Choosing a Retirement Date: The Best Time to Retire

Choosing Your Retirement Date: Here’s What You Should Know

Choosing a retirement date is one of the most important financial decisions you’ll ever make. Your retirement date can determine how much money you’ll need to save to achieve your desired lifestyle — and how many years that money will need to last.

Selecting an optimal retirement date isn’t an exact science. Instead, it involves looking at a number of different factors to determine when you can realistically retire. Whether you’re interested in retiring early or delaying retirement to a later age, it’s important to understand what can influence your decision.

The Importance of Your Retirement Date

When preparing to retire, the date you select matters for several reasons. First, your retirement date can influence other financial decisions, including:

•   When you claim Social Security benefits

•   How much of your retirement savings you’ll draw down monthly or annually

•   In what order you’ll withdraw from various accounts, such as a 401(k), Individual Retirement Account (IRA), pension, or annuity

•   How you’ll pay for health care if you’re retiring early and not yet eligible for Medicare

•   Whether you’ll continue to work on a part-time basis or start a business to generate extra income

These decisions can play a part in determining when you can retire based on what you have saved and how much money you think you’ll need for retirement.

It’s also important to consider how timing your retirement date might affect things like taxes on qualified plans or the amount of benefits you can draw from a defined benefit plan, if you have one.

If your employer offers a pension, for example, waiting until the day after your first-day-of-work anniversary adds one more year of earnings into your benefits payment calculation.

Likewise, if you plan to retire in the year you turn 59 ½, you’d want to wait until six months after your birthday has passed to withdraw money from your 401(k) in order to avoid a 10% early withdrawal penalty on any distributions you take.

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Choosing Your Date for Retirement

There are many questions you might have when choosing the best retirement date: What is the best day of the month to retire? Is it better to retire at the beginning or end of the year? Does it matter if I retire on a holiday?

Weighing the different options can help you find the right date of retirement for you.

End of the Month

Waiting to retire at the end of the month could be a good idea if you want to get your full pay for that period. This can also eliminate gaps in pay, depending on when you plan to begin drawing retirement benefits from a workplace plan.

If you have a pension plan at work, for example, your benefits may not start paying out until the first of the following month. So, if you were to retire on the 5th instead of the 30th, you’d have a longer wait until those pension benefits showed up in your bank account.

Consider End of Pay Period

You could also consider waiting to the end of the pay period if you don’t want to go the whole month. This way, you can draw your full pay for that period. Working the entire pay period could also help you to accumulate more sick pay, vacation pay, or holiday pay benefits toward your final paycheck.

Lump Sums Can Provide Cash

If you’ve accumulated unused vacation time, you could cash that out as you get closer to your retirement date. Taking a lump sum payment can give you a nice amount of cash to start your retirement with, and you don’t have to worry about any of the vacation time you’ve saved going unused.

Other Exceptions to Consider

In some cases, your retirement date may be decided for you based on extenuating circumstances. If you develop a debilitating illness, for example, you may be forced into retirement if you can no longer perform your duties. Workers can also be nudged into retirement ahead of schedule through downsizing if their job is eliminated.

Thinking about these kinds of what-if scenarios can help you build some contingency plans into your retirement plan. Keep in mind that there may also be different rules and requirements for retirement dates if you work for the government versus a private sector employer.

Starting a Retirement Plan

The best time to start planning for retirement is yesterday, as the common phrase says, and the next best time is right now. If you haven’t started saving yet, it’s not too late to begin building retirement wealth.

An obvious way to do this is to start contributing to your employer’s retirement plan at work. This might be a 401(k) plan, 403(b), or 457 plan depending on where you work. You may also have the option to save in a Simplified Employee Pension (SEP) IRA or SIMPLE IRA if you work for a smaller business. Any of these options could help you set aside money for retirement on a tax-advantaged basis.

If you don’t have a workplace retirement plan, you can still save through an IRA. Traditional and Roth IRAs offer different types of tax benefits; the former allows for tax-deductible contributions while latter offers tax-free qualified distributions. You could also open a SEP IRA if you’re self-employed, which offers higher annual contribution limits.

If you decide to start any of these retirement plans, it may be helpful to use a retirement calculator to determine how much you need to save each month to reach your goals. Checking in regularly can help you see whether you are on track to retire or if you need to adjust your contributions or investment targets.

💡 Quick Tip: Can you save for retirement with an automated investment portfolio? Yes. In fact, automated portfolios, or robo advisors, can be used within taxable accounts as well as tax-advantaged retirement accounts.

Retirement Investing With SoFi

Choosing a retirement date is an important decision, but it doesn’t have to be an overwhelming one. Looking at the various factors that can influence how much you’ll need to save and your desired lifestyle can help you pin down your ideal retirement date. Reviewing contributions to your employer’s retirement plan and supplementing them with contributions to an IRA can get you closer to your goals.

Not everyone’s journey to retirement is going to look the same, so you should weigh your options. Think about your goals, and what tools you can use to help you reach them. If you need guidance, it may be a good idea to speak with a financial professional.

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).

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

FAQ

Is it better to retire at the beginning or end of the month?

Retiring on the last day of the month is typically the best option. This enables you to collect all your paychecks during this period. You may also benefit from collecting any holiday pay that might be offered by your employer for that month. As a note, it doesn’t necessarily matter if the last day of the month is a work day for you.

What is the best day to retire?

The best day to retire can be the end of the month or the end of the year, depending on how pressing your desire is to leave your job. If you can wait until the very last day of the year, for example, you can collect another full year of earnings while maxing out contributions to your workplace retirement plan before you leave.

