Feb
19
2025
How Do Negative Interest Rates Work?
Negative interest rates mean borrowers could be rewarded for taking out loans. Here’s an explanation of other effects negative rates might have.
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Feb
13
2025
Can You Withdraw Money From an Annuity?
Annuities are an insurance contract that you can purchase with a lump sum premium, or by paying small premiums over time. The rules governing how and when you can withdraw your money vary depending on the annuity policy.
Can you withdraw some or all of your money from an annuity early? In some cases, yes, and there are some legitimate reasons why you might choose to do so. However, many annuities have restrictions on withdrawals, and an early withdrawal could impact future income from the annuity, and trigger penalties and taxes. It depends on the type of annuity you own, as well as the regulations in your state.
Key Points
• An annuity is an insurance contract that you can purchase by making premium payments, and designed to provide a stream of income in retirement.
• It’s possible to withdraw funds early from an annuity, although you’ll likely face a 10% if you’re under 59 ½.
• Annuities typically come with a surrender period, during which withdrawals are not allowed. Any money withdrawn during the surrender period could incur a 7% penalty, on top of the 10% early withdrawal if you’re not yet 59 ½.
• Annuities are complex and it’s important to understand the terms of the contract before committing to an annuity purchase.
Understanding Annuities and Annuity Withdrawals
An annuity is a type of insurance contract that’s designed to provide a predictable stream of income in retirement. Typically, the owner would purchase an annuity with a lump sum premium, and take payments from the annuity according to the agreed-upon terms.
Generally, the annuity company agrees to provide a stream of income at a future date (or immediately), for a specific period of time or until the death of the annuity holder, also called the annuitant. In some cases, there may be a death benefit paid to a beneficiary, such as a surviving spouse.
Annuities can be a useful part of your retirement plan, but because they are insurance products, not securities, the terms of an annuity may not be familiar to many investors.
Recommended: Annuity Definition
The Complexity of Annuities
Unlike putting money into an IRA or 401(k), which is fairly straightforward and governed by a set of rules determined by government laws and agencies, buying an annuity is vastly more complicated — and this impacts how and when you can withdraw money from an annuity.
The rules governing these products vary from company to company, and from policy to policy. For example, some annuities are considered “fixed annuities,” because they earn a fixed rate of interest. Some are “variable annuities,” because the funds in the annuity may fluctuate because they’re invested in the market.
Annuity holders can tailor their annuities to some degree, by purchasing riders, or special terms that provide for inflation adjustments, lifetime payments, survivor benefits, and other factors. SoFi does not sell annuity products.
How an Annuity Works: The Basics
When purchasing an annuity, you (the account holder) might pay a lump sum premium, or make a series of premium payments over time to build up the value of the policy.
Sometimes, the funds within an IRA or 401(k) can be used to purchase an annuity or pay annuity premiums, when the annuity is held within one of those qualified retirement accounts.
After this accumulation phase, the company begins making regular income payments. This is known as annuitization. The annuity holder can decide, as part of the annuity contract, exactly when payments will begin and how long the distribution phase will last.
For example, you might structure your annuity payments over 10 years, or you might set up guaranteed payments for the rest of your life. The annuity terms and fees depend on the structure of the distribution phase.
The Surrender Period
Money paid into the annuity typically can’t be withdrawn for a certain amount of time without owing a stiff penalty; this is called the surrender period and those terms, and any exceptions, are set by your insurance company.
Again, annuities generally have different rules about early withdrawals, but during the surrender period taking a withdrawal could incur a 7% penalty, in addition to a potential 10% penalty if you’re under 59 ½.
Your choice of annuity will influence your withdrawal options.
Types of Annuities
There are many types of annuities you might choose from to support your financial goals in retirement.
Fixed and Variable Annuities
A primary consideration when selecting an annuity is whether your money earns a steady rate of interest, which is the hallmark of a fixed annuity, or whether it’s invested in underlying assets and tied to market performance to some degree (e.g., via mutual funds or index funds). This would create a variable income stream.
• Fixed annuities offer a guaranteed minimum income benefit (or GMIB) for a set period.
• Variable annuities generate returns based on the performance of underlying investments and the rate of return is not guaranteed.
Within these two branches, fixed and variable annuities, there are other categories.
Other Annuity Categories
• Immediate. When you buy an immediate annuity, you fund it with a lump sum and payouts to you can begin in as little as one year.
• Deferred. Deferred-income annuities can be funded with a lump sum or multiple smaller payments, and payouts to you can begin several years after the purchase.
• Indexed. Indexed annuities generate a rate of return that’s based on the performance of an underlying stock market index, such as the S&P 500.
It’s not unusual to see these terms combined. For example, you might purchase an immediate fixed annuity or deferred variable annuity, based on your needs.
Withdrawal Options for Annuities
The two main considerations here are: First, whether you’re over the age of 59 ½ and second whether you’re still within the surrender period. For example, if you’re younger than 59 ½, and thus taking an early withdrawal, that would trigger a 10% penalty — similar to taking an early withdrawal from an IRA.
The penalty would be steeper if the early withdrawal was also within the surrender period.
If You’re Not Taking an Early Withdrawal
If you’re over 59 ½ and past the surrender period, you would be able to take a withdrawal without a penalty, but you would owe ordinary income tax on the earnings portion of the withdrawal.
If your annuity is held within a 401(k) or tax-deferred IRA account, you would owe tax on the full amount of the withdrawal.
Bear in mind that state regulations may also come into play.
• Partial surrender. If your annuity has not yet been annuitized, meaning your regular payments have not begun, you may be able to make a partial surrender of its value to withdraw cash.
