.71828^(.1)
A = 200 x 1.10517084374
A = $221.03

In this hypothetical case, the interest accrued is $21.03, which is slightly more than 10% of $200, and shows how, over relatively short periods of time, continuously compounded interest does not lead to much greater gains than frequent, or even simple, interest.

To see significant gains, investments or savings must be held for substantially longer, like years. The rate matters as well. Higher rates substantially affect the amount of interest accrued as well as how frequently it’s compounded.

While this math is useful to do a few times to understand how continuous compounding works, it’s not always necessary. There are a variety of calculators online.

The Limits of Compound Interest

The reason simply jacking up the number of periods can’t result in substantially greater gains comes from the formula itself. Let’s go back to A = P x (1 + r/n)^(nt)

The frequency of compounding shows up twice. It is both the figure that the interest rate is divided by, and the figure — combined with the time period — that the factor that we multiply the starting amount is raised to.

So while making the exponent of a given number larger will make the resulting figure larger, at the same time the frequency of compounding will also make the number being raised to that greater power smaller.

What the continuous compounding formula shows you is the ultimate limit of compounding at a given rate of growth or interest rate. And compounding more and more frequently gets you fewer and fewer gains above simple interest. Ultimately a variety of factors besides frequency of compounding make a big difference in how much your principal might increase.

The rate of growth or interest makes a big difference. Using our original compounding example, 15% interest compounded continuously would get you to $232.37, which is 16.19% greater than $200, compared to the just over 10% greater than $200 that continuous compounding at 10% gets you. Even if you had merely simple interest, 15% growth of $200 gets you to $230 in a year.

How Continuous Compounding Impacts Long-Term Growth

Continuous compounding can have a massive effect on long-term growth. Since your principal is earning interest, and that interest (plus principal) is earning interest, it’s possible that your rate of growth could increase exponentially. But it requires time and patience, and the larger your principal, the larger your potential yield from long-term compounding.

Interest and Investments

As noted previously, interest can play a role in an investment portfolio, but it’s important to note the distinction between investing returns and interest. Interest refers to a percentage paid at regular intervals, i.e., quarterly. Investment returns depend on the market, and typically fluctuate widely.

However, if an investor’s portfolio contains holdings in investment vehicles or assets such as bonds, there may be interest payments in the mix, which can and likely will have an impact on overall investing returns.

The Takeaway

Simple interest is the money earned on a principal amount, and compound interest is interest earned on interest and the principal. Understanding the ways in which interest rates can work is important when managing an investment portfolio that may include bonds or bond funds.

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For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.

FAQ

Can simple interest ever outperform compound interest?

Simple interest can’t ever outperform compound interest, as compound interest will always result in a higher overall yield over time.

What industries commonly use simple interest?

Simple interest is commonly used by banks and financial institutions as interest paid on some accounts. But certain types of bonds also make simple interest payments, or coupon payments, to the bondholder.

What types of accounts benefit most from compound interest?

Several types of accounts can earn compound interest, including some savings accounts, money market accounts, and even products like CDs.

Are there downsides to compound interest?

Compound interest may work against you if you’re a borrower and your debt compounds. Because the amount you owe, plus interest, earns additional interest, putting you further into debt over time.

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Apr
02
2025

What Is the Average Retirement Savings by Age?

By | Growing Wealth, invest, Investing, Preparing for Retirement | Comments Off on What Is the Average Retirement Savings by Age?

The average retirement savings by age depends on people’s income, expenses, and even where they live (with some states having higher retirement savings rates than others). The older you are, the more likely you are to prioritize retirement savings.

How much have Americans saved for retirement? While nearly half (46%) of households have no retirement savings, those that do have an average of about $334,000 saved, according to the Federal Reserve Board’s 2022 Survey of Consumer Finance, which is the most recent data available.

If you look at the median amount Americans have saved in retirement accounts such as IRAs, 401(k) and 403(b) plans, pensions, and so forth, that number is lower: about $87,000 per household.

Key Points

•   Average retirement savings by age varies widely, with savings increasing as people get older.

