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Jan

2025

Guide to 457 Retirement Plans

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

A 457 plan — technically a 457(b) plan — is similar to a 401(k) retirement account. It’s an employer-provided retirement savings plan that you fund with pre-tax contributions, and the money you save grows tax-deferred until it’s withdrawn in retirement.

But a 457 plan differs from a 401(k) in some significant ways. While any employer may offer a 401(k), 457 plans are designed specifically for state and local government employees, as well as employees of certain tax-exempt organizations. That said, a 457 has fewer limitations on withdrawals.

This guide will help you decide whether a 457 plan is right for you.

What Is a 457 Retirement Plan?

A 457 plan is a type of deferred compensation plan that’s used by certain employees when saving for retirement. The key thing to remember is that a 457 plan isn’t considered a “qualified retirement plan” based on the federal law known as ERISA (from the Employee Retirement Income Security Act of 1974).

These plans can be established by state and local governments or by certain tax-exempt organizations. The types of employees that can participate in 457 savings plans include:

• Firefighters

• Police officers

• Public safety officers

• City administration employees

• Public works employees

Note that a 457 plan is not used by federal employees; instead, the federal government offers a Thrift Savings Plan (TSP) to those workers. Nor is it exactly the same thing as a 401(k) plan or a 403(b), though there are some similarities between these types of plans.

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.

How a 457 Plan Works

A 457 plan works by allowing employees to defer part of their compensation into the plan through elective salary deferrals. These deferrals are made on a pre-tax basis, though some plans can also allow employees to choose a Roth option (similar to a Roth 401(k)).

The money that’s deferred is invested and grows tax-deferred until the employee is ready to withdraw it. The types of investments offered inside a 457 plan can vary by the plan but typically include a mix of mutual funds. Some 457 retirement accounts may also offer annuities as an investment option.

Unlike 401(k) plans, which require employees to wait until age 59 ½ before making qualified withdrawals, 457 plans allow withdrawals at whatever age the employee retires. The IRS doesn’t impose a 10% early withdrawal penalty on withdrawals made before age 59 ½ if you retire (or take a hardship distribution). Regular income tax still applies to the money you withdraw, except in the case of Roth 457 plans, which allow for tax-free qualified distributions.

So, for example, say you’re a municipal government employee. You’re offered a 457 plan as part of your employee benefits package. You opt to defer 15% of your compensation into the plan each year, starting at age 25. Once you turn 50, you make your regular contributions along with catch-up contributions. You decide to retire at age 55, at which point you’ll be able to withdraw your savings or roll it over to an IRA.

Who Is Eligible for a 457 Retirement Plan?

In order to take advantage of 457 plan benefits you need to work for an eligible employer. Again, this includes state and local governments as well as certain tax-exempt organizations.

There are no age or income restrictions on when you can contribute to a 457 plan, unless you’re still working at age 73. A 457 retirement account follows required minimum distribution rules, meaning you’re required to begin taking money out of the plan once you turn 73. At this point, you can no longer make new contributions.

A big plus with 457 plans: Your employer could offer a 401(k) plan and a 457 plan as retirement savings options. You don’t have to choose one over the other either. If you’re able to make contributions to both plans simultaneously, you could do so up to the maximum annual contribution limits.

Pros & Cons of 457 Plans

A 457 plan can be a valuable resource when planning for retirement expenses. Contributions grow tax-deferred and as mentioned, you could use both a 457 plan and a 401(k) to save for retirement. If you’re unsure whether a 457 savings plan is right for you, weighing the pros and cons can help you to decide.

Pros of 457 Plans

Here are some of the main advantages of using a 457 plan to save for retirement.

No Penalty for Early Withdrawals

Taking money from a 401(k) or Individual Retirement Account before age 59 ½ can result in a 10% early withdrawal tax penalty. That’s on top of income tax you might owe on the distribution. With a 457 retirement plan, this rule doesn’t apply so if you decide to retire early, you can tap into your savings penalty-free.

Special Catch-up Limit

A 457 plan has annual contribution limits and catch-up contribution limits but they also include a special provision for employees who are close to retirement age. This provision allows them to potentially double the amount of money they put into their plan in the final three years leading up to retirement.

Loans May Be Allowed

If you need money and you don’t qualify for a hardship distribution from a 457 plan you may still be able to take out a loan from your retirement account (although there are downsides to this option). The maximum loan amount is 50% of your vested balance or $50,000, whichever is less. Loans must be repaid within five years.

Cons of 457 Plans

Now that you’ve considered the positives, here are some of the drawbacks to consider with a 457 savings plan.

Not Everyone Is Eligible

If you don’t work for an eligible employer then you won’t have access to a 457 plan. You may, however, have other savings options such as a 401k or 403(b) plan instead which would allow you to set aside money for retirement on a tax-advantaged basis. And of course, you can always open an IRA.

Investment Options May Be Limited

The range of investment options offered in 457 plans aren’t necessarily the same across the board. Depending on which plan you’re enrolled in, you may find that your investment selections are limited or that the fees you’ll pay for those investments are on the higher side.

Matching Is Optional

While an employer may choose to offer a matching contribution to a 457 retirement account, that doesn’t mean they will. Matching contributions are valuable because they’re essentially free money. If you’re not getting a match, then it could take you longer to reach your retirement savings goals.

💡 Quick Tip: Before opening any investment account, consider what level of risk you are comfortable with. If you’re not sure, start with more conservative investments, and then adjust your portfolio as you learn more.

457 Plan Contribution Limits

The IRS establishes annual contribution limits for 457 plans. There are three contribution amounts:

• Basic annual contribution

• Catch-up contribution

• Special catch-up contribution

Annual contribution limits and catch-up contributions follow the same guidelines established for 401(k) plans.

The special catch-up contribution is an additional amount that’s designated for employees who are within three years of retirement. Not all 457 retirement plans allow for special catch-up contributions.

Here are the 457 savings plan maximum contribution limits for 2024 and 2025.

	2024	2025
Annual Contribution	Up to 100% of an employees’ includable compensation or $23,000, whichever is less	Up to 100% of an employees’ includable compensation or $23,500, whichever is less
Catch-up Contribution	Employees 50 and over can contribute an additional $7,500	Employees 50 and over can contribute an additional $7,500
Special Catch-up Contribution	$23,000 or the basic annual limit plus the amount of the basic limit not used in prior years, whichever is less^*	$23,500 or the basic annual limit plus the amount of the basic limit not used in prior years, whichever is less^*

^*This option is not available if the employee is already making age-50-or-over catch-up contributions.

