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Jan

2025

Guide to Spousal IRAs

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

A spousal IRA gives a non-working spouse a way to build wealth for retirement, even if they don’t have earned income of their own.

Spousal IRAs can be traditional or Roth accounts. What distinguishes a spousal IRA is simply that it’s opened by an income-earning spouse in the name of a non-working or lower-earning spouse.

If you’re married and thinking about your financial plan as a couple, it’s helpful to understand spousal IRA rules and how you can use these accounts to fund your goals.

🛈 Currently, SoFi does not offer spousal IRAs to members.

What Is a Spousal IRA?

A spousal IRA is an IRA that’s funded by one spouse on behalf of another. This is a notable exception to the rule that IRAs must be funded with earned income. In this case, the working spouse can make contributions to an IRA for the non-working spouse, even if that person doesn’t have earned income.

The couple must be married, filing jointly, in order for the working spouse to be able to fund a spousal IRA.
For example, say that you’re the primary breadwinner for your family, and perhaps your spouse is a stay-at-home parent or the primary caregiver for their aging parents, and doesn’t have earned income. As long as you have taxable compensation for the year, you could open a spousal IRA and make contributions to it on your spouse’s behalf.

Saving in a spousal IRA doesn’t affect your ability to save in an IRA of your own. You can fund an IRA for yourself and an IRA for your spouse, as long as the total contributions for that year don’t exceed IRA contribution limits (more on that below), or your total earnings for the year.

How Do Spousal IRAs Work?

Spousal IRAs work much the same as investing in other IRAs, in that they make it possible to save for retirement in a tax-advantaged way. The rules for each type of IRA, traditional and Roth, also apply to spousal IRAs.

What’s different about a spousal IRA is who makes the contributions. If you were to open an IRA for yourself, you’d fund it from your taxable income. When you open an IRA for your spouse, contributions come from you, not them.

It’s also important to note that these are not joint retirement accounts. Your spouse owns the money in their IRA, even if you made contributions to it on their behalf.

Back to basics: How to Set Up an IRA: A Step-by-Step Guide

Spousal IRA Rules

The IRS sets the rules for IRAs, which also govern spousal IRAs. These rules determine who can contribute to a spousal IRA, how much you can contribute, how long you have to make those contributions, and when you can make withdrawals.

Eligibility

Married couples who file a joint tax return are eligible to open a spousal IRA for the non-working spouse. As long as one spouse has taxable compensation and, in the case of a Roth IRA, they meet income restrictions, they can open an IRA on behalf of the other spouse.

Taxable compensation includes money earned from working, such as wages, salaries, tips, or bonuses. Generally, any amount included in your income is taxable and must be reported on your tax return unless it’s excluded by law.

That said, a traditional IRA does not have income requirements; a Roth IRA does.

Maximum Annual Contributions

One of the most common IRA questions is how much you can contribute each year. Spousal IRAs have the same contribution limits as ordinary traditional or Roth IRAs. These limits include annual contribution limits, income caps for Roth IRAs, and catch-up contributions for savers 50 or older.

For tax-years 2024 and 2025, you can contribute up to $7,000 to a traditional or Roth IRA; if you’re 50 or older you can add another $1,000 (the catch-up contribution) for a total maximum of $8,000.

Remember, you can fund a spousal contribution as well as your own IRA up to the limit each year, assuming you’re eligible. That means for the 2024 and 2025 tax years, a 35-year-old couple could save up to $14,000 per year in an individual and a spousal IRA.

A 50-year-old couple can take advantage of the catch-up provision and save up to $16,000.

Contribution Limits for Traditional and Roth IRAs

There are a couple of rules regarding contribution limits; these apply to ordinary IRAs and spousal IRAs alike.

• First, the total contributions you can make to an individual IRA and/or spousal IRA cannot exceed the total taxable compensation you report on your joint tax return for the year.

• If neither spouse is covered by a workplace retirement account, contributions to a traditional spousal IRA would be deductible. If one spouse is covered by a workplace retirement account, please go to IRS.gov for details on how to calculate the amount of your contribution that would be deductible, if any.

There is an additional restriction when it comes to Roth IRAs. Whether you can make the full contribution to a spousal Roth IRA depends on your modified adjusted gross income (MAGI).

• Married couples filing jointly can contribute the maximum amount to a spousal Roth IRA for tax year 2024 if their MAGI is less than $230,000, and they can contribute the maximum amount in 2025 if their MAGI is less than $236,000.

• They can contribute a partial amount if their income is between $230,000 and $240,000 in 2024, and they can contribute a partial amount if their income is between $236,000 and $246,000 in 2025.

• If a couple’s income is $240,000 or higher in 2024, they are not eligible to contribute to a Roth or spousal Roth IRA, and if their income is more than $246,000 in 2025, they are not eligible to contribute.

Contribution Deadlines

The annual deadline for making an IRA contribution for yourself or a spouse is the same as the federal tax filing deadline. For example, the federal tax deadline for the 2024 tax year is April 15, 2025. You’d have until then to open and fund a spousal IRA for the 2024 tax year.

Filing a tax extension does not allow you to extend the time frame for making IRA contributions.

Withdrawal Rules

Spousal IRAs follow the same withdrawal rules as other IRAs. How withdrawals are taxed depends on the type of IRA and when withdrawals are made.

Here are a few key spousal IRA withdrawal rules to know:

• Qualified withdrawals from a traditional spousal IRA are subject to ordinary income tax.

• Early withdrawals made before age 59 ½ may be subject to a 10% early withdrawal penalty, unless an exception applies (see IRS rules).

• Spouses who have a traditional IRA must begin taking required minimum distributions (RMDs) at age 72, or 73 if they turned 72 after Dec. 31, 2022. Roth IRAs are not subject to RMDs, unless it’s an inherited Roth IRA.

• Roth IRA distributions are tax-free after age 59 ½, as long as the account has been open for five years, and original Roth contributions (i.e., your principal) can always be withdrawn tax free.

• A tax penalty may apply to the earnings portion of Roth IRA withdrawals from accounts that are less than five years old.

Whether it makes more sense to open a traditional or Roth IRA for a spouse can depend on where you are taxwise now, and where you expect to be in retirement.

