Financial Topics Archives

Q: Is it possible to lose your 401k?

Simply changing jobs doesn’t mean your old 401k is gone for good. It does, however, mean that you may need to spend time locating it if it’s been a while since you changed jobs.

Q: How do I find all my old 401k accounts?

The simplest way to find old 401k accounts is contacting your former employer. It’s possible your money may still be in your old plan and if not, your previous employer or plan administrator may be able to tell you where it’s been moved to.

Mar

2025

Finding Your Old 401k: Here's What to Do

How to Find an Old 401(k)

By Rebecca Lake | Growing Wealth, invest, Investing, Preparing for Retirement | Comments Off

Tracking down an old 401(k) may take some time, and perhaps the quickest way to find old 401(k) money is to contact your former employer to see where the account is now. It’s possible that your lost 401(k) isn’t lost at all; instead, it’s right where you left it.

In some cases, however, employers may cash out an old 401(k) or roll it over to an IRA on behalf of a former employee. In that case, you might have to do a little more digging to find lost 401(k) funds. If you ever wished you could click on an app called “Find my 401(k),” the following strategies may be of use.

Key Points

• Contacting previous employers is a primary method for locating old 401(k) accounts.

• Old account statements can be useful for directly reaching out to 401(k) providers.

• Government agencies keep records that can help track down old 401(k) plans.

• National registries may list unclaimed retirement benefits, searchable by Social Security number.

• Recovered 401(k) funds can be rolled over into another retirement account or cashed out.

4 Ways to Track Down Lost or Forgotten 401(k) Accounts

There’s no real secret to how to find old 401(k) accounts. But the process can be a little time consuming as it may require you to search online or make a phone call or two. But it can be well worth it if you’re able to locate your old 401(k).

There are several ways to find an old 401(k) account. Here are a handful that may prove fruitful.

1. Contact Former Employers

The first place to start when trying to find old 401(k) accounts is with your previous employer.

If you had more than $5,000 in your 401(k) at the time you left your job, it’s likely that your account may still be right where you left it. In that case, you have a few options for what to do with the money:

• Leave it where it is

• Transfer your 401(k) to your current employer’s qualified plan

• Rollover the account into an Individual Retirement Account (IRA)

• Cash it out

When your plan balance is less than $5,000 your employer might require you to do a 401(k) rollover or cash it out. If you’re comfortable with the investment options offered through the plan and the fees you’ll pay, you might decide to leave it alone until you get a little closer to retirement. On the other hand, if you’d like to consolidate all of your retirement money into a single account, you may want to roll it into your current plan or into an IRA.

Cashing out your 401(k) has some downsides. You would owe taxes on the money, and likely an early withdrawal penalty as well. So you may only want to consider this option if your account holds a smaller amount of money. If you had less than $5,000 in your old 401(k), it’s possible that your employer may have rolled the money over to an IRA for you or cashed it out and mailed a check to you.

Recommended: How Does a 401(k) Rollover Work?

2. Track Down Old Statements

If you have an old account statement, you can contact your 401(k) provider directly to find out what’s happened to your lost 401(k). This might be necessary if your former employer has gone out of business and your old 401(k) plan was terminated.

When a company terminates a 401(k), the IRS requires a rollover notice to be sent to plan participants. If you’ve moved since leaving the company, the plan administrator may have outdated address information for you on file. So you may not be aware that the money was rolled over.

Either way, your plan administrator should be able to tell you which custodian now holds your lost 401(k) funds. Once you have that information, you could reach out to the custodian to determine how much money is in the account. You can then decide if you want to leave it where it is, roll it over to another retirement account, or cash it out.

3. Check With Government Agencies

Different types of retirement plans, including 401(k) plans, are required to keep certain information on file with the IRS and the Department of Labor (DOL). One key piece of information is DOL Form 5500. This form is used to collect data for employee benefit plans that are subject to federal ERISA (Employee Retirement Income Security Act) guidelines.

How does that help you find your 401(k)? The Department of Labor offers a Form 5500 search tool online that you can use to locate lost 401(k) plans. You can search by plan name or plan sponsor. If you know either one, you can look up the plan’s Form 5500, which should include contact information. From there, you can reach out to the plan sponsor to track down your lost 401(k).

4. Search National Registries

Another place to try is the National Registry of Unclaimed Retirement Benefits. This is an online database you can use to search for an unclaimed 401(k) that you may have left with a previous employer. You’ll need to enter your Social Security number to search for lost retirement account benefits.

In order for your name to come up in the search results, your former employer must have entered your name and personal information in that database. If they haven’t done so, it’s possible you may not find your account this way.

💡 Quick Tip: Want to lower your taxable income? Start saving for retirement with a traditional IRA. The money you save each year is tax deductible (and you don’t owe any taxes until you withdraw the funds, usually in retirement).

What Should I Do With Recovered Funds?

If you do manage to recover an old 401(k) account and its assets, you’ll have some options as to what to do with it. In many cases, it might be a good idea to roll it over into another retirement account to try and stay on track with your retirement savings.

Another important point to consider: If you’ve changed jobs multiple times, it’s possible that you could have more than one “lost” 401(k) — and taken together, that money could make a surprising difference to your nest egg.

Last, if you were lucky to have an employer that offered a matching 401(k) contribution, your missing account (or accounts) may have more money in them than you think. For example, a common employer match is 50%, up to the first 6% of your salary. If you don’t make an effort to find old 401(k) accounts, you’re missing out on that “free money” as well.

But if you’re unsure of what to do, it may be worth speaking with a financial professional for guidance.

Further, if you’re not able to find lost 401(k) accounts you still have plenty of options for retirement savings. Contributing to your current employer’s 401(k) allows you to set aside money on a tax-deferred basis. And you might be able to grow your money faster with an employer matching contribution.

