HSAs and Medicare: What You Need to Know

Health Savings Accounts (HSA) are tax-advantaged accounts that help you pay for out-of-pocket healthcare expenses. Medicare is government-funded health insurance for those aged 65 and older.

While it’s possible to have an HSA and Medicare at the same time, there are some important rules to be aware of to avoid penalties when you have both. Here’s how Medicare affects an HSA.

Key Points

•   It’s possible to have both an HSA and Medicare, but there are rules regarding Medicare enrollment and HSA contributions.

•   Once enrolled in Medicare, you cannot make new contributions to an HSA, and doing so can lead to IRS penalties.

•   HSA funds can still be used tax-free for qualified medical expenses after enrolling in Medicare.

•   Individuals aged 55 and older can make an additional $1,000 catch-up contribution annually to HSAs until enrolling in Medicare.

•   Maximizing HSA contributions before Medicare enrollment may allow for potential investment growth, which could benefit healthcare expenses in retirement.

Understanding Health Savings Accounts (HSAs)

Health Savings Accounts are tax-advantaged accounts that can be used with high-deductible health plans (HDHP).1 HDHPs are plans that, by law, must set a minimum deductible amount and a maximum out-of-pocket limit for coverage.

In 2024, a plan is considered an HDHP by the IRS when it has a minimum deductible of $1,600 for an individual and $3,200 for a family, and doesn’t exceed $8,050 for an individual and $16,100 for a family. In 2025, a plan qualifies as an HDHP when it has a minimum deductible of $1,650 for an individual and $3,300 for a family, and does not exceed $8,300 for an individual and $16,600 for a family.

When you have an HDHP, you have the option to use an HSA as a way to contribute pre-tax dollars to help cover the higher out-of-pocket upfront costs of these plans. It’s also important to note that HSAs offer investment options such as stocks, bonds, and mutual funds, as well as the possibility for tax-free growth.

If you’re wondering how to set up a health savings account, just remember that being enrolled in an HDHP, either through your employer or self-employed health insurance coverage, is a requirement.

The benefits of an HSA include:

•   Contributions are tax-deductible

•   You and your employer can both contribute, up to annual limits

•   Contributions grow tax-deferred

•   Funds roll over year to year, which is a major difference between an HSA vs. FSA

•   Withdrawals are tax-free when you use them for qualified medical expenses

The IRS sets the annual contribution limits for HSAs. Limits are determined by your coverage type. Here’s how much you could contribute for 2024 and 2025.

2024 HSA Limit

2025 HSA Limit

Individual Coverage $4,150 $4,300
Family Coverage $8,300 $8,550

Annual contribution limits apply to employer and employee contributions. So if you have family coverage and your employer contributes $3,000 to your account for 2024, the most you could contribute is $5,300.

If you’re 55 or older, you can contribute an extra $1,000 a year to your HSA until you enroll in Medicare.

Recommended: What Is a Flexible Spending Account?

HSA Contributions and Medicare Enrollment

Using an HSA for retirement can make sense if you’d like to minimize your out-of-pocket costs for healthcare. But it’s important to properly coordinate your Health Savings Account and Medicare enrollment.

Here’s how the HSA Medicare rules work as you’re looking to manage your healthcare costs in retirement.

How Medicare Affects HSA Eligibility

You can have an HSA with Medicare, but there are some rules. If you enroll in Medicare the month you turn 65, you’ll need to stop contributing to your HSA at the beginning of the month before your 65th birthday month. If you delay enrolling in Medicare until after age 65, a six-month look-back period stipulates that you must stop contributing to your HSA six months before you enroll in Medicare or begin receiving Social Security benefits. Also, you cannot set up a new HSA after enrolling in Medicare.

The reason for these rules? One of the conditions of contributing to an HSA is that you can’t have any other health insurance besides a high-deductible health plan. Thus, since Medicare is health insurance, enrollment automatically disqualifies you from making new HSA contributions.

You can still make withdrawals from your HSA, but according to the HSA rules with Medicare, if you (or your employer) make new contributions to your HSA after Medicare enrollment, the IRS will treat them as excess contributions. Excess contributions are subject to a 6% excise tax penalty, which applies each year those contributions remain in your account.

Managing Your HSA When Transitioning to Medicare

The most important thing to consider with HSA contributions and Medicare is knowing when you need to halt them. If your employer makes contributions to your account for you, you’ll also need to tell them when to discontinue the contributions.

As mentioned previously, if you enroll in Medicare the month you turn 65, you and your employer will need to stop contributing to your HSA at the beginning of the month before your 65th birthday month. That means if your birthday is in July, you should stop contributing at the beginning of June.

If you delay enrolling in Medicare until after age 65, you must stop contributing to your HSA six months before you enroll in Medicare. So, let’s say you plan to enroll in the month you turn 65 and your birthday is September 15th. You would make contributions to your HSA no later than March 15th to avoid a tax penalty.

Recommended: Can You Retire at 62?

Using HSA Funds in Retirement

Like many people, you’re probably wondering how much do you need to retire. Healthcare can be a significant retirement expense, so factoring your HSA into the equation can be helpful.

The more money you have in an HSA, the less you may need to draw from your 401(k), traditional IRA, Social Security benefits, or other assets to pay for medical expenses.

Here are some tips for making the most of HSA funds once you retire.

•   Pay for qualified medical expenses first. The IRS defines what counts as a qualified medical or dental expense in Publication 502. It helps to know what counts and what doesn’t to make sure you’re withdrawing funds tax-free whenever possible.