Deducting contributions may help reduce your taxable income, which is a good reason to consider a traditional IRA. On the other hand, you might prefer a Roth IRA if you anticipate being in a higher tax bracket when you retire, as tax-free withdrawals would be desirable in that instance.

Pros and Cons of Spousal IRAs

Spousal IRAs can help married couples to get ahead with saving for retirement and planning long-term goals, but there are limitations to keep in mind.

Pros of Spousal IRAs

• Non-working spouses can save for retirement even if they don’t have income.

• Because they’re filing jointly, couples would mutually benefit from the associated tax breaks of traditional or Roth spousal IRAs.

• Spousal IRAs can add to your total retirement savings if you’re also saving in a 401(k) or similar plan at work.

• The non-working spouse can decide when to withdraw money from their IRA, since they’re the account owner.

Cons of Spousal IRAs

• Couples must file a joint return to contribute to a spousal IRA, which could be a drawback if you typically file separately.

• Deductions to a spousal IRA may be limited, depending on your income and whether you’re covered by a retirement plan at work.

• Income restrictions can limit your ability to contribute to a spousal Roth IRA.

• Should you decide to divorce, that may raise questions about who should get to keep spousal IRA assets (although the spousal IRA itself is owned by the non-working spouse).

Spousal IRAs, Traditional IRAs, Roth IRAs

Because you can open a spousal IRA that’s either a traditional or a Roth style IRA, it helps to see the terms of each. Remember, spouses have some flexibility when it comes to IRAs, because the working spouse can have their own IRA and also open a spousal IRA for their non-working spouse. To recap:

• Each spouse can open a traditional IRA

• If eligible, each spouse can open a Roth IRA

• One spouse can open a Roth IRA while the other opens a traditional IRA.

Bear in mind that the terms detailed below apply to each spouse’s IRA.

	Spousal IRA	Traditional IRA	Roth IRA
Who Can Contribute	Spouses may contribute to a traditional or Roth spousal IRA, if eligible. Roth spousal IRA eligibility is determined by filing status and income (see column at right).	Anyone with taxable compensation.	Eligibility to contribute determined by tax status and income. Married couples filing jointly must earn less than $240,000 in 2024, and less than $246,000 in 2025, to contribute to a Roth.
2024 and 2025 Annual Contribution Limits	$7,000; $8,000 for those 50 and up (note that each spouse can have an IRA and contribute up to the annual limit)	$7,000; $8,000 for those 50 and up	$7,000; $8,000 for those 50 and up.
Tax-Deductible Contributions	Yes, for traditional spousal IRAs*	Yes*	No
Withdrawals	Withdrawal rules for both types of spousal IRAs are the same as for ordinary IRAs (see columns at right).	Qualified distributions are taxed as ordinary income. Taxes and a penalty apply to withdrawals made before age 59 ½ , unless an exception applies, per IRS.gov.	Original contributions can be withdrawn tax free at any time (but not earnings). Distributions of earnings are tax free at 59 ½ as long as the account has been open for 5 years.
Required Minimum Distributions	Yes, for traditional spousal IRAs. RMDs begin at age 72**	Yes, RMDs begin at age 72**	RMD rules don’t apply to Roth IRAs.

* Deduction may be limited, depending on your income and whether you or your spouse are covered by a workplace retirement plan.
** You must take withdrawals from a traditional IRA once you reach 72 (or 73, if you turn 72 in 2023 or later).

Dive deeper: Roth IRA vs. Traditional IRA: Which IRA is the right choice for you?

Creating a Spousal IRA

Opening a spousal IRA is similar to opening any other type of IRA. Here’s what the process involves:

• Find a brokerage. You’ll first need to find a brokerage that offers IRAs; most will offer spousal IRAs. When comparing brokerages, pay attention to the investment options offered and the fees you’ll pay.

• Open the account. To open a spousal IRA, you’ll need to set it up in the non-working spouse’s name. Some of the information you’ll need to provide includes the non-working spouse’s name, date of birth, and Social Security number. Be sure to check eligibility rules.

• Fund the IRA. If you normally max out your IRA early in the year, you could do the same with a spousal IRA. Or you might prefer to space out contributions with monthly, automated deposits. Be sure to contribute within eligible limits.

• Choose your investments. Once the spousal IRA is open, you’ll need to decide how to invest the money you’re contributing. You may do this with your spouse or allow them complete freedom to decide how they wish to invest.

As long as you file a joint tax return, you can open a spousal IRA and fund it. It doesn’t necessarily matter whether the money comes from your bank account, your spouse’s, or a joint account you share. If you’re setting up a spousal IRA, you can continue contributing to your own account and to your workplace retirement plan if you have one.

The Takeaway

Spousal IRAs can make it easier for couples to map out their financial futures even if one spouse doesn’t work. The sooner you get started with retirement saving, the more time your money has to grow through compounding returns.

FAQ

What are the rules for a spousal IRA?

Spousal IRA rules allow a spouse with taxable compensation to make contributions to an IRA on behalf of a non-working spouse. The non-working spouse owns the spousal IRA and can decide how and when to withdraw the money. Spousal IRA withdrawals are subject to the same withdrawal rules as traditional or Roth IRAs, depending on which type of account has been established.

Is a spousal IRA a good idea?

A spousal IRA could be a good idea for married couples who want to ensure that they’re investing as much money as possible for retirement on a tax-advantaged basis. In theory, a working spouse can fund their own IRA as well as a spousal IRA, and contribute up to the maximum amount for each.

Can I contribute to my spouse’s traditional IRA if they don’t work?

Yes, that’s the idea behind the spousal IRA option. When a wife or husband doesn’t have taxable income, the other spouse can make contributions to a spousal traditional IRA or Roth IRA for them. The contributing spouse must have taxable compensation, and the amount they contribute each year can’t exceed their annual income amount or IRA contribution limits.

Photo credit: iStock/andreswd

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

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

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

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Jan

2025

Can You Have a Joint Retirement Account?

By Pam O’Brien | invest, Investing, Preparing for Retirement | No Comments

No matter what stage of life you’re in, it’s likely that planning for retirement may be looming in the back of your mind. And that’s a good thing: According to the Center for Retirement Research, 39% of households are at risk for not having enough to maintain their living standards in retirement.