What if you’re self-employed? In that case, you could choose to open a solo or individual 401(k). This type of 401(k) plan is designed for business owners who have no employees or only employ their spouses. These plans follow the same contribution and withdrawal rules as traditional employer-sponsored 401(k) plans, though special contribution rules apply if you’re self-employed.

The Takeaway

There are several ways to try and find an old 401(k) account, but for most people, the best place to start is by contacting your old employers to see if they can help you. From there, you can also try reaching out to government agencies, tracking down old statements, or even searching through databases to see what you can find.

Saving for retirement is important for most people who are trying to reach their financial goals – as such, if you have money or assets in a retirement account, it may be worthwhile to try and track it down. Again, it may be worth consulting with a financial professional if you need help.

Prepare for your retirement with an individual retirement account (IRA). It’s easy to get started when you open a traditional or Roth IRA with SoFi. Whether you prefer a hands-on self-directed IRA through SoFi Securities or an automated robo IRA with SoFi Wealth, you can build a portfolio to help support your long-term goals while gaining access to tax-advantaged savings strategies.

Help grow your nest egg with a SoFi IRA.

FAQ

Is it possible to lose your 401(k)?

It’s possible to lose money from your 401(k) if you’re cashing it out and taking a big tax hit or your investments suffer losses. But simply changing jobs doesn’t mean your old 401(k) is gone for good. It does, however, mean that you may need to spend time locating it if it’s been a while since you changed jobs.

Do I need my social security number to find an old 401(k)?

Generally, yes, you’ll need your Social Security number to find a lost 401(k) account. This is because your Social Security number is used to verify your identity and ensure that the plan you’re inquiring about actually belongs to you.

What happens to an unclaimed 401(k)?

Unclaimed 401(k) accounts may be liquidated or converted to cash if enough time passes, and that cash could be transferred to a state government, where it will be held as unclaimed property.

Can a financial advisor find old 401(k) accounts?

A financial advisor may be able to help, but the simplest way to find old 401(k) accounts is contacting your former employer. It’s possible your money may still be in your old plan and if not, your previous employer or plan administrator may be able to tell you where it’s been moved to.

About the author

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.

You may also be interested in:

How to Roll Over Your 401(k): Knowing Your Options

What Happens to Your 401(k) When You Leave Your Job?

Guide to Transferring 401(k) to a New Job

Photo credit: iStock/svetikd

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

Mar

2025

What Is an Equal-Weighted Index? How to Calculate It

By Rebecca Lake | Growing Wealth, invest, Investing | Comments Off

An equal-weight index gives each constituent in a market index the same weight versus a market-cap-weighted or price-weighted index, where bigger companies (or those trading at higher prices) hold a larger share of the index.

Equal weighting strives to equalize the impact of each company’s performance on the overall index. Traditional market-cap weighting tends to give bigger companies more influence over outcomes. Equal-weight investing is a smart beta strategy that may appeal to certain types of investors more than others.

Key Points

• An equal-weighted index assigns the same weight to each component, regardless of market capitalization.

• Calculation involves dividing the total number of components into 100 to find the weight per component.

• Rebalancing is necessary to maintain equal weighting, typically done quarterly or annually.

• Performance can differ significantly from market-cap weighted indexes due to equal representation.

• Potential benefits include increased diversification and reduced concentration risk in larger stocks.

What Is an Equal-Weighted Index?

A stock market index tracks the performance of a specific group of stocks or a particular sector of the market. For example, the S&P 500 Composite Stock Price Index tracks the movements of 500 companies that are recognized as leaders within their respective industries.

Stock market indexes are often price-weighted or capitalization-weighted.

• In a price-weighted index, the stocks that have the highest share price carry the most weight. In a capitalization-weighted index, the stocks with the highest market capitalization carry the most weight.

• Market capitalization represents the value of a company as measured by multiplying the current share price by the total number of outstanding shares.

While some investors may wish to invest in stocks, others may be interested in mutual funds or index funds, which are like a container holding many stocks.

How Equal Weighting Works

An equal-weighted index is a stock market index that gives equal value to all the stocks that are included in it. In other words, each stock in the index has the same importance when determining the index’s value, regardless of whether the company is large or small, or how much shares are trading for.

An equally weighted index essentially puts all of the stocks included in the index on a level playing field when determining the value of the index. With a price-weighted or capitalization-weighted index, on the other hand, higher-priced stocks and larger companies tend to dominate the index’s makeup — and thereby dictate or influence the overall performance of that index.

This in turn influences the performance of corresponding index funds, which track that particular index. Because index funds mirror a benchmark index, they are considered a form of passive investing.

Most exchange-traded funds (ETFs) are passive funds that also track an index. Now there are a growing number of actively managed ETFs. While equal-weight ETFs are considered a smart beta strategy, they aren’t fully passive or active in the traditional sense. These funds do track an index, but some active management is required to rebalance the fund and keep the constituents equally weighted.

Examples of Equal-Weight Funds

Equal-weight exchange-traded funds (ETFs) have grown more common as an increasing number of investors show interest in equal-weight funds. Equal weight falls under the umbrella of smart-beta strategies, which refers to any non-market-capitalization strategy.

The term “smart beta” doesn’t mean a particular strategy is better or more effective than others.

Equal-weight funds, for example, are designed to shift the weight of an index and its corresponding funds away from big-cap players, which can unduly influence the performance of the index/fund. And while an equal-weight strategy may have improved fund performance in some instances, the results are not consistent.

Here is a list of some of the top five equal-weight ETFs by assets under management (AUM):

1. Invesco S&P 500 Equal Weight ETF (RSP )

2. SPDR S&P Biotech (XBI )

3. SPDR S&P Oil and Gas Exploration and Production (XOP )

4. SPDR S&P Global Natural Resources ETF (GNR )

5. First Trust Cloud Computing ETF (SKYY )

How to Calculate Equal-Weighted Index

To calculate equal weighted index, you need to know two things:

• The share price of each stock that’s included in the index

• Total number of stocks included in the index

If you’re calculating an equally weighted index value for an index that has five stocks in it, each one would be weighted 20%, regardless of its stock price or market capitalization. To find an equal-weighted index value, you would simply add the share price of each stock together, then multiply it by the weight.