•   Time non-medical withdrawals carefully. Withdrawing money for anything other than healthcare expenses before age 65 can trigger a 20% tax penalty and you’ll owe income tax on the withdrawal. Once you reach 65, the 20% tax penalty goes away so it’s important to consider the timing if you need to use HSA funds for non-medical expenses.

•   Keep good records. It’s important to keep track of healthcare expenses to get the most mileage out of your HSA. For example, medical billing errors could end up charging you more than you actually need to pay, so it’s wise to review estimates and medical bills carefully before you make a payment.

HSAs vs. Medicare Savings Accounts

A Medicare Savings Account or Medical Savings Account (MSA) is somewhat similar to a Health Savings Account that Medicare enrollees can open. More specifically, an MSA is a special type of savings account you can access through a Medicare Advantage Plan, also known as Medicare Part C.

These accounts combine a high-deductible health plan with a medical savings account. Medicare gives your HDHP a set amount each year for your healthcare expenses, which goes into your MSA. You don’t contribute to your MSA directly; Medicare makes contributions for you. It’s up to you to decide which Medicare-eligible costs you want to use the money to pay for. You can access funds through a checking account, debit card, or credit card, depending on how your MSA is set up.

Recommended: Guide to Health Insurance

Maximizing HSA Benefits Before Medicare

The best way to maximize HSA benefits before enrolling in Medicare is to contribute as much as you can to your account annually, starting in the first year you’re eligible to contribute. The longer you have to invest your HSA funds, the more time your HSA investments may have to grow through the power of compounding returns.

Once you turn 55, remember that you can make an additional $1,000 catch-up contribution each year. That’s an extra $10,000 you could contribute to your plan until you hit your Medicare enrollment window at age 65.

You can also make the most of your benefits by choosing investments in your HSA that offer a combination of solid returns and low fees. If you have multiple HSA accounts with previous employers you may consider consolidating HSAs before enrolling in Medicare so your savings is easier to manage.

Common Mistakes to Avoid

The biggest mistake to avoid with HSAs and Medicare is continuing to contribute after Medicare enrollment. Doing so could trigger a sizable IRS tax penalty, not to mention that correcting excess HSA contributions can be a hassle.

The next biggest mistake is not contributing to your HSA at all in the years leading up to Medicare enrollment. When you don’t contribute anything to your HSA, you miss out on some key tax benefits both now and down the line.

Even if you’re young and healthy now and Medicare enrollment is decades away, you can still benefit from tax-deductible contributions to your HSA. And when you need the money, you’ll appreciate being able to withdraw it tax-free for qualified medical expenses.

The Takeaway

An HSA is a way to help pay for out-of-pocket medical costs and also save and invest money for healthcare needs in retirement. Just be sure to know the rules regarding HSAs and Medicare to maximize your HSA and avoid any penalties.

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.

🛈 While SoFi does not offer Health Savings Accounts (HSAs), we do offer a range of Individual Retirement Accounts (IRAs) to help with retirement planning.

FAQ

Can I contribute to an HSA after enrolling in Medicare?

Once you enroll in Medicare you cannot make new contributions to an existing HSA or set up a new HSA account. If you continue to make HSA contributions after enrolling in Medicare, the IRS can impose a tax penalty until you remove the contributions from your account.

How can I use my HSA funds after enrolling in Medicare?

Once you enroll in Medicare, you can use your HSA funds to pay for qualified medical expenses and those withdrawals are tax-free. Starting at age 65, you can withdraw HSA funds for any reason without a penalty. You’ll just pay income tax on the withdrawals.

What happens to my HSA if I delay enrolling in Medicare?

Delaying Medicare enrollment doesn’t affect your HSA, though you will still need to stop making HSA contributions at least six months before you enroll. However, it’s important to note that late enrollment in Medicare could trigger penalties, so be sure to research and consider all the possible implications before choosing to delay.


photo credit: iStock/SethCortright
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.

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

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

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What Is a Self-Directed SEP IRA?

A self-directed Simplified Employee Pension (SEP) IRA is a tax-advantaged retirement savings plan that’s designed for small business owners and self-employed individuals. When a SEP IRA is self-directed, it means that the account owner chooses their own investment options.

A self-directed SEP IRA can be used to invest in a broad range of investments. At the same time, the SEP IRA has the tax benefits of a standard IRA, when certain conditions are met.

Key Points

•   A self-directed SEP IRA allows small business owners and self-employed individuals to choose their own investment options, offering a broad range of investment opportunities.

•   Contributions are made by employers, with limits set at 25% of an employee’s compensation or $69,000 in 2024, and $70,000 in 2025.

•   The account offers tax benefits to employers and self-employed individuals, including tax-deferred growth. Employers, not employees, can deduct contributions.

•   Qualified withdrawals from a self-directed SEP IRA are taxed as ordinary income. Early withdrawals may incur a 10% penalty.

•   Self-directed SEP IRAs allow for a range of investments, including alternative investments and precious metals. Prohibited investments include life insurance and collectibles.

Understanding SEP IRAs

A SEP IRA is one of several types of retirement accounts that are geared toward business owners and self-employed individuals. Here’s a look at how these plans work.

Definition and Eligibility

A SEP IRA allows the self-employed and business owners to make contributions toward their own retirement — and toward the retirement of any employees they may have. SEP IRAs operate like traditional IRAs in terms of how they’re treated for tax purposes.

Here are some key points to know about these retirement accounts:

•   Contributions to a SEP IRA are made by the employer.

•   Employers are not required to make contributions to the plan every year.

•   If an employer decides to contribute to a SEP IRA, they must do so on behalf of all eligible employees.

