Jan
27
2025

Student Loans Denied: Now What?

By | Going to College, Student Loans, student_loan | Comments Off on Student Loans Denied: Now What?

Most students are eligible to receive some type of financial assistance to help pay for college or a trade or vocational school. But the criteria for student loan borrowers varies, depending on the type of financing they apply for, and a borrower can be denied student loans if they don’t meet certain requirements.

Read on to find out why a student loan application might be turned down and what you can do if a student loan is denied.

Key Points

•   Borrowers can be denied student loans if they don’t meet certain eligibility criteria.

•   Standard qualifications for federal student loans include citizenship requirements, having a valid Social Security number, and enrollment in an eligible school program.

•   Eligibility requirements for private student loans include creditworthiness and having a stable income.

•   When a student loan is denied, find out the reason, correct the problem, add a cosigner if necessary, and reapply; or appeal the decision.

•   Alternative funding options to student loans include scholarships and grants.

Student Loans Explained

As the cost of college continues to rise, many students need to take out student loans to pay for college tuition, room and board, and other education expenses.

There are two main categories of student loans borrowers can choose from to help cover their costs:

•   Federal loans offered by the U.S. federal government

•   Private loans provided by banks, credit unions, and online lenders.

Federal Student Loans

Most borrowers (about 92%) take out federal loans. Federal student loans are generally easier to qualify for, and they come with more benefits and protections than private loans do. The interest on federal loans is fixed and generally lower than that of private loans. And if you demonstrate financial need, the government will pay the interest on some federal loans while you’re in school.

The types of federal student loans include Direct Subsidized Loans and Direct Unsubsidized Loans, and Direct PLUS loans for parents taking out money for a child’s education (known as Parent PLUS loans) and graduate or professional students (referred to Grad PLUS loans).

Private Student Loans

There are limits on how much students can borrow each year using federal loans, which is why they may turn to private student loans to fill the gap in their college funding. Students can use private loans to pay for tuition, fees, housing, books, and education-related supplies.

The interest rate on private student loans may be fixed or variable, and unlike federal loans, a credit check is required for a borrower to qualify. If a college student doesn’t have a strong enough credit history, they may need a cosigner on the loan for approval and to get a competitive interest rate. Keep in mind, though, if the rate you get is high, you can consider student loan refinancing in the future when you may be able to qualify for a lower rate and more favorable terms.

There are even opportunities for refinancing for international students.

Can You Get Denied for Student Loans?

If you’re wondering, why can’t I get a student loan?, the answer is that you can be denied student loans if you don’t meet certain eligibility criteria.

With federal student loans, there are some standard qualifications that all applicants must satisfy, including being accepted or enrolled in an eligible degree program and maintaining your grades.

The requirements for private student loans are determined by each lender. Private lenders tend to focus on an applicant’s creditworthiness and ability to repay the loan. If your credit history is not strong enough, you could be denied a student loan.

Do I Qualify for Student Loans?

Eligibility for getting a student loan depends on whether you’re applying for a federal or private loan. Here are some of the basic qualifications that need to be met.

Standard Federal Loan Qualifications

In order to be considered for a federal student loan, you must first fill out the Free Application for Federal Student Aid (FAFSA). Federal student loan applicants need to meet a number of basic eligibility requirements, including:

•   Having a high school diploma or equivalent certificate to show you’re qualified to obtain a college or career school education

•   Being a U.S. citizen, a U.S. national, or an eligible noncitizen with a green card

•   Arrival-Departure Record (I-94), battered immigrant status, or T-visa

•   Having a valid Social Security number (with the exception of students from the Republic of the Marshall Islands, Federated States of Micronesia, and the Republic of Palau)

•   Being accepted for enrollment or enrolled as a regular student in an eligible degree or certificate program

•   Maintaining satisfactory academic progress based on the standards of your school

•   Providing consent and approval to have your federal tax information transferred directly into your FAFSA form.

•   Signing the certification statement on the FAFSA form stating that you are not in default on a federal student loan, don’t owe money on a federal student grant, and will only use federal student aid for educational costs

•   Demonstrating financial need to get some types of federal loans such as Direct Subsidized Loans.

Private Student Loan Qualifications

Private lenders typically require borrowers to have a strong credit history or a qualifying cosigner, and they may ask for proof of income. Here are some of the requirements you can expect when you apply for a private student loan:

•   Applicants must typically be at least 18 and U.S. citizens or permanent residents. Some lenders may consider international students if they have a willing cosigner who is a U.S. citizen.