So for example, say an index has five stocks priced at $100, $50, $75, $90 and $85. Each one would be weighted at 20%.

Following the formula, you would add each stock’s price together for a total of $400. You’d then multiply that by the 20% weighting to arrive at an equal-weighted value of 80.

As fund turnover occurs and new assets are exchanged for old ones, or as share prices fluctuate, the equally weighted index value must be recalculated.

The equally weighted index formula can be used to determine the value of a particular index. You may want to do this when determining which index ETF to invest in or whether it makes sense to keep a particular index mutual fund in your portfolio.

Advantages of Using an Equally Weighted Index

An index investing strategy might be preferable if you lean toward more conservative investments or you simply want exposure to a broad market index without concentrating on a handful of stocks. That’s something you’re less likely to get with mutual funds or ETFs that follow a price-weighted or capitalization-weighted index.

Here are some of the reasons to consider an equal-weighted index approach:

• An equal-weight strategy can increase diversification in your portfolio while potentially minimizing exposure to risk.

• It’s relatively easy to construct an equally weighted portfolio using index mutual funds and ETFs.

• It may appeal to value investors, since there’s less room for overpriced stocks to be overweighted and undervalued stocks to be underweighted.

• Equal-weighted index funds may potentially generate better or more incremental returns over time compared to price-weighted or capitalization-weighted index funds, but there are no guarantees.

Disadvantages of Using Equally Weighted Index

While there are some pros to using an equal weighted approach, it may not always be the best choice depending on your investment goals. In terms of potential drawbacks, there are two big considerations to keep in mind:

• Equal-weighted index funds or ETFs that have a higher turnover rate may carry higher expenses for investors.

There is typically a constant buying and selling of assets that goes on behind the scenes to keep an equal-weighted mutual fund or ETF in balance.

Higher turnover ratios, or, how often assets in the fund are swapped in and out, can lead to higher expense ratios if a fund requires more active management. The expense ratio is the price you pay to own a mutual fund or ETF annually, expressed as a percentage of the fund’s assets. The higher the expense ratio, the more of your returns you hand back each year to cover the cost of owning a particular fund.

• Equal-weighted indexes can also be problematic in bear market environments, which are characterized by an overall 20% decline in stock prices. During a recession, cap-weighted funds may outperform equal-weighted funds if the fund is being carried by a few stable, larger companies.

◦ Conversely, an equal-weighted index or fund may miss out on some of the gains when markets are strong and bigger companies outperform.

Advantages	Disadvantages
Can further diversify a portfolio	Will typically have higher costs
Constructing an equal-weight portfolio is straightforward	May see outsize declines in bear markets
Equal-weight strategies may appeal to value investors	May not realize full market gains
Equal-weight strategies may perform better than traditional strategies, but there are no guarantees

The Takeaway

In an equal-weight index, each stock counts equally toward the index’s value, regardless of whether the company is large or small, or what shares are currently trading for. The same is true of any corresponding fund.

There are advantages to investing in an equal-weight index fund over a capitalization-weighted index or price-weighted index. For example, equal-weighted indexes may generate better or more consistent returns. Investing in an equal-weight index may be appealing to investors who prefer a value investing strategy or who want to diversify their portfolio to minimize risk.

Invest in what matters most to you with SoFi Active Invest. In a self-directed account provided by SoFi Securities, you can trade stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, options, and more — all while paying $0 commission on every trade. Other fees may apply. Whether you want to trade after-hours or manage your portfolio using real-time stock insights and analyst ratings, you can invest your way in SoFi's easy-to-use mobile app.

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FAQ

How do equal-weight ETFs work?

Like an equal-weight index, an equal-weight ETF holds the same proportion of each of its constituents, which in theory may equalize the impact of different companies’ performance.

When should you buy equal-weighted ETFs?

If you’d like to invest in a certain sector, but you don’t want to be riding the coattails of the biggest companies in that sector because you see the value in other players, you may want to consider an equal-weight ETF.

What is the equally weighted index return?

The return of an equally weighted index would be captured by the performance of an investment in a corresponding index fund or ETF. So if you invest $100 in Equal Weight Fund A, which tracks an equal weight index, and the fund goes up or down by 5%, you would see a 5% gain or loss.

About the author

Rebecca Lake

You may also be interested in:

Value-Weighted Index: Explanation and How to Calculate

Understanding The Stock Market Index

The S&P 500 Explained and Defined

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

SOIN-Q424-029

Mar

2025

Guide to 529 Savings Plans vs ESAs

By Rebecca Lake | Growing Wealth, invest, Investing | Comments Off

Saving for college may help minimize the need to take out student loans to pay for school. Education Savings Accounts (ESAs) and 529 plans both allow you to save on a tax-advantaged basis, but there are some key differences in how they work.

Comparing the features of Education Savings Accounts vs. 529 plans, as well as the pros and cons, can help you decide which one is right for your needs.

🛈 Currently, SoFi does not provide ESAs or 529 savings plans.

Education Savings Accounts (ESAs) vs 529 Savings Plans

Education Savings Accounts and 529 plans are both designed to help you save money for qualified education expenses. In other words, they’re accounts you can use to save money for college, as well as potentially other types of schooling.

These plans can help you avoid a situation where you’re using retirement funds for college. On some levels, they’re quite similar but there are notable differences between the two options, as well.

Similarities

When putting an ESA vs. 529 plan side by side, you’ll notice that they have some features in common. Here’s how they overlap:

• Contributions to ESA and 529 plans are generally made with after-tax dollars, and grow on a tax-free basis within these accounts.

• Withdrawals are tax-free when funds are used to pay for qualified education expenses, as defined by the IRS.