457 vs 403(b) Plans

The biggest difference between a 457 plan and a 403(b) plan is who they’re designed for. A 403(b) plan is a type of retirement plan that’s offered to public school employees, including those who work at state colleges and universities, and employees of certain tax-exempt organizations. Certain ministers may establish a 403(b) plan as well. This type of plan can also be referred to as a tax-sheltered annuity or TSA plan.

Like 457 plans, 403(b) plans are funded with pre-tax dollars and contributions grow tax-deferred over time. These contributions can be made through elective salary deferrals or nonelective employer contributions. Employees can opt to make after-tax contributions or designated Roth contributions to their plan. Employers are not required to make contributions.

The annual contribution limits to 403(b) plans, including catch-up contributions, are the same as those for 457 plans. A 403(b) plan can also offer special catch-up contributions, but they work a little differently and only apply to employees who have at least 15 years of service.

Employees can withdraw money once they reach age 59 ½ and they’ll pay tax on those distributions. A 403(b) plan may allow for loans and hardship distributions or early withdrawals because the employee becomes disabled or leaves their job.

Investing for Retirement With SoFi

When weighing retirement plan options, a 457 retirement account may be one possibility. That’s not the only way to save and invest, however. If you don’t have a retirement plan at work or you’re self-employed, you can still open a traditional or Roth IRA to grow wealth.

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).

Help grow your nest egg with a SoFi IRA.

FAQ

How does a 457 plan pay out?

If you have a 457 savings plan, you can take money out of your account before age 59 ½ without triggering an early withdrawal tax penalty in certain situations. Those distributions are taxable at your ordinary income tax rate, however. Like other tax-advantaged plans, 457 plans have required minimum distributions (RMDs), but they begin at age 73.

What are the rules for a 457 plan?

The IRS has specific rules for which types of employers can establish 457 plans; these include state and local governments and certain tax-exempt organizations. There are also rules on annual contributions, catch-up contributions and special catch-up contributions. In terms of taxation, 457 plans follow the same guidelines as 401(k) or 403(b) plans: Contributions are made pre-tax; the employee pays taxes on withdrawals.

When can you take money out of a 457 plan?

You can take money out of a 457 plan once you reach age 59 ½. Withdrawals are also allowed prior to age 59 ½ without a tax penalty if you’re experiencing a financial hardship or you leave your employer. Early withdrawals are still subject to ordinary income tax.

Photo credit: iStock/Nomad

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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.

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Jan

2025

What Are the Different Types of Taxes?

By Kelly Boyer Sagert | Growing Wealth, invest, Investing | Comments Off

There are a variety of taxes you may have to pay, such as Income tax, capital gains tax, sales tax, and property tax. Whether you’re new to the workforce or a seasoned retiree, taxes can be complicated to understand and to pay.

This guide can help. Here, you’ll learn more about what taxes are, the different types of taxes to know about, and helpful tax filing ideas. Read on to raise your tax I.Q.

Key Points

• Taxes are mandatory fees collected by the government to fund various activities and services.

• Income, sales, and property taxes are among the most common types affecting individuals.

• Capital gains tax is levied on profits from the sale of investments, with rates varying by holding period.

• In the U.S., sales tax is typically applied at the final transaction, unlike the European VAT system.

• Understanding the different types of taxes you may have to pay can you manage your money better.

What Are Taxes?

At a high level, taxes are involuntary fees imposed on individuals or corporations by a government entity. The collected fees are used to fund a range of government activities, including but not limited to schools, road maintenance, health programs, and defense measures.

Different Types of Taxes to Know

Here’s a detailed look at what are many of the different types of taxes that can be levied and the ways in which they are typically calculated and imposed, plus insights into how they might impact your checking account.

Income Tax

The federal government collects income tax from people and businesses, based upon the amount of money that was earned during a particular year. There can also be other income taxes levied, such as state or local ones. Specifics of how to calculate this type of tax can change as tax laws do.

The amount of income tax owed will depend upon the person’s tax bracket; it will typically go up as a person’s income does. That’s because the U.S. has a progressive tax system for federal income tax, meaning individuals who earn more are taxed more.

If you’re wondering what tax bracket you are in, know that there are currently seven different federal tax brackets. The amount owed will also depend on filing categories like single; head of household; married, filing jointly; and married, filing separately.

Deductions and credits can help to lower the amount of income tax owed (which might leave you with more money in your savings account).

And if a federal or state government charges you more than you actually owed, you’ll receive a tax refund. It can be helpful to check the IRS website or online tax help centers to learn more about income tax.

Property Tax

Property taxes are charged by local governments and are one of the costs associated with owning a home.

The amount owed varies by location and is calculated as a percentage of a property’s value. The funds typically help to fund the local government, as well as public schools, libraries, public works, parks, and so forth.

Property taxes are considered to be an ad valorem tax, which means they are based on the assessed value of the property.

Payroll Tax

Employers withhold a percentage of money from employees’ pay and then forward those funds to the government. The amount being withheld will vary, based on a particular employee’s wages, with federal payroll taxes being used to fund Medicare and Social Security. For 2025, the income threshold goes up to $176,100.

There are limits on the portion of income that would be taxed. For example, in 2024, a person’s income that exceeds $168,600 is not subject to a common payroll deduction, Social Security tax.

Because this tax is applied uniformly, rather than based on income throughout the system, payroll taxes are considered to be a regressive tax.

Inheritance/Estate Tax

These are actually two different types of taxes.

• The first — the inheritance tax — can apply in certain states when someone inherits money or property from a deceased person’s estate. The beneficiary would be responsible for paying this tax if they live in one of several different states where this tax exists and the inheritance is large enough.

• The federal government does not have an inheritance tax. Instead, there is a federal estate tax that is calculated on the deceased person’s money and property. It’s typically paid out from the assets of the deceased before anything is distributed to their beneficiaries.

There can be exemptions to these taxes and, in general, people who inherit from someone they aren’t related to can anticipate higher rates of tax.

