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After attending college, you might have a hefty student loan you need to pay off, and you might also have some credit card debt you’re ready to eliminate.

Having two (or more) separate payments each month, as well as more than one interest rate, can get messy, and could negatively impact your credit if you don’t make all the minimum payments required. You may be wondering if it’s possible to consolidate student loans and credit card debt together to make things easier.

We’ll look at the differences between debt consolidation, debt refinancing, student loan consolidation, and student loan refinancing, plus explore your options to lower your interest rates and possibly get one single payment for all your student loan and credit card debts.

What Is Debt Consolidation?

There are two different ways you can change what your debt looks like: debt consolidation and debt refinancing.

It’s important to understand that when it comes to loans and credit cards, consolidating is different from refinancing. Refinancing refers to changing the financial terms of a debt. Maybe when you took out your student loan, for example, interest rates were higher than they are now. You might be able to refinance your loan with current, lower rates or you could refinance to extend the loan term.

Debt consolidation, on the other hand, refers to combining more than one debt into a new loan with a single payment. Maybe you have three different credit card balances and you take out a new loan to pay them off. Now, those three credit cards have a zero balance and you’re left with a single monthly payment and a new interest rate and terms with the new loan.

But is consolidating credit cards and student loans together possible? Or are they two different animals?

Consolidating Student Loans

The U.S. Department of Education offers what’s called a Direct Consolidation Loan, which consolidates all your federal education loans that qualify into one new loan with a single interest rate, typically the average of the loans you’re consolidating. When you consolidate federal student loans, you keep federal benefits, such as income-driven repayment plans and student loan forgiveness.

Student loan consolidation may be useful if you have federal loans from different lenders and are making more than one payment per month. However, your interest rate won’t necessarily be lowered, nor will you be allowed to consolidate private student loans or credit card debt.

So, what can you do if you have private student loans you want to consolidate or other loans that don’t qualify for the Direct Consolidation Loan? And what if you want to consolidate student loans and credit card debt together?

Before we get to the solution, let’s talk about consolidating credit cards.


💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

Consolidating Credit Cards

Just like with student loans, you may have multiple credit cards each with their own balance, interest rate, and minimum payment due each month. This can make paying off all this debt next to impossible and feel like you’re treading water as you pay the minimum amount due on each card.

With credit card consolidation, you take out a new personal loan and pay off all outstanding credit card debt.
You then have one payment and one interest rate (which may often be significantly lower than some astronomically high rates for credit cards). You’re now making one monthly payment for all your credit card debt. Sounds good, right?

How to Consolidate Student Loans and Credit Card Debts

As discussed, with a Direct Consolidation Loan, you can’t add credit card debt to the consolidation loan. Direct Consolidation Loans are reserved for federal student loans only.

However, if you’re wanting to consolidate both student loans and credit card debts, there are options you can consider.

Personal Loan

One way to pay off different types of debt is with a personal loan. While personal loans may have higher interest rates than you’re paying for your student loans, the rates for personal loans may be significantly lower than credit card interest rates if your credit is good.

By taking out a personal loan, you may be able to pay off all of your student loans and credit card debt. Your debt is now rolled up into one monthly payment with one interest rate.

The higher your credit score, the lower the interest rate you may qualify for with a personal loan. But even if you don’t get a fantastic rate, you can extend the loan term to make your payments more manageable. And, of course, you can usually pay off a personal loan early without penalty, which can cut down on what you’d otherwise pay in interest.

Balance Transfer

If a personal loan isn’t for you, check to see if you have a credit card with a balance transfer offer. Often, credit cards will offer a promotion of 0% on any balances from other credit cards or loans transferred. Take note though: often these promotions end after a year, and then you’re stuck with the interest payment on the remaining balance.

A balance transfer makes sense if you know you can pay off your debts within a year. If you have a large amount of credit card debt or a high student loan, this may not be the best solution if you can’t pay it off quickly. Instead, you might consider transferring the amount of your debts that you know you can pay off within the timeframe.

Alternatives to Consolidation

If you’re hoping to consolidate student loans and credit card debt together, taking out a personal loan or using a transfer balance are two options to explore.