• You’re not limited to using ESA or 529 plan funds for college; both allow some flexibility in paying for elementary and secondary school expenses.

• Non-qualified withdrawals from ESAs and 529 plans may be subject to taxes and penalties, with some exceptions.

• Both plans allow you to transfer savings to another beneficiary if your student opts not to go to college or there’s money remaining after paying all of their education expenses.

• With both types of accounts, contributions are not deductible on your federal tax return.

Differences

The differences between a 529 plan vs. ESA largely center on who can contribute, contribution limits, and when funds must be used. Here’s how the two diverge:

• ESA contributions are limited by the IRS to $2,000 per child, per year, while 529 plans typically don’t have annual contribution limits.

• Income determines your ability to contribute to an ESA but doesn’t affect your eligibility to open a 529 plan.

• ESA contributions are only allowed up to the beneficiary’s 18th birthday unless they’re a special needs beneficiary.

• Remaining funds in an ESA must be withdrawn by the beneficiary’s 30th birthday unless they’re a special needs beneficiary.

• 529 plans have no age limits on who can be beneficiaries, how long you can make contributions, or when funds must be withdrawn.

• Some states allow you to deduct your 529 contributions from your state income tax, but ESA contributions are not tax deductible at the federal or state level.

	Education Savings Account	529 College Savings Plan
Income Limits	You cannot contribute to an ESA if your MAGI is over $110,000 (single filers); $220,000 (married, filing jointly)	Anyone can contribute, regardless of income
Annual Contribution Limit	$2,000 per child	None, though contributions above the annual gift tax exclusion limit may trigger the gift tax Contributions are subject to lifetime limits imposed by each state, but these are much higher, typically ranging from about $300,000 to $500,000
Eligible Beneficiaries	Students under the age of 18 or special needs students of any age	Students of all ages, including oneself, one’s spouse, children, grandchildren, or other relatives
Investment Options	May include stocks, bonds, and mutual funds	Typically limited to mutual funds
Tax Treatment of Withdrawals	Withdrawals for qualified higher education expenses are tax-free; non-qualified withdrawals may be subject to tax and a penalty on the earnings portion of the withdrawal	Withdrawals for qualified higher education expenses are tax-free; non-qualified withdrawals may be subject to tax and a penalty on the earnings portion of the withdrawal
Tax Deductions	Contributions are not tax deductible	Contributions are not deductible on federal returns; some states may allow a deduction
Qualified Expenses	Withdrawals can be used to pay for elementary, secondary, and higher education expenses, including tuition, fees, books, and equipment	Withdrawals can be used to pay for qualified higher education expenses, including tuition, fees, books, and equipment, as well as K-12 tuition, eligible apprenticeship expenses, and qualified education loan repayments
Required Distributions	All funds must be withdrawn by age 30 or rolled over to another beneficiary, unless the beneficiary is a special needs student	Funds can remain in the account indefinitely or be rolled over to another beneficiary
Financial Aid	Treated as parental assets for FAFSA purpose	Treated as parental assets for FAFSA purposes

What Is an ESA?

An Education Savings Account, now known as a Coverdell Education Savings Account (ESA), is a trust or custodial account intended for education savings. ESAs allow flexibility since you can use them to save for college but the IRS also allows withdrawals for qualified elementary and secondary school expenses.

Pros and Cons of ESAs

If you’re considering an ESA versus 529 plan, it’s important to consider the advantages and potential downsides. While ESAs offer tax benefits, there are some limitations to be aware of.

Pros:

• Tax-deferred growth. Funds in an ESA grow tax-deferred, meaning you pay no tax on the earnings in the account until you begin making withdrawals.

• Tax-free distributions. As long as the money you withdraw is used for qualified education expenses, you’ll pay no tax on ESA funds.

• Multiple uses. Money in an ESA can pay for a variety of expenses, including college tuition and fees, books and supplies, and room and board for students enrolled at least half-time. Parents of elementary and secondary school students can use the funds for private school tuition, academic tutoring, and school-mandated costs of attendance, such as uniforms or room and board.

Cons:

• Contribution limits. You can only contribute $2,000 per year to an ESA, and contributions are not tax deductible.

• Income caps. Single filers with a modified adjusted gross income exceeding $110,000 and married couples filing jointly with a MAGI over $220,000 cannot contribute to an ESA.

• Age restrictions. You can’t contribute anything to an ESA once the beneficiary turns 18, and they must withdraw all remaining funds by age 30, unless they are a special needs beneficiary. Withdrawals after the beneficiary turns 30 may be subject to taxes on earnings, but it’s possible to rollover the funds to an ESA for another beneficiary.

What Is a 529 Savings Plan?

A 529 savings plan or Qualified Tuition Program (QTP) is a tax-advantaged account that you can use to save for education expenses. All 50 states offer at least one 529 account and you don’t need to be a resident of a particular state to contribute to its plan.

In addition to 529 savings plans, some states offer 529 prepaid tuition plans. These plans allow you to “lock in” rates, offering some predictability when it’s time to pay for your child’s college tuition.

Pros and Cons of 529 Savings Plans

There may be a lot to like about 529 savings plans but like ESAs, there are also some potential downsides to consider.

Pros:

• Contribution limits. There are no IRS limits on annual contributions to a 529 plan and states can determine where to set aggregate contribution limits.

• Eligibility. One of the advantages of a 529 savings plan is that anyone can contribute, regardless of income, and there are no age restrictions on who can be a beneficiary.

• Tax benefits. Earnings grow tax-deferred and qualified withdrawals are tax-free. In some states, you may be able to deduct your contributions on your state return.

• Funds use. 529 plan funds can be used to pay for qualified college expenses, K-12 private school tuition, qualified education loan repayment, and eligible apprenticeship expenses.

Cons:

• Tax penalties. Non-qualified withdrawals are subject to a 529 withdrawal penalty and taxes.

• Tax breaks. There are no federal tax deductions or credits for 529 plan contributions and while some states offer them, they may only be available to residents.