Regressive, Progressive, and Proportional Taxes

These are the three main categories of tax structures in the U.S. (two of which have already been mentioned above). Here are definitions that include how they impact people with varying levels of income.

What’s a Regressive Tax?

Because a regressive tax is uniformly applied, regardless of income, it takes a bigger percentage from people who earn less and a smaller percentage from people who earn more.

As a high-level example, a $500 tax would be 1% of someone’s income if they earned $50,000; it would only be half of one percent if someone earned $100,000, and so on. Examples of regressive taxes include state sales taxes and user fees.

What’s a Progressive Tax?

A progressive tax works differently, with people who are earning more money having a higher rate of taxation. In other words, this tax (such as an income tax) is based on income.

This system is designed to allow people who have a lower income to have enough money for cost of living expenses.

What’s Proportional Tax?

A proportional tax is another way of saying “flat tax.” No matter what someone’s income might be, they would pay the same proportion. This is a form of a regressive tax and proportional taxes are more common at the state level and less common at the federal level.

Capital Gains Tax

Next up, take a closer look at the capital gains tax that an investor may be responsible for paying when having stocks in an investment portfolio. This can happen, for example, if they sell a stock that has appreciated in value over the purchase price.

The difference in the increased value from purchase to sale is called “capital gains” and, typically, there would be a capital gains tax levied.

An exception can be when an investor sells increased-in-value stocks through a tax-deferred retirement investment inside of the account. Meanwhile, dividends are taxed as income, not as capital gains.

It’s also important for investors to know the difference between short-term and long-term capital gains taxes. In the U.S. tax code, short-term is one year or less, while long-term is anything longer. For tax year 2024, the federal tax rate on gains made by short-term investments are taxed as ordinary income. For long-term investment gains, the rates will be between 0% and 20%, based on filing status and taxable income.

Recommended: High-Yield Savings Account Calculator

Ideas For Tax-Efficient Investing

Ideas for tax-efficient investing can include to select certain investment vehicles, such as:

• Exchange-traded funds (ETFs): These are baskets of securities that trade like a stock. They can be tax-efficient because they typically track an underlying index, meaning that while they allow investors to have broad exposure, individual securities are potentially bought and sold less frequently, creating fewer events that will likely result in capital gains taxes.

• Index mutual funds: These tend to be more tax efficient than actively managed funds for reasons similar to ETFs.

• Treasury bonds: There are no state income taxes levied on earned interest.

• Municipal bonds: Interest, in general, is exempted from federal taxes; if the investor lives within the municipality where these local government bonds are issued, they can typically be exempt from state and local taxes, as well.

VAT Consumption Tax

In the U.S., taxpayers are charged a regressive form of tax, a sales tax, on many items that are purchased. In Europe, the system works differently. A VAT tax is a form of consumption tax that’s due upon a purchase, calculated on the difference between the sales price and what it cost to create that product or service. In other words, it’s based on the item’s added value.

Here’s one big difference between a sales tax and a VAT tax:

• Sales tax is charged at the final part of the sales transaction.

• VAT, on the other hand, is calculated throughout each supply chain step and then built into the final purchase price.

This leads to another difference. Sales taxes are added onto the purchase price that’s listed; VAT contains those fees within the price and so nothing extra is added onto the price tag that a buyer would see.

Sales Tax

Ka-ching! You are probably used to sales tax being added to many of your purchases. It’s a method that governments use to collect revenue from citizens, and in America, it can vary by state and local area.

Funds collected via sales tax are frequently used for local and state budget items. These might include school, road, and fire department expenses.

Excise Tax

An excise tax is one that is applied to a specific item or activity. Some common examples are the taxes added to alcoholic beverages, amusement/betting pursuits, cigarettes (yes, the “sin taxes,” as they are sometimes called, gasoline, and insurance premiums.

These taxes are primarily paid by businesses but are sometimes passed along to consumers, who may or may not be aware that these taxes can be rolled into retail prices. Some excise taxes, however, are paid directly by consumers, such as property taxes and certain taxes on retirement accounts.

Luxury Tax

Luxury tax is just what it sounds like: tax on purchases that aren’t necessities but are pricey purchases. It can be paid by a business and possibly passed along to the consumer. Typical examples of items that are subject to a luxury tax include expensive boats, airplanes, cars, and jewelry.

The revenue that’s raised by these taxes may fund an array of government programs designed to benefit U.S. citizens.

Corporate Tax

Here’s another tax with a name that tells the story. Corporate tax is, quite simply, a tax on a corporation’s profits, or taxable income. This is based on a business’ revenue once a variety of expenses are subtracted, such as administrative expenses, the cost of any goods sold, marketing and selling costs, research and development expenses, and other related and operating costs.

Corporate taxes are specific to each country, with some having higher rates than others, and there are a variety of ways to lower them via loopholes, subsidies, and deductions.

Tariffs

Tariffs represent a protectionist tool that governments may use. That is, they are taxes levied on imported goods at the border. The idea is typically that this will help boost the cost of imports and hopefully nudge consumers to buy items made on home soil.

Surtax

A surtax is an additional tax levied by the government in addition to other taxes. It is typically paid by consumers when the government needs to raise funds for a specific program. For instance, a 10% surtax was levied on individual and corporate income by the Johnson administration in 1968. The funds were collected to help fund the war effort in Vietnam.

Tax Filing Ideas

Now that you know what the different types of taxes are, consider the event that makes many of us contemplate this topic: filing taxes. It’s an annual ritual that may trigger anxiety for many, but if you spend a little time educating yourself about the process, it’s not so scary. Here, a few ways to help make preparing for tax season easier:

• Consider how you’d like to file. Choose the method that best suits your needs and comfort level. You might want to work with a professional tax preparer to assist you, or perhaps use tax software to help you through the process. (Some taxpayers will qualify for the IRS Free File service, which is a free guided software tool.)

Another option is to fill out either the IRS form 1040 or 1040-SR by hand and mail it in, but given how this can open you up to human error and handwriting or typing mistakes, it’s not recommended.

• Gather all your paperwork. Being organized can be half the battle here. Develop a system that works for you (you might want to use a tax-preparation checklist) to collect such items as:

◦ Your W-2s and/or 1099 forms reflecting your income

◦ Proof of any mortgage interest paid or property taxes

◦ Retirement account contributions

◦ Interest earned on investments or money held in bank accounts

◦ State and local taxes paid

◦ Donations to charities

◦ Educational expenses

◦ Medical bills that were not reimbursed

• Even if you are lower-income and don’t need to file, consider doing so. It may be to your financial benefit. For instance, you might qualify for certain tax breaks, such as the earned income tax credit (EITC) or, if you’re a parent, the child credit.