One way to start your retirement savings plan is to work shoulder-to-shoulder with your partner. You’ve no doubt heard of joint checking accounts, but what about joint retirement accounts – is there such a thing? Unfortunately, no. But while retirement plans like a 401(k) or IRA do not allow for multiple owners, there are ways couples can plan their retirement savings together.

Key Points

• Joint retirement accounts are not available, but couples can coordinate their retirement planning.

• Reviewing retirement goals together helps couples align their financial strategies for the future.

• Each spouse can name the other as a beneficiary on their individual retirement accounts to ensure shared access to funds.

• Couples can each have their own IRAs and contribute based on their joint taxable income.

• Spousal IRAs allow a non-working spouse to contribute to an IRA, provided the other spouse has earned income.

How Couples Can Plan Together for Retirement

Although there are no joint retirement account options, you can prepare for your golden years together by combining retirement forces. Here’s how.

Review Your Retirement Goals as a Couple

Talking openly and honestly about your finances is one of the keys to building a healthy financial plan. A good first step is to have a productive conversation about your plans and goals for retirement with your significant other. Do you plan on staying in the same home during your retirement years? Perhaps you want to travel internationally once per year or buy a camper and travel across the country.

Determine the amount of money you want in retirement, too. While of course each couple’s retirement number is dependent upon their standard of living, you can calculate an estimate: Start with your current income, subtract estimated Social Security benefits, and divide by 0.04 to get your target number in today’s dollars.

Once you’ve put the numbers together and have a sense of how much you need to retire, you can figure out what you can safely withdraw to make your retirement last as long as you do.

💡 Quick Tip: Did you know that you must choose the investments in your IRA? Once you open an IRA and start saving, you get to decide which mutual funds, ETFs, or other investments you want — it’s totally up to you.

Determine When Both of You Will Retire

Do you know when you will retire? How about your partner? Remember, retirement plans like 401(k)s and IRAs generally cannot be withdrawn from penalty-free until you reach age 59 ½.

If you or your partner do plan to retire earlier than 59 ½, it might make sense to put some of your retirement funds into a taxable brokerage account that you can access at any time.

Name Your Spouse as a Beneficiary

While there are many ways to start saving for retirement, unfortunately, there aren’t any options that operate as a joint retirement account by default. A work-around to this is for each of you to name your spouse as a beneficiary in your retirement account. If something were to happen to one of you, the other person would still have access to your accounts and the money in it.

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

Your Top Questions About Joint Retirement, Answered

These are some of the biggest questions couples have when it comes to joint retirement.

Can both spouses contribute to a 401(k)?

No — only one spouse can contribute to a 401(k) account. 401(k)s are employer-sponsored plans. So just the spouse who works at the company offering the plan can participate in it and contribute to it.

However, the other spouse can be a beneficiary of the plan. This means that if the original planholder dies, the spouse gets the inherited 401(k) and can then roll it into their own 401(k) or into an IRA.

How much can a married couple contribute to a 401(k)?

As noted above, 401(k) plans are individual, with only one person contributing to each account (along with their employer, in some cases). The maximum annual 401(k) contribution allowed in 2024 is $23,000, with an additional catch-up contribution of $7,500 for those 50 and older.

For 2025, the limits are $23,500 per year, and an additional $7,500 for those 50 and up — with a special “super catch-up” contribution limit of $11,250 for those aged 60 to 63 only. Those between age 60 and 63 could contribute $11,250 rather than $7,500, not in addition.

With those figures in mind, in 2025 a married couple could each contribute $23,500 for a combined $47,000 per year, with the same catch-up provisions for those 50 and up, or 60 to 63.

How many IRAs can a married couple have?

If a couple is married and files their taxes jointly, each partner in the marriage can contribute to their own IRAs. There is a contribution limit, however — the total contributions to the IRAs “may not exceed your joint taxable income or the annual contribution limit on IRAs times two, whichever is less,” according to the IRS.

The annual IRA contribution limit is $7,000 for tax years 2024 and 2025, so the total limit is $14,000 for both years. Those 50 and older can contribute an additional catch-up amount of $1,000 for 2024 or 2025. Note that the “super catch-up” amount does not apply to IRAs.

Recommended: How Many IRAs Can You Have?

Can my wife contribute to an IRA if she doesn’t work?

Yes, a non-working spouse can open and contribute to an IRA (called a spousal IRA) as long as the other spouse is working and the couple files a joint federal income tax return. The spouse who doesn’t work can contribute up to the IRA limit of $7,000 in 2024 and 2025, plus $1,000 additional in catch-up contributions if they are 50 or older.

What is a spousal Roth IRA?

A spousal IRA is a Roth or traditional IRA for a spouse who doesn’t work. A couple must file their taxes as married filing jointly to be eligible for a spousal IRA. The spouse who doesn’t work can contribute up to the IRA limit of $7,000 in 2024 and 2025, plus $1,000 additional in catch-up contributions if they are 50 or older.

Can a husband and wife both have a Roth IRA?

A husband and wife can each have their own separate Roth IRAs. Their total contributions to both IRAs must not exceed their joint taxable income, or the annual contribution limit to the IRAs, times two. For tax years 2024 and 2024, each spouse can contribute $7,000 to separate Roth IRAs, making the total contribution limit $14,000 for those under age 50. Those 50 and up can each contribute an extra $1,000 if they choose.

Can my non-working spouse have a Roth IRA?

Yes. Spousal IRAs can be traditional or Roth IRAs. In a Roth IRA, the money put into it is not tax deductible. Instead the money comes from taxable income but may grow tax free, so that an individual typically doesn’t have to pay taxes on the money that’s taken out of the account when they retire. While the contribution limits vary according to your tax filing and income status, typically the limit of contributions is the same as it is for traditional IRAs.

What is the maximum Roth contribution for a married couple?

In 2024, the annual limit for an IRA contribution is 7,000 per person, or $8,000 for those 50 and older. However, a Roth IRA has income limits. In 2024, a couple that is married filing jointly cannot contribute to a Roth IRA if their modified adjusted gross income (MAGI) is more than $240,000. Those with a MAGI between $230,000 and $240,000 can contribute a partial amount, and those whose income is less than $230,000 can contribute the full amount.