•   Employees cannot contribute to their SEP IRA.

•   SEP IRA rules allow employers, not employees, to deduct contributions.

•   Employer contributions don’t affect what employees can contribute to any traditional or Roth IRAs they may own.

•   Qualified withdrawals beginning at age 59 ½ are taxed as ordinary income.

•   Withdrawals made before age 59 ½ can trigger a 10% early withdrawal penalty unless an exception is met.

•   SEP IRAs are subject to required minimum distribution (RMD) rules.

Small businesses of any size can open a SEP IRA, including sole proprietorships. If you run a small business alone you could use a SEP IRA to fund your own retirement.

If you’re self-employed and considering a solo 401(k) vs. SEP IRA, a SEP account is easier to start and generally has fewer fees and paperwork requirements. SEP accounts also offer the same annual contribution limits as individual 401(k) plans.

Contribution Limits and Tax Advantages

The IRS determines the annual contribution limits for SEP IRAs and other retirement plans. For 2024, employers can contribute the lesser of:

•   25% of the employee’s compensation

   OR

•   $69,000

For 2025, employers can contribute the lesser of:

•   25% of an employee’s compensation

   OR

•   70,000

Unlike other retirement plans, SEP IRAs do not allow for catch-up contributions. Again, all of the money comes from the employer; employees cannot make elective salary deferrals.

There are certain tax benefits of a SEP IRA for employers and self-employed individuals. Employers can deduct contributions made to employee plans. For the self-employed, there’s a special formula for determining what to deduct. You’ll use your net earnings from self-employment, less deductions for one-half of your self-employment tax and contributions made to the plan.

Employees don’t get a tax deduction and they’ll owe taxes on qualified withdrawals in retirement. However, they receive the benefit of contributions made to their account on their behalf and they still have the option to contribute to a traditional or Roth IRA themselves.

What Makes a SEP IRA Self-Directed?

With a traditional or Roth IRA, or a workplace retirement plan, your plan’s custodian, which is the financial institution that holds your plan’s investments, decides which investment options to offer. Typically, that might mean a mix of mutual funds, index funds, target-date funds, and exchange-traded funds (ETFs).

Self-directed SEP accounts allow you to choose investments yourself, including alternative investments. Your custodian holds your IRA but you decide how much to contribute up to the annual contribution limits, and how to invest that money.

Benefits of a Self-Directed SEP IRA

A self-directed SEP IRA offers several benefits for people who are comfortable choosing investments themselves. You’ll need to follow self-directed SEP IRA rules to set up one of these accounts, but it could be worth considering if you run a business or are self-employed. Advantages of a self-directed SEP IRA include:

Tax-Deferred Growth and Diversification

When you contribute to a SEP IRA self-directed plan, you fund your account with pre-tax dollars. Those contributions may grow in the account on a tax-deferred basis; qualified withdrawals are taxed at ordinary income tax rates in retirement.

You may be able to increase diversification in your portfolio with a self-directed SEP account since you can choose from a broader range of investment vehicles. While mutual funds can offer exposure to a variety of investments in a single basket, a self-directed IRA could allow you to move beyond that by choosing other types of investments.

Potential for Higher Returns

A self-directed retirement account has the potential to generate higher or lower returns than other retirement accounts, depending on what you choose to invest in and how those investments perform. No investment is without risk. It’s important to research investments for a self directed SEP IRA to compare:

•   Historical performance

•   How performance is affected by current market trends

•   Risk profiles

•   Fees

Higher returns often correspond to higher levels of risk, which is something you’ll need to factor into your decision-making. The closer you are to retirement age, the less comfortable you may be with taking on more risk for the possibility of more profits.

Estate Planning Opportunities

Self-directed SEP IRAs have potential as an estate-planning tool if you’re using them to invest in higher-value assets. The tax-advantaged status of a self-directed IRA may help you preserve more of your wealth if you hold investments that generate significant returns.

You can pass that wealth on by naming one or more beneficiaries to your SEP IRA. You could leave your account to an individual, or name a trust as the beneficiary. Choosing a trust to inherit your self directed IRA funds could make sense if you’d like to maintain a degree of control over how the money is managed after you’re gone.

For instance, if you’re caring for a child, sibling, or other relative with special needs, you might establish a special needs trust on their behalf. You could name the trust as beneficiary to your self- directed retirement accounts to ensure that money is set aside and used for their care.

Setting Up a Self-Directed SEP IRA

Establishing a self-directed IRA for yourself requires some research, as you’ll need to decide which IRA custodian to use and how to fund the account. Once your account is open you’ll need to adhere to tax and reporting requirements.

Choosing a Self-Directed IRA Custodian

A self-directed IRA custodian holds your account and has no responsibility for your investment choices or how those investments perform. When deciding which custodian to use, consider:

•   How easy the new account setup process is

•   What fees you’ll pay

•   Customer support and service if you have questions or need help

•   The company’s overall reputation

The SEC warns investors about fraudulent self-directed IRA custodians who may establish fake companies in an effort to take their money. It’s wise to verify whether a custodian is IRS-approved and licensed before opening a self-directed SEP IRA or transferring any money to the account.

Rollover or Transfer Process

Once you’ve found a reputable custodian to work with, you can begin the process of opening and funding your account. The IRS allows you to roll over or transfer funds from an existing retirement account into a self-directed SEP IRA.

•   Trustee-to-trustee transfers allow you to move money directly from your old IRA custodian or trustee to your new one. No money enters your hands directly and no taxes are withheld from the transfer amount.