You might also look at a debt reduction strategy, such as the Avalanche Method or the Snowball Method.

The Avalanche Method

The Avalanche Method focuses on paying off your debts with the highest interest rates first. Once those are paid off, you put that money toward the debts with the next highest interest rates, and so on and so forth, until they are all paid off.

The Snowball Method

With the Snowball Method, you focus on the largest balance first. Put extra money toward paying that off, then when it’s paid off, move to the next largest balance.

Continue Payments

Whatever strategy you choose, the key is to keep making payments. And if possible, pay more than the minimum amount due. Even paying an additional $25 a month on a debt will help you pay it off faster and reduce the total amount of interest you pay overall.

Student Loan Refinance Tips from SoFi

Because student loans are often the largest debts people carry (even if they don’t have the highest interest rate), you may want to have a separate strategy for paying off your student loans.

When you refinance student loans, look for loans that offer a longer time period if you want a smaller monthly payment. However, keep in mind that with a longer loan term, you’re likely to pay more in interest over the life of the loan.

Also, if you plan on using federal benefits, it’s not recommended to refinance with a private lender. Instead, look into a Direct Consolidation Loan or refinance your student loans once you’re no longer using federal benefits.


💡 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.

The Takeaway

While it may be challenging to consolidate student loans and credit card debt together, you may be able to do so with a personal loan or a credit card balance transfer. Using one of these methods allows you to transfer these debts into a single loan with a single payment and interest rate.

However, if a personal loan or balance transfer credit card isn’t an option, you could consider refinancing your student loans to possibly lower your interest rate and save money each month. The money you save could then be put toward paying off your credit card debt.

FAQ

Do I lose my credit cards if I consolidate?

Consolidating credit card debt does not cause you to lose your credit cards. It merely wipes out the debt on each card you include in the consolidation.

Will consolidating my student loans lower my credit score?

If you use the Direct Consolidation Loan, this will not impact your credit score. However, if you consolidate your student loans with a personal loan or through student loan refinancing, it may impact your credit.

Can my student loans be forgiven if I consolidate?

If you consolidate your loans with a Direct Consolidation Loan, you’re still eligible for student loan forgiveness. However, if you refinance your student loans with a private lender, you are no longer eligible for federal benefits, including loan forgiveness.

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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.

SoFi Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

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Dividends are payments that investors can receive from stocks, exchange-traded funds (ETFs), and mutual funds. These earnings count as income and may be taxable, depending on your income and filing status.

We’ll investigate dividend tax rates and the difference between ordinary and qualified dividends.

Defining Ordinary and Qualified Dividends

The IRS divides stock dividends into two categories: ordinary and qualified. The federal tax rate is different for each category. A qualified dividend is one that qualifies for a lower tax rate based on the concept of capital gains. An ordinary dividend, meanwhile, is one that doesn’t that doesn’t qualify for a lower rate.

When a company declares a dividend payment, your dividend is ordinary if you’ve held their stock for less than 61 days over a 121-day period. If, however, you make the stock purchase on or before the date that it’s declared, and then hold it for at least 61 days, it is considered qualified.

The timing also matters. Let’s say that you own stock in Company A, and they announce that a dividend will be paid on December 1. The day before, November 30, is called the ex-dividend date, or ex-date. If you bought your shares of stock 60 days or fewer before November 30, then your dividend is ordinary. But if you bought the stock more than 60 days before November 30, your dividend is qualified.

Qualified Dividend Documentation

When it’s tax time, you’ll receive a 1099-DIV. This is the form that financial institutions use to report dividends to the IRS and relevant taxpayers. Box 1a shows the total ordinary dividends you received during this tax period. Box 1b shows your qualified dividends. The form will also show any federal or state income tax that was withheld. You can use this information plus the federal dividend tax rate to determine what you owe.

Financial institutions must issue a 1099-DIV to shareholders who receive more than $10 in dividends and other distributions for the year. For more on tax documentation, read our story on the most common types of tax forms.


💡 Quick Tip: We love a good spreadsheet, but not everyone feels the same. An online budget planner can give you the same insight into your budgeting and spending at a glance, without the extra effort.