•   Though 46% of U.S. households show no retirement savings, those with retirement assets have an average of about $334,000.

•   By age 30, it’s generally recommended to save an amount equal to your annual salary, and by age 40, three to four times annual salary.

•   By age 50, it’s advised to have six times annual salary saved, and by age 60, eight times.

•   Given that many Americans are not saving for retirement, it’s important to consider these broader benchmarks as a way to keep your own savings on track.

Average Retirement Savings By Age

Below is a breakdown of retirement savings by age group, ranging from people in their 20s to people in their 70s, according to the 2022 Survey of Consumer Finance.

Age Group

 Mean Retirement Savings
Under age 35 $49,130
35 to 44 $141,520
45 to 54 $313,220
55 to 64 $537,560
65 to 74 $609,230

Source: 2022 Survey of Consumer Finance, Federal Reserve Board, latest data available.

Average Retirement Savings Before Age 35: $49,130

Most Americans in their 20s and early 30s haven’t reached their peak earning years, and many might be paying off student loans, and saving up to buy a house or have kids. Retirement isn’t always top of mind.

But the earlier people can figure out which retirement plan is right for them and commit to actually starting a retirement savings plan, the more they will benefit from compound growth over time.

Average Retirement Savings, Age 35 to 44: $141,520

With their careers and lives generally more established, many people are making more money at this age than they ever have. It can be tempting to spend more on lifestyle choices (e.g., vacations, cars, furniture). Many people also have mortgages, families, and other big-ticket expenses during this time in their lives.

But those who put that money towards retirement may be able to reach their retirement goal with greater confidence. Granted, it can be difficult to juggle competing priorities, but taking advantage of employer-provided retirement accounts, matching funds, and automatic transfers to savings can all help busy people make progress.

Recommended: How to Save for Retirement at 30

Average Retirement Savings, Age 45 to 54: $313,220

At this age, some Americans are on track to reach their retirement goals, while others are far off. There are still ways to catch up, such as cutting unnecessary expenses, moving to a smaller home, or putting any additional pay, income, or bonuses into retirement accounts.

In addition, many retirement accounts offer what’s known as a catch-up provision, which is a way to add more money to certain accounts, once you’re over age 50. Starting in 2025, there is also a new policy that allows people between 60 and 64 to save an extra amount in an employer-sponsored plan.

Average Retirement Savings, Age 55 to 64: $537,560

Although the goal for many is to retire at about age 65, many Americans have to keep working since they don’t have enough savings. In some cases, people plan on working at this stage of life anyway, although it’s not always easy to find work. Ideally, working in later years of life would be a choice and not a necessity.

Retirement contributions tend to increase as people age partly because they are earning more and partly because they are thinking about retirement more — and in some cases because other expenses are lower. For example: Your kids may be done with college, or you may have paid off your mortgage.

Average Retirement Savings, Age 65 to 74: $609,320

Many people in this age group have embarked on retirement, thanks to years of self-directed investing (although many retirees may have consulted a professional as well). This is a time when people need to evaluate the amount they have saved in light of how long they are likely to live — which is the most significant factor impacting retirees, in addition to the cost of living.

It may be possible to enjoy some years of travel, starting a business, helping raise grandchildren — or other adventures. Or it may be a time to adjust living expenses in order to make one’s savings last.

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Target Retirement Savings by Age

Because the cost and standard of living varies so greatly, there aren’t clear dollar figure amounts that each age group should aim to have saved for retirement. But there are suggested guidelines, and numerous ways to save for retirement as well.

Retirement Savings Benchmarks

•   By age 30: It’s generally recommended that people save an amount equal to their annual salary by the time they reach age 30. That may not be a realistic goal for many people, but it can be a general guideline or goal to aspire to.

One way to achieve this is to save 10-15% of one’s gross income starting in one’s 20s. Some employers will match 401(k) contributions if employees save a certain amount each month, so it’s a good idea to contribute at least that much to take advantage of what is essentially free money.

•   By age 40: It’s recommended that investors have three to four times their annual salary saved by age 40.

•   By age 50: Investors are typically advised to have six times their salary saved by age 50.