• Investment options. Compared to ESAs, 529 education savings plans may offer fewer investment options; it’s also important to consider the investment fees you might pay.

Which Savings Plan Is Right for You?

Deciding when to start saving for college for your child is the first question to tackle; where to do it is the next. Whether you should choose an Education Savings Account vs. 529 plan may hinge on your eligibility for either plan and your ability to save.

You might choose an Education Savings Account if you…

• Are within the income thresholds allowed by the IRS

• Would like a broader range of investment options to choose from

• Are comfortable with control of the account being transferred to the beneficiary when they turn 18

On the other hand, you might prefer a 529 plan if you…

• Want to be able to contribute more than $2,000 a year to the plan

• Don’t want to be limited by age restrictions for contributions or withdrawals

• Qualify for a state tax deduction or credit for making 529 contributions

You may also lean toward a 529 if you want more options concerning how you use the funds. While you can withdraw money from a 529 to repay student debt or pay for apprenticeship fees and supplies, you can’t do that with an ESA.

If you’re shopping for an ESA or 529 plan, consider the type of investment options offered and the fees you might pay. You might start with your current brokerage to see what college savings accounts are available, if any.

The Takeaway

Saving for college early and often gives you more time to potentially see your money grow. If you’re torn between an Education Savings Account vs. 529 plan, remember that you don’t necessarily have to choose just one. You could use both to save for education expenses if you’re eligible to do so. Just remember to prioritize saving in your own retirement accounts along the way so that you’re not shortchanging your nest egg.

FAQ

Is it better to put money in a 529 or an education savings account?

One of the main advantages of a 529 savings plan is the opportunity to save more than you could with an ESA, which is limited to $2,000 per year, total, per beneficiary. In addition, some states may offer a tax deduction for contributions to a 529 plan.

What is the downside of 529 accounts?

If you take money out of your plan for anything other than qualified education expenses, you may have to pay tax on the earnings you withdraw, plus a 10% penalty, which could make a non-qualified distribution expensive.

What happens to the 529 if the child doesn’t go to college?

If you opened a 529 savings plan for your child and they decide not to go to college, you can use the funds for other types of higher education or training, including apprenticeships. You can also transfer the money to a different beneficiary. You may select yourself as the beneficiary or choose your spouse, another child, a grandparent, or another relative.

About the author

Rebecca Lake

Photo credit: iStock/kate_sept2004

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

Mar

2025

Understanding Economic Indicators

By Rebecca Lake | Growing Wealth, invest, Investing | Comments Off

An economic indicator is a statistic or piece of data that offers insight into an economy. Analysts use economic indicators to gauge where an economic system is in the present moment, and where it might head next. Governments use economic indicators as guideposts when assessing monetary or fiscal policies, and corporations use them to make business decisions. Individual investors can also look to these indicators as they shape their portfolios.

There are different types of economic indicators and understanding how they work can make it easier to interpret them, and fold them into your investing strategy.

What Is an Economic Indicator?

An economic indicator is typically a macroeconomic data point, statistic, or metric used to analyze the health of an individual economy or the global economy at large. Government agencies, universities, and independent organizations can collect and organize economic indicator data.

In the United States, the Census Bureau, Bureau of Economic Analysis (BEA) and the Bureau of Labor Statistics (BLS) are some of the entities that aggregate economic indicator data.

Some of the most recognizable economic indicators examples include:

• Gross domestic product (GDP)

• Personal income and real earnings

• International trade in goods and services

• U.S. import and expert prices

• Consumer prices (as measured by the Consumer Price Index or CPI)

• New residential home sales

• New home construction

• Rental vacancy rates

• Home ownership rates

• Business inventories

• Unemployment rates

• Consumer confidence

Private organizations also regularly collect and share economic data investors and economists may use as indicators. Examples of these indicators include the Fear and Greed Index, existing home sales, and the index of leading economic indicators.

Together, these indicators can provide a comprehensive picture of the state of the economy and shine light on potential opportunities for investors.

How Economic Indicators Work

Economic indicators work by measuring a specific component of the economy over a set time period. An indicator may tell you what patterns are emerging in the economy — or confirm the presence of patterns already believed to be established. In that sense, these indicators can serve as a thermometer of sorts for gauging the temperature of the economic environment or where an economy is in a given economic cycle.

Economic indicators can not predict future economic or market movements with 100% accuracy. But they can be useful when attempting to identify signals about which way the economy (and the markets) might head next.

For example, an investor may study an economic indicator like consumer prices when gauging whether inflation is increasing or decreasing. If the signs point to a steady rise in prices, the investor might then adjust their portfolio to account for higher inflation. As prices rise, purchasing power declines but investors who are conscious of this economic indicator could take action to minimize negative side effects.

Types of Economic Indicators

Economic indicators are not all alike in terms of what they measure and how they do it. Different types of economic indicators can provide valuable information about the state of an economy. Broadly speaking, they can be grouped into one of three categories: Leading, lagging, or coincident.

Leading Indicators

Leading indicators are the closest thing you might get to a crystal ball when studying the markets. These indicators pinpoint changes in economic factors that may precede specific trends.

Examples of leading indicators include:

• Consumer confidence and sentiment

• Jobless claims

• Movements in the yield curve

• Stock market volatility

A leading indicator doesn’t guarantee that a particular trend will take shape, but it does suggest that conditions are ripe for it to do so.

Lagging Indicators

Lagging indicators are the opposite of leading indicators. These economic indicators are backward-looking and highlight economic movements after the fact.

Examples of lagging indicators include:

• Gross national product (GNP)

• Unemployment rates

• Consumer prices

• Corporate profits

Analysts look at lagging indicators to determine whether an economic pattern has been established, though not whether that pattern is likely to continue.