• Full surrender. You could opt to make a full surrender instead if you no longer need the annuity. A surrender fee may apply to partial or full surrenders, and you typically have only a few years after purchasing the annuity to exercise either option.
• Periodic payments. You might have the option to take recurring payments from your annuity, separate from the amounts you’re entitled to receive once the contract has been annuitized.
A 1035 exchange is another option if you’d like to have an annuity but aren’t happy with your current one
Early Withdrawal Penalties
The IRS imposes a 10% early withdrawal penalty when you take money from tax-advantaged accounts before age 59 ½. That rule extends to annuities held within an IRA, unless you qualify for an exception.
For example, you could avoid the penalty if you’re making an early withdrawal because you:
• Become totally and permanently disabled
• Plan to use the money to fund a birth or adoption, higher education expenses, or the purchase of a first home
• Are subject to an IRS levy
• Have unreimbursed medical expenses that exceed 7.5% of your adjusted gross income
If you’re subject to a 10% early withdrawal penalty on top of income tax, on top of surrender charges that could quickly make an early withdrawal from an annuity expensive.
Required Minimum Distributions (RMDs)
Required minimum distributions or RMDs are amounts you’re required to withdraw from certain retirement accounts, typically beginning at age 73. The amount you’re expected to withdraw is based on your account value, age, and life expectancy, as established by the IRS.
Qualified accounts, including qualified annuities, are subject to these rules under the Internal Revenue Code. If you have a qualified annuity and do not begin taking RMDs on time, you could be hit with a penalty. The penalty is equal to 25% of the amount you were required to withdraw.
IRA annuity withdrawal rules allow you to skip RMDs if you have a Roth account. However, if someone inherits a Roth IRA annuity from you, they would be subject to RMDs.
Factors to Consider Before Withdrawing
Rather than asking, Can I withdraw all my money from an annuity? the better question may be whether you should tap your annuity early. There are advantages and disadvantages to weigh before making a move.
Impacts on Lifetime Income Stream
If you plan to withdraw money from an annuity early, ask yourself what that might mean later if you’re relying on that income for retirement. Taking money from your annuity now can affect its growth, potentially leaving you with smaller payments later on.
You’d have to consider how smaller payments might affect your broader retirement picture. For example, if your payouts would shrink from $2,000 per month to $1,200 per month, would you be able to make up the gap with other retirement savings or Social Security benefits?
If not, then you may need to rethink your early withdrawal plans. This retirement planning guide offers more tips on how to plan your income strategy.
You can also use a retirement calculator to estimate what you’ll need.
Surrender Charges and Fees
Annuity companies may let you take money from an annuity early but they don’t allow you to do it for free. You may have to pay a surrender fee, which can eat into your withdrawal amount. For example, if you’re taking out $20,000 and the surrender fee is 7%, you’re handing over $1,400 to the annuity company.
Surrender charges may decrease as time goes on, so you might save a little money if you can wait a few years to make a withdrawal. If you’re not thrilled about paying the fees, however, you might consider other ways to access cash.
Alternatives to Withdrawals From an Annuity
If you no longer need your annuity, you could sell some or all of the payments owed to you for cash. The amount you can get will depend on your contract’s current value and the company you’re working with. You’ll need to find a reputable annuity buyer, and you may want to compare offers to find the best deal.
If you want to keep your annuity, you might consider other ways to borrow the cash that you need. Your options may include:
• Selling or cashing out a cash-value life insurance policy you own
• Taking out a home equity loan or line of credit
• Taking an early withdrawal from an IRA
• Getting a personal loan or line of credit
Some of these options have more pros and cons than others. Borrowing from your 401(k), for example, can shrink your retirement nest egg and potentially trigger tax penalties if you don’t pay it back on time. Weighing all the possibilities can help you decide on which path to take.
Strategies for Withdrawing from an Annuity
If you’re interested in how to withdraw money from an annuity while minimizing penalties and fees, there are a few things to keep in mind. These tips can help you figure out the best way to withdraw from your annuity.
Annuity Withdrawal Calculators
Annuity withdrawal calculators can help you estimate what you can get from your annuity, should you decide to withdraw early. They can also tell you how much you might owe in taxes and penalties for an early withdrawal.
Seeing the numbers can put the true cost of an early withdrawal in perspective. You might decide that it makes more sense to choose another option if what you’d pay to make the withdrawal outweighs what you’d gain.
Tax Planning and Optimization
The last thing you want is to end up with a surprise tax bill following an early annuity withdrawal. If you know how much you plan to withdraw, consider how that’s going to affect you tax-wise. Specifically, consider whether it would:
• Push you into a higher tax bracket for that tax year
• Trigger a 10% early withdrawal penalty, based on your age
If a withdrawal would bump you into a higher tax bracket, even temporarily, you may need to think about how you could offset it. For example, could you make a tax-deductible contribution to an IRA or a donation to an eligible charity? Or, would it be possible to wait and take the withdrawal next year, if you expect your income to be lower then?
Thinking ahead can help you avoid a situation where you’re stuck with a tax bill you can’t afford.
Consulting a Financial Advisor
Annuities can be complicated products and if you find it challenging to make sense of your contract’s terms or have questions about the tax consequences, it’s probably in your best interest to talk to a financial advisor.
A professional advisor can walk you through your withdrawal options, based on the terms of your annuity contract, and guide you through the potential tax impacts. And if you decide that an annuity withdrawal isn’t right for you, an advisor can suggest other possibilities for getting the cash you need.
