SoFi

Do you have multiple accounts that hold your money across different banks? If you’re like a lot of people, you keep one account for your savings, and yet another for checking. Some people have additional accounts for their retirement savings or after-tax investments—but that’s a whole different can of worms.

For those looking for a better way to manage their checking and savings, there’s another account that should be on your radar: a checking and savings account. It’s a hybrid between a checking and a high-yield savings account. You can write checks and they’ll even issue you a debit card. In this article, we’ll answer the question, “What is a checking and savings account,” along with a discussion of their benefits, how they’re used, and who might benefit from using this type of account.

What Is a Cash Management Vehicle?

A checking and savings account—also known as a cash management vehicle—is designed to manage cash, make payments, and earn interest. It’s a hybrid between a checking and savings account.

Cash management accounts typically come equipped with checking account features such as a debit card and ATM withdrawals. They also typically pay a higher rate of interest than keeping your money in a traditional savings account. If you have a checking account, you know how little they pay in interest; .08% is the national average .

Cash management accounts are often all-in-one accounts, and they can combine features of a checking account, brokerage account, and an interest-bearing savings account. (Not all checking and savings accounts include all these features, though.)

While checking and savings accounts used to be limited to those with high balances in brokerage accounts, this is no longer always the case. For example, online-only financial services companies are breaking the mold by offering similar accounts to those without a brokerage account or without having to meet a minimum balance requirement. They’re able to offer higher interest rates because they don’t maintain brick and mortar locations.

What to Look for in a Checking and Savings Account

While most checking and savings accounts share similarities, they won’t all be the same. Here are some items to consider when shopping around for a checking and savings account.

Safety

FDIC (Federal Deposit Insurance Corporation) insurance protects your money in the event your bank goes belly-up. For your safety and protection, it is essential that your checking and savings account is FDIC-insured. Some banks offer more coverage by using a system that spreads their deposits across several banks (this is done behind the scenes). For example, SoFi Checking and Savings offers $1.5 million in FDIC insurance per account.

Interest Rate

Generally, you’re able to get a higher rate of interest within a checking and savings account than you are with a savings account at a brick and mortar bank. This interest rate will likely not be as high as in an online-only savings account, the trade-off being that an online-only savings account will usually limit your access to your money. SoFi Checking and Savings has aspects of a high-yield savings account and a checking account.

Accessibility

When deciding on an account, you’ll want to investigate its accessibility. Cash management accounts usually offer either a credit card or debit card hooked up to the account, allowing you to use it as if it were a checking account.

Most will also allow you to withdraw money at an ATM and set up bill pay. (For comparison, some high-yield savings accounts only allow you to access your money a certain number of times per month. Limiting the number of transactions in an account allows them to offer a higher interest rate.)

Fees

As with most types of bank accounts, there is a possibility for fees, such as monthly or annual account maintenance fees, or fees to use out-of-network ATMs. Conversely, some checking and savings accounts will actually reimburse you for any ATM fees you incur.

If you travel internationally, also be sure to check the account’s policy on international transactions and ATM usage. SoFi Checking and Savings, for instance, reimburses 100% of all ATM fees, even internationally, on qualified accounts.

Bank Locations

Brick and mortar locations for checking and savings accounts are limited because in the past, most checking and savings accounts have been offered by brokerage banks. Brokerage banks do have physical locations, but they’re often limited to large cities.

If it’s important to you to be able to walk into a location, you’ll want to research whether there is on near you. Online-only banks specifically opt out of providing physical locations, often so they can offer more by way of interest rates. This will likely become more common as financial services move the majority of their operations online.

Who Should Use a Checking and Savings Account?

Because a cash management vehicle is a hybrid between checking and high-yield savings accounts, they would suit anyone who would like to consolidate the two. Most financially savvy folks understand that larger cash balances should be earning more interest than is offered in a “regular” checking account, but dislike coordinating checking and savings accounts at different banks.

Really, anyone looking to consolidate and elevate their finances should, at the very least, research a cash management vehicle to see whether it makes sense given their financial goals and the structure of their current accounts.