•   Direct rollovers let you move money from one type of retirement account, such as a solo 401(k), into a different one, like a self-directed SEP IRA. Similar to transfers, no money enters your hands and no taxes are withheld from the rollover amount.

•   Indirect rollovers involve the administrator of your old retirement account sending you a check for the money in the plan, with taxes on the distribution withheld. You then have 60 days to deposit the check into your new self-directed SEP account to avoid a tax penalty.

Of these options, a direct transfer or rollover IRA is the simplest option. Your new custodian should provide you with the paperwork you need to fill out and the information you need to give to your old custodian to initiate a transfer or rollover.

Account Administration and Reporting

Your custodian should handle annual tax filing and reporting requirements with the IRS for you. However, you’re responsible for keeping track of contributions and investment choices, as well as adhering to self-directed SEP IRA rules to maintain the account’s tax-advantaged status.

The IRS outlines the prohibited transactions you must avoid. Failing to follow self-directed IRA rules would cause you to lose their associated tax benefits, including the ability to deduct contributions and tax-deferred growth.

Examples of prohibited transitions include:

•   Borrowing money from your self-directed IRA

•   Selling property to it

•   Using your IRA assets as collateral for a loan

•   Using money from your IRA to buy property for personal use

The rules surrounding self directed IRAs and prohibited transactions are complex. You may benefit from talking to a financial advisor so you know what to avoid when managing your account.

Investment Options in a Self-Directed SEP IRA

What can you invest in with a self directed SEP account? Besides mutual funds, ETFs, stocks, and bonds, there are typically a range of alternative investments, such as:

•   Real estate, including land

•   Precious metals

•   Private equity

•   Private debt

•   Cryptocurrency

•   Tax liens

•   Commodities

•   Mineral rights or land rights

•   Bonds

•   Convertible notes

•   Venture capital

There are, however, a few things you can’t use a self-directed IRA to invest in. The IRS does not allow you to use them to invest in life insurance or anything that’s considered a collectible, such as artwork, antiques, gems, stamps, coins, or fine wines.

The Takeaway

Self-directed SEP IRA accounts may help you build retirement wealth while enjoying some tax advantages along the way. Once you set up an investment account for your SEP IRA, you have the freedom to choose what you’d like to invest in and how you’d like to shape your investment strategy. Just be sure to thoroughly research any investment options you’re considering, and make sure you’re comfortable with the risk involved.

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

Who can open a self-directed SEP IRA?

Self-directed SEP IRAs are available to small businesses of all sizes, including sole proprietorships. If you’re self-employed, you may choose to invest for retirement through a self- directed SEP IRA instead of a solo 401(k) or SIMPLE IRA.

What are the contribution limits for a self-directed SEP IRA?

The annual contribution limit for a self-directed SEP IRA in 2024 is the lesser of 25% of an employee’s compensation or $69,000. In 2025, the contribution limit is the lesser of 25% or $70,000. If you’re self-employed, you’ll need to use a special formula to determine how much of your contributions you can deduct.

Are there any prohibited investments in a self-directed SEP IRA?

The IRS prohibits transactions that involve “self-dealing,” meaning using your self-directed SEP IRA in a way that gives you a personal financial benefit rather than benefiting the IRA (such as using the IRA to buy a property you already own). You’re also barred from using a self-directed SEP IRA to invest in life insurance and collectibles, such as artwork, antiques, fine wines, or rare coins.


photo credit: iStock/SethCortright
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.


Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.

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

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

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Roth IRA Explained

A Roth IRA is an individual retirement account that allows you to contribute after-tax dollars and then withdraw your money tax-free in retirement. A Roth IRA is different from a traditional IRA in which you contribute pre-tax dollars but owe tax on the money you withdraw in retirement.

A Roth IRA can be a valuable way to help save for retirement over the long-term with the potential for tax-free growth. Read on to learn how Roth IRAs work, the rules about contributions and withdrawals, and how to determine whether a Roth IRA is right for you — just think of it as Roth IRA information for beginners and non-beginners alike.

Key Points

•   A Roth IRA is a retirement savings account that offers tax-free growth and tax-free withdrawals in retirement.

•   Contributions to a Roth IRA are made with after-tax dollars, and qualified withdrawals are not subject to income tax.

•   Roth IRAs have income limits for eligibility, and contribution limits that vary based on age and income.

•   Unlike traditional IRAs, Roth IRAs do not entail required minimum distributions (RMDs) during the account holder’s lifetime.

•   Roth IRAs can be a valuable tool for long-term retirement savings, especially for individuals who expect to be in a higher tax bracket in the future.

What Is a Roth IRA?

A Roth IRA is a retirement account that provides individuals with a way to save on their own for their golden years.

You can open a Roth IRA at most banks, online banks, or brokerages. Once you’ve set up your Roth account, you can start making contributions to it. Then you can invest those contributions in the investment vehicles offered by the bank or brokerage where you have your account.

What differentiates a Roth IRA from a traditional IRA is that you make after-tax contributions to a Roth. Because you pay the taxes upfront, the earnings in a Roth grow tax free. When you retire, the withdrawals you take from your Roth will also be tax free, including the earnings in the account.

With a traditional IRA, you make pre-tax contributions to the account, which you can deduct from your income tax, but you pay taxes on the money, including the earnings, when you withdraw it in retirement.

Roth IRA Contributions

There are several rules regarding Roth IRA contributions, and it’s important to be aware of them. First, to contribute to a Roth IRA, you must have earned income. If you don’t earn income for a certain year, you can’t contribute to your Roth that year.