Should a married couple have two Roth IRAs?

Whether you should have two Roth IRAs is a personal decision. One consideration: Since a married couple cannot have a joint retirement account like a joint Roth IRA, if you each have a Roth IRA, you may be able to save more for retirement if you both contribute the full amount allowed to your separate IRAs. For 2024, that amount is $7,000 for those under age 50, and $8,000 for those 50 and up. However, your total contributions to both IRAs must not exceed your joint taxable income

The Takeaway

While no specific retirement savings plans — such as 401(k)s or IRAs — offer joint retirement accounts, there are ways for couples to plan and save for retirement together. One way is to each have your own separate IRAs that you contribute to. Another easy way to make sure you’re both taken care of in retirement is to make each other the beneficiaries on your individual accounts.

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.

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

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

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.

SoFi Invest®

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

Jan

2025

Roth 401(k) vs Traditional 401(k): Which Is Best for You?

By AJ Smith | Growing Wealth, invest, Investing, Preparing for Retirement | Comments Off

A traditional 401(k) and a Roth 401(k) are tax-advantaged retirement plans that can help you save for retirement. While both types of accounts follow similar rules — they have the same contribution limits, for example — the impact of a Roth 401(k) vs. traditional 401(k) on your tax situation, now and in the future, may be quite different.

In brief: The contributions you make to a traditional 401(k) are deducted from your gross income, and thus may help lower your tax bill. But you’ll owe taxes on the money you withdraw later for retirement.

Conversely, you contribute after-tax funds to a Roth 401(k) and can typically withdraw the money tax free in retirement — but you don’t get a tax break now.

To help choose between a Roth 401(k) vs. a traditional 401(k) — or whether it might make sense to invest in both, if your employer offers that option — it helps to know what these accounts are all about.

Key Points

• Traditional 401(k) contributions are made with pre-tax dollars, reducing taxable income for the year of contribution.

• Roth 401(k) contributions are made with after-tax dollars, offering tax-free withdrawals in retirement.

• Withdrawals from traditional 401(k)s are taxed as income, whereas Roth 401(k) withdrawals are tax-free if rules are followed.

• Early withdrawals from both accounts may incur taxes and penalties, though Roth contributions can be withdrawn tax-free.

• Starting January 2024, Roth 401(k)s are not subject to required minimum distributions, unlike traditional 401(k)s.

5 Key Differences Between Roth 401(k) vs Traditional 401(k)

Before deciding on a Roth 401(k) or traditional 401(k), it’s important to understand the differences between each account, and to consider the tax benefits of each in light of your own financial plan. The timing of the tax advantages of each type of account is also important to weigh.

1. How Each Account is Funded

• A traditional 401(k) allows individuals to make pre-tax contributions. These contributions are typically made through elective salary deferrals that come directly from an employee’s paycheck and are deducted from their gross income.

• Employees contribute to a Roth 401(k) also generally via elective salary deferrals, but they are using after-tax dollars. So the money the employee contributes to a Roth 401(k) cannot be deducted from their current income.

💡 Quick Tip: Did you know that you must choose the investments in your IRA? Once you open a new IRA account and start saving, you get to decide which mutual funds, ETFs, or other investments you want — it’s totally up to you.

2. Tax Treatment of Contributions

• The contributions to a traditional 401(k) are tax-deductible, which means they can reduce your taxable income now, and they grow tax-deferred (but you’ll owe taxes later).

• By contrast, since you’ve already paid taxes on the money you contribute to a Roth 401(k), the money you contribute isn’t deductible from your gross income, and withdrawals are generally tax free (some exceptions below).

3. Withdrawal Rules

• You can begin taking qualified withdrawals from a traditional 401(k) starting at age 59 ½, and the money you withdraw is taxed at ordinary income rates.

• To withdraw contributions + earnings tax free from a Roth 401(k) you must be 59 ½ and have held the account for at least five years (often called the 5-year rule). If you open a Roth 401(k) when you’re 57, you cannot take tax-free withdrawals at 59 ½, as you would with a traditional 401(k). You’d have to wait until five years had passed, and start tax-free withdrawals at age 62.

4. Early Withdrawal Rules

• Early withdrawals from a 401(k) before age 59 ½ are subject to tax and a 10% penalty in most cases, but there are some exceptions where early withdrawals are not penalized, including certain medical expenses; a down payment on a first home; qualified education expenses.

You may also be able to take a hardship withdrawal penalty-free, but you need to meet the criteria, and you would still owe taxes on the money you withdrew.

• Early withdrawals from a Roth 401(k) are more complicated. You can withdraw your contributions at any time, but you’ll owe tax proportional to your earnings, which are taxable when you withdraw before age 59 ½.

For example: If you have $100,000 in a Roth 401(k), including $90,000 in contributions and $10,000 in taxable gains, the gains represent a 10% of the account. Therefore, if you took a $20,000 early withdrawal, you’d owe taxes on 10% to account for the gains, or $2,000.

5. Required Minimum Distribution (RMD) Rules

With a traditional 401(k), individuals must take required minimum distributions starting at age 73, or face potential penalties. While Roth 401(k)s used to have RMDs, as of January 2024, they no longer do. That means you are not required to withdraw RMDs from a Roth 401(k) account.

For a quick side-by-side comparison, here are the key differences of a Roth 401(k) vs. traditional 401(k):

Traditional 401(k)	Roth 401(k)
Funded with pre-tax dollars.	Funded with after-tax dollars.
Contributions are deducted from gross income and may lower your tax bill.	Contributions are not deductible.
All withdrawals taxed as income.	Withdrawals of contributions + earnings are tax free after 59 ½, if you’ve had the account for at least 5 years. (However, matching contributions from an employer made with pre-tax dollars are subject to tax.)
Early withdrawals before age 59 ½ are taxed as income and are typically subject to a 10% penalty, with some exceptions.	Early withdrawals of contributions are not taxed, but earnings may be taxed and subject to a 10% penalty.
Account subject to RMD rules starting at age 73.	No longer subject to RMD rules as of January 2024.