• Whether you owe money or are getting a refund, know how to settle your account with the IRS. If you’ll be receiving a tax refund, you may want to request that it be sent via direct deposit to make the process as seamless and speedy as possible. If, on the other hand, you owe money, there are an array of ways to send funds, including payment plans. Do a little research to see what suits you best.

By getting ahead of tax filing deadlines in these ways, you can likely make this annual ritual a little less intimidating and time-consuming.

The Takeaway

Understanding the different kinds of taxes can help you boost your financial literacy and your ability to budget well. You’ll know a bit more about why you pay federal and any state and local taxes and also be aware of other charges like luxury taxes and sales taxes.

Here’s another way to help your finances along: by partnering with a bank that puts you first.

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FAQ

What are the most common taxes people use?

The most common taxes that Americans pay are income tax on their earnings, sales tax on purchases, and property tax on their homes.

How many categories of taxes are there?

There are easily more than a dozen kinds of taxes levied in the U.S. Which ones you are liable for will depend on a variety of factors, such as whether you are an individual or represent a business, whether you purchase luxury items, and so forth.

Will I use all of these forms of taxes?

Which forms of taxes you will be liable for will likely depend upon the specifics of your situation. For example, among the most common taxes are income, property, and sales taxes, but if you rent rather than own your home, you won’t owe property taxes. If you purchase a boat, you might pay a luxury tax; if you like to frequent casinos, you could be paying excise taxes.

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Jan

2025

What to Do About Excess Contributions to a Roth IRA

By Rebecca Lake | Financial Topics, Preparing for Retirement | Comments Off

If you contribute more than the annual allowable limit to a Roth IRA given your income and tax filing status, you need to withdraw the excess amount or face a 6% penalty.

The good news is that it’s possible to withdraw or transfer excess IRA contributions. Knowing how to fix this mistake — and how to best plan yearly contributions — can help you to avoid an excess IRA contribution penalty going forward.

Note that the rules are generally the same for excess contributions to a traditional IRA or to a Roth IRA.

Key Points

• Excess contributions to a Roth IRA incur a 6% penalty each year they remain in your account.

• You can withdraw excess contributions before the tax filing deadline (or extension deadline) to avoid penalties.

• Report excess IRA contributions on IRS Form 5329, which you include with your Form 1040 when you file your return or an extension.

• If you don’t wish to withdraw excess contributions, you may be able to recharacterize — or shift them — to another type of IRA before the deadline.

• You may also be able to apply excess contributions to future years within the allowed limits to avoid penalties.

Maximum Annual Roth IRA Contributions

If you don’t know what a Roth IRA is, it’s a tax-advantaged individual retirement account. Contributions to a Roth are made with after-tax dollars, and qualified withdrawals from a Roth IRA are tax-free, which can make them attractive for people who expect to be in a higher tax bracket when they retire — or who want a tax-free income source later in life.

You can contribute to both a Roth IRA and a workplace retirement plan like a 401(k), at the same time, as long as you observe the contribution limits for each type of account, and as long as you qualify for a Roth IRA.

Whether you’re eligible to contribute to a Roth IRA depends on your tax filing status and income (see chart below). Roth IRA contribution limits are set by the IRS and adjusted periodically for inflation.

The contribution limit for a Roth IRA in both 2024 and 2025 is $7,000 per year, while those 50 and up can contribute up to $8,000 per year. These annual limits are the same, whether you’re saving in a traditional IRA vs. Roth IRA, and these are total amounts across all IRA accounts.

Here’s how Roth IRA income limits and contribution rules work for 2024 and 2025.

Filing Status	If your Modified Adjusted Gross Income (MAGI) is …	You can contribute…
Married filing jointly or qualifying widow(er)	< $230,000	Up to a maximum of $7,000 per year ($8,000 for those 50 and older)
Married filing jointly or qualifying widow(er)	≥ $230,000 and < $240,000	a reduced amount
Married filing jointly or qualifying widow(er)	≥ $240,000	Not eligible to contribute to a Roth
Married filing separately and you lived with your spouse at any time during the year	< $10,000	a reduced amount
Married filing separately and you lived with your spouse at any time during the year	≥ $10,000	Not eligible
Single, head of household, or married filing separately and you did not live with your spouse at any time during the year	< $146,000	up to the limit
Single, head of household, or married filing separately and you did not live with your spouse at any time during the year	≥ $146,000 and < $161,000	a reduced amount
Single, head of household, or married filing separately and you did not live with your spouse at any time during the year	≥ $161,000	Not eligible

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.

What Happens If You Contribute Too Much to a Roth IRA?

Opening an IRA can get help you save for retirement. The downside is that contributing too much money to a Roth IRA (or traditional IRA) can result in a tax penalty. An excess contribution to an IRA can happen when:

• You contribute more than the annual contribution limit because you have multiple IRAs.

• You make an improper rollover contribution.

• You inadvertently contribute more than the amount allowed for your income and filing status.

• You made a contribution early in the year, but you ended up earning more than anticipated, which changed the amount you would be allowed to contribute.

Excess IRA contributions are subject to a 6% penalty each year that they remain in your account. Per the IRS: “The tax can’t be more than 6% of the combined value of all your IRAs as of the end of the tax year.”

If you’ve contributed too much to your Roth IRA, there are some steps you can take to rectify this mistake.

How Do You Report Excess Roth IRA Contributions?

Excess IRA contributions are reported on IRS Form 5329. You’ll include this form with your Form 1040 when you file your return or an extension.

This form allows the IRS to calculate how much of a tax penalty you’ll owe if you don’t take steps to correct an excess Roth IRA contribution.

Can You Withdraw Excess Roth IRA Contributions?

If you realize that you contributed too much before you file your tax return, you can avoid the tax penalty by withdrawing the excess Roth IRA contribution by the tax filing deadline, or by the extension deadline. Any excess amounts withdrawn before the tax filing or extension deadline, would not be subject to the 6% penalty.