Second, Roth IRAs have annual contribution limits (see more on that below). If you earn less than the Roth IRA contribution limit for the year, you can only deposit up to the amount of money you made. For instance, if you earn $5,000 in 2025, that is the maximum amount you can contribute to your Roth IRA for that year.

In addition, there are income restrictions regarding Roth IRA contributions. In 2025, in order to contribute the full amount to a Roth, single filers must have a modified adjusted gross income (MAGI) of less than $150,000, and married joint filers must have a MAGI of less than $236,000. Single filers whose MAGI is $150,000 up to $165,000 can contribute a reduced amount, and if their MAGI is $165,000 or more, they can’t contribute to a Roth. Married couples filing jointly who earn $236,000 up to $246,000 can contribute a reduced amount, and if their MAGI is $246,000 or more, they are not eligible to contribute.

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Tax Treatment

Contributions to a Roth IRA are made with after-tax dollars — meaning you pay taxes on the money before contributing it to your Roth. You can’t take your contributions as income tax deductions as you can with a traditional IRA, but you can withdraw your contributions at any time with no taxes or penalties. Once you reach age 59 ½ or older, you can withdraw your earnings, along with your contributions, tax-free.

If you expect to be in a higher tax bracket in retirement, or if you want to maximize your savings in retirement and not have to pay taxes on your withdrawals then, a Roth IRA may make sense for you.

Contribution Limits

As mentioned, Roth IRAs have annual contribution limits, which are the same as traditional IRA contribution limits.

For both 2024 and 2025, the annual IRA contribution limit is $7,000 for individuals under age 50, and $8,000 for those 50 and up. The extra $1,000 is called a catch-up contribution for those closer to retirement.

Remember that you can only contribute earned income to a Roth IRA. If you earn less than the contribution limit, you can only deposit up to the amount of money you made that year.

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Tax-Free Withdrawals

As noted, you can make withdrawals, including earnings, tax-free from a Roth once you reach age 59 ½. And you can withdraw contributions tax-free at any time. However, there are some specific Roth IRA withdrawal rules to know about so that you can make the most of your IRA.

Qualified Distributions

Since you’ve already paid taxes on the money you contribute to your Roth IRA, you can withdraw contributions at any time without paying taxes or a 10% early withdrawal penalty. But you cannot withdraw earnings tax- and penalty-free until you reach age 59 ½.

For example, if you’re age 45 and you’ve contributed $25,000 to a Roth through your online brokerage over the last five years, and your investments have seen a 10% gain (or $2,500), you would have $27,500 in the account. But you could only withdraw up to $25,000 of your contributions tax-free, and not the $2,500 in earnings.

The 5-Year Rule

According to the 5-year rule, you can withdraw Roth IRA account earnings without owing tax or a penalty, as long as it has been five years or more since you first funded the account, and you are 59 ½ or older.

The 5-year rule applies to everyone, no matter how old they are when they want to withdraw earnings from a Roth. For example, even if you start funding a Roth when you’re 60, you still have to wait five years to take qualified withdrawals.

Non-Qualified Withdrawals

Non-qualified withdrawals of earnings from a Roth IRA depends on your age and how long you’ve been funding the account.

•   If you meet the 5-year rule, but you’re under age 59 ½, you’ll owe taxes and a 10% penalty on any earnings you withdraw, except in certain cases, as noted below.

•   If you don’t meet the 5-year rule, meaning you haven’t had the account for five years, and if you’re less than 59 ½ years old, in most cases you will also owe taxes and a 10% penalty.

Exceptions

You can take an early or non-qualified withdrawal prior to 59 ½ without paying a penalty or taxes in certain circumstances, including:

•   For a first home. You can take out up to $10,000 to pay for buying, building, or rebuilding your first home.

•   Disability. You can withdraw money if you qualify as disabled.

•   Death. Your heirs or estate can withdraw money if you die.

  Additionally you may be able to avoid the 10% penalty (although you’ll still generally have to pay income taxes) if you withdraw earnings for such things as:

•   Medical expenses. Specifically, those that exceed 7.5% of your adjusted gross income.

•   Medical insurance premiums. This applies to health insurance premiums you pay for yourself during a time in which you’re unemployed.

•   Qualified higher education expenses. This includes expenses like college tuition and fees.

Advantages of a Roth IRA

Depending on an individual’s income and circumstances, a Roth IRA has a number of advantages.

Advantages of a Roth IRA

•   No age restriction on contributions. Roth IRA account holders can make contributions at any age as long as they have earned income for the year.

   * You can fund a Roth and a 401(k). Funding a 401(k) and a traditional IRA can sometimes be tricky, because they’re both tax-deferred accounts. But a Roth IRA is after-tax, so you can contribute to a Roth and a 401(k) at the same time and stick to the contribution limits for each account.

•   Early withdrawal option. With a Roth IRA, an individual can generally withdraw money they’ve contributed at any time without tax or penalties (but not earnings). In contrast, withdrawals from a traditional IRA before age 59 ½ may be subject to a 10% penalty.

•   Qualified Roth withdrawals are tax-free. Investors who have had the Roth for five years or more, and are at least 59 ½, are eligible to take tax- and penalty-free withdrawals of contributions and earnings.

•   No required minimum distributions (RMDs). Unlike traditional IRAs, which require account holders to start withdrawing money at age 73, Roth IRAs do not have RMDs. That means an individual can withdraw the money as needed without fear of triggering a penalty.

Disadvantages of a Roth IRA

Roth IRAs also have some disadvantages to consider. These include:

•   No tax deduction for contributions. A primary disadvantage of a Roth IRA is that your contributions are not tax deductible, as they are with a traditional IRA and other tax-deferred accounts like a 401(k).