Bear in mind that a traditional 401(k) and Roth 401(k) also share many features in common:

• The annual contribution limits are the same for a 401(k) and a Roth 401(k). For 2024, the total amount you can contribute to these employer-sponsored accounts is $23,000; if you’re 50 and older you can save an additional $7,500 for a total of $30,500. The 2025 limit is capped at $23,500; $31,000 if you’re 50 and older. Those aged 60 to 63 may contribute a total of $34,750 in 2025, thanks to SECURE 2.0.

• For both accounts, employers may contribute matching funds up to a certain percentage of an employee’s salary.

• In 2024, total contributions from employer and employee cannot exceed $69,000 ($76,500 for those 50 and up). In 2025, total contributions from employer and employee cannot exceed $70,000 ($77,500 for those 50 and up, and $81,250 for those 60 to 63).

• Employees may take out a loan from either type of account, subject to IRS restrictions and plan rules.

Because there are certain overlaps between the two accounts, as well as many points of contrast, it’s wise to consult with a professional when making a tax-related plan.

How to Choose Between a Roth and a Traditional 401(k)

In some cases it might make sense to contribute to both types of accounts (more on that below), but in other cases you may want to choose either a traditional 401(k) or a Roth 401(k) to maximize the specific advantages of one account over another. Here are some considerations.

When to Pay Taxes

Traditional 401(k) withdrawals are taxed at an individual’s ordinary income tax rate, typically in retirement. As a result these plans can be most tax efficient for those who will have a lower marginal rate after they retire than they did while they were working.

In other words, a traditional 401(k) may help you save on taxes now, if you’re in a higher tax bracket — and then pay lower taxes in retirement, when you’re ideally in a lower tax bracket.

On the other hand, an investor might look into the Roth 401(k) option if they feel that they pay lower taxes now than they will in retirement. In that case, you’d potentially pay lower taxes on your contributions now, and none on your withdrawals in retirement.

Your Age

Often, younger taxpayers may be in a lower tax bracket. If that’s the case, contributing to a Roth 401(k) may make more sense for the same reason above: because you’ll pay a lower rate on your contributions now, but then they’re completely tax free in retirement.

If you’re older, perhaps mid-career, and in a higher tax bracket, a traditional 401(k) might help lower your tax burden now (and if your tax rate is lower when you retire, even better, as you’d pay taxes on withdrawals but at a lower rate).

Where You Live

The tax rates where you live, or where you plan to live when you retire, are also a big factor to consider. Of course your location some years from now, or decades from now, can be difficult to predict (to say the least). But if you expect that you might be living in an area with lower taxes than you are now, e.g. a state with no state taxes, it might make sense to contribute to a traditional 401(k) and take the tax break now, since your withdrawals may be taxed at a lower rate.

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

The Benefits of Investing in Both a Roth 401(k) and Traditional 401(k)

If an employer offers both a traditional and Roth 401(k) options, employees might have the option of contributing to both, thus taking advantage of the pros of each type of account. In many respects, this could be a wise choice.

Divvying up contributions between both types of accounts allows for greater flexibility in tax planning down the road. Upon retirement, an individual can choose whether to withdraw money from their tax-free 401(k) account or the traditional, taxable 401(k) account each year, to help manage their taxable income.

It is important to note that the $23,000 contribution limit ($30,500 for those 50 and older) for 2024 is a total limit on both accounts.

So, for instance, you might choose to save $13,500 in a traditional 401(k) and $9,500 in a Roth 401(k) for the year. You are not permitted to save $23,000 in each account.

What’s the Best Split Between Roth and Traditional 401(k)?

The best split between a Roth 401(k) and a traditional 401(k) depends on your individual financial situation and what might work best for you from a tax perspective. You may want to do an even split of the $23,000 limit you can contribute in 2024. Or, if you’re in a higher tax bracket now than you expect to be in retirement, you might decide that it makes more sense for you to put more into your traditional 401(k) to help lower your taxable income now. But if you expect to be in a higher income tax bracket in retirement, you may want to put more into your Roth 401(k).

Consider all the possibilities and implications before you decide. You may also want to consult a tax professional.

The Takeaway

Employer-sponsored Roth and traditional 401(k) plans offer investors many options when it comes to their financial goals. Because a traditional 401(k) can help lower your tax bill now, and a Roth 401(k) generally offers a tax-free income stream later — it’s important for investors to consider the tax advantages of both, the timing of those tax benefits, and whether these accounts have to be mutually exclusive or if it might benefit you to have both.

When it comes to retirement plans, investors don’t necessarily have to decide between a Roth or traditional 401(k). Some might choose one of these investment accounts, while others might find a combination of plans suits their goals. After all, it can be difficult to predict your financial circumstances with complete accuracy — especially when it comes to tax planning — so you may decide to hedge your bets and contribute to both types of accounts, if your employer offers that option.

Another step to consider is a 401(k) rollover, where you move funds from an old 401(k) into an IRA. When you do a 401(k) rollover it can help you manage your retirement funds.

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

Easily manage your retirement savings with a SoFi IRA.

FAQ

Is it better to contribute to 401(k) or Roth 401(k)?

Whether it’s better to contribute to a traditional 401(k) or Roth 401(k) depends on your particular financial situation. In general, if you expect to be in a lower tax bracket in retirement, a traditional 401(k) may make more sense for you since you’ll be able to deduct your contributions when you make them, which can lower your taxable income, and then pay taxes on the money in retirement, when you’re in a lower income tax bracket.

But if you’re in a lower tax bracket now than you think you will be later, a Roth 401(k) might be the preferred option for you because you’ll generally withdraw the money tax-free in retirement.

Can I max out both 401(k) and Roth 401(k)?

No, you cannot max out both accounts. Per IRS rules, the annual 401(k) limits apply across all your 401(k) accounts combined. So for 2024, you can contribute a combined amount up to $23,000 (or $30,500 if you’re 50 or older) to your Roth 401(k) and your traditional 401(k) accounts.

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

Jan

2025

Backdoor Roth IRAs

By Pam O’Brien | Growing Wealth, invest, Investing, Preparing for Retirement, Terminology | No Comments

Want to contribute to a Roth IRA, but have an income that exceeds the limits? There’s another option. It’s called a backdoor Roth IRA, and it’s a way of converting funds from a traditional IRA to a Roth.