That said: If those excess contributions generated investment gains while in your IRA account, you’d have to withdraw the gains as well. And you would have to report them as income.

However, as of Dec. 29, 2022, a “corrective distribution” — meaning, a withdrawal of the gains on an excess contribution — is no longer subject to a 10% early withdrawal penalty.

You can contact your IRA custodian (the bank that holds your IRA account) if you’re not sure how to withdraw excess amounts. Keep in mind that you’ll need to withdraw the excess contribution amount as well as any earnings those contributions generated.

You may owe tax on the earnings from the excess contribution amount (see below for possible ways to avoid this). There are no guarantees that a Roth contribution would see a gain, however; if there is a net loss, you could still withdraw the remainder of your contribution, minus the loss.

If you’ve already filed your taxes, you have up to six months — usually until October 15 of the same year — to amend your return and make the necessary withdrawals.

Recharacterizing Excess Roth IRA Contributions

Recharacterizing IRA contributions allows you to move assets deposited in one IRA to a second IRA, and treat that money as if it had originally been contributed to the second IRA.

If you have excess contributions because you contributed more than was allowed based on your income and filing status, recharacterization could allow you to avoid a tax penalty. You would transfer the excess contribution from one IRA to the second IRA by the tax-filing or extension deadline, doing a direct transfer within the same institution, or a trustee-to-trustee transfer to an IRA at another bank (not a withdrawal, which could be subject to additional taxes and/or a penalty).

For example: If you made excess contributions to an IRA for tax year 2024, you have until April 15, 2025 to recharacterize the excess contribution and earnings (or net loss); or until the extension deadline in October.

If you made excess contributions in prior years, you couldn’t recharacterize these, as the window for recharacterization would have passed, and you’d likely owe a penalty.

In order to complete a recharacterization of the excess funds, you must take the following steps:

• Include any earnings specific to the excess amount. If there was a loss attributable to that contribution, you would note a negative amount.

• Be sure to report the recharacterization on your tax return for the year in which you made the original excess contribution.

• Use the date of the excess contribution to the first IRA as the date the contribution is made to the second IRA.

Applying Excess Contributions to the Following Year

The IRS also allows you to carry excess Roth IRA contributions forward. You can apply excess contributions to your annual contribution limit for future years.

Again, the contributions you carry forward must be within your allowed limit for that following year. Be sure to check, so as not to create excess contributions in a subsequent year.

Penalties for Excess Roth IRA Contributions

As mentioned, the IRS imposes a penalty on excess Roth IRA contributions in the form of a 6% tax, as of 2024. It applies each year that excess Roth IRA contributions remain in your account.

Keep in mind that you might also owe ordinary income tax on any earnings on that contribution amount as well.

When Are Excess Contributions Penalized?

Excess Roth IRA contributions are penalized when they’re not corrected. The IRS will continue to penalize you for each year that you allow the excess contributions to remain in your IRA. That rule goes for both Roth and traditional IRA contributions.

Again, if you haven’t filed your tax return yet, the simplest way to correct them and avoid the penalty is to withdraw the excess amounts, plus any gains. As long as you do that by the tax-filing deadline or extension deadline, then the IRS doesn’t consider those amounts to be excess contributions.

How to Avoid Excess IRA Contributions

Avoiding excess IRA contributions is possible if you understand how much you’re able to contribute each year, then planning your contributions accordingly. With Roth IRA contributions, your contribution amount will depend on your tax filing status and modified AGI for the tax year.

You can use a tax calculator to estimate your modified AGI and use that to plan your contributions. Remember that you have until the April tax-filing deadline to make IRA contributions for the current tax year.

The extra few months allow you time to prepare your return and make your contributions — or withdraw them if necessary — to stay within your annual contribution limit.

Calculating Excess Contributions

While you have until tax day in April of the following year to contribute to a Roth IRA for the current tax year, the income you use to determine the amount of your allowable Roth contribution is based only on the current tax year, which ends on December 31.

Example: To determine whether your modified AGI is within allowable Roth IRA limits for 2024, you would calculate your compensation from Jan. 1 to Dec. 31, 2024.

If you’re married, filing jointly for tax year 2024, your modified AGI must be less than $230,000 in order to make a full contribution of $7,000 ($8,000 if you’re 50 and up). From $230,000 to $239,999 you can only make a partial contribution. If you earn $240,000 or more, you are not eligible to contribute to a Roth IRA.

If you need help to determine your allowable contribution, you can use an Roth IRA contribution calculator to estimate what you can save. You may want to consult with a tax professional if you have any questions.

The Takeaway

A Roth IRA can be a useful tool for retirement planning, but it’s important to keep track of how much you’re saving. All IRAs, including Roth IRAs, have strict annual contribution limits. Making excess Roth IRA contributions could result in an unexpected — and costly — tax penalty.

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

What happens if you accidentally contribute too much to a Roth IRA?

If you make excess Roth IRA contributions the IRS can assess a tax penalty of 6% each year that they remain in your account. You can avoid the tax penalty by withdrawing excess amounts, recharacterizing them, or carrying them ahead for future tax years.

How do you correct excess Roth IRA contributions?

The easiest way to correct an excess Roth IRA contribution is to withdraw the excess amount, along with any interest earned. You can do that before the tax filing deadline, including extension deadlines, to avoid the IRS tax penalty. You cannot correct or recharacterize excess contributions once the tax-filing and extension deadlines have passed for the relevant tax year.

What is the penalty for excess IRA contributions?

A 6% tax applies to excess IRA contributions. The penalty applies each year that the excess contributions remain in your retirement account.

Photo credit: iStock/mixetto

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.

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

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

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

SOIN0423007

Jan

2025

Options for a $50,000 Personal Loan

By Caroline Banton | Budgeting & Goals, personal_loan | Comments Off

Most people could use a cash injection at some point in their lives. Perhaps they need to cover major home repairs, a big-ticket purchase, or emergency expenses. Whatever the reason, a personal loan may be a good idea, especially for borrowers with a strong credit history.

Read on to learn how to get a $50,000 personal loan. Find out why it might be right for you (and when it may be wrong), how the terms are decided, and possible alternatives to a personal loan for $50K.

Key Points

• Personal loans provide quick access to funds, often available within days after approval.

• Credit score plays a crucial role in determining interest rates and loan terms.