Is my retirement date my last day of work?

Depending on how your employer handles payroll, your retirement date is usually the day after your last day of work or the first day of the next month following the date you stop working.


About the author

Rebecca Lake

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.


Photo credit: iStock/Tatomm

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

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Cost of Christmas Lights on Utility Bills

How Much Christmas Lights Cost to Run for a Month

Many people love showing their holiday spirit with Christmas lights, whether just a strand of twinkle lights around a window or going all-out like the Griswolds.

While these lights are festive, it’s worth noting that they aren’t free. In fact, the cost of running holiday lights rose 13% last year, costing the average household $15.48 vs. $13.41 the prior year.

In this economy, every dollar can count, so if you want to learn how much it costs to run Christmas lights for a month and how to reduce that expense, read on.

Here, you’ll learn more about:

•   How much do Christmas lights cost to run?

•   How much does it cost to run Christmas lights for a month?

•   How can you save money on your holiday light electric bill?

Factors Affecting the Cost of Running Christmas Lights

Running Christmas lights uses energy, which can translate to higher utility bills. How much of an increase you see in your electric bill can depend on a number of factors, including:

•   How many strands of lights you use

•   The type of bulbs used in each strand

•   The number of hours you run your lights each day

•   How many days you run Christmas lights for

•   Where you live and what you pay per kilowatt hour for electricity.

All of these things can influence how large your Christmas lights electric bill turns out be once January rolls around. Understanding what you could wind up paying can help if affordably celebrating the holidays is your goal.

Keep in mind that other costs can drive up electric bills during the holidays, apart from Christmas lights. If you’re using the oven more often to prepare holiday meals, for example, that can result in a higher electric bill. You may also see a bigger bill if colder weather means the heat is kicking on more often or your kids are home all day using electronics more while school is out. Lowering your energy bill may require a multifaceted approach.

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How Much Electricity Do Christmas Lights Use?

The amount of energy used by Christmas lights can depend on the type of bulb and the number of bulbs per strand. The most popular options for Christmas lights include incandescent mini lights, mini LED lights, and ceramic C7 lights.

So which type of bulb uses the most energy?

The simplest answer is to look at the wattage of Christmas lights, based on bulb size and number of bulbs per strand. For example:

•   With C7 lights, for instance, you’re typically getting 25 lights per strand.

•   With mini LED lights, you’ll normally have 50 bulbs for a 14-foot strand and 100 bulbs per 32-foot strand.

•   With mini icicle lights, you often have 300 bulbs for a 26-foot strand.

Here’s how the average wattage for each one compares, though note that incandescent bulbs stopped being manufactured and sold in August 2023 (some people may still own and use strands of these, however):

•   C7 lights: 5 watts

•   C9 incandescent lights (2-¼” long): 7 watts

•   Mini incandescent lights: 0.4 watts

•   Mini LED lights: 0.07 watts

Between those three options, mini LED lights draw the least amount of energy per strand while C7 lights draw the most.

LEDs possibly lowering energy costs by up to 90% vs. the other options. Switching to LEDs could be a way to save money daily during the holidays.

Also note that you’d need four strands of C7 lights to equal the same number of bulbs in just one strand of incandescent or LED mini lights. This is important to understand because it can affect the number of kilowatt hours used and your overall energy costs.

Recommended: 23 Tips on Saving Money Daily

Cost of Running Christmas Lights

So how much do Christmas lights cost to run for a month? Or longer? Calculating your estimated cost of running Christmas lights matters when trying to lower your electric bill during the winter months. Again, what you’ll pay can depend on a variety of factors, including where you live and how much electricity costs.

The average household pays $0.17 cents per kilowatt hour for electricity, according to the U.S. Department of Energy, but prices may be significantly higher or lower in different parts of the country due to cost of living differences.

If you live in Connecticut, for example, you might pay an average of $0.21 cents per kilowatt hour. People living in Florida, however, might pay an average of $0.11 cents per kilowatt hour. Residents of Hawaii typically pay the most, currently spending $0.32 cents per kilowatt hour.

Here’s how to figure out how much you’ll pay for Christmas lighting:

•   Multiply the wattage of the lights by the hours per day the lights will be on, then divide by 1,000 to find kilowatt hours per day

•   Multiply kilowatt hours per day by your cost of electric usage to get the cost per day

•   Multiply the cost per day by the number of days your lights will be on

Calculating the Cost of Christmas Lights

Now, for how much does it cost to run Christmas lights? Here’s a look at what it would cost to run C7 lights, C9, and mini incandescent lights, and mini LED lights for six hours a day for 30 days, using a price of $0.14 cents per kilowatt hour. Here’s what you’d pay for each one:

Bulb Type

Hourly Cost

Daily Cost

Monthly Cost

C7 (25 bulbs, 5 watts per bulb) $0.0175 $0.105 $3.15
C9 (25 bulbs, 7 watts per bulb) $0.025 $0.15 $4.50
Incandescent Mini Lights (100 bulbs, 0.45 watts per bulb) $0.0063 $0.0378 $1.13
Mini LED Lights (100 bulbs, 0.07 watts per bulb) $0.0042 $0.0252 $0.76

Keep in mind that these costs are for just one strand of lights, as noted. If you string together several strands on your tree, frame your windows with lights, and then drape your shrubs or street-facing windows outdoors with more, your costs will of course go up.