The Takeaway
How do you withdraw money from an annuity? With careful thought, if you intend to minimize what you pay in taxes and fees.
If you have an annuity, or you’re thinking of adding one to your financial plan, it’s important to understand what you’re getting and what you might pay if you decide to take cash from your contract early. After all, an annuity is one part of your overall retirement plan — which may include an IRA, a 401(k) or other accounts. Whatever you decide should make sense in light of your other investments.
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).
🛈 SoFi does not offer annuities to its members, though SoFi Invest offers investments that may provide income through dividends.
FAQ
What is the penalty for withdrawing from an annuity early?
The IRS imposes a 10% early withdrawal penalty when you withdraw money from an annuity before age 59 ½. The withdrawal is also subject to ordinary income tax and you may be required to pay a surrender charge to the annuity company if the withdrawal is during the surrender period.
Can you withdraw the entire annuity balance at once?
As long as your annuity contract permits it you can make a full or partial withdrawal. A full surrender would effectively cancel your contract, while a partial surrender might still allow you to receive annuitized payments later.
How are annuity withdrawals reported for tax purposes?
Withdrawals from qualified annuities are subject to ordinary income tax on the entire withdrawal amount. Nonqualified annuities are subject to income tax only on the earnings withdrawn. Both types of annuities are subject to a 10% early withdrawal penalty when you take money out before age 59 ½, unless an exception applies.
About the author
Rebecca Lake
Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.
Photo credit: iStock/Super Scout
SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.
For a full listing of the fees associated with Sofi Invest please view our fee schedule.
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.
S&P 500 IndexThe S&P 500 Index is a market-capitalization-weighted index of 500 leading publicly traded companies in the U.S. It is not an investment product, but a measure of U.S. equity performance. Historical performance of the S&P 500 Index does not guarantee similar results in the future. The historical return of the S&P 500 Index shown does not include the reinvestment of dividends or account for investment fees, expenses, or taxes, which would reduce actual returns.
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.
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.
SOIN-Q424-003
Read moreFeb
13
2025
Silver Certificate Dollar Bills: What Are They Worth?
Silver certificates are a type of money, or paper bill, issued by the United States government between the years 1878 and 1964.
Although they resemble ordinary currency, and can still be used as legal tender, silver certificate bills are generally worth more than their face value. How much more depends on the type, the size, and several other factors. The rarer the certificate, the higher its likely value. In some cases, certain unusual or historic silver certificates may be worth large sums at auction.
Silver certificates are more like collectibles, in that their value can also fluctuate based on demand or trend factors. There is also the risk of fraud, and it’s wise to consult a professional before buying or trading silver certificates.
Key Points
• Silver certificates, issued from 1878 to 1964, are a unique form of U.S. currency that could, at one time, be exchanged for silver.
• They can now be used as legal tender, and are typically worth above face value, sometimes a lot more, depending on rarity.
• Two types of silver certificates exist: large (pre-1929) and small (1929-1964) certificates, differing in size and production period.
• Value depends on condition, age, denomination, serial number, design, with some rare certificates fetching thousands at auction.
• Preservation involves using protective sleeves and storing in cool, dry, dark places to maintain condition.
What Are Silver Certificates?
Silver certificates, which were issued only between the years 1878 and 1964, could at one time be redeemed for their designated amount in silver: either coins or silver bullion.
History of Silver Certificates
Silver certificates are no longer printed or produced by the U.S. Mint, and haven’t been since the mid-1960s. As such, they’re somewhat rare, and may be worth more than their face value. Each series of silver certificates displays its own combination of design flourishes and security elements that also reflect artistic trends of the day, as well as technological developments.
The Mint stopped producing silver certificates in 1964 after Congress passed a law repealing the Silver Purchase Act — which had allowed certificates to be exchanged for silver. They were gradually replaced by Federal Reserve notes, which solidified the era of fiat currency: legal tender not backed by a precious metal, but rather the U.S. government’s guarantee.
Uses for Silver Certificates
Silver certificates can, however, still be used as cash even today. Depending on the type of silver certificate, they may vary slightly in appearance from other bills, but they are considered legal tender.
For collectors or investors, silver certificates may be considered a type of alternative investment, similar to collectibles like art, rare books, and antique sports cards. While they aren’t necessarily high-risk investments, silver certificates are beholden to certain risk factors, like potential fraud from counterfeit certificates, as well as a lack of transparency in the market for these items.
At this time, SoFi does not offer silver certificates.
💡 Quick Tip: How do you decide if a certain online trading platform or app is right for you? Ideally, the online investment platform you choose offers the features that you need for your investment goals or strategy, e.g., an easy-to-use interface, data analysis, educational tools.
Types of Silver Certificates
Generally speaking, there are two types of silver certificates: Large and small silver certificates. The description actually refers to when the certificates were produced, as well as the difference in their physical dimensions. Because silver certificates are basically a type of collectible — in that their value isn’t derived from their face value — they fall under the rubric of alternative assets.
Large-Size Silver Certificates (pre-1929)
Large silver certificates are, as the name suggests, physically larger than small silver certificates, and measure around seven inches long by three inches wide. These certificates were produced between 1878 and 1923, and came in nine denominations, ranging from $1 to $1,000.
Small-Size Silver Certificates (1929-1964)
Small silver certificates conform to modern bill sizes, measuring at a bit more than six inches long, and two-and-a-half inches wide. They were produced beginning in 1928, after the Mint redesigned bills, and were printed until 1964. They come in only three denominations: $1, $5, and $10. And, like their modern standard counterparts, they feature portraits of either George Washington, Abraham Lincoln, or Alexander Hamilton.