Tax Information for Ordinary and Qualified Dividends

The ordinary dividend tax rate is the same as an individual’s income tax bracket for the year.

The qualified dividend tax rate for 2023 is calculated using capital gains tax rates. This may be 0% depending on your taxable income and filing status. Here are the latest figures from the IRS:

•   Less than $44,625 for single or married filing separately.

•   Less than $59,750 for head of household.

•   Less than $89,250 for married filing jointly or qualifying widow(er).

The qualified dividend tax rate rises to 15% for the next tax brackets:

•   $44,625 to $492,300 for single filers.

•   $44,625 to $276,900 for married filing separately.

•   $59,750 to $523,050 for head of household.

•   $89,250 to $553,850 for married filing jointly or qualifying widow(er).

Once your household income exceeds the 15% bracket, you’ll pay a 20% tax rate on any qualified dividends. There may also be a 3.8% net investment income tax. Consult your accountant or financial advisor regarding your situation.

Recommended: 2023 IRS Tax Refund Dates

Dividend Tax Rate 2022

The thresholds can change by year. For example, the dividend tax rate for 2022 was as follows:

•   0% dividend tax rate:

◦   Single filers, up to $41,675

◦   Married filing jointly, up to $83,350

•   15% dividend tax rate:

◦   Single filers, $41,676–$459,750

◦   Married filing jointly, $83,351–$517,200

•   20% dividend tax rate:

◦   Single filers, $445,851+

◦   Married filing jointly, $517,201+

Dividend Tax Rate 2024

Looking ahead, we’ve got some insights into the 2024 tax year. A married couple filing jointly won’t pay taxes on qualified dividends until their income is above $94,054. Above that amount, the tax rate will be 15%. The tax raise will go up to 20 percent when a couple earns more than $583,751.

Individual filers won’t pay 15% until their income is greater than $47,025. They’ll pay 20% when income exceeds $518,901.

Recommended: Guide to Filing Your Taxes for the First Time

Why Are the Two Types of Dividends Taxed Differently?

Qualified dividends are more favorably taxed as an incentive to investors to hold onto stocks for a longer period of time. This is based on the concept of capital gains.

Additional Qualified Dividend Requirements

Besides the holding period described above, the dividend must have been paid by a corporation in the U.S. or a qualifying foreign one. Plus, the payment can’t be a dividend in name only. For example, payments given by tax-exempt agencies don’t qualify.

If a payment doesn’t satisfy all three requirements, then it can’t be a qualified dividend. It may be an ordinary dividend or another type of income.


💡 Quick Tip: Income, expenses, and life circumstances can change. Consider reviewing your budget a few times a year and making any adjustments if needed.

The Takeaway

There are two broad types of dividends: ordinary and qualified. Qualified dividends are taxed at a lower rate than ordinary dividends. For a dividend to be qualified, an investor must hold the stock for at least 61 days during a particular time frame. A 1099-DIV will break out dividends into qualified and ordinary for the taxpayer’s information. There are three tax rates for qualified dividends. The lowest tax brackets pay nothing. The next brackets pay 15%, and the highest brackets pay 20%. Ordinary dividends are taxed as regular income.

To seamlessly track your finances, consider a spending app, which allows you to handle tasks like budgeting, paying bills, and more.

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

FAQ

What is the tax rate on dividends in 2024?

The ordinary dividend tax rate is based on your tax bracket. With a qualified dividend tax rate, it depends on your filing status and your income. The lowest tax brackets pay nothing, the middle brackets pay 15%, and the highest brackets pay 20%.

How do I calculate my qualified dividends?

Investors receive form 1099-DIV from their financial institution, which provides the amount of ordinary and qualified dividend income received during the year. The IRS also provides a worksheet.

Why are my qualified dividends being taxed?

Dividends are a type of income, and investors who receive them typically pay taxes on them. It’s true that individuals who make less than $47,025 in 2024 pay no tax on qualified dividends. However, taxpayers in higher brackets must pay 15% or 20%.