A checking and savings account is an excellent place to save up for short to mid-term goals, such as an emergency fund, a down payment for a home, for a wedding, or an exotic trip to celebrate paying off student loans.

As the landscape of financial services changes, it’s a good idea to stay up to date on advances in technology and improvements to the services provided to consumers. For a long time, brick and mortar banks had very little competition, as the physical locations (and convenience) were paramount to effective banking. As banking moves online, those with the most branches won’t necessarily be the ones providing the best customer service or the most competitive interest rates.

SoFi, who has been leading the charge in refinancing student loans to lower rates, is expanding its business to offer a checking and savings account that offers an interest rate competitive with high-yield savings accounts. They’re able to do so precisely because they don’t maintain physical branches—and understand the need for a more versatile checking and savings account that’s easy to use and and has no fees.

SoFi can’t guarantee future financial performance.
This information isn’t financial advice. Investment decisions should be based on specific financial needs, goals and risk appetite.
Neither SoFi nor its affiliates is a bank.
SoFi Checking and Savings^TM is offered through SoFi Securities, LLC, member FINRA/SIPC.
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.
MN18140

Congratulations! Not only have you graduated college, but you’re also starting your first job. It’s an exciting time, and a great opportunity to use what you learned in college and apply it to life on your own: how to manage your time, how to meet and engage with different types of people, and, of course, all the knowledge you picked up in class. However, something else many students pick up in college is student loan debt.

According to Forbes , student loan debt is quickly catching up with mortgage debt.

In fact, student debt now ranks as the second-highest consumer debt category in the United States. CNBC reported that in 2018, the average student loan debt upon graduation was $37,172, which marks a $20,000 increase from 2005.

And it’s not just a few people graduating with debt—an estimated 70% of all college students will graduate owing money to somebody else.

In fact, Americans collectively hold $1.5 trillion in student debt. That’s a lot of money, especially when you take into account how little entry-level salaries can pay these days, even for college graduates.

According to the National Center for Education Statistics , the most popular undergraduate degree in America is a business-related degree. It’s undoubtedly a versatile academic path and business majors have the ability to work in a number of fields, but it’s a degree that comes with an average entry-level job salary of just $62,000 a year, according to PayScale .

Trying to balance an entry-level paycheck with rent, food, bills, and massive student loans can be overwhelming, but it’s not impossible. Delaying loan payments isn’t necessary; here’s how you can start paying off your student loans on just an entry-level salary.

Creating a Budget That Includes Paying off Debt

Upon graduation and starting your new job, it’s key to create a budget that’s comfortable for you. This can include setting aside money to grow both an emergency fund and a retirement fund.

To create a budget, gather all of your financial documents, including your post-tax income statements. You’ll also need to compile all your monthly bills, such as rent, utilities, food, entertainment expenses, insurance, the minimum requirement on your student loan repayments, and anything else you spend money on each month.

Tally up your expenses, and see how much you have left over after putting your after-tax income toward your bills. If you have money left over, consider stashing some away in an emergency fund and some in a retirement account—any amount can help. (Note: Retirement may seem far away, but if you start early you could see serious returns in your golden years.

As NerdWallet calculated, assuming a 7% interest rate, if you start saving $200 a month when you turn 25, you could have about $528,000 by the time you turn 65.)

Consider a Job Eligible for Public Service Loan Forgiveness

If you’re willing to work in the public sector and are open to relocating, several states have programs that may forgive part or all of your student loans. These programs are often geared toward students who recently completed grad school.

So a forgiveness program like this might be a fit for post-grads earning an entry-level salary. For example, if qualified health care professionals agree to work in areas of Alaska experiencing a provider shortage, the state may pay off up to $35,000 of those graduates’ loans.

California offers a similar deal for health care workers, offering repayment assistance up to $50,000 for a two-year commitment to working full time in high-need areas.

In North Dakota , qualified veterinarians can see up to $80,000 of their student loans repaid by the state if they are willing to live and work there for four years.