•   A specific minimum credit score. While each lender has different requirements for a borrower’s or cosigner’s minimum credit score, an acceptable score is typically around 650. The higher the score, the more likely it is that you’ll be offered a lower interest rate and better loan terms.

•   Students must generally be enrolled full- or half-time at an accredited institution.

What to Do After Being Denied Student Loans

If your application for a federal or private student loan is denied, don’t panic. There are steps you can take to help get the necessary funds for your education.

1. Understand Why You Were Denied

If you were denied a federal student loan, reviewing your FAFSA Submission Summary, formerly known as the Student Aid Report (SAR), can help you determine the reason. Use it to check your application for errors and then make any necessary corrections. You can find your Submission Summary on the dashboard of your StudentAid.gov account after your FAFSA has been processed.

If a private lender denied your student loan application, you should receive a notice explaining why you were not approved. The Equal Opportunity Credit Act (ECOA) requires that when a creditor takes “adverse action” against an applicant, it must provide a notice with specific and accurate reasons why.

For both federal and private loans, if the denial was based on incorrect or missing information, you may be able to file an appeal. Consult the financial aid office at your college for information about the appeals process for federal student loans, and talk to your lender about how to appeal a private loan denial.

2. Wait and Apply Again

If you were denied a private student loan based on your credit history, you may want to add a cosigner and reapply. Or you could apply again after you’ve had a chance to build your credit.

If you applied for a federal loan and were denied, identify the reason for the denial and try to fix it. For example, if your GPA is low, work on improving it.

In the meantime, you can seek out other forms of financial aid, such as scholarships and grants.

Apply to Multiple Lenders

Private lenders often have different criteria for student loans, so shop around for the best terms. You can check the loan requirements, interest rates, and other loan terms and conditions from various lenders.

You can also prequalify online with multiple lenders to see what rates and terms you can get. Then you can pick the lender that offers the terms most suitable to your situation.

Private Student Loans with SoFi

If you’ve received federal financial aid and still have a funding gap for college, or if you were denied a federal loan, you might decide that a private student loan is right for you. SoFi offers private student loans you can quickly and easily apply for online. You can add a cosigner (or not) and choose a fixed or variable interest rate. Loan repayment plans are flexible, so you can select the option that works best.

SoFi also can help if you’re looking to refinance your student loans, ideally for a lower interest rate and better terms, if you qualify, which may help you manage your monthly loan payments. Just be aware that if you refinance federal loans, you’ll no longer have access to federal benefits and protections.

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


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

FAQ

What can I do if my student loan is denied?

If your student loan is denied, find out the reason you weren’t approved. If the denial was due to incorrect information, you may be able to appeal the decision to your college’s financial aid office for a federal loan or to the lender for a private loan. If the denial was issued because you didn‘t meet specific lending requirements, fix the problem then reapply. And if the loan was denied because of your credit, you could add a cosigner with strong credit and then apply again.

Can a refinance be denied?

Yes, a student loan refinance can be denied if you don’t meet a private lender’s specific refinancing eligibility criteria for your credit score, income, or debt-to-income ratio, among other factors.

Can you be denied student loan consolidation?

If you’re in the process of repaying your loans or in the grace period after graduation, most federal student loans are eligible for Federal Direct Consolidation. If you want to consolidate a defaulted loan, however, you must make satisfactory repayment arrangements, which means three consecutive monthly payments, or agree to repay your new Direct Consolidation Loan under an income-driven repayment plan.

Photo credit: iStock/PeopleImages

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FOREFEIT YOUR EILIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

SoFi Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

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

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.

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

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

Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .

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.

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

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Jan
27
2025

What Are the Prerequisites for Nursing School?

By | Going to College, Life & Career, student_loan | Comments Off on What Are the Prerequisites for Nursing School?

A nursing career can be incredibly rewarding professionally and personally. If you’ve decided to attend nursing school to pursue your dream job, you’ll first need to meet certain nursing school prerequisites in order to be eligible. Prerequisites (also called pre reqs for nursing) are required courses or subjects aspiring nurses must take before applying to nursing school.

Learn more about the prerequisites and nursing school requirements you’ll need to be accepted at the college of your choice.

Key Points

•   Academic prerequisites for nursing school vary, depending on the type of nursing degree a student wants to earn.

•   Common prerequisites include high school biology, chemistry, and two years of college-preparatory math, all with a minimum grade of C.

•   Students must also have a certain high school GPA and passing grades on standardized tests like the SAT.

•   Once a student is in nursing school, there are ongoing prerequisite courses they will need to fulfill.