•   By age 60: It’s recommended that investors have eight times their salary saved by age 60.

•   By age 67: Investors are typically advised to have ten times their salary saved by age 67, which is considered full retirement age for Social Security for many Americans.

For example, if a 67-year-old makes $75,000 per year, ideally they would aim to have $750,000 saved, more or less, at the point at which they actually retire and start to claim Social Security.

Is Anyone Saving Enough for Retirement?

Despite the above recommendations, most Americans don’t have nearly these amounts in their retirement accounts. As noted, a significant percentage of Americans don’t have any retirement savings at all — and that includes Americans who are near retirement age.

In a recent SoFi survey of adults aged 18 and over, 59% had either no retirement savings or less than $49,000.

So, while some people are saving enough for retirement, many people aren’t. And relying on Social Security benefits isn’t likely to cover all of a retiree’s living expenses.

Social Security and Your Retirement

Social Security was designed to help people pay some of their expenses during retirement, but it was always assumed these benefits would be part of an individual’s larger income plan, which might include a pension and personal savings.

As a result, Social Security benefits are generally modest. As of January 2025, the estimated average Social Security payment for a retired worker was around $1,976 per month. But benefit amounts can be higher or lower, depending on your earning history, how old you are when you file, and other factors.

Perspectives on Social Security Vary Widely

In addition, people have different perspectives about Social Security. According to SoFi’s recent retirement survey, some adults think it will be their main source of income in retirement, while others see it as a supplement to other income sources. And some people aren’t counting on Social Security at all.

Perceptions of Social Security Perceptions in Retirement

•   41% Perceive SS as a supplementary source of income

•   31% Perceive SS as a their primary source of income

•   16% Aren’t relying on SS as a source of income

•   12% Aren’t sure how to perceive SS in their retirement plans

Source: SoFi Retirement Survey, April 2024

The fact that nearly a third of respondents believe Social Security could be their primary source of income reveals a lack of awareness of these benefits and how they work. And it points to a need for greater education around the need for personal savings and careful financial planning.

Strategies to Maximize Retirement Savings

It can be stressful to feel behind on saving for retirement, but it’s never too late to start.

There are several ways to save for retirement — but a good place to start, if you haven’t already, is by creating a budget to track expenses. This allows you to see where your money is going and identify categories of spending that could be reduced. It’s then possible to direct some of those savings to a retirement account, such as a traditional IRA, or a work-sponsored plan such as a 401(k) or 403(b).

Some retirement plans also have catch up options for those who start late — typically, individuals older than 50 can contribute extra funds to their retirement accounts.

No matter how much you put aside for retirement, or whether you contribute to a traditional IRA or a Roth IRA, a 401(k) or an after-tax investment account, a good strategy is to automate savings. With automated savings, the money is deducted from your paycheck or your bank account automatically — making it easy to forget that the money was ever in the account in the first place.

Recommended: Comparing the SIMPLE IRA vs. Traditional IRA

Retirement Account Options

Whether you’re employed full-time, working part-time, or you’re self-employed, there are many types of retirement account options available. Following is a selection of common retirement accounts, but there are others as well.

Bear in mind: Most retirement accounts offer different tax advantages, as well as strict rules about annual contribution limits, withdrawals and early withdrawals, loans, and required minimum distributions (RMDs). Be sure to understand the terms, to ensure a the plan you choose can help you reach your goals before funding a retirement account.

Individual Retirement Accounts, or IRAs

With an IRA, you open and fund a tax-advantaged IRA account yourself or for a custodian (e.g., a minor child). IRAs are for individuals, and are not offered by employers. That said, small businesses may offer a special type of IRA.

IRAs come in two flavors: traditional and Roth IRAs. When considering a Roth IRA vs traditional it’s important to understand the tax implications of each type of account. Traditional IRAs take tax-deferred contributions. This means your contributions are pre-tax, and can reduce your taxable income. You owe ordinary income tax on withdrawals.

Roth IRAs are considered after tax, because you deposit funds that have been taxed already. Qualified withdrawals are tax free.