A Roth IRA is an individual retirement account that may provide investors with a tax-free income once they reach retirement. With a Roth IRA, investors save after-tax dollars, and their money generally grows tax-free. Roth IRAs also provide additional flexibility for withdrawals — once the account has been open for five years, contributions can generally be withdrawn without penalty.

But there’s a catch: Investors can only contribute to a Roth IRA if their income falls below a specific limit. If your income is too high for a Roth, you may want to consider a backdoor Roth IRA.

Key Points

• A backdoor Roth IRA allows high earners to contribute to a Roth IRA by converting funds from a traditional IRA.

• This strategy involves paying income taxes on pre-tax contributions and earnings at conversion.

• There are no income limits or caps on the amount that can be converted to a Roth IRA.

• The process includes opening a traditional IRA, making non-deductible contributions, and then converting these to a Roth IRA.

• Potential tax implications include moving into a higher tax bracket and owing taxes on pre-tax contributions and earnings.

What Is a Backdoor Roth IRA?

If you aren’t eligible to contribute to a Roth IRA outright because you make too much, you can do so through a technique called a “backdoor Roth IRA.” This strategy involves contributing money to a traditional IRA and then converting it to a Roth IRA.

The government allows individuals to do this as long as, when they convert the account, they pay income tax on any contributions they previously deducted and any profits made. Unlike a standard Roth IRA, there is no income limit for doing the Roth conversion, nor is there a ceiling to how much can be converted.

💡 Quick Tip: How much does it cost to open an IRA account? Often there are no fees to open an IRA, but you typically pay investment costs for the securities in your portfolio.

How Does a Backdoor IRA Work?

This is how a backdoor IRA typically works: An individual opens a traditional IRA and makes non-deductible contributions. They then convert the account into a Roth IRA. The strategy is generally most helpful to those who earn a higher salary and are otherwise ineligible to contribute to a Roth IRA.

Example Scenario

For instance, let’s say a 34-year-old individual wants to open a Roth IRA. Their tax-filing status is single and they earn $165,000 per year. Their income is too high for them to be eligible for a Roth directly (more on this below), but they can use the “backdoor IRA” strategy. In order to do this, the individual would open a traditional IRA and contribute non-deductible funds to it. They then convert that money to a Roth IRA.

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

Income and Contribution Limits

In general, Roth IRAs have income limits. In 2024, a single person whose modified adjusted gross income (MAGI) is $161,000 or more, or a married couple filing jointly with a MAGI that is $240,000 or more, cannot contribute to a Roth IRA. For tax year 2025, a single filer whose MAGI is $165,000 or more, or a married couple filing jointly with a MAGI that is $246,000 or more, cannot contribute to a Roth IRA.

There are also annual contribution limits for Roth IRAs. For tax years 2024 and 2025, the annual contribution limit for traditional and Roth IRAs is $7,000. These IRAs allow for a catch-up contribution of up to $1,000 per year if you’re 50 or older. Traditional IRAs have the same contribution limits as Roth IRAs.

How to Set Up and Execute a Backdoor Roth

Here’s how to initiate and complete a backdoor Roth IRA.

• Open a Traditional IRA. You could do this with SoFi Invest^®, for instance.

• Make a non-deductible contribution to the Traditional IRA.

• Open a Roth IRA, complete any paperwork that may be required for the conversion, and transfer the money into the Roth IRA.

Tax Impact of a Backdoor Roth

If you made non-deductible contributions to a traditional IRA that you then converted to a Roth IRA, you won’t owe taxes on the money because you’ve already paid taxes on it. However, if you made deductible contributions, you will need to pay taxes on the funds.

In addition, if some time elapsed between contributing to the traditional IRA and converting the money to a Roth IRA, and the contribution earned a profit, you will owe taxes on those earnings.

You might also owe state taxes on a Roth IRA conversion. Be sure to check the tax rules in your area.

Another thing to be aware of: A conversion can also move people into a higher tax bracket, so individuals may consider waiting to do a conversion when their income is lower than usual.

And finally, if an investor already has traditional IRAs, it may create a situation where the tax consequences outweigh the benefits. If an individual has money deducted in any IRA account, including SEP or SIMPLE IRAs, the government will assume a Roth conversion represents a portion or ratio of all the balances. For example, say the individual contributed $5,000 to an IRA that didn’t deduct and another $5,000 to an account that did deduct. If they converted $5,000 to a Roth IRA, the government would consider half of that conversion, or $2,500, taxable.

The tax rules involved with converting an IRA can be complicated. You may want to consult a tax professional.

💡 Quick Tip: Before opening an investment account, know your investment objectives, time horizon, and risk tolerance. These fundamentals will help keep your strategy on track and with the aim of meeting your goals.

Is a Backdoor Roth Right for Me?

It depends on your situation. Below are some of the benefits and downsides to a backdoor Roth IRA to help you determine if this strategy might be a good option for you.

Benefits

High earners who don’t qualify to contribute under current Roth IRA rules may opt for a backdoor Roth IRA.

As with a typical Roth IRA, a backdoor Roth may also be a good option when an investor expects their taxes to be lower now than in retirement. Investors who hope to avoid required minimum distributions (RMDs) when they reach age 73 might also consider doing a backdoor Roth.

Downsides

If an individual is eligible to contribute to a Roth IRA, it won’t make sense for them to do a backdoor conversion.

And because a conversion can also move people into a higher tax bracket, you may consider waiting to do a conversion in a year when your income is lower than usual.

For those individuals who already have traditional IRAs, the tax consequences of a backdoor Roth IRA might outweigh the benefits.

Finally, if you plan to use the converted funds within five years, a backdoor Roth may not be the best option. That’s because withdrawals before five years are subject to income tax and a 10% penalty.

Is a Backdoor Roth Still Allowed in 2024 or 2025?

Backdoor Roth conversions are still allowed for tax years 2024 and 2025.

There had been some discussion in previous years of possibly eliminating the backdoor Roth strategy, but this has not happened as yet.

The Takeaway

A backdoor Roth IRA may be worth considering if tax-free income during retirement is part of an investor’s financial plan, and the individual earns too much to contribute directly to a Roth.