•   Higher earners often can’t contribute to a Roth. Individuals with a higher MAGI are generally excluded from Roth IRA accounts, unless they do what’s known as a backdoor Roth or a Roth conversion.

•   The 5-year rule applies. The 5-year rule can make withdrawals more complicated for investors who open a Roth later in life. If you open a Roth or do a Roth conversion at age 60, for example, you must generally wait five years to take qualified withdrawals of contributions and earnings or face a penalty.

•   Low annual contribution limit. The maximum amount you can contribute to a Roth IRA each year is low compared to other retirement accounts like a SEP IRA or 401(k). But, as noted above, you can combine saving in a 401(k) with saving in a Roth IRA.

Roth IRA Investments

How does a Roth IRA make money? Once you contribute money to your IRA account you can invest those funds in different assets such as mutual funds, exchange-traded funds (ETFs), stocks, and bonds. Depending on how those investments perform, you may earn money on them (however, no investment is guaranteed to earn money). And if you leave your earnings in the account, you can potentially earn money on your earnings through a process called compounding returns, in which your money keeps earning money for you.

To choose investments for your Roth IRA, consider your financial circumstances, goals, timeframe (when you will need the money), and risk tolerance level. That way you can determine which investment options are best for your situation.

Is a Roth IRA Right for You?

How do you know whether you should contribute to a Roth IRA? This checklist may help you decide.

•   You might want to open a Roth IRA if you don’t have access to an employer-sponsored 401(k) plan, or if you do have a 401(k) plan but you’ve already maxed out your contribution to it. You can fund both a Roth IRA and an employer-sponsored plan.

•   Because Roth contributions are taxed immediately, rather than in retirement, using a Roth IRA can make sense if you are in a lower tax bracket currently. It may also make sense to open a Roth IRA if you expect your tax bracket to be higher in retirement than it is today.

•   Individuals who are in the beginning of their careers and earning less might consider contributing to a Roth IRA now, since they might not qualify under the income limits later in life.

•   A Roth IRA may be helpful if you think you’ll work past the traditional retirement age, as long as your income falls within the limits. Since there is no age limit for opening a Roth and RMDs are not required, your money can potentially grow tax-free for a long period of time.

The Takeaway

A Roth IRA can be a valuable tool to help save for retirement. With a Roth, your earnings grow tax-free, and you can make qualified withdrawals tax-free. Plus, you can withdraw your contributions at any time with no taxes or penalties and you don’t have to take required minimum distributions (RMDs).

That said, not everyone is eligible to fund a Roth IRA. You need to have earned income, and your modified adjusted gross income cannot exceed certain limits. You must fund your Roth for at least five years and be 59 ½ or older in order to make qualified withdrawals of earnings. Otherwise, you would likely owe taxes on any earnings you withdraw, and possibly a penalty.

Still, the primary advantage of a Roth IRA — being able to have an income stream in retirement that’s tax-free — may outweigh the restrictions.

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 build your nest egg with a SoFi IRA.

FAQ

Are Roth IRAs insured?

If your Roth IRA is held at an FDIC-insured bank and is invested in bank products like certificates of deposit (CDs) or money market account, those deposits are insured up to $250,000 per depositor, per institution. On the other hand, if your Roth IRA is with a brokerage that’s a member of the Securities Investor Protection Corporation (SIPC), and the brokerage fails, the SIPC provides protection up to $500,000, which includes a $250,000 limit for cash. It’s very important to note that neither FDIC or SIPC insurance protects against market losses; they only cover losses due to institutional failures or insolvency.

How much can I put in my Roth IRA monthly?

For tax years 2024 and 2025, the maximum you can deposit in a Roth or traditional IRA is $7,000, or $8,000 if you’re over 50. How you divide that per month is up to you. But you cannot contribute more than the annual limit.

I opened a Roth IRA — now what?

After you open a Roth IRA, you can make contributions up to the annual limit. Then you can invest those contributions in assets offered by your IRA provider. Typically you can choose from such investment vehicles as mutual funds, exchange-traded funds, stocks and bonds.


SoFi Invest®

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

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

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

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

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

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What Is an Interest-Only Loan Mortgage?

An interest-only mortgage lets you pay just interest for a set period of time, typically between seven and 10 years, as opposed to paying interest plus principal from the beginning of the loan term.

While interest-only mortgages can mean lower payments for a while, they also mean you aren’t building up equity (ownership) in your home. Plus, you will likely have a big jump in payments when the interest-only period ends and you are repaying both interest and principal.

Read on to learn how interest-only mortgages work, their pros and cons, and who might consider getting one.

Note: SoFi does not offer interest only mortgages at this time. However, SoFi does offer conventional mortgage loan options.

How Do Interest-Only Mortgages Work?

With an interest-only mortgage, you solely make interest payments for the first several years of the loan. During this time, your payments won’t reduce the principal and you won’t build equity in your home.

When the interest-only period ends, you generally have a few options: You can continue to pay off the loan, making higher payments that include interest and principal; look to refinance the loan (which can provide for new terms and potentially lower interest payments with the principal); or choose to sell the home (or use saved up cash) to fully pay off the loan.

Usually, interest-only loans are structured as a type of adjustable-rate mortgage (ARM). The interest rate is fixed at first then, after a specified number of years, the interest rate increases or decreases periodically based on market rates. ARMs usually have lower starting interest rates than fixed-rate loans, but their rates can be higher during the adjustable period. Fixed-rate interest-only mortgages are uncommon.