Employer-Sponsored Plans

A 401(k) plan is a tax-advantaged plan typically offered to the employees of a company. A 403(b) and 457(b) are similar, but offered by governments, schools, churches, or non-profit organizations that are tax exempt.

Traditional accounts allow employees to contribute pre-tax dollars, but withdrawals are taxed as income in retirement. Roth versions of these accounts (you may be able to set up a Roth 401(k) or Roth 403(b) account) allow after-tax contributions, and qualified tax-free withdrawals.

Self-Employed and Small Business Accounts

•   A Saving Incentive Match Plan for Employees, or SIMPLE IRA plan, is also a tax-deferred account, similar to a traditional IRA. But these accounts are designed for small businesses with 100 employees or less (including sole proprietors, and people who are self-employed).

As a result, the contribution limits for SIMPLE IRAs are higher, and the tax treatment of these plans is slightly different.

•   A SEP IRA is a Simplified Employee Pension Plan that small businesses and self-employed individuals can fund. Here, the employer makes the contributions. Employees do not. Like a SIMPLE IRA, the annual contribution limits are generally higher than for standard IRAs.

The Takeaway

The average American household has about $334,000 in retirement accounts, e.g., IRAs, 401(k) and 403(b) plans, pensions, and so forth. The number varies depending on age groups and other factors. Knowing how much others in your age group are saving for retirement can help provide a benchmark for evaluating whether you’re making the progress you envision.

There are a number of different formulas, calculations, and rules of thumb to help individuals figure out how much money they’ll need in retirement. While these figures can be helpful, it’s also important to take personal goals, financial responsibilities, and lifestyle into consideration.

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

How much money do I need to retire comfortably?

Calculating the amount you need to retire comfortably is highly personal. It depends on how long you’re likely to live, how healthy you are, as well as the lifestyle you envision. It may be worth consulting with a professional to lay out different options, and what the financial implications may be, as this can influence how much you save as well as your investment strategy.

What percentage of my income should I save for retirement?

The general rule of thumb is to save between 10% and 20% of your income for retirement. The exact amount will depend on many factors, including whether you’re saving for yourself or also for a spouse; what your likely longevity will be; whether you might have other financial sources of income (e.g., from a trust or an inheritance); and the retirement lifestyle you hope to have.

When should I start saving for retirement?

Given that you could live as many years in retirement as you did while you were working, the odds are that you might need more savings than you anticipated. In that light, it’s wise to start as soon as you can, and maximize the savings opportunities available to you.

What happens if I start saving for retirement late?

If you get a late start on retirement, it’s even more important to maximize your savings and your investing strategy. As an older saver, it can be hard to recover from market volatility, so you want to be cautious. It may make sense to work with a professional.

How do I catch up on retirement savings?

Catching up on retirement savings can mean boosting the percentage you save, pairing another retirement account, such as an IRA, with your employer plan, making sure you get your employer match, and — for those 50 and up — being sure to take advantage of catch-up provisions that allow you to save more in most retirement accounts. For those between the ages of 60 and 64, a “super catch-up” amount is now allowed in most employer plans.

SoFi Invest®

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

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

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

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02
2025
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5 Things to Consider When Choosing a Mortgage Lender

By | Budgeting & Goals, Home Ownership, mortgage | No Comments

Buying a home is likely one of the biggest moves you’ll make in your personal and financial life, and your home may represent one of your largest assets.

If you take out a mortgage to help you buy it, you will end up making mortgage payments — and if your lender ends up servicing your loan after closing, you will make payments to that lender — possibly for decades. That’s why it’s important to shop around before committing to a mortgage lender and loan program that’s right for you.

Today, borrowers have more choices than ever. With the rise of online and marketplace lenders, there’s increased competition, which fuels improvements in process, service, and cost — and can mean a much better experience for you.

With so much choice, however, finding the right lender can feel overwhelming. To help simplify the process, we’ve listed five key things you may want to consider when shopping for a mortgage lender.

1. Does the lender offer competitive interest rates?

A good first step is to get the lay of the land by looking at various lenders and the rates and fees they advertise. Taking this step may help you understand what the market looks like overall and who may be offering competitive rates.