Recommended Comprehensive Guide to Alternative Investments
Factors Affecting the Value of Silver Certificates
There are quite a few variables that ultimately determine the value of a silver certificate today, just as there are a range of factors that impact the value of various types of stocks.
Perhaps the most important is the physical condition of the silver certificate itself, or “grading,” as numismatics would say. Similar to collecting rare coins, there are professionals who assess the condition of paper money and bills, and give them a specific grade to convey that condition.
The grade includes a number between one and 70 (70 indicates that the bill is in mint condition), and a letter, signifying that it is either in good, very good, very fine, extremely fine, about uncirculated, or gem uncirculated condition. The absolute best condition you could hope for would be a “70 Gem Unc.”
Beyond the condition and grade of a silver certificate, the value can be affected by its age, its denomination, and even its serial number, or whether or not it contains a minting error (bills with errors are rarer than those without errors, increasing their value to collectors). Further, where a bill was produced can affect its value, as can its specific design — again, some are more scarce than others.
Recommended: Alternative Investments, Explained
Common Silver Certificate Denominations and Their Worth
The most common silver certificate denominations on the market are $1, $5, and $10 varieties, although older bills may come in a wider range of denominations. And while their values depend on some of the factors discussed (most importantly, their grading), potential investors or collectors may want a ballpark figure of what they might pay to get their hands on one — or what they could reap if they were to sell it.
It’s likely worth it to speak with a specialist or numismatist to get a more accurate valuation of a specific bill.
• $1 silver certificates: Depending on the certificate (grading, year, etc.), $1 silver certificates may be worth a bit more than their face value, or they could be worth hundreds of dollars.
• $5 silver certificates: For the more common $5 silver certificates on the market, values are likely to be somewhere between 10% and 30% above face value. But again, some may be worth much more, into the hundreds of dollars, for rarer bills.
• $10 silver certificates: Values for common $10 silver certificates are similar to $5 varieties, typically 10% to 30% above face value. For specific, rare certificates, the values could be much higher.
Owing to the wide range of factors that come into play regarding the actual current value of a silver certificate, it may be best to consult with a professional before buying, trading, or investing in silver certificates.
💡 Quick Tip: Because alternative investments tend to perform differently than conventional ones, even under the same market conditions, alts may help diversify your portfolio, mitigate volatility, and provide a hedge against inflation.
Rare and Valuable Silver Certificates
As mentioned, there are some rare and more valuable silver certificates out there, too. While the more common certificates are not worth much more than their face value, these hard-to-find bills can fetch hundreds, or even perhaps thousands of dollars from the right buyer. Here are a few examples.
• 1896 $1 Silver Certificate Educational Series: Featuring an elaborate design and portraits of George and Martha Washington, this rare bill has sold for as much as $10,000.
• 1886 $5 Silver Certificate (Ulysses S. Grant): This certificate, featuring a portrait of Ulysses S. Grant on the front, is another old, rare bill. These specific certificates often sell for as much as $50,000 at auction, and sometimes more.
• 1891 Series $20 Silver Certificate: This bill has a portrait of Daniel Manning, and there are only a handful of them that still exist. Given its rarity, these bills can sell for as much as $50,000 at auction.
How to Determine the Value of Your Silver Certificate
Determining the value of a silver certificate isn’t easy, and may best be left up to professional numismatists to ensure you’re getting an accurate estimate. But you could begin by trying to assess the grade yourself — that is, determining the overall condition of the bill. Again, this may not be easy to do, but if the bill is damaged in specific ways, you may be able to use a grading guide to help you figure things out.
Beyond that, you can also look up the specific mintage or production information to get a sense of how rare a certificate is. That may also help you get a ballpark idea of the value of your certificate. But again, you may want to go to a professional — perhaps at a local coin shop or auction house — to get a professional appraisal, or more information.
Collecting vs. Investing in Silver Certificates
Perhaps the primary difference between collecting and investing in silver certificates is that investors are actively trying to generate a positive return. So, while a collector may be willing to pay higher prices, or even lose some money in order to get their hands on a specific silver certificate, an investor looking at various types of alternative investments likely won’t be willing to do the same, owing to the lack of transparency and liquidity.
Recommended: Why Alternative Investments?
Where to Buy and Sell Silver Certificates
Whether you’re collecting or investing in silver certificates, there are many online stores or retailers that sell silver certificates, and there are even auction houses that may offer the chance to buy rarer bills. Many physical coin or bullion stores may have silver certificates available for purchase, too, and be willing to buy them as well.
Preserving Silver Certificates
In order to keep silver certificates safe and their condition intact, it’s best to try and put them in some sort of protector, and control the environment in which they’re stored. That means likely purchasing currency sleeves — which can be purchased from many retailers — made of rigid plastic. That will help protect the bill from physical damage.
But you’ll also want to aim to keep your silver certificates in a place that is relatively cool, dry, and dark. Heat, humidity, and direct sunlight can and will damage paper bills, so if you can find a safe spot to keep them, it should help keep their integrity for longer.
The Takeaway
Silver certificates are paper bills that, at one time, could be exchanged for silver coins or silver bullion. They have not been produced since the mid-1960s, and as such, are something of a rarity on the market today — although they can still be used as legal tender to make purchases. Some are rarer than others, naturally, and can have higher values, and that’s made them attractive to investors and collectors alike.
Ready to expand your portfolio's growth potential? Alternative investments, traditionally available to high-net-worth individuals, are accessible to everyday investors on SoFi's easy-to-use platform. Investments in commodities, real estate, venture capital, and more are now within reach. Alternative investments can be high risk, so it's important to consider your portfolio goals and risk tolerance to determine if they're right for you.