•   The average annual cost for a Bachelor of Science in Nursing (BSN) degree is approximately $30,884, with financial aid options like scholarships and grants and student loans available to help cover the cost.

Why Nursing School Prerequisites Matter

Nursing school prerequisites prepare students for a career in which they can earn a good salary as a nurse and do work that fulfills them. Whether you’re planning to get an Associate Degree in Nursing (ADN) or a Bachelor of Science in Nursing (BSN), each degree program and school requires specific prerequisites. Nursing pre reqs provide the foundation for the more advanced courses you’ll take while in school.

There are different types of nurses, and the type you’re planning to become helps determine the nursing school requirements you’ll need to fulfill. Knowing how many years you’ll be attending school can also help you with budgeting as a nurse. These are some of the nursing roles you might consider.

•   Licensed practical nurse (LPN): LPNs provide basic patient care under the supervision of registered nurses and doctors. They work in hospitals, physicians’ offices, nursing homes, extended care facilities, and in patient’s homes. Rather than a college degree, LPN’s typically attend a vocational or technical school for one year and they must graduate with a license from an accredited institution to practice.

•   Registered nurse (RN): RNs care for patients, administer medication, assist in diagnostic testing, and more. RNs usually work in hospitals, doctors’ offices, nursing homes, long-term care facilities, and other locations. They must have an associate degree in nursing or a Bachelor of Science in Nursing.

•   Clinical nurse specialist: This is an RN with additional training and education who diagnoses conditions, prescribes medication, and treats patients. These professionals must have a Master of Science in Nursing (MSN).

•   Nurse practitioner (NP): Nurse practitioners examine and diagnose patients, prescribe medications, and order tests. They must be licensed RNs and have an MSN or a master’s degree in a specialty role.

•   Nursing director: Nursing directors oversee health care facilities. They typically need a Master of Science in Nursing (MSN) or a Doctor of Nursing Practice (DNP).

•   Nurse educator: These nurses teach nursing students clinical skills, patient care methods, and collaboration practices. Nurse educators must have an MSN or DNP degree.

Factoring in the Cost of Nursing School

As you consider the nursing school requirements you’ll need to meet, it’s important to think about how you’ll pay for college. The average cost of nursing school is approximately $30,884 annually for a BSN degree, which can be costly over the four-year degree program.

Fortunately, there are options to help students afford their schooling, including federal student loans, scholarships and grants, and private student loans. Explore the different options, and fill out the Free Application for Federal Student Aid (FAFSA) to see what you qualify for.

Also, keep in mind that while the thought of repaying school loans can seem daunting, there are ways to manage your payments including income-driven repayment plans for federal student loans, loan repayment assistance programs offered by various states and organizations, and student loan refinancing.

When you refinance student loans, you replace your current loans with a new loan from a private lender such as a bank, credit union, or online lender. Ideally, the new loan will have a lower interest rate and more favorable loan terms.

If you can secure a lower interest rate, refinancing student loans to save money may make sense for you. But be sure to explore your options.

Using our student loan refinancing calculator can help you see what your monthly payment might be.

Common Nursing School Prerequisites

No matter what type of nursing degree you want to earn, the most common nursing school prerequisite is earning a high school diploma or its equivalent, a General Equivalency Diploma (GED).

In addition, you will need these nursing pre reqs:

Biology

Nursing students need one year of high school biology with a grade of C or better.

Chemistry

As a nursing pre req, students need one year of high school chemistry with a grade of C or better.

College-Preparatory Math

Nursing school requirements call for two years of college-preparatory math with at least a C grade.

Grade Point Average (GPA)

To qualify for an Associate Degree in Nursing program, students generally need a GPA of at least 2.7. For a Bachelor of Science in Nursing program, they need at least a 3.0 GPA.

Standardized Tests

Passing grades on SATs or TEAS (Test of Essential Academic Skills) are typically required for admission to most nursing schools.

It’s important to note that every college has its own requirements (including GPA requirements), so check with your college’s admissions office to find out what you’ll need specifically to be admitted.

For example, the University of Iowa suggests the following high school prerequisites for nursing:

•   Four years of high school English

•   One year of biology

•   One year of chemistry

•   One year of physics

•   Four years of the same world language or two years in two different world languages, or two years of the same world language plus required additional coursework

•   Algebra I, Algebra II, and geometry

•   Three years of social studies

Recommended: Ways to Pay for Nursing School

How to Complete Nursing School Prerequisites

In most cases, you can take high school courses to complete nursing school prerequisites. But if you know what college you’d like to attend for nursing school, check to see what required courses they ask for.