Also, in terms of what the average person spends on Christmas lights, it can vary by a state’s cost of living, as well as by what kind of bulbs are used. Louisiana residents who run LED lights, for example, would likely spend the least, since they are paying just over nine cents per kilowatt hour (currently the lowest rate in the US) and they would be using energy-saving bulbs. Meanwhile, Hawaiians who opt for incandescent bulbs would probably spend the most, since their bulbs use a considerable amount of power and they currently pay the highest national rate for energy of almost 33 cents per kilowatt hour.

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Tips to Save on Your Christmas Lighting Bill

If you’re looking for ways to lower your energy bill when you start plugging in your holiday lights, follow this advice.

Embracing Energy-Efficient LEDs

As mentioned, the wattage of Christmas lights plays an important part in determining how much you pay for electric bills over the holidays. Between C7 lights, incandescent lights and LED lights, LED lights are highly energy-efficient. According to the Department of Energy, residential LEDs that are ENERGY STAR rated use up to 75% less energy and last 25 times longer than incandescent lights.

People who use LED Christmas lights tend to pay far less than those using incandescent bulbs or C7 lights. So it follows that an easy way to save money on your electric bill and reduce energy usage would be to use mini LED lights as often as possible. Aside from that, LED bulbs emit less light and are less likely to overload sockets, making them a potentially safer option for Christmas lighting compared to other types of bulbs.

So if you still have some incandescent bulbs in your box of Christmas decorations, you may want to think about swapping them out for LEDs. (You won’t find incandescents made or sold in the US anymore either.)

Benefits of Solar-Powered Outdoor Lights

You might consider using solar-powered outdoor lights on your house over the holidays. These strands depend upon energy collected by small panels that gather and hold energy from the sun during the day.

These strands don’t plug in and draw no electrical power. So they can be especially easy and economical to use over the holidays.

Battery-Operated Lights for Smaller Displays

If you like to create smaller displays, you might consider battery-powered strands of lights. There is a wide range of how long these lights will stay illuminated, but this can be a good unplugged option to try for small-scale displays. While you do have to pay for the batteries, it can be cheaper than plugging in lights for weeks on end.

Recommended: 18 Common Misconceptions About Money

The Takeaway

A higher-than-usual electric bill can put a damper on your holiday celebrations. Estimating your potential costs beforehand can help you manage utility expenses. And you can decide whether it’s worth it to invest a little money in upgrading your current Christmas lights to energy-efficient options.

Having the right banking partner, such as one with budgeting tools, can also help make tackling high utility bills after the holidays easier.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.


Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.80% APY on SoFi Checking and Savings.

FAQ

Do LED Christmas lights use a lot of electricity?

Compared to C7 lights or incandescent mini lights, LED Christmas lights use the least amount of energy. Specifically, they can use up to 90% less energy while lasting longer. LED Christmas lights also emit less heat and can be easier to install than other types of holiday lighting.

Do Christmas lights raise your light bill?

Holiday lights can raise your electric bill during the winter months. How much it costs to run Christmas lights can depend on several things, including the type of bulbs used, how many light strands you’re running, how long you turn the lights on for, and the average cost of energy per kilowatt hour in your area. Using timers and switching to energy-efficient bulbs can be helpful for reducing your Christmas lights electric bill.

Do Christmas trees use a lot of electricity?

Christmas trees can use a lot of electricity, depending on the type of lights you use, the number of strands on the tree, and how long you leave your tree plugged in each day. Using mini LED lights can reduce electric costs for Christmas tree lighting, while using C7 bulbs to light your tree could result in a higher energy bill.


About the author

Rebecca Lake

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.



Photo credit: iStock/BanksPhotos

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

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What Is a Chartered Alternative Investment Analyst (CAIA)?

A chartered alternative investment analyst, or CAIA, is a financial professional who specializes in offering advice about alternative investments. The CAIA Association offers the CAIA Charter Program for financial professionals who are interested in expanding their financial knowledge to include alternatives such as real estate, private equity, and hedge funds.

Obtaining a CAIA designation requires the successful completion of two exams and membership in the CAIA Association. A securities license is not needed for CAIA certification, though you will need to have at least a bachelor’s degree and adequate work experience to earn it.

Key Points

•   The CAIA Charter Program specializes in alternative investments like real estate, private equity, and hedge funds.

•   The successful completion of two exams and CAIA Association membership are required for certification.

•   Exams cover topics like professional standards, ethics, and the various types of alternative investments.

•   CAIA certification can enhance career prospects and distinguish financial advisors.

•   Approximately 13,000 CAIA charterholders exist worldwide, working in diverse financial roles.

Advantages of Obtaining a CAIA


Professional designations generally have a time and cost component to acquire — meaning that you’ll likely need to pay some fees and put in some study time to earn them — and it’s no different with the CAIA certification. It’s important, then, to consider what kind of return on investment you might enjoy. Adding a CAIA credential to your professional resume may yield several benefits.

•   A CAIA charter can help you distinguish yourself from other financial advisors you compete with.

•   Gaining additional knowledge in the area of alternative investments could enable you to expand the services you offer as a financial advisor, potentially increasing your revenues in the process.

•   You can use what you learn in the CAIA Charter Program to better serve your existing clients and offer more comprehensive advice when constructing a diversified portfolio.

•   CAIA certification may give you an edge if you’re hoping to get promoted within your current firm, or get hired at a different one.

•   You can use your skills to build your brand reputation and network. For example, you might offer to lead a seminar on the benefits of alternative investments at a nationally recognized conference.

A CAIA designation might be right for you if you’re hoping to broaden your knowledge base where alternative investments are concerned. Examples of financial professionals who may be good candidates for CAIA certification include risk managers, portfolio managers, traders, consultants, and fiduciary advisors.

Recommended: Alternative Investments Guide

Alternative investments,
now for the rest of us.