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SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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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If you want to start a business, one thought may go through your mind (particularly if you’re funding your business out of pocket): “If I didn’t have to repay my student loans, I’d have more money to put toward my business.”

No doubt about it, student debt can be steep. The current average federal student loan debt per borrower is $37,338 and $54,921 per private loan borrower. Student loan borrowers who feel stymied by their debt may wonder how to get their business idea off the ground.

If student loans gobble up a chunk of your cash every month, refinancing might free up funds to put your fledgling business on the right track. Read on to learn how refinancing student loans can benefit the launch of your new business.

What Is Student Loan Refinancing?

Before diving into the definition of student loan refinancing, let’s discuss the components that make up a student loan: principal, interest rate, and loan term.

•   Principal: The principal is the original amount that you borrowed, which you will repay with interest over time.

•   Interest rate: The interest rate is a percentage of the loan principal that you pay monthly — on top of a portion of the principal. This is charged by the lender and is how they earn money while lending you cash.

•   Loan term: The loan term is the amount of time in which you will repay your loan.

Student loan refinancing means replacing your existing student loan with a new student loan. You can refinance either federal or private loans with funds from a private lender. There are two important points to keep in mind if you are considering refinancing. These factors can help you determine if refinancing is a good fit for you.

•   When you refinance federal loans with a private loan, you forfeit federal protections and benefits, such as deferment and forbearance.

•   If you refinance for an extended term, you may end up paying more in interest over the life of the loan, even if your monthly payment is lower.

💡 Quick Tip: Get flexible terms and competitive rates when you refinance your student loan with SoFi.

Benefits of Student Loan Refinancing

Some of the key reasons to refinance your student loans include the following:

•   Potentially lowering your interest rate: Reducing your interest rate on your student loans can save you a lot of money over time because you won’t pay as much in interest per monthly payment. Check with various lenders to ensure you’re getting the lowest interest rate possible. You can usually get the best rates by having a strong credit score and a steady source of income. Your credit score is the three-digit number that reflects how well you’ve paid back debts in the past.

•   Reducing your monthly payment: When you work with a lender to extend your loan term, you may reduce your student loan payments per month. For example, you may extend your loan term from 10 years to 15 years, though the specific options will depend on your lender. Note, however, as mentioned above, that extending your term often means you’re likely paying more interest over the life of your loan.

•   Obtaining a single monthly payment: Instead of making multiple monthly payments, you can refinance and make one monthly payment. Sticking to one monthly payment can help you stay organized and make your payments on time. You don’t have to refinance all of your student loans, however. For example, if you have five student loans and you have a low interest rate on one and a high interest rate on the rest, you could refinance just those four. Use a student loan refinance calculator to determine how different refinance scenarios might work to your advantage.

•   Choosing between variable- and fixed-rate loans: Refinancing may allow you to choose between a fixed- or variable-rate loan. A fixed-rate means your interest rate stays the same throughout the life of the loan, while a variable rate changes — and could increase or fall over time.

Note that you can also consolidate student loans, which involves combining several federal student loans into one loan, through the Direct Loan Program.


💡 Quick Tip: Refinancing could be a great choice for working graduates who have higher-interest graduate PLUS loans, Direct Unsubsidized Loans, and/or private loans.

How Refinancing Student Loans Can Benefit a New Business

So, how exactly does refinancing student loans benefit a new business? Here’s a closer look.

1. Lower Your Loan Payments

As mentioned earlier, refinancing can help lower your loan payments by possibly offering a lower interest rate and/or by stretching out your loan term. Lowering your monthly payments can allow you to devote more financial resources toward your new business. You can also use the extra money to pay for household expenses or financial goals, like the down payment on a house or your retirement nest egg.

2. More Money to Get Business Loan

First, to clarify: Using student loans to start a business is a no-go. Student loan money should go toward education costs, living expenses, and housing. When you refinance, you can lower your monthly repayment amount. That can help your overall financial outlook. Then, if you apply for a business loan, you may have a more creditworthy profile.