• Monthly payments must align with the borrower’s budget to prevent financial difficulties.

• Alternatives such as a HELOC or credit cards should be considered for potential benefits.

• Taking a personal loan can positively or negatively affect credit, based on repayment consistency.

Factors to Consider When Applying for a $50,000 Personal Loan

Personal loans are a convenient way to fund a short-term cash flow problem or consolidate credit card debt. In many cases, once the loan is approved, the funds are deposited to your account within a day or two.

Banks, credit unions, and online lenders can all provide personal loans for $50K. Note that payback terms are flexible, running from 12 months to several years, and loan payments are due monthly. Personal loan rates vary depending on the credit score of the borrower: A higher credit score will be rewarded with better terms and a lower interest rate.

As you consider whether to apply for a $50K personal loan, it’s a good idea to first assess your financial health and your credit score. (Your bank or credit card issuer may allow you to check your score for free.)

You’ll also want to determine whether you’d be able to pay back the loan. Making a budget can help. Simply subtract your recurring expenses from your income, and see if the amount left over is enough to cover the monthly loan payment.

Next, find out the average personal loan interest rate, then shop around with different lenders. Be sure to look out for origination fees and prepayment penalties hidden in the small print.

How to Qualify for a $50,000 Personal Loan

Criteria varies by lender, but in general, to qualify for a $50K personal loan, you’ll need to satisfy a few requirements:

• Maintain a good credit score. For such a significant loan amount, a traditional bank or credit union may require a credit score of 670 or more, which is considered a good credit score. However, other lenders may work with borrowers who have a credit score of 580 and up.

• Provide proof of employment and income. Examples include paycheck stubs, tax returns, Social Security payments, alimony payments, or disability benefits statements.

• Have a debt-to-income (DTI) ratio of 36% or lower. That said, lenders may allow a higher DTI ratio for borrowers who are using the loan funds to consolidate credit card debt.

What Can You Do With a $50,000 Personal Loan?

One of the upsides of a $50,000 personal loan is that you can use the funds for just about any purpose. But considering the size of the loan, you may choose to put the money toward a larger financial goal. Common examples of this include consolidating high-interest debts, paying for home improvement projects, and funding a major purchase, like a bucket-list vacation.

Understanding the Costs of a $50,000 Personal Loan

Borrowers should pay special attention to these factors when comparing the cost of a loan.

Interest Rates

The biggest consideration for a $50,000 personal loan is the interest rate, because the rate and the length of the loan will determine the total cost of the loan. The shorter the loan, the less interest you will pay, and the lower the total cost.

In most cases personal loans have a fixed interest rate, but some do have variable rates. Variable rate loans often start out with a relatively low interest rate, but the rate can rise significantly later, increasing the monthly payments.

Fees

Origination fees can be hidden in the fine print, so make sure you understand how they impact the annual percentage rate (APR) that you are charged. Also check if there’s a prepayment penalty for paying off your loan early.

Total Repayment Cost

The total repayment cost of a $50,000 loan will depend on the interest rate and the length of the loan. You will make more payments over a longer term, racking up more interest and increasing the total cost of the loan. A shorter term will lower the total repayment cost. To minimize total repayment costs, select a loan with the biggest monthly payment you can comfortably afford and the shortest repayment term.

Monthly Payment Amount

The monthly payment is critical. If a monthly payment offered by a lender seems like a stretch, try to negotiate a longer repayment period. For instance, if a five-year loan is extended to a seven-year loan, you’ll make 84 smaller payments compared to 60 larger payments. Just remember, you’ll pay more interest over the life of the loan.

Is a $50,000 Personal Loan the Right Choice for You?

A $50,000 personal loan is a huge financial commitment. Ask yourself the following questions before signing on the dotted line.

How Much Do You Really Need?

Minimizing your debt load means you pay less to lenders in fees and interest. Consider whether you can borrow money from another source at a lower cost and reduce the amount that you need from a personal loan.

Can You Afford the Monthly Payment?

If the monthly payment is going to take a big bite out of your paycheck each month, you may find yourself unable to meet the payments. Make sure your cash flow is sufficient to meet your monthly payments.

Is a Personal Loan Your Best Financing Option?

Look at other options before you settle on a $50,000 personal loan. If you have equity in your home, refinancing your mortgage or obtaining a HELOC might be a better choice. Credit cards and borrowing from family or friends are also good alternatives.

How Will the Loan Affect Your Credit?

When you are shopping for a loan, whether it be for $5,000, $10,000, or $100,000, a lender may pull a soft credit check to prequalify you. This will not affect your credit score. When you formally apply for your loan, the lender will do a hard credit check. This may reduce your credit score by around five points for one year.

Aside from credit checks, personal loans can help build your credit history or seriously hurt it, depending on how you manage your payments. If you make a payment that’s over 30 days late and it gets reported to the credit bureaus, it could lower your credit rating from excellent to fair. But if you use your loan to consolidate existing debt, your score might actually rise because your credit utilization ratio has improved.

What Are the Pros and Cons of Borrowing?

Despite their flexibility and convenience, there are pros and cons to personal loans that a borrower should be aware of before they opt for this financing option. One of the biggest advantages of an unsecured personal loan is that no collateral is required, which means you don’t risk losing your home or car. On the other hand, interest rates can be high if your credit score is low, and fees and penalties often apply.

Benefits of Choosing SoFi for a $50,000 Personal Loan

Traditional banks, credit unions, and online lenders like SoFi all provide flexible personal loans. SoFi personal loans offer competitive interest rates and no origination fees or prepayment penalties. The application process is quick and easy, and funds could be available as quickly as the same day your loan is approved. The terms of a SoFi personal loan will depend on your credit score — the higher your score the lower your interest rate.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

FAQ

What credit score do I need to get a $50,000 personal loan?

Most lenders will require a credit score of 670 or more, which is considered a good credit score. Other lenders may require a credit score of at least 580, but they’ll likely charge higher fees and a higher interest rate.

How can you qualify for a $50,000 personal loan?

In general, to qualify for a $50,000 personal loan you will need to show you have sufficient income to make the monthly payments and have a credit score of 580 or higher. You also must be 18 years old and a U.S. citizen, legal resident, or visa holder.

Is it hard to get a 50k personal loan?