On the federal level, teachers may be able to take advantage of the Teacher Loan Forgiveness Program in all states. To qualify, the teacher must teach full time for five consecutive academic years in a low-income school or educational service agency.

Consider an Income-Based Repayment (IBR) Plan

The government is willing to help those who cannot afford their current federal student loan payments with programs including IBR, Income-Contingent Repayment (ICR), Pay As You Earn (PAYE), and Revised Pay As You Earn (REPAYE).

What all of these essentially do is rejigger your repayments to an amount you can afford each and every month. NerdWallet explains that the right IBR plan could reduce your payments to as little as 10% of your discretionary income each month. So, if you took out a loan after 2014 and are currently paying more than 10% of your discretionary income on a student loan, the IBR plan may be an excellent option for you.

Think about a Side Hustle

Sometimes, an entry-level salary isn’t enough to make a dent on your student loan balance. For those feeling particularly underwater with student loan repayments, getting a side hustle may be the answer, but not all side gigs are created equal. To help subsidize your entry-level job salary, look for a gig you’ll actually find fulfilling. This could involve using pre-existing skills, such as freelance photography, copy editing, or consulting.

It could also just be something you enjoy doing and is easy to get involved in, such as driving for a ride-sharing company or completing tasks for people via a site like TaskRabbit. Whatever it is, try to make it fun or useful for your future career goals so it feels less like work.

Look into Refinancing Your Student Loans

If you’re unhappy with your current student loan rates, you may find relief through student loan refinancing.

By refinancing, you could make your student loan debt more manageable and potentially become debt-free sooner. (Don’t forget that refinancing with a private lender means you’re no longer eligible for the federal programs we mentioned above—like PAYE, REPAYE, loan forgiveness, and income-based repayment plans.)

You can start by checking out SoFi’s student loan refinancing options and see if there’s a better interest rate out there for you. You might be able to lower your payments or shorten your term.

Notice: SoFi refinance loans are private loans and do not have the same repayment options that the federal loan program offers such as Income Based Repayment or Income Contingent Repayment or PAYE. SoFi always recommends that you consult a qualified financial advisor to discuss what is best for your unique situation.
No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third party trademarks referenced herein are property of their respective owners.
The savings and experiences mentioned herein may not be representative of the experiences of all members. Savings are not guaranteed and will vary based on your unique situation and other factors.
SoFi does not render tax or legal advice. Individual circumstances are unique and we recommend that you consult with a qualified tax advisor for your specific needs.
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.
SLR18197

Retirement is supposed to be the golden age of relaxation. Whether it be reading the garden, lazy days spent fishing, or early mornings on the golf course, when you retire, there are no bosses or daily meetings to preoccupy you. But what is the best way to get there?

Saving for retirement can seem daunting, especially when you consider housing expenses, student loan debt, and other day-to-day living expenses.

The average American retirement savings leave much to be desired. Most Americans nearing retirement age in the U.S. have only 12% of the recommended $1 million saved.

Actively preparing for retirement is one of the best ways to ensure you can spend your later years relaxing and enjoying your well-earned time off. There are a wide variety of accounts that allow you to save for retirement, from Traditional and Roth IRAs to a 401k, 403b, or other investment accounts. One of the most popular retirement vehicles is the 401k.

If you’re getting ahead on saving for retirement you may be wondering “how much should I have in my 401k?” While the answer to that varies depending on your financial situation, age, and more, there are a few retirement guidelines that can help you better prepare for the future.

What Is a 401k?

A 401k is an employer-sponsored retirement plan that allows both you and your employer to make contributions to the account. If your employer offers a 401k plan, you are most likely able to select a percentage or specific monetary amount to contribute to your 401k from each paycheck.

One of the major benefits of a 401k is that your employer can also make contributions. If your employer offers matching contributions, it makes sense to participate in the 401k plan, at least up until the matching maximum. Matched contributions are determined at your employer’s discretion, so check your company policy to see what is offered at your workplace.