If your high school doesn’t offer certain prerequisite courses, you can typically complete them through a community college, online courses, or the four-year college where you plan to get your nursing degree.

Other Nursing School Prerequisites

Once you’re in nursing school, there are additional prerequisites you’ll need to fulfill. For example, your school may require you to take some basic courses like the ones below before you can take more advanced classes.

•   English composition

•   Fundamentals of oral communication

•   Biomedical ethics

•   College algebra

•   Microbiology

•   Chemistry

•   Human growth and development

•   College study skills

If you’re already in college and you want to switch your major to nursing, you must also meet specific prerequisites to get into nursing. For example, the University of Iowa requires you to meet these prerequisites with a grade of “C” or higher:

•   Natural science, such as chemistry, biology, anatomy, physiology, microbiology, or nutrition courses

•   Social science, such as elementary psychology, human development and behavior, or sociology classes

•   General education courses, such as arts and cultural perspectives

•   Additional prerequisites, such as rhetoric, statistics, and diversity, equity, and inclusion for health professions

•   World language

Check with the college or university to see what’s needed for the nursing program you want to attend.

Recommended: Student Loan Refinancing Guide

The Takeaway

There are a number of prerequisites needed for nursing school, including high school class requirements before you apply to college, and prerequisites needed once you’re enrolled. Keeping on top of them and making sure you fulfill all the requirements for the type of nursing degree you’re working for can help you chart a clear path toward graduation.

Nursing school can be expensive, and many students use federal student loans to help pay for it. They might also fill any funding gaps with private student loans. To better manage your monthly payments after graduation, you can consider refinancing student loans, especially if you can qualify for a lower interest rate and more favorable terms. Just be aware that refinancing federal student loans makes them ineligible for federal programs like income-driven repayment.

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


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

FAQs

What are the minimum requirements for nursing school?

The minimum nursing school requirements generally include graduating from high school with a diploma after taking science and math classes (such as chemistry, biology, and college- preparatory math), having a GPA of 2.7 or higher for an Associate Degree in Nursing program and 3.0 or higher for a Bachelor of Science in Nursing program, and passing grades on standardized tests such as the SATs. However, minimum requirements can vary from school to school, so check with each institution you’re applying to.

When do you take nursing school prerequisites?

You take nursing school prerequisites starting in high school with classes like biology, chemistry, and math, as well as standardized tests like the SATs. When you’re in nursing school, you’ll begin by taking foundational prerequisite classes and work your way up to higher-level classes as you work toward your degree.

What if my GPA is too low for nursing school?

There are some possible ways to get into nursing school even if your GPA is too low. While many programs require at least a 3.0 for admission to a Bachelor of Science in Nursing program, some schools are less selective than others. For instance, you could apply to a community college to earn a licensed practical nurse degree (LPN) and then transfer to a four-year college once your grades are higher. Also, consider doing volunteer work in a health care setting — some institutions give more weight than others to nonacademic activities like health-related volunteer work.

Photo credit: iStock/FatCamera

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FOREFEIT YOUR EILIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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.

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

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.

SOSLR-Q424-010

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Jan
27
2025
child with magnifying glass

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

By | Growing Wealth, invest, Investing, Preparing for Retirement | Comments Off on Custodial Roth IRA: How to Open a Roth IRA For Kids

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

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

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

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

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

What Is a Roth IRA for Kids?

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

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

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

Who’s Eligible for a Roth IRA for Kids?

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

Custodial Roth IRA Rules

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

No Minimum Age Limit

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

A Child Must Have Earned Income

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

There Are Contribution Limits

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

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

Certain Early Withdrawals Are Allowed

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

Eventual Conversion to a Regular Roth IRA

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

How to Open a Custodial Roth IRA for a Kid

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

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

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

Benefits of Starting a Roth IRA for a Child

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

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

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

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

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

Alternatives to a Roth IRA for a Kid

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

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

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

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

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

The Takeaway

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

FAQ

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

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

Can you open a Roth IRA for a baby?

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

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

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

Can I give my child money for a Roth IRA?

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

What is the disadvantage of a Roth IRA for kids?

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

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

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

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

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

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

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

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

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

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

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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

SoFi Invest®

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

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

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Jan
27
2025
Understanding How Income Based Repayment Works

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

By | Debt Payoff, Fresh Out of School, Student Loans, student_loan | No Comments
March 2025: The SAVE Plan is no longer available after a federal court blocked its implementation in February 2025. Applications for other income-driven repayment plans and for loan consolidation are also on hold. We will update this page as more information becomes available.