A bank or credit union will review your financial information to evaluate your qualifications for a business loan. If you refinance your student loans and lower your monthly payment, that could help improve your debt-to-income ratio (DTI), an important indicator when you apply for a loan. Your DTI is calculated by all your monthly debt payments divided by your gross monthly income. If you lower a component of your monthly debt (say, your student loan), you can lower your overall DTI, which is a positive.

3. Use Business Income to Pay Student Loans

Are you wondering, “Can my business pay my student loans?” The answer to that is “no,” if you mean pay directly through your enterprise. However, if you launch a business and earn income, of course you can use your pay to eliminate your debt, whether from a student loan or another source.

Keep in mind that as a business owner, you could get tax breaks that other taxpayers can’t claim, but you can’t deduct the principal payments you make on student loans.

Recommended: How to Get Out of Student Loan Debt

Refinancing Student Loans With SoFi

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.

FAQ

Can you start a business if you have student loans?

Yes, you can start a business if you have student loans, but it may be harder to access business credit and save cash to put toward your business. No matter what, you must keep up with your student loan payments. Not making your payments can hurt your credit score later, which in turn can hurt your application for a small business loan.

How do I start a student loan?

You can apply for federal student loans by filing the Free Application for Federal Student Aid (FAFSA), which helps determine the amount of federal student aid you can receive. You can apply for private student loans on lender websites.

Can I get an SBA loan with defaulted student loans?

Through the Small Business Administration, SBA loans require potential borrowers to keep up to date on student loan payments. Unfortunately, you could become ineligible with defaulted student loans.

Photo credit: iStock/ferrantraite

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 Student Loan Refinance
SoFi Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891. (www.nmlsconsumeraccess.org). SoFi Student Loan Refinance Loans are private loans and do not have the same repayment options that the federal loan program offers, or may become available, such as Public Service Loan Forgiveness, Income-Based Repayment, Income-Contingent Repayment, PAYE or SAVE. Additional terms and conditions apply. Lowest rates reserved for the most creditworthy borrowers. For additional product-specific legal and licensing information, see SoFi.com/legal.

By saving and investing for retirement, you are working toward financial freedom — a goal worthy of your time and effort.

As you may know, there are benefits to using an account designed specifically for retirement, such as a 401(k) plan or Roth IRA.

For instance, some company retirement programs may offer a match program. Second, these accounts are designed to hold investments so that you can earn compound returns.

Retirement accounts also have tax advantages. Because these accounts have special tax treatment, there’s a limit to how much money the IRS allows you to contribute to each of them in a given year.

These retirement contribution limits vary depending on the type of account you have. For example, 401(k) contribution limits are different from IRA contribution limits.

To build a successful long-term financial plan, you’ll likely want a solid understanding of your retirement plan options. Below is a summary of these retirement accounts and their respective annual retirement contribution limits.

What Are Retirement Contribution Limits?

Ever heard someone say that they have “maxed out” their retirement account? Maxing out means contributing the total amount allowed by the IRS in a given year. In some cases, you may be able to contribute more than the allowable maximum, but that money will not qualify for the tax advantages of the money within the retirement contribution limit.

Generally, the IRS increases retirement contribution limits every few years as the cost of living increases. Many of the 2024 contribution limits were increased from the previous year.

There are a lot of different types of retirement accounts, and each comes with its own nuances, which can make it hard to keep them straight.

This list of the account types along with their contribution limits will help keep track.

Note that if you have any questions about what type of account is best for you, or whether you can use multiple accounts concurrently, you may want to consult a tax professional.


💡 Quick Tip: Did you know that opening a brokerage account typically doesn’t come with any setup costs? Often, the only requirement to open a brokerage account — aside from providing personal details — is making an initial deposit.

401(k) Contribution Limits

A 401(k) plan is a tax-deferred retirement account that is typically set up through a person’s employer, usually as part of a benefits package. With a 401(k) plan, the employee can opt to have a certain percentage of their salary withheld from their paycheck on a pretax basis.

Individual 401(k) plans — also known as solo 401(k) plans — are becoming more popular. These accounts are available to people who are self-employed and have an employee identification number (EIN).

2023 Employee contribution limit: $22,500
2024 Employee contribution limit: $23,000

Plans may allow for catch-up contributions for employees age 50 and over.