There are two kinds of 401ks. When you contribute money to a traditional 401k, the money is tax deductible, but will be taxed when you withdraw it in retirement, at the income bracket you are in at that time. When you contribute to a Roth 401k, the money is taxed at the time of contribution, at the tax rate you are currently in. But it’s not taxed when you withdraw the money.

For both Roth and Traditional 401ks, the contribution limit for 2018 is $18,500. If you are over the age of 50, you are allowed to contribute an additional $6,000, known as a catch-up contribution. When you contribute money to a 401k, it is intended to be used in retirement .

Because of this, there is a penalty if you withdraw money before the age of 59 ½. On the other side of the age spectrum, if you do not begin withdrawals by the age of 70 ½, you will be faced with fines and penalties.

Average 401k Balance by Age

Your readiness for retirement will depend on a few factors; including your age, income, and expected retirement age. While everyone’s situation is different, it’s never too early—or too late—to start preparing for retirement.

To see if you’re on track with your retirement goals, take advantage of free online resources, like a retirement calculator that will help you estimate your financial readiness for retirement.

The earlier you start saving for retirement, the better. But if you’ve gotten a late start, there are ways to boost your retirement savings. As you age, your strategies for saving for retirement will shift. Here’s what to expect in your 20s and beyond.

In Your 20s

You’re just starting out in the work force and chances are you’re still paying off your student loan debt. While paying off your student loans and spending money on happy hour may seem more important than saving for retirement, the earlier you begin saving, the more time you will have to benefit from compound interest.

Compound interest is interest calculated on the initial principal and on the interest accumulated over the previous deposit period. This means saving for retirement in your 20s has significant advantages when you are finally ready to retire. Some experts think by the time you turn 30 , you should have saved one year’s salary toward your retirement. The average 401k savings for someone in their 20s in 2017 was $9,900.

In Your 30s

Your 30s are when you want to kick your retirement savings into high gear. It’s a good rule of thumb to up your retirement savings contributions to 15% of your monthly income . You may have other expenses like kids or a mortgage, but you’re also likely making a bit more money than you were in your 20s—so take advantage and invest some of that money in your future.

No one else will be looking out for your financial health in retirement. The average 401k savings for someone in their 30s in 2017 was $38,400.

In Your 40s

By the time you have reached your 40s, you should have a considerable chunk of change socked away for retirement. Common financial advice is that you have at least three times your annual salary saved at 40 if you intend to retire at 67. Often times, your 40s are also when you’re faced with financing your children’s education.

And when push comes to shove, many parents will put their child’s education ahead of their retirement savings. You’re now considerably closer to retirement than you were at 22, so consider opening an independents retirement savings account like an IRA, in addition to contributing to your company’s 401k plan.

Diversifying your investments may help reduce some investment risk. The average 401k savings for someone in their 40s in 2017 was $91,000.

In Your 50s

When you turn 50, you can begin making catch-up contributions to your 401k and IRA. You can contribute an additional $6,000 a year to a 401k and an additional $1,000 a year to your IRA. Take advantage of these catch-up contributions and continue to save.

Consider adding any bonuses or extra income into your 401k to boost your savings. The average 401k savings for someone in their 50s in 2017 was $152,700.

In Your 60s

As you get into your 60s, you can see retirement at the next exit. Now would be a good time to adjust your investments into less risky options. As retirement becomes more real, take the time to prepare for the unexpected and safeguard some of your investments. The average 401k savings for someone in their 60s in 2017 was $167,700.

But the average couple in their mid-60s will have to cover approximately $280,000 in health care costs. Make sure your retirement plan accounts for health care costs.

About 70% of Americans surveyed in 2016 said they plan to work as long as possible. Extending your working years could lead to financial gains down the road. Depending on when you were born, you qualify for Social Security benefits at different ages. If you were born after 1960, you won’t be able to collect Social Security until you are 67.