Coincident Indicators

Coincident indicators measure economic activity for a particular area or region. Examples of coincident indicators include:

• Retail sales

• Employment rates

• Real earnings

• Gross domestic product

These indicators reflect economic changes at the same time that they occur. So they can be useful for studying real-time trends or patterns.

Popular Economic Indicators

There are numerous economic indicators the economists, analysts, institutional and retail investors use to better understand the market and the direction in which the economy may move. The Census Bureau, for example, aggregates data for more than a dozen indicators. But investors tend to study some indicators more closely than others. Here are some of the most popular economic indicators and what they can tell you as an investor.

Gross Domestic Product

Gross domestic product represents the inflation-adjusted value of goods and services produced in the United States. This economic indicator offers a comprehensive view of the country’s economic activity and output. Specifically, gross domestic product can tell you:

• How fast an economy is growing

• Which industries are growing (or declining)

• How the economic activity of individual states compares

The Bureau of Economic Analysis estimates GDP for the country, individual states and for U.S. territories. The government uses GDP numbers to establish spending and tax policy, as well as monetary policy, at the federal levels. States also use gross domestic product numbers in financial decision-making.

Consumer Price Index

The Consumer Price Index or CPI measures the change in price of goods and services consumed by urban households. The types of goods and services the CPI tracks include:

• Food and beverages

• Housing

• Apparel

• Transportation

• Medical care

• Recreation

• Education

• Communications

CPI data comes from 75 urban areas throughout the country and approximately 23,000 retailers and service providers. This economic indicator is the most widely used tool for measuring inflation. According to the Bureau of Labor Statistics, which compiles the consumer price index, it’s a way to measure a government’s effectiveness in managing economic policy.

Producer Price Index

The Producer Price Index or PPI measures the average change over time in the selling prices received by domestic producers of goods and services. In simpler terms, this metric measures wholesale prices for the sectors of the economy that produce goods, including:

• Mining

• Manufacturing

• Agriculture

• Fishing

• Forestry

• Construction

• Natural gas and electricity

The Producer Price Index can help analysts estimate inflation, as higher prices will show up on the wholesale level first before they get passed on to consumers at the retail level.

Unemployment Rate

The unemployment rate is an economic indicator that tells you the number of people currently unemployed and looking for work. The BLS provides monthly updates on the unemployment rate and nonfarm payroll jobs. Together, the unemployment rate and the number of jobs added or lost each month can indicate the state of the economy.

Higher unemployment, for example, generally means that the economy isn’t creating enough jobs to meet the demand by job seekers. When the number of nonfarm payroll jobs added for the month exceeds expectations, on the other hand, that can send a positive signal that the economy is growing.

Consumer Confidence

The Consumer Confidence Index can provide insight into future economic developments, based on how households are spending and saving money today. This indicator measures how households perceive the economy as a whole and how they view their own personal financial situations, based on the answers they provide to specific questions.

When the indicator is above 100, this suggests consumers have a confident economic outlook, which may make them more inclined to spend and less inclined to save. When the indicator is below 100, the mood is more pessimistic and consumers may begin to curb spending in favor of saving.

The Consumer Confidence Index is separate from the Consumer Sentiment Index, which is also used to gauge how Americans feel about the economy. This index also uses a survey format and can tell you how optimistic or pessimistic households are and what they perceive to be the biggest economic challenges at the moment.

Retail Sales

Retail sales are one of the most popular economic indicators for judging consumer activity. This indicator measures retail trade from month to month. When retail sales are higher, consumers are spending more money. If more spending improves company profits, that could translate to greater investor confidence in those companies, which may drive higher stock prices.

On the other hand, when retail sales lag behind expectations the opposite can happen. When a holiday shopping season proves underwhelming, for example, that can shrink company profits and potentially cause stock prices to drop.

Housing Starts

Census Bureau compiles data on housing starts. This economic indicator can tell you at a glance how many new home construction projects in a given month. This data is collected for single-family homes and multi-family units.

Housing starts can be useful as an economic indicator because they give you a sense of whether the economy is growing or shrinking. In an economic boom, it’s not uncommon to see high figures for new construction. If the boom goes bust, however, new home start activity may dry up.

It’s important to remember that housing starts strongly correlate to mortgage interest rates. If mortgage rates rise in reaction to a change in monetary policy, housing starts may falter, which makes this economic indicator more volatile than others.

Interest Rates

Federal interest rates are an important economic indicator because of the way they’re used to shape monetary policy. The Federal Reserve makes adjustments to the federal funds rate — which is the rate at which commercial banks borrow from one another overnight–based on what’s happening with the economy overall. These adjustments then trickle down to the interest rates banks charge for loans or pay to savers.

For example, when inflation is rising or the economy is growing too quickly, the Fed may choose to raise interest rates. This can have a cooling effect, since borrowing automatically becomes more expensive. Savers can benefit, however, from earning higher rates on deposits.

On the other hand, the Fed may lower rates when the economy is sluggish to encourage borrowing and spending. Low rates make loans less expensive, potentially encouraging consumers to borrow for big-ticket items like homes, vehicles, or home improvements. Consumer spending and borrowing can help to stimulate the economy.

Stock Market

The stock market and the economy are not the same. But some analysts view stock price and trading volume as a leading indicator of economic activity. For example, investors look forward to earnings reports as an indicator of a company’s financial strength and health. They use this information about both individual companies and the markets as a whole to make strategic investment decisions.

If a single company’s earnings report is above or below expectations, that alone doesn’t necessarily suggest where the economy might be headed. But if numerous companies produce earnings reports that are similar, in terms of meeting or beating expectations, that could indicate an economic trend.

If multiple companies come in below earnings expectations, for example, that could hint at not only lower market returns but also a coming recession. On the other hand, if the majority of companies are beating earnings expectations by a mile, that could signal a thriving economy.

The Takeaway

Economic indicators can provide a significant amount of insight into the economy and the trends that shape the markets. Having a basic understanding of the different types of economic indicators could give you an edge if you’re better able to anticipate market movements when you start investing.