Start trading funds that include commodities, private credit, real estate, venture capital, and more.


Preparing for the CAIA Exam


The CAIA exam is actually two levels of examinations, both of which you’ll need to complete unless you qualify for a waiver. You’re eligible to obtain CAIA certification by taking just one exam if you’re a CFA charterholder. CFA is short for “certified financial analyst,” and is a professional designation offered by the CFA Institute.

In terms of what the exams cover, there are two topic groups. Level I topics include, but are not limited to:

•   Professional standards and ethics

•   Introduction to alternative investments

•   Real assets

•   Private equity

•   Private debt

•   Hedge funds

•   Digital assets

•   Additional strategies in alternative investing3

Level II exams cover:

•   Emerging topics in alternative investments

•   Universal investment considerations

•   Modeling

•   Institutional asset owners and investment policies

•   Risk and risk management

•   Methods for alternative investments

•   Accessing alternative investments

•   Due diligence and selecting managers

•   Volatility and complex strategies3

Exams are offered twice per year, in March and September. The CAIA Association writes and prepares the curricula covered by both exams.

When you register for the CAIA exam and pay the registration fee you’ll get access to digital exam prep materials. You must pay a one-time enrollment fee of $400 for each exam, at the time of publication, as well as a $1,395 registration fee per exam. If you need to retake an exam, the fee is $795.

It’s possible to find CAIA study courses online. Courses may be self-paced or include live instruction. Note that these courses are not endorsed by the CAIA Association. Candidates are encouraged to commit at least 200 hours to study prep for each level before attempting the exams.

As far as the exam format goes, Level I and Level II are slightly different. Both exams include a multiple-choice component. Level I features 200 multiple-choice questions, while Level II has 100 multiple-choice questions. The Level II exam also has a constructed response section, which requires you to answer questions in essay format. You’ll have two hours per section, four hours total, to complete both exams.

Historical Pass Rates


CAIA exam pass rate numbers from March 2024 put the pass rate for the Level I exam at 46%, and the pass rate for the Level II exam at 59%. Since 2011, pass rates for the exam have been on a downward trend. Before 2011, the typical pass rate for the exams was around 70%.

The CAIA Association does not specify what constitutes a passing score for the CAIA exam. It’s generally recommended that candidates aim for a final score of 70 or better on both exams in order to position themselves for the best chance of passing.

CAIA vs. CFA


Chartered financial analysts or CFAs conduct research and analyze financial data, then use what they learn to make portfolio recommendations to clients who might be using a brokerage for online investing. A CFA may work with individual investors, institutional investors, or a mix of both. CFAs may offer advice on alternative investments but they may be less knowledgeable about them than a CAIA.

To obtain a CFA designation, you’ll need to pass three levels of exams, which become progressively more difficult. You must also meet minimum education and work experience requirements, and be able to provide professional letters of reference.

As for which is better, CAIA vs. CFA? It depends on your career goals. If you’d like to specialize in alternative investments, then a CAIA credential could help you attract clients with those particular needs. For example, you might have clients who are interested in investing in art, fine wines, or hedge funds.

On the other hand, you may lean toward a CFA designation if you’d like to offer advice for a broader range of investments, or even consider earning both designations.

The CAIA Charter


The CAIA Charter is how the CAIA Association refers to the CAIA designation or credential. Approximately 13,000 financial professionals worldwide have earned a CAIA certification and are considered charterholders.

The CAIA Association was founded in 2002 by the Alternative Investment Management Association (AIMA) and the Center for International Securities and Derivatives Markets (CISDM). The Association’s mission is to raise industry standards among financial professionals who work with alternative investments.

The Takeaway


If you’re working in financial services you might weigh the merits of a CAIA designation. And if you’re interested in exploring alternative investments for your portfolio it could make sense to seek out a CAIA professional.

Ready to expand your portfolio's growth potential? Alternative investments, traditionally available to high-net-worth individuals, are accessible to everyday investors on SoFi's easy-to-use platform. Investments in commodities, real estate, venture capital, and more are now within reach. Alternative investments can be high risk, so it's important to consider your portfolio goals and risk tolerance to determine if they're right for you.

Invest in alts to take your portfolio beyond stocks and bonds.

FAQ


How difficult is the CAIA exam?


Based on current pass rates and historical trends the numbers suggest that its level of difficulty is something to take seriously. Taking practice tests can be a helpful way to prepare for the exam and get a sense of where you might land score-wise.

What jobs can I get as a CAIA charterholder?


CAIA professionals can work in many different roles, in varied settings. Possible job titles you could get with a CAIA credential include investment analyst, investment consultant, portfolio manager, risk manager or risk analyst, and investment advisor.

How many CAIA charterholders are there?


According to the CAIA Association, there are approximately 13,000+ CAIA charterholders worldwide. Charterholders are located in more than 100 countries globally.


About the author

Rebecca Lake

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.



Photo credit: iStock/Arsenii Palivoda

SoFi Invest®

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

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


An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. This and other important information are contained in the Fund’s prospectus. For a current prospectus, please click the Prospectus link on the Fund’s respective page. The prospectus should be read carefully prior to investing.
Alternative investments, including funds that invest in alternative investments, are risky and may not be suitable for all investors. Alternative investments often employ leveraging and other speculative practices that increase an investor's risk of loss to include complete loss of investment, often charge high fees, and can be highly illiquid and volatile. Alternative investments may lack diversification, involve complex tax structures and have delays in reporting important tax information. Registered and unregistered alternative investments are not subject to the same regulatory requirements as mutual funds.
Please note that Interval Funds are illiquid instruments, hence the ability to trade on your timeline may be restricted. Investors should review the fee schedule for Interval Funds via the prospectus.