Invest with SoFi Invest®

If you are looking for opportunities to expand your retirement savings and complement your employer-sponsored 401k plan, consider investing with SoFi. If you have an old 401K, we can help you find out how much you are paying in management fees. Then, we can help you determine the impact of rolling over your 401K into an IRA with SoFi. Schedule an appointment here.

Additionally, at SoFi, we offer a competitive wealth management account with no SoFi management fees and members get complimentary access to financial advisors.

We’ll work with you to establish your financial goals and determine the risk profile you are most comfortable with. SoFi will work to diversify your investments and automatically rebalance your profile as needed. You can start investing with as little as $100.

SoFi can’t guarantee future financial performance.
This information isn’t financial advice. Investment decisions should be based on specific financial needs, goals and risk appetite.
Diversification can help reduce some investment risk. It cannot guarantee profit or fully protect loss in a down market.
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.
Advisory services offered through SoFi Wealth, LLC, a registered investment advisor.
WM18205

Target Date Fund Basics

Target date funds are becoming increasingly common when it comes to saving for retirement. A target date fund is a mutual fund with a passive mix of investments curated based on when you’re likely to retire.

They are also sometimes referred to as “set it and forget it” funds, and are relatively popular investment options because they are fairly easy to understand and offer a decent return on investment. You simply put your money in a fund with the target date you plan to retire—and you don’t have to think about it on the daily.

Target date funds surpassed the $1 trillion mark in 2017 —meaning that over $1 trillion in our retirement savings are now invested in these funds—and about nine in 10 employer retirement plans now offer target date funds as an option. Target date funds are, simply, funds organized around a target date for retirement.

For example, a 2050 fund means you are hoping to use those retirement funds in 2050. The idea is that by picking a fund aimed at a specific date, the mix of investments can change as you near that date.

This means you might have riskier investments with the potential for greater return earlier in the fund’s life, when retirement is decades away. Your investments gradually become less risky as retirement nears.

However, it should be noted—as with all investments—target date funds are not without inherent risk. You can lose or gain money if the stocks, bonds, or mutual funds you’re invested in go up or down. The return on investment is never guaranteed.

Additionally, even if two funds have the same target date (or similar names), it doesn’t mean they’re the same. The underlying strategy, risk, and asset allocation varies among the best target date funds.

How Target Date Funds Work

Typically, target date funds are mutual funds with a passively managed mix of assets. A mutual fund is a portfolio of stocks, bonds, and securities. You buy into the fund, as do other investors, essentially pooling your money and allowing you to buy a mix of assets you might otherwise not be able to purchase as an individual. Passively managed means you’re not actively trading stocks and securities.

How a specific target date fund shifts its asset mix over time is called its “glide path.” You’ll probably want to research the glide path before committing to a fund. You’ll also want to consider how much risk you want to take. Even though target date funds generally become more conservative over time, the specific risk and asset allocation varies from fund to fund.

How to Pick the Best Target Date Fund for You

The best target date funds are the ones that match your needs, offer the right level of risk for your desired return, and have low management fees. The average target date fund asset-weighted expense ratio for 2017 was 66 basis points—which means 0.66%. And the typical investor pays 0.47% in fees because so many target date funds come from low-cost providers.

That same report found that Vanguard Group, Fidelity, and T. Rowe Price make up nearly 70% of target date fund assets. In addition to considering fees, here are some other issues to weigh when picking the best target date funds for you.

Pick the Right Target Date

You can choose the year you’re hoping to retire, but it’s not a requirement. If you want to be slightly more conservative, you could consider a target date that’s sooner than you plan to retire.

However, you should make these choices consciously (and plan accordingly—don’t pick a date sooner than your actual retirement and then be surprised when there’s not as much return as you want).

And check in regularly to update your target date as necessary—something most people don’t do. One research paper analyzed 34,000 participants in target date funds and found that investors were more likely to pick a target date ending in “0” rather than one ending in “5,” simply because it’s easier to round to zero.

Assess Your Risk Tolerance

A big question with any investment—and target date funds are no different—is how much risk you want and are willing to tolerate. Your risk tolerance can also change over time, and you may want to change the mix of your investments as that happens.