It’s not difficult to get a personal loan for $50K if you have good credit. If you have poor credit, the number of lenders available to you will be limited, and you will likely face higher interest rates and high fees, making the loan quite costly.

Photo credit: iStock/undefined undefined

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.

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.

SOPL-Q424-066

Jan

2025

Trading Futures vs. Options: Key Differences to Know

Futures vs Options: What Is the Difference?

By Laurel Tincher | Growing Wealth, invest, Investing | Comments Off

Futures and options are both derivative contracts that enable an investor to buy or sell an investment for a certain price by a certain date. Although they share similarities, they work quite differently and pose different risks for investors.

With an options contract, the holder has the option (but not the obligation) to buy an underlying asset, such as stock in a business, for a specified price by a specific date. A futures contract requires the holder to buy the asset on the agreed-upon date (unless the position is closed out before then).

The underlying asset for a futures contract is often a physical asset, such as commodities like grain or copper, but you can also trade futures on stocks or an equity index, such as the S&P 500. The underlying asset for an options contract can be a financial asset like a stock or bond, or it could be a futures contract.

Key Points

• Futures contracts make obligations about trading an underlying asset at a set price and date.

• Options give the buyer the right, not the obligation, to trade the underlying asset.

• Futures are riskier due to high leverage and daily mark-to-market adjustments.

• Options buyers risk only the premium paid, while futures leverage amplifies gains and losses.

• Both futures and options are used by hedgers and speculators for different purposes.

Main Differences Between Futures and Options

Although futures and options are similar, as they are both derivative contracts tied to an underlying asset, they differ significantly in terms of risk, obligations, and the ways in which they are executed.

How Futures Work

Futures contracts are a type of derivative in which buyers and sellers are obligated to trade a specific asset on a certain future date, unless the asset holder closes their position prior to the contract’s expiration.

A futures contract consists of a long side and a short side, where the short side is obligated to make delivery of the underlying asset, and the long side is obligated to take it (unless the contract is terminated before the delivery date).

Both options and futures typically employ some form of financial leverage or margin, amplifying gains and losses, increasing potential risk of loss.

How Options Work

Options trading consists of buying and selling derivatives contracts that give the holder the right, but not the obligation, to buy or sell an asset at a specified price (the strike price) by the contract’s expiration date.

• The options buyer (or holder) may buy or sell a certain asset, like shares of stock, at a certain price by the expiration of the contract. Buyers pay a premium for each option contract; this represents the cost of acquiring the option.

• The options seller (or writer), who is on the opposite side of the trade, has the obligation to buy or sell the underlying asset at the strike price, if the options holder exercises their contract.

There are only two types of options: puts and calls. Standard equity options contracts are for 100 shares of the underlying security.

💡 Quick Tip: Look for an online brokerage with low trading commissions as well as no account minimum. Higher fees can cut into investment returns over time.

The Role of Risk

Trading options come with certain risks. The buyer of an option could lose the premium they paid to enter the contract. The seller of an option is at risk of being required to purchase or sell an asset if the buyer on the other side of their contract exercises the option.

Futures can be riskier than options due to the high degree of leverage they offer. A trader might be able to buy or sell a futures contract putting up only 10% of the actual value, known as margin. This leverage magnifies price changes, meaning even small movements can result in substantial profit or loss.

With futures, the value of the contract is marked-to-market daily, meaning each trading day money may be transferred between the buyer and seller’s accounts depending on how the market moved. An option buyer is not required to post margin since they paid the premium upfront.

The Role of Value

Futures pricing is relatively straightforward. The price of a futures contract should approximately track with the current market price of the underlying asset, plus any associated costs (like storage or financing) until maturity.

Option pricings, on the other hand, is generally based on the Black-Scholes model. This is a complicated formula that requires a number of inputs. Changes in several factors other than the price of the underlying asset, including the level of volatility, time to expiration, and the prevailing market interest rate can impact the value of the option.

Holding constant the price of the underlying asset, futures maintain their value over time, whereas options lose value over time, also known as time decay. The closer the expiration date gets, the lower the value of the option gets. Some traders use this as an options trading strategy. They sell options contracts, anticipating that time decay will eat away at their value over time, expire worthless, and allow them to keep the premium collected upfront.

Options come with limited downside, since the maximum loss is the premium. Futures, however, can fall below zero: the contract’s value is tied to the underlying asset’s price, meaning traders may have to pay more than the contract’s original value.

Here are some of the key differences between futures and options:

Futures	Options
Buyer is obliged to take possession of the underlying asset, or make a trade to close out the contract. Seller is obligated to deliver the asset or take action to close the position.	Buyer has the right, but not the obligation, to buy or sell a certain asset at a specific price, while the seller has the obligation to fulfill the option contract if exercised.
Futures typically involve taking much larger positions, which can involve more risk.	Options may be less risky for buyers because they are not obliged to acquire the asset.
No up-front cost to the buyer, other than commissions.	Buyers pay a premium for the options contract.
Price can fall below $0.	Price can never fall below $0.

Understanding Futures

Futures contracts are similar to options in that they set a specific price and date for the trade of an underlying asset. Unlike options, that give the holder the right to buy or sell, futures investors are obligated to buy at a certain date and price.

Among the most common types of futures are those for commodities, with which speculators can attempt to benefit from changes in the market without actually buying or selling the physical commodities themselves. Commodity futures may include agricultural products (wheat, soybeans), energy (oil), and metals (gold, silver).

There are also futures on major stock market indices, such as the S&P 500, government bonds, and currencies.

Rather than paying a premium to enter a futures contract, the buyer pays a percentage of the market value, called an initial margin.

Recommended: Margin Account: What It Is and How It Works

Example of a Futures Contract

Let’s say a buyer and seller enter a contract that sets a price per bushel of wheat. During the life of the contract, the market price may move above that price — putting the contract in favor of the buyer — or below the contracted price, putting it in favor of the seller.

If the price of wheat goes higher at expiration, the buyer would make a profit off the difference in price, multiplied by the number of bushels in the contract. The seller would incur a loss equal to the price difference. If the price goes down, however, the seller would profit from the price difference.

Who Trades Futures?

Traders of futures are generally divided into two camps: hedgers and speculators. Hedgers typically have a position in the underlying commodity and use a futures contract to mitigate the risk of future price movements impacting their investment.