2023 Catch-up contribution limit: $7,500
2024 Catch-up contribution limit: $7,500

Some employers may offer a company match in their 401(k) plans. A typical match would see employers match around 3% of an employee’s salary when that employee contributes 6% to the plan. The company match plan is determined by the employer.

Employer contributions to a 401(k) do not count toward the employee’s contribution limits. But instead of putting a cap on how much the employer alone can contribute, there’s a total contribution limit that includes both the employer and employee contributions.

2023 Total employer plus employee contribution limit: The lesser of 100% of the employee’s compensation or $66,000 — if the employee is eligible for catch-up contributions, then it would be $73,500.

2024 Total employer plus employee contribution limit: The lesser of 100% of the employee’s compensation or $69,000 — if the employee is eligible for catch-up contributions, then it would be $76,500.

403(b) Contribution Limits

A 403(b) plan is similar to a 401(k) but is offered to employees of public schools, nonprofit hospital workers, tax-exempt organizations, and certain ministers.

2023 Employee contribution limit: $22,500
2024 Employee contribution limit: $23,000

2023 Catch-up contribution limit: $7,500
2024 Catch-up contribution limit: $7,500

Catch-up contributions are for employees aged 50 and older. Employees of any age who have been in service for 15 or more years with the same eligible 403(b) employer can potentially contribute another $3,000. There is a $15,000 lifetime limit for the latter catch-up provision. It may be possible to qualify for both catch-up provisions; if you think you qualify, check with the plan or your CPA to be sure.

2023 Total employer plus employee contribution limit: The lesser of 100% of the employee’s compensation or $66,000.

2024 Total employer plus employee contribution limit: The lesser of 100% of the employee’s compensation or $69,000.

It is important to keep in mind that some 403(b) plans have mandatory employee contributions. These mandatory contributions are made by the employee, but since you do not have a choice they do not count towards the employee contribution limit. If you are part of a plan like this you might actually be able to contribute your annual contribution maximum plus the mandatory contributions.

457(b) Contribution Limits

A 457(b) plan is similar to a 401(k) plan but for governmental and certain nonprofit employees. Unlike a 401(k), there is only one contribution limit for both employer and employee.

2023 Total employer plus employee contribution: $22,500
2024 Total employer plus employee contribution: $23,000

If permitted by the plan, a participant who is within three years of the normal retirement age may contribute the lesser of twice the annual limit or the standard annual limit plus the amount of the limit not used in prior years.

Thrift Savings Plan (TSP) Contribution Limits

A TSP is similar to a 401(k), but for federal employees and members of the military.

2023 Employee contribution limit: $22,500
2024 Employee contribution limit: $23,000

Tax-free combat zone contributions: Military members serving in tax-free combat zones are allowed to make the full $66,000 in employee contributions for 2023, and $69,000 in 2024.

2023 Catch-up contribution limit: $7,500
2024 Catch-up contribution limit: $7,500

On January 1, 2021, the Federal Retirement Thrift Investment Board (FRTIB) implemented a new method for TSP Catch-up contributions called the “spillover” method. For those eligible to make catch-up contributions, any contributions made that exceed the annual employee contribution limit will automatically count toward the catch-up contribution limit of $6,500.

Traditional IRA Contribution Limits

The traditional IRA is a tax-deferred account that is set up by the individual. IRA stands for individual retirement account. Unlike workplace retirement plans, IRA accounts tend to have lower contribution limits. These contribution limits are combined totals for both your traditional and Roth IRAs.

2023 Contribution limit: $6,500
2024 Contribution limit: $7,000

2023 & 2024 Catch-up contribution limit: $1,000 (for a total of $7,500 in 2023, and $8,000 in 2024) for those age 50 or over

Additionally, there are income limits for tax deductions on contributions that vary based on whether or not you are covered by a retirement plan at work.

Calculate your IRA contributions.

Use SoFi’s IRA contribution calculator to determine how much you can contribute to an IRA in 2024.

Roth IRA Contribution Limits

Similar to a traditional IRA, a Roth IRA is set up by the individual.