Remember that the rates and programs you are ultimately eligible for will likely depend not only on the lender you choose but also on your needs and financial situation. However, this initial comparison can give you a baseline to start working from.

You’ll also want to look at the common loan types offered. Interest rates for fixed-rate loans do not change over the life of the loan. Interest rates for adjustable-rate mortgages (ARMs) can change over the life of the loan and are influenced by benchmark interest rates.

Hybrid adjustable-rate mortgages are mortgages that offer an initial fixed rate for a certain period of time. These hybrid ARMs often offer a low introductory rate for 1, 3, 5, 7 or 10 years. Some hybrid ARMs will also offer an interest-only payment option for a specified period of time such as 10 years.

When the initial fixed-rate period is over, the interest rate is normally reviewed on an annual basis for adjustment. Although the benchmark index tied to the ARM rate may have moved much higher, these loans typically have yearly and annual interest rate caps to control rate and payment fluctuations.

When talking to a lender about their mortgage loans, it’s a good idea to not only ask about interest rate, but also about APR, or annual percentage rate. This figure takes into account certain fees like broker fees, points, and other applicable credit charges, giving you an easier way to compare loan offers.

2. Does the lender offer loan products with terms that suit your needs?

Your needs and financial situation can play a large part in which mortgage programs you choose and are eligible for. For example, some lenders require a 20% down payment to qualify for a mortgage.

If you can’t pay 20%, lenders may require that you have private mortgage insurance (PMI), which covers them in case you default on your mortgage payments. Mortgage insurance premiums vary depending upon many factors.

It’s a good idea to ask your chosen lender how much insurance payments will add to your monthly payment. Also keep in mind that, in certain circumstances, PMI does not apply, such as with some jumbo loan programs. In addition, PMI can be eligible for removal from your home loan later if certain criteria are met.

If you can’t afford a 20% down payment, you can look for lenders who offer more flexible down payment requirements. Also, consider what term — the length of time you’ll be paying off your loan — works best for you. See what kinds of terms lenders offer and the interest rates that accompany those terms.

A shorter term will likely come with higher monthly payments, but lower interest rates that result in lower interest charges over time. Not everyone can afford those higher monthly payments, however, in which case a longer term may be preferable. Note that longer terms usually mean that you end up paying more in interest over the life of the loan.

Once you’ve found a loan with rates and terms that work for you, you can typically obtain a rate lock from your lender, generally for the time it takes to close on the transaction, such as 30 or 45 days.

You may have to pay a fee if you want to lock in the rate for a longer extended period of time. However, once you do, it will guarantee that you have access to the mortgage at a specific rate during the lock-in period, even if interest rates rise while your loan is being processed.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Questions? Call (888)-541-0398.

3. What type of origination, lender, and other fees might you be responsible for?

We’ve already alluded to the fact that you’ll likely be on the hook for other costs in addition to your down payment. One good idea is to request a Loan Estimate (LE) for any mortgage you’re considering to see a solid estimate of what costs you may be facing.

Keep your eye out for things like:

•   Commissions Mortgage brokers are paid on commission, which is either paid by you, your lender, or a combination of both.
•   Origination fees These fees may cover the cost of processing your loan application.
•   Appraisal fees Appraisal fees cover the cost of having a professional come in and put a value on the home you want to buy. You must have a property valuation of some type in order to borrow money to buy a home and in most cases a full appraisal is required.
•   Credit report fee This covers the cost of the bank obtaining your credit report from the credit reporting bureaus.
•   Discount points Optional fee the borrower can pay to reduce or buy down their interest rate.

Unless you receive a seller or lender credit toward closing costs, the added fees will impact the overall cost of buying the home, so doing your research and reading the fine print up front might pay off.

Depending on the loan terms and fees charged, some will be paid upfront at the beginning of the application process (such as credit report and appraisal), while other fees might be paid at loan closing (such as lender fees and title insurance).

In some cases, under certain loan programs, you can borrow the money to cover these fees, which will increase your overall mortgage payment(s). Therefore, having a clear understanding of what fees you’ll owe is critical to understanding how much you’ll end up paying.