🛈 SoFi does not offer silver certificate dollar bill investments, but it does offer alternative investment funds, which may provide access commodities, venture capital, real estate assets, and more.
FAQ
Can silver certificates still be redeemed for silver?
No, silver certificates can no longer be redeemed for silver coins or bullion, but can be used as legal tender to conduct transactions — or bought as a collectible.
What makes some silver certificates more valuable than others?
The primary variables that determine the value of a silver certificate are its denomination, grade, age, and mintage or production information — in general, the rarer a bill, the higher its value.
How do you determine if a silver certificate is genuine?
The best thing to do in order to determine whether a silver certificate is genuine or not is to take it to a professional numismatist.
Photo credit: iStock/svetikd
SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.
For a full listing of the fees associated with Sofi Invest please view our fee schedule.
An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. This and other important information are contained in the Fund’s prospectus. For a current prospectus, please click the Prospectus link on the Fund’s respective page. The prospectus should be read carefully prior to investing.
Alternative investments, including funds that invest in alternative investments, are risky and may not be suitable for all investors. Alternative investments often employ leveraging and other speculative practices that increase an investor's risk of loss to include complete loss of investment, often charge high fees, and can be highly illiquid and volatile. Alternative investments may lack diversification, involve complex tax structures and have delays in reporting important tax information. Registered and unregistered alternative investments are not subject to the same regulatory requirements as mutual funds.
Please note that Interval Funds are illiquid instruments, hence the ability to trade on your timeline may be restricted. Investors should review the fee schedule for Interval Funds via the prospectus.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
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.
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.
Investment Risk: Diversification can help reduce some investment risk. It cannot guarantee profit, or fully protect in a down market.
SOIN-Q424-049
Read moreFeb
13
2025
How to Invest in Platinum
Platinum is one of several precious metals, including silver and gold, that tend to have high relative values, which can make them attractive to investors. Investing in platinum, likewise, isn’t all that different from investing in other precious metals, and investors can generally add platinum to their portfolios by purchasing bullion (or, the metal itself), purchasing stocks that are involved in the mining or production of platinum, or through funds that may offer exposure to the precious metals market.
Investors may turn to platinum for a number of reasons, such as the potential to see gains or as a possible hedge against inflation. But, as with any alternative investment, there are additional risks and considerations investors should take into account before adding platinum to their portfolios.
Key Points
• Platinum can be added to investment portfolios through physical purchases, mining stocks, or funds offering exposure to precious metals.
• The metal’s value is influenced by supply, demand, and economic factors, including its use in vehicles and electronics.
• Investing in platinum can offer diversification and potential protection against inflation, but involves risks due to price volatility.
• Physical platinum requires secure storage and may be harder to sell compared to stocks or funds.
• Tax implications vary, with physical platinum classified as a collectible, potentially incurring a 28% capital gains tax rate.
Understanding Platinum as an Investment
Platinum is a precious metal, which has a shiny metallic appearance, similar to silver. In fact, the moniker “platinum” comes from the Spanish word “platina,” which translates to “little silver.” It’s been mined and traded for hundreds of years, too, particularly in pre-Columbian South America, and was initially taken to European markets in the mid-1700s. It’s even been found in ancient Egyptian tombs, too. Today, a majority of platinum is mined in South Africa.
It’s commonly used to produce jewelry — again, because of its striking visual appeal — but is also used to produce some auto parts like catalytic converters, in chemical production, and to create computer and electronics components. Additionally, it’s used to produce a host of other products, including wind turbines and even dental fillings. It’s a versatile metal, but it’s largely due to its visual aesthetics that it carries a lot of value.
And that value is mostly tied to the fact that it’s scarce – scarcer even than gold, in fact. Since the mid-1700s, roughly 10,000 cubic tons of platinum have been mined, out of an estimated 70,000 total. So, platinum’s relative scarcity — meaning that it could go up in value in the future (or not, of course!) — is what primarily makes it attractive to investors as an alt investment.
Ways to Invest in Platinum
For investors who are interested in investing in platinum, there are a few primary ways to do it: By purchasing physical platinum, buying shares of funds that may add exposure to platinum to their portfolios, or by purchasing shares of mining companies that may be involved in platinum production. It’s not much different, really, from the types of assets you might consider when determining how to invest in gold or another alternative investment.
In addition, some investors may choose to invest in the precious metal through platinum futures, derivative contracts to buy or sell an asset at a future date for a set price. (Note that SoFi does not offer futures trading at this time.)
Read more: Guide to Alternative Investments
Physical Platinum
Purchasing physical platinum can include buying bullion, examples of which may be bars or coins. Effectively, platinum bullion is solid (or near solid) platinum, valued for its weight, rather than an assigned monetary value (such as a quarter from a mint that’s used for transactions) or its numismatic value (i.e., its value to collectors based on factors such as its rarity and condition).
Bullion coins can be purchased in different sizes, such as one ounce, one-half ounce, and one-quarter ounce . Bars, too, are generally sold by the ounce – one ounce, ten ounces, etc. – and can be purchased through the United States Mint, at coin and bullion dealers’ online shops or stores, and at certain retailers such as Walmart and Costco. Investors may also buy platinum jewelry from jewelers or other retailers.
Platinum ETFs and Mutual Funds
If buying physical platinum isn’t exactly what investors are looking for, they may look at fund options — that can include exchange-traded funds (ETFs) or mutual funds that are focused on or concentrated in the platinum market. There are numerous platinum-focused funds on the market, though each will vary in terms of costs, risks, price-per-share, and individual holdings or allocations. As such, investors should do their due diligence and research the particular funds they’re considering before investing.