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

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

What Is Income-Based Student Loan Repayment?

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

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

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

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


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

Income-Driven Student Loan Repayment Plans

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

•   Income-Based Repayment (IBR)

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

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

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

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

Plan

 Monthly Payment

 Term (Undergrad)

 Term (Graduate)

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

How Income-Based Student Loan Repayment Works

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

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

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


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

What Might My Student Loan Repayment Plan Look Like?

Here’s an example:

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

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

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

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

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

Which Loans Are Eligible for Income-Based Repayment Plans?

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

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

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

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

Pros and Cons of Income-Based Student Loan Repayment

Pros

•   Borrowers gain more affordable student loan payments.

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

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

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

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

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

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

Cons

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

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

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

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

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

Student Loan Refinancing Tips From SoFi

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

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

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


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

FAQ

Is income-based repayment a good idea?

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

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

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

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

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

How does income-based repayment differ from standard repayment?

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

Who is eligible for income-based repayment plans?

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

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

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

SoFi Student Loan Refinance
Terms and conditions apply. SoFi Refinance Student Loans are private loans. When you refinance federal loans with a SoFi loan, YOU FOREFEIT YOUR EILIGIBILITY FOR ALL FEDERAL LOAN BENEFITS, including all flexible federal repayment and forgiveness options that are or may become available to federal student loan borrowers including, but not limited to: Public Service Loan Forgiveness (PSLF), Income-Based Repayment, Income-Contingent Repayment, extended repayment plans, PAYE or SAVE. Lowest rates reserved for the most creditworthy borrowers. Learn more at SoFi.com/eligibility. SoFi Refinance Student Loans are originated by SoFi Bank, N.A. Member FDIC. NMLS #696891 (www.nmlsconsumeraccess.org).

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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 Private Student Loans
Please borrow responsibly. SoFi Private Student loans are not a substitute for federal loans, grants, and work-study programs. We encourage you to evaluate all your federal student aid options before you consider any private loans, including ours. Read our FAQs.

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

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

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

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

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Jan
27
2025
When to Start Saving for Retirement

When Should You Start Saving for Retirement?

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

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

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

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

Key Points

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

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

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

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

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

money management guide for beginners

What Is the Ideal Age to Start Saving for Retirement?

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

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

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

Get a 1% IRA match on rollovers and contributions.

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

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

The #1 Reason to Start Early: Compound Interest

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

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

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

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

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

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

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

Saving Early vs Saving Later

To understand the power of compound returns, consider this:

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

Age

 Annual Return

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

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

Starting Retirement Savings During Different Life Stages

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

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

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

•   Age you are now

•   Age you’d like to retire

•   Your income

•   Your expenses

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

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

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

Starting in Your 20s

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

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

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

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

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

💡 Learn more: Savings for Retirement in Your 20s

Starting in Your 30s

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

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

💡 Learn more: Savings for Retirement in Your 30s

Starting in Your 40s

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

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

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

Starting in Your 50s

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

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

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

Starting in Your 60s

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

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

💡 Learn more: Savings for Retirement in Your 60s

The Takeaway

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

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

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

Easily manage your retirement savings with a SoFi IRA.

FAQ

Is 20 years enough to save for retirement?

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

Is 25 too late to start saving for retirement?

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

Is 30 too old to start investing?

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

Should I prioritize paying off debt over saving for retirement?

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

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

SoFi Invest®

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

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

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

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.

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Shares of ETFs must be bought and sold at market price, which can vary significantly from the Fund’s net asset value (NAV). Investment returns are subject to market volatility and shares may be worth more or less their original value when redeemed. The diversification of an ETF will not protect against loss. An ETF may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.
Fund Fees
If you invest in Exchange Traded Funds (ETFs) through SoFi Invest (either by buying them yourself or via investing in SoFi Invest’s automated investments, formerly SoFi Wealth), these funds will have their own management fees. These fees are not paid directly by you, but rather by the fund itself. these fees do reduce the fund’s returns. Check out each fund’s prospectus for details. SoFi Invest does not receive sales commissions, 12b-1 fees, or other fees from ETFs for investing such funds on behalf of advisory clients, though if SoFi Invest creates its own funds, it could earn management fees there.
SoFi Invest may waive all, or part of any of these fees, permanently or for a period of time, at its sole discretion for any reason. Fees are subject to change at any time. The current fee schedule will always be available in your Account Documents section of SoFi Invest.

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

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

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