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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Value vs Growth Stocks

Generally speaking, value stocks are shares of companies that have fallen out of favor and are valued less than their actual worth. Growth stocks are shares of companies that demonstrate a strong potential to increase earnings, thereby ramping up their stock price.

The terms value and growth refer to two categories of stocks, as well as two contrasting investment “styles”: value can be lower risk with a focus on longer-term returns; growth can be higher risk, with a focus on higher, short-term returns.

Each style has pros and cons. When value investing, investors can buy shares (or fractional shares) of a company that has strong fundamentals at bargain prices. However, investors must be careful not to fall into a “value trap”: i.e., buying stocks that appear to be a bargain, but are actually trading at a discount due to poor fundamentals.

Key Points

•   Value stocks represent undervalued assets, while growth stocks indicate potential for significant price increases.

•   Established companies may offer value stocks, whereas growth stocks usually stem from emerging, rapidly expanding businesses.

•   Dividends are more common with value stocks, as growth stocks frequently retain earnings for reinvestment.

•   Long-term gains are the focus of value investing, contrasting with the short-term appreciation sought in growth investing.

•   Volatility tends to be lower in value stocks and higher in growth stocks, reflecting different risk profiles.

What Are Value Stocks?

Value stocks are stocks that tend to be relatively cheap, or that investors believe aren’t receiving a fair market valuation. In other words, investors think that a stock may be undervalued by the market. Value investors try to identify value stocks by examining quarterly and annual financial statements and comparing what they see to the price the stock is getting on the market.

Investors will also look at a number of valuation metrics to determine whether the stock is lower cost relative to its own trading history, its industry, and other benchmarks, such as the S&P 500 index.

Key Characteristics of Value Stocks

Value stocks tend to have a few underlying characteristics that may lead investors to believe that they’re undervalued.

For example, investors often look at price-to-earnings (P/E) ratio, which is the ratio of price per share over earnings per share. Some experts say that a value stock’s P/E should be 40% less than the stock’s highest P/E in the previous five years.

Investors may also look at price-to-book, which is the price per share over book value per share. A stock’s book value is a company’s total assets minus its liability and provides an estimate of a company’s value if it were liquidated.

Value investors are hoping to buy a quality stock when its price is in a temporary lull, holding it until the stock market corrects and the stock price goes up to a point that better reflects the underlying value of the company.

What Could Make a Stock Undervalued?

There are a number of reasons that a stock could be undervalued.

•   A stock could be cyclical, meaning it’s tied to the movements of the market. While the company itself might be strong, market fluctuations may temporarily cause its price to dip.

•   An entire sector of the market could be out of favor, causing the price of a specific stock to dip. For example, a pharmaceutical company with an effective new drug might be priced low if the health care sector is generally on the outs with investors.

•   Bad press or a negative news cycle could cause share prices to drop.

•   Companies can simply be overlooked by investors looking in a different direction.

Examples of Well-Known Value Stocks

As of early 2025, here are five examples of top-performing value stocks, according to Morningstar. But remember, there’s no guarantee that any of these stocks, or any stock for that matter, will appreciate.

•   JPMorgan Chase

•   Walmart

•   UnitedHealth Group

•   International Business Machines (IBM)

•   Wells Fargo

What Are Growth Stocks?

Growth stocks are shares of companies that demonstrate the potential for high earnings or sales. These companies tend to reinvest their earnings back into their business to spur their company’s growth, as opposed to paying out dividends to shareholders.

Growth investors are betting that a company which is growing fast now, will continue to grow quickly in the future. But the risk is that investors jumping into growth stocks may be buying a stock that is already valued relatively high. In doing so, they could lose a potentially significant amount of money if prices to tumble in the future.

Key Characteristics of Growth Stocks

To spot growth stocks, investors can look for companies that are not only expanding rapidly but may be leaders in their industry. For example, a company may have developed a new technology that gives it a competitive edge over similar companies.

There are also a number of metrics growth investors could examine to help them identify growth stocks. First, investors may look at price-to-sales (P/S), or price per share over sales per share. Not all growth companies are profitable, and P/S allows investors to see how quickly a company is expanding without factoring in its costs.

Investors may also look at price-to-earnings growth (PEG), which is P/E over projected earnings growth. A PEG of 1 or more typically suggests that investors are overvaluing a stock, while PEG of less than one may mean the stock is relatively cheap. PEG is a useful metric for investors who want to consider both value and growth investing.

Key Differences Between Value and Growth Stocks

The main difference between value and growth stocks mostly concerns their current valuation. As discussed, investors believe that value stocks are undervalued at a certain point in time, and believe the stock could appreciate over time.

Growth stocks, on the other hand, may not be undervalued, but are expected to appreciate relatively quickly over the short or medium term.

With that in mind, some other differences between the two could include relative risk; value stocks may be less risky than growth stocks, which can be more volatile. Further, value stocks may be shares of older more established companies, which could also offer dividends (but have lower earnings growth). The opposite might be true for growth stocks.

Performance in Bull vs. Bear Markets

Given relative risk factors and volatility in relation to growth and value stocks, investors might expect that value stocks would perform better than growth stocks during bear markets. The inverse could be true for bull markets. But again, nothing is guaranteed.

Investment Horizon for Value vs Growth

Investors may also want to consider their strategy and time horizon when deciding whether a value or a growth strategy makes more sense for them.