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Platinum Mining Stocks
Investing in stocks of companies that are involved in platinum mining or production is another option for investors. Like platinum-focused funds, there are many companies that mine platinum, each with their own individual risks and potential upsides. It’s up to investors to do their homework to weigh the pros and cons and consider how these stocks fit within their overall investment strategy before making a choice.
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Factors Affecting Platinum Prices
Platinum prices are subject to numerous factors, like other precious metals. The largest, however, is supply and demand — as simple as it is, the more that platinum is in demand, the higher its value tends to be. Supply and demand, of course, is influenced by a large set of variables that include how much and often platinum is being used by manufacturers, or even if platinum jewelry experiences a moment of popularity.
In recent years, platinum has seen an increase in demand due to an uptick in electric and hybrid vehicle production, for example. But it’s also been influenced by power outages in South Africa, where most mining takes place, as well as military conflicts and wars in Europe.
Economic factors can also play a role. For instance, some investors crowd into precious metals investing if they feel that a recession is on the horizon or if inflation becomes an issue. That’s because precious metals are often seen as a powerful store of value and a hedge against inflation — though whether or not that’s true is, itself, dependent on other factors.
Advantages of Investing in Platinum
There can be potential advantages of investing in platinum, as noted. For one, adding platinum or other precious metals to your portfolio can add an element of diversification. That is, if your portfolio already contains a good mix of other investment types — which may include stocks, bonds, ETFs, mutual funds, and more — precious metals may be yet another asset class that can help diversify it even further.
Additionally, as mentioned, it’s possible that investing in platinum or other precious metals may help a portfolio retain value if the markets see a dip, or if inflation goes up. Likewise, there’s always the possibility that platinum prices could rise in the future, helping a portfolio’s overall value increase as well — but there are no guarantees.
Read more: What are Alternative Investments?
Risks and Challenges
While there are some advantages to investing in platinum and precious metals, there are risks and other considerations that investors need to take into account to determine if precious metals may be a good investment choice for them.
For example, precious metal values — including platinum — are notoriously volatile. That means that one day platinum prices may look like they’re heading to the moon, and the next, they’re cratering. Investors who don’t have much of an appetite for risk may want to consider whether they can handle wild price swings.
On top of that, if investors are buying physical platinum, they’ll need a safe place to actually store it, where it won’t be affected by environmental conditions, or even tempt thieves. It could also be a bit more of a chore to sell physical platinum, as well, as it’d require at the very least a trip to a trusted coin store or finding a reputable buyer online.
How to Buy Physical Platinum
Buying physical platinum is fairly easy. Investors can find numerous online retailers that sell platinum and other precious metals, and buy through those channels. That includes the United States Mint, which produces and sells platinum coins. Investors can also visit coin or bullion shops in their local markets to see what platinum options are available.
Investing in Platinum Through the Stock Market
Investing in platinum through the stock market is likewise fairly straightforward, as it involves simply selecting the company or fund you want to buy shares in, and executing a trade. But the important part of the trade is doing due diligence before investing.
That means looking at a stock or fund’s financial statements and history of returns, where it’s being operated and by whom, and much more. It’s effectively the same process as investing in any other asset — doing some initial research and analysis of the fundamentals in order to make a choice that aligns with your investment strategy.
Tax Implications of Platinum Investments
Figuring out tax liabilities generated from platinum investments generally boils down to calculating any capital gains on those investments. If you invest in physical platinum, the IRS considers or classifies it as a collectible. So, if you sell it after holding it for more than a year, you may be subject to a 28% capital gains tax rate.
However, if you’ve invested in platinum-focused funds or stocks, there may be other tax implications, and potentially, a different capital gains tax rate. As such, it may be best to touch base with a financial professional to help you figure out exactly what the tax implications of your platinum investment might be.
Comparing Platinum to Other Precious Metals
Platinum is just one of several precious metals that investors often set their sights on, the others being gold, silver, and palladium. They each have their own unique properties, uses, and potential upsides and risks.
Their prices vary over time and, at times in the past, platinum has actually been more expensive than gold, given its rarity. Typically, however, gold is the most expensive per ounce of the four, while investing in silver is typically the cheapest — platinum and palladium lie somewhere between the two.
It may help to review the gold/silver ratio to better understand the pricing differences. Again, depending on an investor’s strategy and how much risk they’re willing to take on, looking at options for each precious metal may be worth the effort.
The Takeaway
Platinum is one of four main precious metals that investors typically focus on. The rare metal has a number of industrial uses, and is valued for its use in jewelry, given its aesthetic and physical qualities.
Platinum investments may be advantageous in that they can diversify a portfolio and act as a hedge against inflation, but precious metal values are typically volatile, and investors would do well to do their research before buying physical assets, or investing in related funds or stocks.
Ready to expand your portfolio's growth potential? Alternative investments, traditionally available to high-net-worth individuals, are accessible to everyday investors on SoFi's easy-to-use platform. Investments in commodities, real estate, venture capital, and more are now within reach. Alternative investments can be high risk, so it's important to consider your portfolio goals and risk tolerance to determine if they're right for you.
FAQ
What are the different forms of platinum investments available?
Investors can buy physical platinum — such as bars or coins — or invest in funds that focus on platinum. It’s also possible to invest in companies that operate in or around platinum mining and production.
How does platinum pricing compare to gold and silver?