It’s a good idea to request from your lender a quote on all the costs and fees associated with the loan. A Loan Estimate (LE) is a typical form used to disclose loan fees to a borrower. Ask questions about what each fee covers. Have your lender explain any fees you don’t understand, and then find out which ones may be negotiable or can be waived entirely.

4. How much of the process is online vs. on paper or in person?

How much facetime you have to put in to apply for a mortgage can vary by lender. Some online banks will have you complete the process entirely online, while brick-and-mortar banks may require an in-person visit.

In the past, applying for a mortgage required a lot of physical paperwork. But much of this has now been replaced by online interactions. For example, you are now likely able to send your financial information like bank statements and W-2s electronically.

Lenders who complete much, or all, of the mortgage application process online may be able to offer lower rates or fees, since they don’t have the cost of brick-and-mortar bank locations and their employees to maintain.

That said, if you’re someone who likes face-to-face help, you may consider a lender that allows you to apply in person or a lender who utilizes facetime.

5. How quickly can the lender close once you’re in contract?

Once you’ve found the home you want to buy and you’re under a purchase contract with the seller, the amount of time it takes to close on a loan can vary. Depending on the situation, you may have to wait for inspections, appraisals, and all sorts of paperwork to go through before you can close.

However, your lender may offer you ways to speed up the process. For example, you may be able to get preapproved for a loan, which takes care of a lot of potentially time-consuming paperwork upfront before you’ve even started shopping for a home.

Ask your potentiallender how much time their closing process usually takes and what you can do to expedite it. Especially if you’re crunched for time, their answer can have a big impact on which lender you choose. After all, the faster you’re financed, the sooner you’ll be able to move in.

The Takeaway

Your relationship with your mortgage lender is likely to be a long one. Finding out basic information about potential lenders, like how they operate, what kinds of fees they charge, and whether they offer loan products that meet your needs can help you make a smart decision about what lender you want to use.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.
.


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


SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.



*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

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


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

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Apr
02
2025

What Assets Should Be Noted on a Mortgage Application?

By | Family Finances, Home Ownership, mortgage | Comments Off on What Assets Should Be Noted on a Mortgage Application?

When lenders ask borrowers to list their assets during the mortgage application process, they’re looking primarily for cash and “cash equivalents” (assets that can be quickly converted to cash). But that doesn’t mean you can’t or shouldn’t include other types of assets on your application.

The assets you choose to include could help determine the type of mortgage you can get and the interest rate you’re offered. So it’s important to be prepared with a well-thought-out list of assets for your lender.

What Is Considered a Financial Asset?

When you apply for a loan, you can expect your lender to ask about your income, the debts you owe, and the assets you own. What’s an asset? In the broadest sense, a financial asset is anything you own that has monetary value and can be turned into cash. But all assets are not created equal when it comes to borrowing money.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Questions? Call (888)-541-0398.

Types of Financial Assets

Some assets can take longer to liquidate than others, and the value of some assets may change over time. So it can be helpful to break down your assets into different categories, including:

Cash and Cash Equivalents

This category includes cash you have on hand (in a home safe, for example); the accounts you use to hold your cash (checking, savings, and money market accounts); and assets that can be quickly converted to cash (CDs, money market funds).

Physical Assets

A physical or tangible asset is something you own that can be touched and that would have some value if you had to sell it to qualify for your loan or to make your loan payments. (If you need to use this type of asset to qualify for a mortgage, the lender may ask you to sell it before you close.) Some examples of physical assets include homes, cars, boats, jewelry, or artwork.

Nonphysical Assets

Nonphysical or nontangible assets aren’t as liquid as physical assets, and you can’t actually put your hands on them — but they still have value. This category includes workplace pensions and retirement plans (401(k)s, 403(b)s, etc.), and IRAs. You may be able to withdraw money from your account in certain circumstances, or borrowing from your 401(k) might be an option, but it can take time as well as careful planning to avoid tax and other consequences.