An interest-only mortgage typically starts out with a lower initial payment than other types of mortgages, and you can stick with those payments as long as 10 years before making any payments toward the principal. However, you typically end up paying more in overall interest than you would with a traditional mortgage.

💡 Quick Tip: When house hunting, don’t forget to lock in your mortgage loan rate so there are no surprises if your offer is accepted.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.

Questions? Call (888)-541-0398.


Interest-Only Loan Pros and Cons

Before you choose to take out an interest-only mortgage, it’s a good idea to carefully weigh both the benefits and drawbacks.

Pros

•  Lower initial payments The initial monthly payments on interest-only loans tend to be significantly lower than payments on regular mortgages, since they don’t include any principal.

•  Lower interest rate Because interest-only mortgages are usually structured as ARMs, initial rates are often lower than those for 30-year fixed-rate mortgages.

•  Frees up cash flow With a lower monthly payment, you may be able to set aside some extra money for other goals and investments.

•  Delays higher payments An interest-only mortgage allows you to defer large payments into future years when your income may be higher.

•  Tax benefits Since you can deduct mortgage interest on your tax return, an interest-only mortgage could result in significant tax savings during the interest-only payment phase.

Cons

•  Cost more overall Though your initial payments will be smaller, the total amount of interest you will pay over the life of the loan will likely be higher than with a principal-and-interest mortgage.

•  Interest-only payments don’t build equity You won’t build equity in your home unless you make extra payments toward the principal during the interest-only period. That means you won’t be able to borrow against the equity in your home with a home equity loan or home equity line of credit.

•  Payments will increase down the road When payments start to include principal, they will get significantly higher. Depending on market rates, the interest rate may also go up after the initial fixed-rate period.

•  You can’t count on refinance If your home loses value, it could deplete the equity you had from your down payment, making refinancing a challenge.

•  Strict qualification requirements Lenders often have higher down payment requirements and stricter qualification criteria for interest-only mortgages.

Recommended: What Is Considered a Good Mortgage Rate?

Who Might Want an Interest-Only Loan?

You may want to consider an interest-only mortgage loan if:

•  You want short-term cash flow A very low payment during the interest-only period could help free up cash. If you can use that cash for another investment opportunity, it might more than cover the added expense of this type of mortgage.

•  You plan to own the home for a short time If you’re planning to sell before the interest-only period is up, an interest-only mortgage might make sense, especially if home values are appreciating in your area.

•  You’re buying a retirement home If you’re nearing retirement, you might use an interest-only loan to buy a vacation home that will become your primary home after you stop working. When you sell off your first home, you can use the money to pay off the interest-only loan.

•  You expect an income increase or windfall If you expect to have a significant bump up in income or access to a large lump sum by the time the interest period ends, you might be able to buy more house with an interest-only loan.

Recommended: Tips for Shopping for Mortgage Rates

Qualifying for an Interest-Only Loan

Interest-only loans aren’t qualified mortgages, which means they don’t meet the backing criteria for Fannie Mae, Freddie Mac, or the other government entities that insure mortgages. As a result, these loans pose more risk to a lender and, therefore, can be more difficult to qualify for.

In general, you may need the following to get approved for an interest-only loan:

•  A minimum credit score of 700 or higher

•  A debt-to-income (DTI) ratio of 43% or lower

•  A down payment of at least 20% to 30% percent

•  Sufficient income and assets to repay the loan

The Takeaway

An interest-only mortgage generally isn’t ideal for most home-buyers, including first-time home-buyers. However, this type of mortgage can be a useful tool for some borrowers with strong credit who fully understand the risks involved and are looking at short-term ownership or have a plan for how they will cover the step-up in payment amounts that will come down the road.

Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.


SoFi Mortgages: simple, smart, and so affordable.


SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.


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SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.


*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.

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.

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

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What Is Time in Force? Definition and Examples

What Is Time in Force? Definition and Examples


Editor's Note: Options are not suitable for all investors. 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. Please see the Characteristics and Risks of Standardized Options.

Time in force (TIF) is a stock investing term referring to the length for which a trading order is good. Although casual or buy-and-hold investors may not use time-in-force stock limits, they’re an important tool for active traders.

Understanding different time-in-force options may help you close out positions more efficiently.

Key Points

•   “Time in force” is a stock investing term that defines how long a trading order remains active before expiring.

•   Different types of TIF orders include day order, on-open order (OOO), market on close order (MOC), and good ’til canceled order (GTC).

•   Understanding these orders helps active traders manage trade executions and avoid unintended trades.

•   Casual or long-term investors typically do not use TIF orders.

What Does Time in Force Mean?

Time in force is a directive, set by a trader, that defines how long a trade will remain open (or “in force”) before expiring. Options traders and other active traders can set an appropriate end date for their trades to help prevent unintended executions.

Without an end date, an order could be filled at an unfavorable time or price, particularly in markets that move fast. This is especially true for investors employing day-trading strategies and taking advantage of volatile market conditions with rapidly changing prices.

Basics of Time in Force

Before you place a time-in-force stock order, you’ll want to make sure that you understand exactly how they work. As with options trading terminology, it’s important to understand the language used to describe time-in-force orders.

Recommended: A Guide to Trading Options

Types of Time in Force Orders

Time in force is not a specific kind of stock market order. Instead, the phrase refers to the collection of order types that set how long a trade order is valid — or “in force” — in order to pursue potential investment opportunities. If you are considering a buy-to-open (purchasing a new position) or buy-to-close order (closing an existing position), you can also specify the time in force for either of them.

There are several kinds of time-in-force orders, although not every broker or dealer supports them.