Gold is typically the most expensive precious metal per ounce, while silver is generally the least expensive. Platinum (and palladium) prices are often between the two, with platinum prices, as of mid-February 2025, around $1,001 per ounce.
What factors influence the platinum market?
Platinum values and the overall market can be influenced by a number of factors, including general supply and demand, industrial need, economic strength, and more.
Photo credit: iStock/Zinkevych
SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.
For a full listing of the fees associated with Sofi Invest please view our fee schedule.
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.
An investor should consider the investment objectives, risks, charges, and expenses of the Fund carefully before investing. This and other important information are contained in the Fund’s prospectus. For a current prospectus, please click the Prospectus link on the Fund’s respective page. The prospectus should be read carefully prior to investing.
Alternative investments, including funds that invest in alternative investments, are risky and may not be suitable for all investors. Alternative investments often employ leveraging and other speculative practices that increase an investor's risk of loss to include complete loss of investment, often charge high fees, and can be highly illiquid and volatile. Alternative investments may lack diversification, involve complex tax structures and have delays in reporting important tax information. Registered and unregistered alternative investments are not subject to the same regulatory requirements as mutual funds.
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12
2025
401(k) Catch-Up Contributions: What Are They & How Do They Work?
Retirement savers age 50 and older get to put extra tax-advantaged money into their 401(k) accounts beyond the standard annual contribution limits. Those additional savings are known as “catch-up contributions.”
If you have a 401(k) at work, taking advantage of catch-up contributions is key to making the most of your plan, especially as retirement approaches. Here’s a closer look at how 401(k) catch-up limits work.
Key Points
• Individuals aged 50 and older can contribute additional funds to their 401(k) accounts through catch-up contributions.
• The annual catch-up contribution limit for individuals 50 and up is $7,500 for both 2024 and 2025, allowing eligible participants to save a total of $30,500 in 2024 and $31,000 in 2025. In 2025, those aged 60 to 63 may contribute an additional $11,250 (instead of $7,500), for a total of $34,750.
• Catch-up contributions can be made to various retirement accounts, including 401(k) plans, 403(b) plans, and IRAs, providing flexibility in retirement savings.
• Utilizing catch-up contributions effectively can help older savers offset previous under-saving and better prepare for retirement expenses.
What Is 401(k) Catch-Up?
A 401(k) is a type of defined contribution plan. This means the amount you can withdraw in retirement depends on how much you contribute during your working years, along with any employer matching contributions you may receive, as well as how those funds grow over time.
There are limits on how much employees can contribute to their 401(k) plan each year as well as limits on the total amount that employers can contribute. The regular employee contribution limit is $23,000 for 2024 and $23,500 for 2025. This is the maximum amount you can defer from your paychecks into your plan — unless you’re eligible to make catch-up contributions.
Under Internal Revenue Code Section 414(v), a catch-up contribution is defined as a contribution in excess of the annual elective salary deferral limit. For 2024 and 2025, the 401(k) catch-up contribution limit is $7,500. In 2025, those aged 60 to 63 may contribute an additional $11,250 (instead of $7,500) to their 401(k) plan.
That means if you’re eligible to make these contributions, you would need to put a total of $30,500 in your 401(k) in 2024 to max out the account and $31,000 in 2025 ($34,750 for those aged 60 to 63). That doesn’t include anything your employer matches.
Congress authorized catch-up contributions for retirement plans as part of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA). The legislation aimed to help older savers “catch up” and avoid falling short of their retirement goals, so they can better cover typical retirement expenses and enjoy their golden years.
Originally created as a temporary measure, catch-up contributions became a permanent feature of 401(k) and other retirement plans following the passage of the Pension Protection Act in 2006.
Who Is Eligible for 401(k) Catch-Up?
To make catch-up contributions to a 401(k), you must be age 50 or older and enrolled in a plan that allows catch-up contributions, such as a 401(k).
The clock starts ticking the year you turn 50. So even if you don’t turn 50 until December 31, you could still make 401(k) catch-up contributions for that year, assuming your plan follows a standard calendar year.
Making Catch-Up Contributions
If you know that you’re eligible to make 401(k) catch-up contributions, the next step is coordinating those contributions. This is something with which your plan administrator, benefits coordinator, or human resources director can help.
Assuming you’ve maxed out your 401(k) regular contribution limit, you’d have to decide how much more you want to add for catch-up contributions and adjust your elective salary deferrals accordingly. Remember, the regular deadline for making 401(k) contributions each year is December 31.
It’s possible to make catch-up contributions whether you have a traditional 401(k) or a Roth 401(k), as long as your plan allows them. The main difference between these types of plans is tax treatment.
• You fund a traditional 401(k) with pre-tax dollars, including anything you save through catch-up contributions. That means you’ll pay ordinary income tax on earnings when you withdraw money in retirement.
• With a Roth 401(k), regular contributions and catch-up contributions use after-tax dollars. This allows you to withdraw earnings tax-free in retirement, which is a valuable benefit if you anticipate being in a higher tax bracket when you retire.
You can also make catch-up contributions to a solo 401(k), a type of 401(k) used by sole proprietorships or business owners who only employ their spouse. This type of plan observes the same annual contribution limits and catch-up contribution limits as employer-sponsored 401(k) plans. You can choose whether your solo 401(k) follows traditional 401(k) rules or Roth 401(k) rules for tax purposes.
401(k) Catch-Up Contribution Limits
Those aged 50 and older can make catch-up contributions not only to their 401(k) accounts, but also to other types of retirement accounts, including 403(b) plans, 457 plans, SIMPLE IRAs, and traditional or Roth IRAs.