Specifically, value stocks may be better suited for investors with long-term strategies, while growth may be better for those with shorter time horizons. Naturally, a mix of the two, to some degree, is likely an ideal route for most investors, but it may be worth speaking with a financial professional for guidance.

How Are Growth and Value Strategies Similar?

While growth and value investing are two different investment strategies, distinctions between the two are not hard and fast; there can be quite a bit of overlap. Investors may see that stocks listed in a growth fund are also listed in a value fund depending on the criteria used to choose the stock.

What’s more, growth stocks may evolve into value stocks, and value stocks can become growth stocks. For example, say a small technology company develops a new product that attracts a lot of investor attention. It might start to use that capital to grow its business more quickly, shifting from value to growth.

Investors practicing growth and value strategies also have the same end goal in mind: They want to buy stocks when they are relatively cheap and sell them again when prices have gone up. Value investors are simply looking to do this with companies that are already on solid financial footing, and hopefully, see stock price appreciation should rise as a result.

Growth investors are looking for companies with a lot of growth potential, whose stock price will hopefully rise quickly.

Using Growth and Value Strategies Together

The stock market goes through natural cycles during which either growth or value stocks will be up. Investors who want to capture the potential benefits of each may choose to employ both strategies over the long term. Doing so may add diversity to an investor’s portfolio and head off the temptation to chase trends if one style pulls ahead of the other.

Investors who don’t want to analyze individual stocks for growth or value potential can access these strategies through growth or value mutual funds. Because of the cyclical nature of growth and value investing, investors may want to keep a close eye on their portfolios to ensure they stay balanced — and consider rebalancing their portfolio if market cycles shift their asset allocation.

Balancing Risk With Growth and Value Investments

As noted, it may be a good strategy to find some sort of balance between value and growth assets in your portfolio. This adds a degree of diversification, naturally, but given your personal risk tolerance and time horizon, there may be advantages to balancing your portfolio more toward growth or value — it’ll depend on your specific situation.

Again, this may be worth a conversation with a financial professional, who can help with some additional guidance. But given prevailing, changing market conditions and more variables, it can also be a good idea to regularly check in and rebalance your portfolio.

The Takeaway

Growth and value are different strategies for investing in stocks. Investing in growth stocks is considered a bit riskier, though it also may provide potentially higher returns than value investing. That said, growth stocks have not always outperformed value stocks. Value stocks may be purchased for less than they’re worth, tend to be lower risk, and may offer investors some appreciation over time.

As a result, some investors may choose to build a diversified portfolio that includes each style so they have a better chance of reaping benefits when one is outperforming the other.

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

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

FAQ

What is the main difference between value and growth stocks?

Value stocks are considered to be undervalued by investors, whereas growth stocks have an expectation of short-term growth or appreciation.

Can growth stocks turn into value stocks over time?

Yes, growth stocks may turn into value stocks over time, and value stocks may turn into growth stocks. They are fluid, in that sense.

How can beginners balance growth and value investments?

Perhaps the easiest way for beginners to balance growth and value investments is to diversify their portfolios through index or mutual funds, which may include a mix of both types of investments.

Which strategy works better in a recession?

While nothing is guaranteed or for certain, it may be a better bet to stick to a value strategy during a recession or economic downturn, as value stocks tend to have less volatility and risk than growth stocks.

How do dividends impact value and growth stocks?

Many growth stocks may not offer dividends, as those companies may instead be focused on growth and reinvesting their profits. Value stocks, on the other hand, tend to offer dividends, as they’re not necessarily in “growth mode,” and are in the practice of returning value to shareholders.


SoFi Invest®

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

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

Mutual Funds (MFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or clicking the prospectus link on the fund's respective page at sofi.com. You may also contact customer service at: 1.855.456.7634. Please read the prospectus carefully prior to investing.Mutual Funds must be bought and sold at NAV (Net Asset Value); unless otherwise noted in the prospectus, trades are only done once per day after the markets close. Investment returns are subject to risk, include the risk of loss. Shares may be worth more or less their original value when redeemed. The diversification of a mutual fund will not protect against loss. A mutual fund may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.

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.

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.

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.

Claw Promotion: Customer must fund their Active Invest account with at least $50 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

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FDIC Insurance: What It Is And How It Works

When you deposit money into a bank, you expect it to be safe and accessible whenever you need it. But what happens if the bank itself runs into trouble or even goes out of business? That’s where the Federal Deposit Insurance Corporation (FDIC) comes in.

FDIC insurance is a crucial safety net that protects depositors’ funds in the rare event of a bank failure. This ensures that you don’t lose your money (up to certain limits) if a financial institution goes belly up.

But there are rules and limits surrounding FDIC insurance that are important for banking customers to understand. Read on for a closer look at what the FDIC is, what “FDIC insured” means, and how to make the most of the FDIC’s coverage.

Key Points

•   The FDIC protects depositors’ funds and ensures bank stability by offering insurance, monitoring banks, and managing failures.

•   The agency insures checking accounts, savings accounts, money market accounts, CDs, and certain retirement accounts and prepaid cards.

•   Coverage limits for FDIC insurance are $250,000 per depositor, per insured bank, and per account ownership category.

•   When a bank fails, the FDIC ensures quick access to insured funds, typically by transferring them to another bank or issuing a check.

•   Uninsured financial products like stocks, bonds, and crypto assets carry risks.

What Is the FDIC?

The FDIC is shorthand for the Federal Deposit Insurance Corporation. It’s an independent agency of the U.S. government that provides insurance to protect depositors’ money in case of a bank failure. You don’t need to apply for this insurance when you open a bank account — your deposits are automatically insured up to at least $250,000 at each FDIC-insured bank.