In general, Roth IRAs may be a good option for younger investors who have low tax rates and people with a high income looking to reduce tax bills in retirement.

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

Help grow your nest egg with a SoFi IRA.

FAQ

What are the rules of a backdoor Roth IRA?

The rules of a backdoor Roth IRA include paying taxes on any deductible contributions you make; paying any other taxes you may owe for the conversion, such as state taxes; and waiting five years before withdrawing any earnings from the Roth IRA to avoid paying a penalty.

Is it worth it to do a backdoor Roth IRA?

It depends on your specific situation. A backdoor Roth IRA may be beneficial if you earn too much to contribute to a Roth IRA. It may also be advantageous for those who expect to be in a higher tax bracket in retirement.

What is the 5-year rule for backdoor Roth IRA?

According to the 5-year rule, if you withdraw money from a Roth IRA before the account has been open for at least five years, you are typically subject to a 10% tax on those funds. The five year period begins in the tax year in which you made the backdoor Roth conversion. There are some possible exceptions to this rule, however, including being 59 ½ or older or disabled.

Do you get taxed twice on backdoor Roth?

No. You pay taxes once on a backdoor IRA — when you convert a traditional IRA with deductible contributions and any earnings to a Roth. When you withdraw money from your Roth in retirement, the withdrawals are tax-free because you’ve already paid the taxes.

Can you avoid taxes on a Roth backdoor?

There is no way to avoid paying taxes on a Roth backdoor. However, you may be able to reduce the amount of tax you owe by doing the conversion in a year in which your income is lower.

Can you convert more than $6,000 in a backdoor Roth?

There is no limit to the amount you can convert in a backdoor Roth IRA. The annual contribution limits for IRAs does not apply to conversions. But you may want to split your conversions over several years to help reduce your tax liability.

What time of year should you do a backdoor Roth?

There is no time limit on when you can do a backdoor Roth IRA. However, if you do a backdoor Roth earlier in the year, it could give you more time to come up with any money you need to pay in taxes.

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

Jan

2025

Why You Should Start Retirement Planning in Your 20s

By Austin Kilham | invest, Investing, Preparing for Retirement | Comments Off

When you’re in your 20s, the last thing on your mind may be the end of your career and the retirement that comes after. But thinking about retirement now can ensure your financial security in the future.

The longer you have to save for retirement, the better. Here’s why you should start thinking about retirement planning and investing in your 20s.

Main Reason to Start Saving for Retirement Early

When you start investing in your 20s, even if you begin with just a small amount, you have more time to build your nest egg. Typically, having a long time horizon means you have time to weather the ups and downs of the markets.

What’s more — and this is critical — the earlier you start saving, by opening a savings vehicle such as a high-yield savings account or a money market account, for instance, the more time you’ll have to take advantage of compound interest, which can help boost your ability to save. Compound interest is the reason small amounts of money saved now can go further than much larger amounts of money saved later. The more time you have, the more returns compound interest can deliver.

Compound Interest Example

Imagine you are 25 with plans to retire at 65. That gives you 40 years to save. If you save $100 a month in a money market account with an average annual return of 6% compounded monthly, at age 60, you would have saved about $200,244.

Now, let’s imagine that you waited for 30 years, until age 55 to start saving. You put $1,000 a month into a money market account. With an average annual return of 6% compounding monthly, you’d only have about $165,698 by the time you’re ready to retire, far less than if you’d started saving smaller amounts earlier.

The lesson? The longer you wait to start saving for retirement, the more money you’ll have to save later to make up the difference. Depending on your financial situation, it could be difficult to find these extra funds when you’re older.

Though it may not sound fun in your 20s to start putting money toward retirement, it may actually be easier in the long run.

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

How to Start Saving for Retirement in Your 20s

If you’re new to saving, starting a retirement fund requires a little bit of planning.

Step 1: Calculate how much you need to save

Set a goal. Consider your target retirement date and how long you’ll expect to be retired based on current life expectancy. What kind of lifestyle do you want to lead? And what do you expect your retirement expenses to be?

Step 2: Choose a savings vehicle

When it comes to where to put your savings, you have a number of options. For example, high-yield savings accounts typically offer higher interest rates than standard savings accounts.

Many retirement savers also opt to use an investing account, such as a taxable brokerage account or tax-advantaged retirement savings account instead.

Keep in mind that investments in equities or other securities are riskier than savings accounts, but that allows for the possibility of better returns. Young investors may be better positioned than older investors to take on additional risk, since they have time to recover after a market decline. However, the amount of risk you’re willing to take on is an important consideration and a personal choice.

Step 3: Start investing

Once you’ve opened an account, your investment strategy depends on age, goals, time horizon and risk tolerance. For example, the longer you have before you retire, the more money you might consider investing in riskier assets such as stock, since you’ll have longer to ride out any rocky period in the market. As retirement approaches, you may want to re-allocate more of your portfolio to less risky assets, such as bonds.

Types of Retirement Plans

If you’re interested in opening a tax-advantaged retirement plan, there are three main account types to consider: 401(k)s and traditional IRAs, and Roth IRAs.

401(k)

A 401(k) is an employer sponsored retirement account that you invest in through your workplace, if your employer offers it. You make contributions to 401(k)s with pre-tax funds (meaning contributions lower your taxable income), usually deducted from your paycheck. Your 401(k) will typically offer a relatively small menu of investments from which you can choose.

Employers may also contribute to your 401(k) and often offer matching contributions. Consider saving enough money to at least meet your employer’s match, which is essentially free money and an important part of your total compensation.

Some companies also offer a Roth 401(k), which uses after-tax paycheck deferrals.

Individuals can contribute up to $23,000 in their 401(k) in 2024. Individuals can contribute up to $22,500 in their 401(k) in 2023. And those aged 50 and up can make an additional catch-up contribution of $7,500.

Money invested inside a 401(k) grows tax-deferred, and you’ll pay regular income tax on withdrawals that you make after age 59 ½. If you take out money before then, you could owe both income taxes and a 10% early withdrawal penalty.

You must begin making required minimum distributions (RMDs) from your account by age 73.

Learn more: What Is a 401(k)?