Economic indicators aren’t perfect, and while they can be a helpful part of an investing strategy, investors should always do as much research as they can before making specific moves. Discussing a strategy with a financial professional may be a good idea, too.

Opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.¹

FAQ

What are the leading economic indicators?

There are several leading economic indicators in the U.S., and they include consumer confidence and sentiment, jobless claims, movements in the yield curve, and stock market volatility.

What are the big three macro indicators?

While they may not be “the” big three macro indicators, a few of the key macroeconomic indicators that are often cited are gross domestic product (GDP), the unemployment rate, and the Consumer Price Index (CPI).

About the author

Rebecca Lake

Photo credit: iStock/FG Trade

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

Mar

2025

Guide to ESAs and How They Work

By Rebecca Lake | Growing Wealth, invest, Investing | Comments Off

A Coverdell Education Savings Account (ESA) is a tax-advantaged way to set aside money for educational expenses, including those for primary, secondary, and higher education. You can open one in addition to a 529 college savings plan, or in place of one.

Generally speaking, an ESA has similar rules and benefits to a 529 plan, but more stringent income and contribution limits. ESAs offer more investment choices, however.

🛈 Currently, SoFi does not offer ESAs.

What Is an Education Savings Account (ESA)?

An Education Savings Account is a type of custodial account that can be established to save money for qualified education expenses for students in grades K-12, as well as in college. ESA funds can be withdrawn to pay for tuition, textbooks, tutoring, and other education-related expenses. Non-qualified withdrawals will be taxed.

Parents, grandparents, and other individuals can open educational savings accounts on behalf of an eligible beneficiary (the student) and make annual contributions. Contributions are limited to $2,000 per year, total, per beneficiary.

ESA Rules

These accounts are different from traditional savings accounts or high-yield savings accounts because they’re designed for a single purpose: funding education expenses. That means you have less flexibility when it comes to withdrawals, but the tax benefits can make up for it.

Setting up a college fund at a bank or brokerage that offers ESAs is usually just a matter of filling out an application and meeting the requirements.

• The beneficiary must be under 18 when the account is opened (or be a special needs beneficiary, per the IRS).

• If you make more than $110,000 in income (for single filers), or $220,000 (married filing jointly), you cannot contribute to an ESA. See below for details.

• It’s possible to contribute to an ESA and a 529 college savings plan for the same student.

How Do ESAs Work?

Education Savings Accounts work by allowing savers to contribute money for the benefit of an eligible student on a tax-advantaged basis. Contributions are not deductible, but they grow tax-deferred; and withdrawals are tax free when used for qualified education expenses.

Because contributions are made with after-tax dollars (similar to a Roth IRA), you can withdraw the amount of your contributions at any time tax free. But earnings are taxable. Thus the earnings portion of non-qualified withdrawals will be taxed as income, and you may get hit with a 10% penalty on that taxable amount as well.

You might use an ESA to fund future expenses for K-12 tuition, as well as saving for your child’s college tuition. The IRS imposes guidelines on how these plans can be used to pay for education. Unlike 529 plans in some states, you cannot deduct contributions to an ESA.

Income Limits

In addition, your income determines your ability to contribute to an Education Savings Account. You might be eligible to make a full contribution, a partial contribution, or no contribution at all.

Generally, full contributions are allowed for:

• Single filers with a modified adjusted gross income (MAGI) below $95,000

• Married couples filing jointly with a MAGI below $190,000

Partial contributions are allowed for:

• Single filers with MAGI between $95,000 and $110,000

• Married couples filing jointly with MAGI between $190,000 and $220,000

If you file single and have a MAGI greater than $110,000, or are married with a MAGI greater than $220,000, you can’t contribute to an Education Savings Account.

Contribution Limits

The IRS is very clear about how much you can contribute to an ESA each year, for each student. The annual contribution limit is $2,000. That limit applies per beneficiary, no matter how many educational savings accounts they have.

For example, if you open an ESA for your child and contribute $1,400, and the child’s grandparents also open an ESA for the same child, they could only contribute $600 for the same year.

Excess contributions in a given year may face a penalty of 6%, except under certain circumstances. You can find more information at IRS.gov.

ESA Withdrawal Rules

As with any tax-deferred account, whether for retirement (like an IRA) or for education, ESA withdrawals rules are complicated. Withdrawals are tax-free when the money is used for qualified education expenses incurred at an eligible education institution. A qualified education institution is any school that’s eligible to participate in federal student aid programs.

You can use ESA funds to pay for college expenses, secondary school expenses, or elementary school expenses. If you’re using an ESA for college savings, qualified higher education expenses include:

• Tuition and fees

• Books, supplies, and equipment

• Room and board, for students enrolled at least half-time

• Expenses for special needs services for a special needs beneficiary

A portion of the withdrawals that exceed a student’s qualified education expenses are treated as taxable income by the IRS.

Elementary and Secondary School Expenses

ESA funds can also be used to cover tuition and fees, books, supplies, equipment, academic tutoring, and special needs services at secondary or elementary schools. Room and board, uniforms, transportation, and supplementary items may also be covered if the school requires them as a condition of attendance.

Handling Leftover Funds

Leftover funds must be distributed within 30 days of the designated beneficiary’s 30th birthday, unless they qualify for a special needs exception. Or, if the beneficiary dies before turning 30, you must also withdraw any remaining funds within 30 days of their death.

Here’s one important thing to know:

A portion of withdrawals (i.e. earnings) from an Education Savings Account that aren’t for a qualified education expense, including required distributions at age 30, may be taxed as income and subject to a 10% penalty. You can avoid these tax penalties by rolling the balance over to another ESA for another member of the original beneficiary’s family.

ESA Pros and Cons

Is an Education Savings Account a good way to save for education? There are advantages and drawbacks to consider if you’re trying to decide how to pay your child’s college tuition.