The IRS determines how much to allow for elective salary deferrals, catch-up contributions, and aggregate employer and employee contributions to retirement accounts, periodically adjusting those amounts for inflation. Here’s how the IRS retirement plan contribution limits for 2025 add up:
|
Retirement Plan Contribution Limits in 2025 |
|||
|---|---|---|---|
| Annual Contribution | Catch Up Contribution | Total Contribution for 50 and older | |
| Traditional, Roth and solo 401(k) plans; 403(b) and 457 plans | $23,500 |
$7,500 (ages 50-59, 64+) $11,250 (ages 60-63) |
$31,000 (ages 50-59, 64+) $34,750 (ages 60-63) |
| Defined Contribution Maximum, including employer contributions | $70,000 |
$7,500 (ages 50-59, 64+) $11,250 (ages 60-63) |
$77,500 (ages 50-59, 64+) $81,250 (ages 60-63) |
| SIMPLE IRA | $16,500 |
$3,500 (ages 50-59, 64+) $5,250 (ages 60-63) |
$20,000 (ages 50-59, 64+) $21,750 (ages 60-63) |
| Traditional and Roth IRA | $7,000 | $1,000 | $8,000 |
These amounts only include what you contribute to your plan or, in the case of the defined contribution maximum, what your employer contributes as a match. Any earnings realized from your plan investments don’t count toward your annual or catch-up contribution limits.
Also keep in mind that employer contributions may be subject to your company’s vesting schedule, meaning you don’t own them until you’ve reached certain employment milestones.
Tax Benefits of Making Catch-Up Contributions
Catch-up contributions to 401(k) retirement savings allow you to save more money in a tax-advantaged way. The additional money you can set aside to “catch up” on your 401(k) progress enables you to save on taxes now, as you won’t pay taxes on the amount you contribute until you withdraw it in retirement. These savings can add up if you’re currently in a high tax bracket, offsetting some of the work of saving extra.
The amount you contribute will also grow tax-deferred, and making catch-up contributions can result in a sizable difference in the size of your 401(k) by the time you retire. Let’s say you start maxing out your 401(k) plus catch-up contributions as soon as you turn 50, continuing that until you retire at age 65. That would be 15 years of thousands of extra dollars saved annually.
Those extra savings, thanks to catch-up contributions, could easily cross into six figures of added retirement savings and help compensate for any earlier lags in saving, such as if you were far off from hitting the suggested 401(k) amount by 30.
Roth 401(k) Catch-Up Contributions
The maximum amount you can contribute to a Roth 401(k) is the same as it is for a traditional 401(k): $23,000 and, if you’re 50 or older, $7,500 in catch-up contributions, as of 2024. For 2025, it is $23,500 and, if you’re 50 or older, $7,500 in catch-up contributions ($11,250 in catch-up contributions if you’re 60 to 63). This means that if you’re age 50 and up, you are able to contribute a total of $30,500 to your Roth 401(k) in 2024 and $31,000 in 2025 (or $34,750 in 2025 if you’re 60 to 63).
If your employer offers both traditional and Roth 401(k) plans, you may be able to contribute to both, and some may even match Roth 401(k) contributions. Taking advantage of both types of accounts can allow you to diversify your retirement savings, giving you some money that you can withdraw tax-free and another account that’s grown tax-deferred.
However, if you have both types of 401(k) plans, keep in mind while managing your 401(k) that the contribution limit applies across both accounts. In other words, you can’t the maximum amount to each 401(k) — rather, they’d share that limit.
The Takeaway
Putting money into a 401(k) account through payroll deductions is one of the easiest and most effective ways to save money for your retirement. To determine how much you need to put into that account, it helps to know how much you need to save for retirement. If you start early, you may not need to make catch-up contributions. But if you’re 50 or older, taking advantage of 401(k) catch-up contributions is a great way to turbocharge your tax-advantaged retirement savings.
Of course, you can also add to your retirement savings with an IRA. While a 401(k) has its advantages, including automatic savings and a potential employer match, it’s not the only way to grow retirement wealth. If you’re interested in a traditional, Roth, or SEP IRA, you can easily open an IRA account on the SoFi Invest® brokerage platform. If you’re age 50 or older, those accounts will also provide an opportunity for catch-up contributions.
FAQ
How does the 401(k) catch-up work?
401(k) catch-up contributions allow you to increase the amount you are allowed to contribute to your 401(k) plan on an annual basis. Available to those aged 50 and older who are enrolled in an eligible plan, these catch-contributions are intended to help older savers meet their retirement goals.
What is the 401(k) catch-up amount in 2025?
For 2025, the 401(k) catch-up contribution limit is $7,500 if you’re aged 50 to 59 or 64-plus. For those aged 60 to 63 in 2025, the 401(k) catch-up contribution limit is $11,250 (instead of $7,500).
About the author
Rebecca Lake
Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.
Photo credit: iStock/1001Love
SoFi Invest®
INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUE
1) Automated Investing and advisory services are provided by SoFi Wealth LLC, an SEC-registered investment adviser (“SoFi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC.
2) Active Investing and brokerage services are provided by SoFi Securities LLC, Member FINRA (www.finra.org)/SIPC(www.sipc.org). Clearing and custody of all securities are provided by APEX Clearing Corporation.
For additional disclosures related to the SoFi Invest platforms described above please visit SoFi.com/legal.
Neither the Investment Advisor Representatives of SoFi Wealth, nor the Registered Representatives of SoFi Securities are compensated for the sale of any product or service sold through any SoFi Invest platform.
For a full listing of the fees associated with Sofi Invest please view our fee schedule.
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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