An example of this is a farmer, who might sell a futures contract against a crop they produce, to hedge against a fall in prices and lock in the price at which they can sell their crop.

Speculators, on the other hand, accept risk in order to potentially profit from favorable price movements in the underlying asset. These may include institutional investors, such as banks and hedge funds, as well individual investors.

Futures enable speculators to take a position on the price movement of an asset without trading the actual physical product. In fact, much of trading volume in many futures contracts comes from speculators rather than hedgers, and so they provide the bulk of market liquidity.

Understanding Options

Options buyers and sellers may use options if they think an asset’s price will go up (or down), to offset risk elsewhere in their portfolio, or to potentially enhance returns on existing positions. There are many different options-trading strategies.

Example of a Call Option

An investor buys a call option for a stock that expires in six months, paying a premium. The stock is currently trading at just below the option’s strike price.

If the stock price goes up above the strike price within the next six months, the buyer can exercise their call option and purchase the stock at the strike price. If they sell the stock, their profit would be the difference in the price per share, minus the cost of the premium.

The buyer could also choose to sell the option instead of exercising it, which can also result in a profit, minus the cost of the premium.

If the price of the stock is below the strike price at the time of expiration, the contract would expire worthless, and the buyer’s loss would be limited to the premium they paid upfront.

Example of a Put Option

Meanwhile, if an investor buys a put option to sell a stock at a set price, and that price falls before the option expires, the investor could earn a profit based on the price difference per share, minus the cost of the premium.
If the price of the stock is above the strike price at expiration, the option is worthless, and the investor loses the premium paid upfront.

Who Trades Options?

Options traders often fall into two categories: buyers and sellers. Buyers purchase options contracts — be they calls or puts — with the hope of making a profit from favorable price movements from the underlying asset. They also want to limit potential loss to the premium they paid for the option. Sellers can potentially profit from the premium they’ve collected when writing the options contract, but they face the risk of having to fulfill the contract if the market moves unfavorably.

The Takeaway

Futures and options are two types of investments for those interested in hedging and speculation. These two types of derivatives contracts operate quite differently, and present different opportunities and risks for investors.

Futures contracts specify an obligation — for the long side to buy, and for the short side to sell — the underlying asset at a specific price on a certain date in the future. Meanwhile, option contracts give the contract holder (or buyer) the right to buy or sell the underlying asset at a specific price, but not the obligation to do so.

Investors who are ready to try their hand at options trading despite the risks involved, might consider checking out SoFi’s options trading platform offered through SoFi Securities, LLC. The platform’s user-friendly design allows investors to buy put and call options through the mobile app or web platform, and get important metrics like breakeven percentage, maximum profit/loss, and more with the click of a button.

Plus, SoFi offers educational resources — including a step-by-step in-app guide — to help you learn more about options trading. Trading options involves high-risk strategies, and should be undertaken by experienced investors. Currently, investors can not sell options on SoFi Active Invest®.

Explore SoFi’s user-friendly options trading platform.

FAQ

Are futures more risky than options?

Both options and futures are considered high-risk investments. Futures are considered more risky than options, however, because it’s possible to lose more than your total investment amount.

Which uses more leverage: futures or options?

Typically, futures trading uses more leverage, and that’s part of what makes futures higher risk, and potentially appealing to speculators.

Which is easier to trade: futures or options?

Options strategies can be more complicated, and in some ways futures contracts are more straightforward, but futures trading can be highly speculative and volatile.

Photo credit: iStock/DonnaDiavolo

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.

Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire amount invested in a short period of time. Before an investor begins trading options they should familiarize themselves with the Characteristics and Risks of Standardized Options . Tax considerations with options transactions are unique, investors should consult with their tax advisor to understand the impact to their taxes.
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SOIN-Q424-053

Guide to 457 Retirement Plans

What Is a 457 Retirement Plan?

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

How a 457 Plan Works

Who Is Eligible for a 457 Retirement Plan?

Pros & Cons of 457 Plans

Pros of 457 Plans

No Penalty for Early Withdrawals

Special Catch-up Limit

Loans May Be Allowed

Cons of 457 Plans

Not Everyone Is Eligible

Investment Options May Be Limited

Matching Is Optional

457 Plan Contribution Limits

457 vs 403(b) Plans

Investing for Retirement With SoFi

FAQ

How does a 457 plan pay out?

What are the rules for a 457 plan?

When can you take money out of a 457 plan?

What Are the Different Types of Taxes?

What Are Taxes?

Different Types of Taxes to Know

Income Tax

Property Tax

Payroll Tax

Get up to $300 when you bank with SoFi.

Inheritance/Estate Tax

Regressive, Progressive, and Proportional Taxes

What’s a Regressive Tax?

What’s a Progressive Tax?

What’s Proportional Tax?

Capital Gains Tax

Ideas For Tax-Efficient Investing

VAT Consumption Tax

Sales Tax

Excise Tax

Luxury Tax

Corporate Tax

Tariffs

Surtax

Tax Filing Ideas

The Takeaway

FAQ

What are the most common taxes people use?

How many categories of taxes are there?

Will I use all of these forms of taxes?

What to Do About Excess Contributions to a Roth IRA

Maximum Annual Roth IRA Contributions

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

What Happens If You Contribute Too Much to a Roth IRA?

How Do You Report Excess Roth IRA Contributions?

Can You Withdraw Excess Roth IRA Contributions?

Recharacterizing Excess Roth IRA Contributions

Applying Excess Contributions to the Following Year

Penalties for Excess Roth IRA Contributions

When Are Excess Contributions Penalized?

How to Avoid Excess IRA Contributions

Calculating Excess Contributions

The Takeaway

FAQ

What happens if you accidentally contribute too much to a Roth IRA?

How do you correct excess Roth IRA contributions?

What is the penalty for excess IRA contributions?

Options for a $50,000 Personal Loan

Factors to Consider When Applying for a $50,000 Personal Loan

How to Qualify for a $50,000 Personal Loan

What Can You Do With a $50,000 Personal Loan?

Understanding the Costs of a $50,000 Personal Loan

Interest Rates

Fees

Total Repayment Cost

Monthly Payment Amount

Is a $50,000 Personal Loan the Right Choice for You?

How Much Do You Really Need?

Can You Afford the Monthly Payment?

Is a Personal Loan Your Best Financing Option?

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

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

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