Unlike tax-deferred retirement accounts, Roth IRA contributions are not tax deductible. The trade-off is that you will not need to pay income taxes on qualified withdrawals. Again, these contribution limits are combined totals for both your traditional and Roth IRAs.

2023 Contribution limit: $6,500
2024 Contribution limit: $7,000

2023 & 2024 Catch-up contribution limit: $1,000 (for a total of $7,500 in 2023, and $8,000 in 2024) for those age 50 or over

There are income limitations for who is able to use a Roth IRA. These limits exist on a phase-out schedule and ability to use a plan slowly tapers off until the final income cap.

Single-filer income limit: Under $153,000 for tax year 2023, and under $161,000 for tax year 2024.

Married, filing jointly income limit: under $228,000 for tax year 2023, and under $240,000 for tax year 2024.


💡 Quick Tip: Did you know that you must choose the investments in your IRA? Once you open a new IRA and start saving, you get to decide which mutual funds, ETFs, or other investments you want — it’s totally up to you.

SEP IRA Contribution Limits

A simplified employee pension simplified employee pension (SEP) IRA is a tax-deferred retirement account for employers and self-employed individuals.

2023 Contribution limit: An employer’s contributions to an employee’s SEP IRA can’t exceed the lesser of 25% of the employee’s compensation or $66,000.

2024 Contribution limit: An employer’s contributions to an employee’s SEP IRA can’t exceed the lesser of 25% of the employee’s compensation or $69,000.

Catch-up contributions are not permitted in SEP plans.

SIMPLE IRA

A savings incentive match plan for employees (SIMPLE) IRA is a retirement savings plan for small businesses with 100 or fewer employees.

2023 Employee contribution limit: $15,500
2024 Employee contribution limit: $16,000

2023 Catch-up contribution limit: $3,500 for savers age 50 and older
2024 Catch-up contribution limit: $3,500 for savers age 50 and older

Employer contribution limit: The employer is generally required to make a 100% match for each employee’s contributions up to 3% of the employee’s compensation. In certain circumstances, an employer may choose to make a matching contribution of less than 3%.

In 2024, under a new SECURE Act 2.0 provision, an employer can make an additional 10% nonelective contribution to eligible employees, up to $5,000.

Maxing Out Your Retirement Contributions

Now that you know how much you can contribute to an account, you may be wondering how one actually goes about contributing the full amount.

For some people, it may help to understand the monthly dollar figure necessary to max out your annual retirement plan contributions. If you have a 401(k), you would need to contribute $1,916.67 each month to reach the $23,000 limit for 2024. With IRAs, that number is $583.33 per month to reach the annual $7,000 contribution limit for 2024.

A bit of good news: When you are making pre-tax contributions to a tax-deferred account such as a 401(k), the money is entering into the account before income tax deductions. Therefore, the difference in your post-tax paycheck might not be as drastic as you think.

There are several tactics you can take when working to increase how much you’re contributing to your retirement plan.

But whether you increase your contribution each month, quarter, or year, you may want to consider automating the saving process. Automation removes human emotion from the equation, which may help you save.

You may want to try to avoid massive lifestyle creep as your income increases over the years. It’s a balance to take care of both your current self and your future self. When you get raises or bonuses, consider allocating those funds to your retirement instead of a material purchase.

The most successful savers will likely have a strategy that focuses on earning more and cutting costs.

Opening Your Own Retirement Account

If you have a retirement account through work, this may be the easiest option, as contributions are taken directly from your paycheck and you can take advantage of a company match program if it’s offered.

Ease of use shouldn’t be discounted; the most important characteristic of a retirement plan is that you actually use it.

For those without a workplace retirement plan, getting set up with an account may take slightly more initiative. Luckily, opening an account doesn’t have to be hard. An account like a traditional IRA, Roth IRA, SEP IRA, or Solo 401(k) can be set up at a brokerage firm of your choosing.

Another way to save for retirement is through a general investment account, like SoFi Invest. With SoFi Invest, you can either make trades on your own through active investing or you can use an automated investing service which invests your money on your behalf using your goals as a guide.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

SoFi Invest®