Here are some of the pros:

• Earnings grow tax-deferred, and you can open an ESA as a supplement to other college savings plans.

• Qualified withdrawals are 100% tax-free and can be used for elementary, secondary, or higher education expenses.

• Should your student decide not to go to college, you can transfer their ESA to another beneficiary (similar to a 529 plan), but they must be under 30.

• Most ESA plans offer a wide array of investment choices.

Now for the cons:

• With a $2,000 annual contribution limit per child, you can only save so much with an ESA.

• Distributions for anything other than education expenses are subject to tax and penalties (including funds left over when the child’s education is complete).

• Excess contributions may face a 6% penalty.

• High-income earners may be ineligible to contribute to an Education Savings Account.

The deadline for withdrawals at age 30 can also be a disadvantage. With a 529 savings plan, you’re not required to take money out by a specific date or age, and you’re permitted to rollover unused funds to a Roth IRA for the beneficiary.

ESA vs 529 Savings Plan

A 529 savings plan is another tax-advantaged way to save for college. Thanks to a recent rule change, parents can also withdraw funds from a 529 to pay for qualified K-12 tuition expenses.

So, how does a 529 compare to an ESA? Here’s a quick rundown.

	Education Savings Account	529 College Savings Plan
Who Can Contribute	Individuals whose MAGI is within IRS limits	Anyone, regardless of income
Annual Contribution Limit	$2,000 per child	None, though contributions above the annual gift tax exclusion limit may trigger the gift tax Lifetimes contributions (typically between $235,000-$575,000) are determined by each state
Eligible Beneficiaries	Students under the age of 18, or special needs students of any age (you cannot contribute after the student turns 18)	Any future student, including oneself, one’s spouse, children, grandchildren, or other relatives, regardless of age
Investment Options	Typically a wide array of investment choices	Typically limited or pre-set by the plan provider
Taxes on Withdrawals	Withdrawals for qualified education expenses are tax free; all other withdrawals are subject to tax and penalties	Withdrawals for qualified education expenses are tax-free; all other withdrawals are subject to tax and penalties
Eligible Expenses	Withdrawals can be used to pay for elementary, secondary, and higher education expenses, including tuition, fees, books, and equipment	Withdrawals can be used to pay for qualified higher education expenses, including tuition, fees, books, and equipment, as well as K-12 tuition, eligible apprenticeship expenses, and qualified education loan repayments
Mandatory Distributions	All funds must be withdrawn by age 30, excluding special needs beneficiaries	Funds can remain in the account indefinitely or be rolled over to another beneficiary
FAFSA Impact	Treated as parental assets	Treated as parental assets

The benefits of a 529 savings plan may outweigh the advantages of an Education Savings Account. Aggregate contribution limits for 529 plans are much higher and there’s no hard cutoff for using the money.

The Takeaway

Saving up for college can reduce the need for students to take out federal or private loans to pay for school. An Education Savings Account is one option for saving; a 529 plan is another. You can also consider opening a Roth IRA for yourself or your child, as it’s possible to access the amount you contribute for expenses like education.

FAQ

How does an education savings account work?

An Education Savings Account works by allowing you to set aside $2,000 per year on behalf of an eligible student to cover education expenses, from elementary school through college. Your earnings grow tax-deferred, and you pay no taxes on withdrawals when they’re used for qualified expenses.

Is an ESA the same as a 529?

An ESA is not the same as a 529 plan. If you’re starting college savings late, you may get more benefits from contributing to a 529 plan versus an Education Savings Account. The annual contribution limits for 529 plans are much higher than they are for an ESA, meaning you could save quite a bit more — and you’re not required to stop making contributions once your child turns 18.

What is the income limit for an ESA?

The income limit for making a full contribution to an ESA is $95,000 for single filers and $190,000 for married couples filing jointly. You’ll need to have a modified adjusted gross income below those thresholds to contribute the $2,000 maximum; if you earn up to $110,000 (single) and $220,000 (joint) you can make a partial contribution.

About the author

Rebecca Lake

Photo credit: iStock/RyanJLane

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

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For disclosures on SoFi Invest platforms visit SoFi.com/legal. For a full listing of the fees associated with Sofi Invest please view our fee schedule.

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SOIN-Q224-1854652-V1

4 Ways to Track Down Lost or Forgotten 401(k) Accounts

1. Contact Former Employers

2. Track Down Old Statements

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4. Search National Registries

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The Takeaway

FAQ

Is it possible to lose your 401(k)?

Do I need my social security number to find an old 401(k)?

What happens to an unclaimed 401(k)?

Can a financial advisor find old 401(k) accounts?

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How to Calculate Equal-Weighted Index

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Education Savings Accounts (ESAs) vs 529 Savings Plans

Similarities

Differences

What Is an ESA?

Pros and Cons of ESAs

What Is a 529 Savings Plan?

Pros and Cons of 529 Savings Plans

Which Savings Plan Is Right for You?

The Takeaway

FAQ

Is it better to put money in a 529 or an education savings account?

What is the downside of 529 accounts?

What happens to the 529 if the child doesn’t go to college?

What Is an Economic Indicator?

How Economic Indicators Work

Types of Economic Indicators

Leading Indicators

Lagging Indicators

Coincident Indicators

Popular Economic Indicators

Gross Domestic Product

Consumer Price Index

Producer Price Index

Unemployment Rate

Consumer Confidence

Retail Sales

Housing Starts

Interest Rates

Stock Market

The Takeaway

FAQ

What are the leading economic indicators?

What are the big three macro indicators?

What Is an Education Savings Account (ESA)?

ESA Rules

How Do ESAs Work?

Income Limits

Contribution Limits

ESA Withdrawal Rules

Elementary and Secondary School Expenses

Handling Leftover Funds

ESA Pros and Cons

ESA vs 529 Savings Plan

The Takeaway

FAQ

How does an education savings account work?

Is an ESA the same as a 529?

What is the income limit for an ESA?

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