The National Credit Union Administration (NCUA) offers similar protection at credit unions.

History and Mission of the FDIC

The FDIC was created under the Banking Act of 1933 in response to the many bank failures during the Great Depression. In the early 1930s, the U.S. experienced one of the most severe banking crises in history. Thousands of banks failed, wiping out savings and triggering widespread financial panic. To prevent future economic disasters and protect the savings of ordinary Americans, Congress established the FDIC.

The FDIC officially began operations on January 1, 1934. Its initial insurance limit was $2,500 per depositor, which has been increased multiple times over the decades to reflect inflation and changing economic conditions. Today, the standard insurance coverage limit is $250,000 per depositor, per insured bank, for each account ownership category (more on exactly how this works below).

What Does the FDIC Do?

The FDIC plays a crucial role in the U.S. financial system by acting as both an insurer and a regulator.

Role of the FDIC in Maintaining Financial Stability

The FDIC’s primary responsibility is to safeguard depositors’ funds and ensure that banks operate in a sound and secure manner. It does this by:

•   Providing deposit insurance: By insuring deposits, the FDIC protects individual and business accounts from losses due to bank failures. Customers do not pay for this insurance; banks cover the cost of insurance premiums.

•   Conducting bank examinations: The FDIC regularly audits banks to ensure they are following sound financial practices and complying with federal regulations.

•   Managing risk: The FDIC monitors financial institutions for signs of instability and typically steps in to address problems before they lead to failure.

•   Handling bank failures: If a bank does fail, the FDIC ensures that depositors’ insured funds are quickly accessible. They often do this by transferring the funds to another bank or directly reimbursing depositors.

Recommended: What Are National Banks?

How the FDIC Protects Consumers

Thanks to FDIC insurance, the money you deposit in a checking account or savings account remains safe (up to certain limits), even if your bank goes out of business. In fact, no depositor has lost any insured money as a result of bank failure since the creation of FDIC insurance.

The FDIC’s protection extends beyond just insuring deposits, though. The agency also enforces consumer protection laws to prevent unfair practices by banks. These protections include:

•   The Truth in Lending Act, which requires banks to disclose the terms and costs of loans and credit products.

•   The Electronic Fund Transfer Act, which protects consumers when they use ATMs, debit cards, and electronic payment systems.

•   The Fair Credit Reporting Act, which regulates how banks use and share consumer credit information.

Through these regulations, the FDIC ensures that banks treat consumers fairly and transparently, and help foster trust in the financial system.

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Types of Accounts Insured by the FDIC

The FDIC covers common banking products, including checking accounts, savings accounts, and money market accounts. However, not all financial products qualify for FDIC coverage.

How to Tell if Your Money Is FDIC-Insured

To determine if a bank is FDIC-insured, you can ask a bank representative or look for the FDIC sign when visiting a branch. If you use an online bank, the company’s website should contain information about its coverage.

Another option is to use the FDIC’s BankFind tool. BankFind provides access to detailed information about all FDIC-insured institutions, including branch locations, the bank’s official website, and the current operating status of the bank.

Commonly Covered Accounts Under FDIC Insurance

The FDIC insures all deposit accounts at insured banks and savings associations up to the FDIC’s limits, including:
Checking accounts

•   Checking accounts

•   Savings accounts, including high-yield savings accounts

•   Money market accounts

•   Certificates of deposit (CDs)

•   Prepaid cards (if certain FDIC requirements are met; also note that funds are only insured in the event of bank failure, not loss or theft of card)

•   Certain retirement savings accounts (in which plan participants have the right to direct how the money is invested)

Types of Accounts Not Insured by the FDIC

While the FDIC protects many types of deposit accounts, not all financial products are covered. For example, investments in the stock market and other securities carry inherent risks, and the FDIC does not cover losses in these markets.

Examples of Uninsured Financial Products

Products that are not insured by the FDIC include:

•   Stocks

•   Bonds

•   Annuities

•   Crypto assets

•   Mutual funds

•   Municipal securities

•   Life insurance policies

•   The contents of a safety deposit box

How FDIC Insurance Works

Understanding how FDIC insurance works is essential to maximizing your coverage and protecting your assets.

Coverage Limits and How They Apply

FDIC insurance covers up to $250,000 per depositor, per institution, and per ownership category. But what exactly does that mean? Let’s break it down.

•   “Per deposit, per institution” refers to one person (the depositor) at one insured bank. If you own multiple deposit accounts at the same bank those deposits count towards the $250,000 limit. If you own accounts at two different banks, each account would have separate and full coverage.

•   “Per ownership category” generally refers to whether the account is owned by one person (single) or owned by two or more individuals (joint). (Other types of ownership categories include certain retirement accounts, employee benefit plan accounts, and business accounts.)

For example:

•   An individual with a checking account and a savings account at the same bank is insured for up to $250,000 across both accounts.

•   A couple with a joint account is insured for up to $500,000 ($250,000 per depositor).

•   A person with a checking account at one insured bank and a savings account at another insured bank is insured for up to $250,000 at each bank.

If you’re married and want to maximize your FDIC insurance, you and your spouse could each open individual accounts at one bank (resulting in each of you having up to $250,000 FDIC-insured), then also open a joint account (where each of you has $250,000 insured). Across all three accounts, you could have up to $1 million FDIC-insured at one bank.

If you’re not sure if all your cash on deposit at a bank is insured, the FDIC’s Electronic Deposit Insurance Estimator can show your specific deposit insurance coverage once you put in your account details.