Liquid Assets

This category includes nonphysical assets that you can easily convert to cash if necessary. For example, a stock or bond that isn’t part of your retirement account would be considered a liquid asset.

Fixed Assets

Fixed assets are items you own that could be sold for cash, but it may take a while to find a buyer — and the value may have changed (up or down) since you made the initial purchase. You would list a valuable piece of furniture, an antique, or a real estate property as a fixed asset using the item’s current value — not its original purchase price.

Equity Assets

This category includes any ownership interest you may have in a company, such as a stock, mutual fund, or holdings in a retirement account.

Fixed Income Assets

Investment money lent in exchange for interest, such as a government bond, may be categorized as a fixed-income asset. (Yes, there can be some confusing overlap in how assets may be designated. Don’t let that hang you up: The goal is simply to keep your mind open to anything you own that might be helpful when listed as an asset on your application.)

Financial Assets to List on Your Mortgage Application

You may have heard or read that lenders tend to prioritize a borrower’s liquid net worth (the total amount of cash and cash equivalents you own minus any outstanding debt) over total net worth (everything you own minus everything you owe).

That’s partly because lenders want to be clear on where the money for your down payment and closing costs is coming from. When you apply for a home mortgage loan, a lender will want to determine if you’re a good financial risk, able to comfortably manage monthly mortgage payments — even if you suddenly have a bunch of medical bills to pay or experience a job layoff. So it can help your application if you have a healthy savings account, certificates of deposit (CDs), or other assets you can quickly liquidate in a pinch.

That doesn’t mean, though, that your lender won’t also note other assets you own when gauging your financial stability. Listing physical assets that can be quickly converted to cash may show your lender that you have options if you need more money for your down payment or to keep in cash reserves. And the assets you have in other categories could help bolster your application if you’re a candidate for a certain type of mortgage loan or a better interest rate.

Does Reporting More Assets Help With Mortgage Approval?

As you go through the mortgage preapproval process, you can ask your lender to help you determine which assets will help make your application stronger. You also could meet with your accountant in advance to go over what you have. If in doubt, you may want to list everything of value on your application — especially if you’re concerned about qualifying for the loan amount you want. Just be sure everything is accurate, because the lender will verify the information you provide.

Bear in mind the lender will also be looking at whether you have the credit score needed to buy a house. Your debt-to-income ratio will also be important.

How Mortgage Lenders Verify Assets

Your lender will want to be sure all the information on your application is correct, so you should be prepared to provide asset statements to support everything you’ve listed. Documents you may be asked for include:

Bank Statements

Lenders generally will ask to see two or three of the most recent monthly statements from your checking, savings, and other bank accounts. You can send copies of paper statements (if you still do paper) or you can download copies online. If you have cash deposits on your statements, you should be ready to answer questions about the source (or sources) of that money. Your lender will want to be sure you have enough money on your own to make your down payment and monthly payments.

Keep in mind that when you turn over your bank statements, your lender will look for clues to the stability of your financial health. If you have a history of overdrafts or other problems, your application could be denied, even if your current balances are sufficient to qualify for a mortgage.

Gift Letters

Some lenders and loan programs allow borrowers to accept a large monetary gift from a family member to help with their down payment. But you’ll likely have to ask your benefactor to sign a document stating you won’t have to repay the money, and the lender also may ask to see a copy of that person’s bank statements to verify he or she was the source of the money.

Retirement and Investment Account Statements

If you need more money to make your down payment or help cover closing costs, and you plan to withdraw or borrow money from a retirement or brokerage account, you should be ready to provide two to three months’ worth of statements from those accounts.

Appraisal and Insurance Paperwork

If you’re listing a physical or fixed asset, you may have to produce an appraisal report or insurance document that states the item’s current value and that it belongs to you.

The Takeaway

Making a list of your assets, and gathering up documents to verify ownership and value, may seem like a tedious exercise. But being prepared to provide a complete accounting of your assets — along with the other documentation you’ll need — could help you find and get the mortgage you want.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.

SoFi Mortgages: simple, smart, and so affordable.

Photo credit: iStock/FG Trade

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



*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.

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