Traditional IRA

Traditional IRAs are not offered through employers. Anyone can open one as long as they have earned income. Depending on your income and access to other retirement savings accounts, you may be able to deduct contributions to a traditional IRA on your taxes.

As with 401(k) contributions, you’d owe taxes on traditional IRA withdrawals after age 59 ½ and may have to pay taxes and a penalty on early withdrawals.

In 2024, traditional IRA contribution limits are $7,000 a year or $8,000 for those aged 50 and up. In 2023, traditional IRA contribution limits are $6,500 a year or $7,500 for those aged 50 and up. Compared to 401(k)s, IRAs offer individuals the ability to invest in a much broader range of investments. These investments can then grow tax-deferred inside the account. Traditional IRAs are also subject to RMDs at age 73.

Roth IRA

Unlike 401(k)s and traditional IRAs, savings go into Roth IRAs with after-tax dollars and provide no immediate tax benefit. However, money inside the account grows tax-free and it isn’t subject to income tax when withdrawals are made after age 59 ½.

You can also withdraw your principal (but not the earnings) from a Roth at any time without a tax penalty as long as the Roth has been open for five tax years. The first tax year begins on January 1 of the year the first contribution was made and ends on the tax filing deadline of the next year, such as April 15. Any contribution made during that time counts as being made in the prior year. So, for instance if you made your first contribution on April 10, 2023, it counts as though it were made at the beginning of 2022. Therefore, your Roth would be considered open for five tax years in January 2027.

Roths are not subject to RMD rules. Contribution limits are the same as traditional IRAs.

Investing in Multiple Accounts

Individuals can have both a traditional and Roth IRA. But note the contribution limits apply to total contributions across both. So if you’re 25 and put $3,250 in a traditional IRA, you could only put up to $3,250 in your Roth as well in 2023.

You can also contribute to both a 401(k) and an IRA, however if you have access to a 401(k) at work you may not be able to deduct your IRA contributions.

Retirement Plan Strategies

The investment strategy you choose will depend largely on three things: your goals, time horizon and risk tolerance. These factors will help you determine your asset allocation, what types of assets you hold and in what proportion. Your retirement portfolio as a 20-something investor will likely look very different from a retirement portfolio of a 50-something investor.

For example, those with a high risk tolerance and long time horizon might hold a greater portion of stocks. This asset class is typically more volatile than bonds, but it also provides greater potential for growth.

The shorter a person’s time horizon and the less risk tolerance they have, the greater proportion of bonds they may want to include in their portfolio. Here’s a look at some portfolio strategies and the asset allocation that might accompany them:

Sample Portfolio Style	Asset allocation
Aggressive	100% stocks
Moderately Aggressive	80% stocks, 20% bonds
Moderate	60% stocks, 40% bonds
Moderately Conservative	30% stocks, 70% bonds
Conservative	100% bonds

The Takeaway

Even if you don’t have a lot of room in your budget to start investing, putting away what you can as early as you can, can go a long way toward saving for retirement. As you start to earn more money, you can increase the amount of money that you’re saving over time.

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

Help grow your nest egg with a SoFi IRA.

Photo credit: iStock/izusek

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

SOIN0723081

Guide to Spousal IRAs

What Is a Spousal IRA?

How Do Spousal IRAs Work?

Spousal IRA Rules

Eligibility

Maximum Annual Contributions

Contribution Limits for Traditional and Roth IRAs

Contribution Deadlines

Withdrawal Rules

Pros and Cons of Spousal IRAs

Pros of Spousal IRAs

Cons of Spousal IRAs

Spousal IRAs, Traditional IRAs, Roth IRAs

Creating a Spousal IRA

The Takeaway

FAQ

What are the rules for a spousal IRA?

Is a spousal IRA a good idea?

Can I contribute to my spouse’s traditional IRA if they don’t work?

Can You Have a Joint Retirement Account?

How Couples Can Plan Together for Retirement

Review Your Retirement Goals as a Couple

Determine When Both of You Will Retire

Name Your Spouse as a Beneficiary

Get a 1% IRA match on rollovers and contributions.

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

Your Top Questions About Joint Retirement, Answered

Can both spouses contribute to a 401(k)?

How much can a married couple contribute to a 401(k)?

How many IRAs can a married couple have?

Can my wife contribute to an IRA if she doesn’t work?

What is a spousal Roth IRA?

Can a husband and wife both have a Roth IRA?

Can my non-working spouse have a Roth IRA?

What is the maximum Roth contribution for a married couple?

Should a married couple have two Roth IRAs?

The Takeaway

Roth 401(k) vs Traditional 401(k): Which Is Best for You?

5 Key Differences Between Roth 401(k) vs Traditional 401(k)

1. How Each Account is Funded

2. Tax Treatment of Contributions

3. Withdrawal Rules

4. Early Withdrawal Rules

5. Required Minimum Distribution (RMD) Rules

How to Choose Between a Roth and a Traditional 401(k)

When to Pay Taxes

Your Age

Where You Live

The Benefits of Investing in Both a Roth 401(k) and Traditional 401(k)

What’s the Best Split Between Roth and Traditional 401(k)?

The Takeaway

FAQ

Is it better to contribute to 401(k) or Roth 401(k)?

Can I max out both 401(k) and Roth 401(k)?

Backdoor Roth IRAs

What Is a Backdoor Roth IRA?

How Does a Backdoor IRA Work?

Example Scenario

Get a 1% IRA match on rollovers and contributions.

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

Income and Contribution Limits

How to Set Up and Execute a Backdoor Roth

Tax Impact of a Backdoor Roth

Is a Backdoor Roth Right for Me?

Benefits

Downsides

Is a Backdoor Roth Still Allowed in 2024 or 2025?

The Takeaway

FAQ

What are the rules of a backdoor Roth IRA?

Is it worth it to do a backdoor Roth IRA?

What is the 5-year rule for backdoor Roth IRA?

Do you get taxed twice on backdoor Roth?

Can you avoid taxes on a Roth backdoor?

Can you convert more than $6,000 in a backdoor Roth?

What time of year should you do a backdoor Roth?

Why You Should Start Retirement Planning in Your 20s

Main Reason to Start Saving for Retirement Early

Compound Interest Example

Get a 1% IRA match on rollovers and contributions.

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

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

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

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