What FDIC Insurance Does Not Cover

FDIC insurance does not cover:

•   Investment losses (stocks, bonds, mutual funds)

•   Losses due to bank fraud or theft

•   Funds held at non-FDIC-insured banks

•   Failure or bankruptcy of a non-bank

•   Business losses related to bank failure

What Happens if a Bank Fails?

When a bank fails, the FDIC steps in to protect depositors and minimize disruption to the financial system.

Steps the FDIC Takes to Protect Depositors

If a bank were to collapse, the FDIC would intervene in two ways:

Giving Customers Access to Their Funds

The FDIC would pay depositors up to the insurance limit to cover their losses. So, if you had $10,500 in an insured account and the bank failed, you would be reimbursed for that amount. Typically, this happens within a few days after a bank closes.

The FDIC may pay depositors by providing a new account at another insured bank for the insured amount they had at the failed bank, or by issuing a check for that amount.

In some cases, you may be able to receive amounts higher than the coverage limit, but there is no guarantee. If the failed bank is acquired by another institution, your uninsured funds may also be transferred. If the failed bank is dissolved, you typically need to file a claim with the FDIC to recoup uninsured funds.

Becoming the “Receiver” of the Failed Bank

The FDIC also takes responsibility for collecting the assets of the failed bank and settling its debts. As assets are sold, depositors who had more than the $250,000 limit in an insured account may receive payments on their claim, though this can take several years.

How to Recover Your Money if a Bank Fails

Recovering your funds after a bank failure is usually straightforward. Here’s how it works.

FDIC Claims Process Explained

Because of the FDIC safety net, you won’t likely see fearful customers lining up to get their money the way they did before deposit insurance was established.

Still, when a bank closes, it can cause depositors to worry and wonder how to get their money. Typically, there are one of two scenarios when a bank fails:

•   Most commonly, you would become a depositor at a healthy, FDIC-insured bank. You would have access to your insured funds at this new bank and could likely choose to keep your accounts there if you like.

•   If there is not a healthy, FDIC-insured bank that can step in quickly, the FDIC will likely pay the insured depositor by check within as little as a few days after the bank closes.

As for immediate next steps if you learn your bank is closing, the FDIC aims to post information as promptly as possible, or you can contact the agency at 877-ASK-FDIC or visit the FDIC Support Center website.

The Takeaway

Though it’s a rare occurrence, a bank can fail when it takes on too much risk. This means the bank can’t meet its financial obligations to its depositors and borrowers. If your bank is covered by FDIC insurance, you can receive reimbursement up to certain limits, meaning your funds aren’t lost for good. FDIC insurance covers checking accounts, savings accounts, money market accounts, CDs, and other deposit accounts.

The FDIC does not cover some of the other financial products or services offered by banks, including stocks, bonds, mutual funds, annuities, and securities.

Putting your money in a brick-and-mortar financial institution isn’t the only way to make sure it’s protected. Many online banks, including SoFi, are FDIC-insured.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.


Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.80% APY on SoFi Checking and Savings.

FAQ

How often does a bank fail?

Currently, bank failure is relatively uncommon. Since January 2020, there have been 12 bank failures in the U.S., but only three of these were major banks.

In stable economic periods, bank failures tend to be rare due to strict regulations and oversight. If an insured bank does go under, the FDIC steps in to protect depositors by covering funds up to the standard limit. This ensures customers can access their money with little to no disruption.

How does the FDIC differ from the NCUA?

The FDIC (Federal Deposit Insurance Corporation) insures deposits at banks, while the NCUA (National Credit Union Administration) insures deposits at credit unions. Both provide up to $250,000 in coverage per depositor, per institution, and per account ownership category.

The FDIC is an independent government agency, while the NCUA is a federal agency overseeing credit unions. Although they serve similar functions, they apply to different types of financial institutions — banks (FDIC) and credit unions (NCUA).

How many banks are FDIC insured?

As of the third quarter of 2024, the FDIC (Federal Deposit Insurance Corporation) insured 4,517 banks and savings institutions in the U.S. The FDIC protects deposits up to $250,000 per depositor, per insured bank, per account category. The number of FDIC-insured banks has declined over time due to mergers and acquisitions, but the FDIC continues to monitor and regulate the banking system.

Are credit unions FDIC insured?

No, credit unions are not insured by the FDIC (Federal Deposit Insurance Corporation). Instead, they are insured by the NCUA (National Credit Union Administration), which provides similar protection for deposits up to $250,000 per depositor, per credit union, and per account type.

The NCUA operates the National Credit Union Share Insurance Fund (NCUSIF) and ensures that credit union members’ deposits are safe even if the institution fails, similar to how FDIC insurance protects bank customers.

Does FDIC insurance cover online banks?

Yes, FDIC insurance typically covers online banks just as it does traditional brick-and-mortar banks. This protects your deposits up to $250,000 per depositor, per insured bank, per ownership category, even if the online bank fails. You can confirm an online bank’s FDIC status by checking the FDIC website, the bank’s website, or contacting the bank directly.


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

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

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

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

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

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

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

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

Interest rates are variable and subject to change at any time. These rates are current as of 1/24/25. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
*Awards or rankings from NerdWallet are not indicative of future success or results. This award and its ratings are independently determined and awarded by their respective publications.

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

We do not charge any account, service or maintenance fees for SoFi Checking and Savings. We do charge a transaction fee to process each outgoing wire transfer. SoFi does not charge a fee for incoming wire transfers, however the sending bank may charge a fee. Our fee policy is subject to change at any time. See the SoFi Checking & Savings Fee Sheet for details at sofi.com/legal/banking-fees/.

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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