1. Day Order

Of the different time-in-force orders used in options trading and other types of trading, day orders are the most common. With a day order, your trade remains open until the end of the trading day. This may happen if the order’s pricing conditions were not met (such as the price on a limit order). If your order has not been executed at the close of the day’s markets, it will expire.

With many brokers, including online brokerage firms, day orders represent the default option. Thus, this is the time in force order with which most people are likely familiar.

2. On-Open Order

Depending on the types of order that your broker or dealer offers, there can be two different types of options for trades executed at market open: MOO and LOO.

A MOO is an order filled when the market opens, at the prevailing opening price. With a LOO order, you can set a limit price for the highest price you’ll pay or the lowest price at which you’ll sell. If the market opens within the constraints of your limit order, it will be executed. Otherwise, your broker will cancel the LOO order.

3. Market on Close Order

A market-on-close (MOC) order requests the sale or purchase of a security at the final closing price of the trading day. These orders may help you avoid intraday trading volatility or simplify trade execution without having to closely monitor the market for fluctuations.

If your brokerage offers MOCs, they may have a cutoff time by which you need to enter in any MOC orders.

Recommended: Buy to Open vs. Buy to Close

4. What Is Good ‘Til Canceled (GTC)?

As its name suggests, a good-til-canceled (GTC) order is a type of time-in-force order that remains in force until you proactively cancel the order or it is filled. Depending on the type of trading or options trading strategy you’re employing, a GTC order may be worth considering if you’re waiting for the underlying stock price to move. Many brokerages will restrict the number of days a GTC order can remain open, often to 90 days.

The maximum potential gain for these orders is the difference between the limit price and the original purchase price, so long as the stock moves in your favor and the trade executes. If the stock fails to reach your target and continues to decline, you may face missed opportunities for smaller gains or risk holding a depreciating asset, leading to unrealized losses.

5. What Is Fill or Kill (FOK)?

FOK orders ensure that trades are executed in full and immediately. If that cannot happen, the order is canceled completely. This helps traders avoid partial fills, which may result in executing orders at differing prices, or with additional transaction fees.

Examples of Time in Force

You currently own shares of a stock that announced earnings last night, and you’re considering liquidating (or selling) your position. You’re not sure how the market will react to the earnings news, so you place a LOO order for more than you paid per share. If the stock opens at this number or higher, your trade will execute. If not, your broker will cancel it.

If the stock’s shares have been rising all day, but you anticipate that it may open at a lower price, you might use a MOC order to try to sell at the end-of-day price.

The maximum potential gain from a market-on-close order depends on how much the stock’s closing price exceeds your original purchase price. For instance, if you bought shares of a stock that closes at an increase in price, your maximum potential gain would be the difference in the price per share (before fees and taxes).

The maximum potential loss can occur if the market moves against your position. In the case of a long position, your loss would be the difference between the original price paid and the lower closing price if the price drops below your purchase price. For a short position, your loss would be the difference between the sale price and the higher closing price, if the closing price rises above the price at which you sold. This loss could be unlimited.

If you prefer to sell the stock when it hits a specific price in the future, you might choose to set a good-til-canceled order as part of your strategy. With a GTC order, you can specify a limit price, ensuring that your trade will only execute if the stock reaches or exceeds that price. Although GTC orders remain active until they are executed or canceled, most brokers set a maximum duration (around 90 days) before an order will expire if it isn’t filled.

This strategy may help investors take advantage of favorable price movements while maintaining flexibility. However, it also carries the risk of missing your target price due to market volatility or unexpected conditions.

Time in Force Day Order vs On-Close Order

Day orders and an on-close order are similar, but they have some important differences. A day order is one that is good for the entire trading day, up to and including close. If you’re placing an order in the middle of the trading day and do not need it to execute at a specific time, this is the type of order you’d use.

Alternatively, an on-close order (either market on close or limit on close) is only good at the close of the trading day. The intent of an on-close order is to execute at the final trading price of the day. If you place an on-close order in the middle of the trading day, it will not execute until the end of the trading day, regardless of its intraday price.

Using Time in Force Orders

How you use the different time-in-force orders will depend on how you buy and sell stocks or execute your options trading strategy. Most buy-and-hold investors won’t use time-in-force orders at all, but if you’re using a more complex strategy, such as buying to cover, you may want to have more control over how and at what price your order is executed.

The Takeaway

Time-in-force orders can be a part of day traders’ execution of specific strategies. It determines how long a trade will remain open before being canceled. It is uncommon for long-term investors to use time-in-force orders.

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

What happens if my order isn’t executed before it expires?

If your order expires without being executed, it means that the price conditions you set were not met during your chosen specified time period. You will need to place a new order if you still want to trade.

How do I decide which Time-in-Force option to use?

Your choice depends on your trading strategy. For instance:

•   Day orders are for keeping your trade active during the current trading day.

•   GTC orders allow you to execute trades that happen at a specific price level, and orders can stay open for days or weeks.

•   MOC orders are designed for executing trades at the end-of-day closing price.

Are Time-in-Force orders only for active traders?

Active traders frequently use time-in-force orders to manage trades in dynamic markets. While less frequent, these orders can also play a role in long-term investors’ strategies, particularly if they want more control over trade execution timing and price conditions.

Can I change the Time-in-Force setting after placing an order?

No. Once you’ve submitted an order, the time-in-force setting cannot be modified. If you want to adjust the duration, you’ll need to cancel the original order and create a new one with the updated time-in-force option.


Photo credit: iStock/Tatomm

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.
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.
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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