Do you want your target date fund to carry you to retirement or through retirement?

Some target date funds are “to” retirement, meaning they’ll hit their most conservative allocation at the target date and then won’t change much once you retire. But other target date funds are “through” retirement, meaning they continue to adjust and rebalance their mix of funds even after you retire.

Check in on the mix of investments and the fund’s glide path

It’s probably not a great idea to really “set it and forget it.” You’ll want to check in periodically to ensure your fund still meets your needs. Although many employers may automatically enroll you in a target date fund, it doesn’t mean you have to stay in the fund.

If you’re going to want to be more actively involved in investing for your retirement or more aggressive than a traditional asset allocation strategy, then a target date fund might not be right for you. Additionally, if you’re going to need or want more customization, then you might want a different investment product.

Before you decide on products and investment strategies, think about what your financial plans are and your goals for retirement. As a first step, use our retirement calculator to figure out how much you should be saving.

Investing with SoFi Invest®

It’s never too early—or too late—to take control of your retirement savings. If you’re ready to start actively preparing for retirement, consider investing with SoFi Invest. When you open a invest account at SoFi, you’ll gain access to a team of financial advisors who will work with you to create a long-term financial plan. You can get started with as little as $100, with no SoFi management fees.

SoFi can’t guarantee future financial performance.
This information isn’t financial advice. Investment decisions should be based on specific financial needs, goals and risk appetite.
Advisory services offered through SoFi Wealth, LLC, a registered investment advisor.
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.
WM18215

Being a doctor is super rewarding. (We’ll admit, it’s pretty hard to beat saving lives every day.)

But there can be some downsides to the career path, especially when it comes to saving. Because physicians are known to have higher incomes, they are often ineligible for a number of tax breaks and retirement programs. And while recent studies show that 60% of doctors are retired just shy of turning 70¹, current doctors have the opportunity to pursue life outside the hospital long before that.

With a few smart moves, early retirement is possible. Here are three ways doctors can save more now and end their careers at an early retirement age:

Refinance Your Student Loans

Paying back med school loans could keep you working for a while. One way to pay them off more quickly? Refinancing to a lower interest rate or choosing better terms.

As a bonus, this move can save you thousands of dollars that can help you head to earlier retirement. (However, if you are pursuing Public Service Loan Forgiveness Program, don’t do this with your federal student loans—it will make them ineligible.)

Save, Save, Save—Up to 30%

The average worker should aim to save 15% of their income for retirement⁴. However, it’s different for doctors—due to all the extra schooling and high burnout rates in the field, their earnings window is much smaller. That means physicians have less time to take advantage of the compounding interest that comes with investing, or even a regular savings account.

To make up for this, doctors should consider saving at least 30% of their income if they want to retire early. (One helpful tip: Live like you’re still making what you made as a resident!)

Considering Taking Advantage of any and All Pre-Tax Programs at Work

Got an employer match on a 401(k) and 403(b)? HSA or FSA accounts? Commuter benefits? Consider taking advantage of them as a way to put away more money, pre-tax.

Any opportunities you have to save money on taxes can help out a lot when it comes to your goals toward early retirement. In fact, saving money on taxes is one of the best options for doctors with early retirement goals.

These strategies are just a few of the ways you can start working toward financial independence.

Sources:
1. https://www.annfammed.org/content/14/4/344.full
2. https://members.aamc.org/iweb/upload/2017%20Debt%20Fact%20Card.pdf
3. https://www.medscape.com/slideshow/2018-compensation-overview-6009667#2
4. https://time.com/money/4807504/are-you-saving-as-much-of-your-pay-as-the-average-401k-investor/
SoFi can’t guarantee future financial performance.
SoFi doesn’t provide tax or legal advice. Individual circumstances are unique. Consult with a qualified tax advisor or attorney.
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.
This information isn’t financial advice. Investment decisions should be based on specific financial needs, goals and risk appetite.
Advisory services offered through SoFi Wealth, LLC, a registered investment advisor.