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Feb

2024

Investment Tax Rules Every Investor Should Know

By Anna Davies | Growing Wealth, invest, Investing | Comments Off

Investing can feel like a steep learning curve. In addition to having a clear grasp of types of investment vehicles available and the role investments play in overall financial strategy, it’s a good idea to understand how taxes may affect your investments. Knowing tax implications of various investment vehicles and investment decisions may help an investor tailor their strategy and end up with fewer headaches at tax time.

What Is Investment Income?

Tax requirements for investments can be complicated, and it may be helpful for investors to work with a professional to see how taxes might impact a return on their investment. Doing so might also help ensure that investors aren’t overlooking anything important when it comes to their investments and taxes.

That said, it’s beneficial to enter into any discussion with some solid background information on when and how investments are taxed. Typically, investments are taxed at one or more of these three times:

• When you sell an asset for a profit. This profit is called capital gains—the difference between what you bought an investment for and what you sold it for. Capital gains taxes are typically only triggered when you sell an asset; otherwise, any gain is an “unrealized gain” and is not taxed.

• When you receive money from your investments. This may be in the form of dividends or interest.

• When you have investment income that includes such things as royalties, income from rental properties, certain annuities, or from an estate or trust. This may incur a tax called the Net Investment Income Tax (NIIT).

In the following sections, we delve deeper into each of these situations that can lead to taxes on investments.

💡 Quick Tip: Investment fees are assessed in different ways, including trading costs, account management fees, and possibly broker commissions. When you set up an investment account, be sure to get the exact breakdown of your “all-in costs” so you know what you’re paying.

Tax Rules for Different Investment Income Types

Capital Gains Taxes on Assets Sold

Capital gains are the profits an investor makes from the purchase price to the sale price of an asset. Capital gains taxes are triggered when an asset is sold (or in the case of qualified dividends, which is explained further in the next section). Any growth or loss before a sale is called an unrealized gain or loss, and is not taxed.

The opposite of a capital gain is a capital loss. This occurs when an investor sells an asset at a lower price than purchased. Why would this happen? That depends on the investor. Sometimes, an investor needs to sell an asset at a suboptimal time because they need the cash, for instance.

At other times, an investor may sell “losing” assets at the same time they sell assets that have gained as a way to minimize their overall tax bill, by using a strategy called tax-loss harvesting. This strategy allows investors to “balance” any gains by selling profits at a loss, which, according to IRS rules, may be carried over through subsequent tax years.

There are two types of capital gains, depending on how long you have held an asset:

• Short-term capital gains. This is a tax on assets held less than a year, taxed at the investor’s ordinary income tax rate.
• Long-term capital gains. This is a tax on assets held longer than a year, taxed at the capital-gains tax rate. This rate is lower than ordinary income tax. For the 2023 tax year, the long-term capital gains tax is $0 for individuals married and filing jointly with taxable income less than $89,250, and no more than 15% for those with taxable income up to $553,850. The long-term capital gains tax rate is 20% for those whose taxable income is more than that.

For the 2024 tax year, individuals may qualify for a 0% tax rate on long-term capital gains if their taxable income is $94,050 or less for those married and filing jointly, and no more than 15% if their taxable income is up to $583,750. Beyond that, the tax rate is 20%.

Dividend And Interest Taxes

Dividends are distributions that a corporation, S-corp, trust or other entity taxable as a corporation may pay to investors. Not all companies pay dividends, but those that do typically pay investors in cash, out of the corporation’s profits or earnings. In some cases, dividends are paid in stock or other assets.

Dividends that are part of tax-advantaged investment vehicles are not taxed. Generally, taxpayers will receive a form 1099-DIV from a corporation that paid dividends if they receive more than $10 in dividends over a tax year. All other dividends are either ordinary or qualified:

• Ordinary dividends are taxed at the investor’s income tax rate.
• Qualified dividends are taxed at the lower capital-gains rate.

In order for a dividend to be considered “qualified” and taxed at the capital gains rate, an investor must have held the stock for more than 60 days in the 121-day period that begins 60 days before the ex-dividend date. (Additionally, said dividends must be paid by a U.S. corporation or qualified foreign corporation, and must be an ordinary dividend, as opposed to capital gains distributions or dividends from tax-exempt organizations.)

Both ordinary dividends and interest income on investments are taxed at the investors regular income rate. Interest may come from brokerage accounts, or assets such as mutual funds and bonds. There are exceptions to interest taxes based on type of asset. For example, municipal bonds may be exempt from taxes on interest if they come from the state in which you reside.

Total Investment Income and Net Investment Income Tax (NIIT)

Net investment income tax (NIIT) is a flat 3.8% surtax levied on investment income for taxpayers above a certain income threshold. The NIIT is also called the “Medicare tax” and applies to all investment income including, but not limited to: interest, dividends, capital gains, rental and royalty income, non-qualified annuities, and income from businesses involved in trading of financial instruments or commodities.

NIIT applies to individuals with a modified adjusted gross income (MAGI) over $200,000 for single filers and $250,000 for married couples filing jointly. For taxpayers over the threshold, NIIT is applied to the lesser of the amount the taxpayer’s MAGI exceeds the threshold or their total net investment income.

For example, consider a couple filing jointly who makes $200,000 in wages and has a NIIT of $60,000 across all investments in a single tax year. This brings their MAGI to $260,000—$10,000 over the AGI threshold. This would mean the taxpayer would owe tax on $10,000. To calculate the exact amount of tax, the couple would take 3.8% of $10,000, or $380.

Cases of Investment Tax Exemption

Certain types of investments may be exempt from tax implications if the money is used for certain purposes. These investment vehicles are called “tax-sheltered” vehicles and apply to certain types of investments that are earmarked for certain uses, such as retirement or education.

There are two types of tax-sheltered accounts:

• Tax-deferred accounts. These are accounts in which money is contributed pre-tax and grows tax-free, but taxes are taken out when money is withdrawn. For example, a 401(k) retirement account grows tax-free until you withdraw money, at which point it is taxed.
• Tax-exempt accounts. These are accounts—such as a Roth 401(k) or Roth IRA, or a 529 plan—in which money can be withdrawn tax-free if the funds are taken out according to qualifications. For example, money in a Roth account is not taxed upon withdrawal in retirement.

Beyond investing in tax-sheltered accounts, investors may also choose to research or speak with a professional about tax-efficient investing strategies. These are ways to calibrate a portfolio that might help minimize taxes, build wealth, and reach key portfolio goals—such as ample savings for retirement.

The Takeaway

Dividends, interest, and gains can add up, which is why it’s important for a taxpayer to be mindful of investment taxes not only at tax time, but throughout the year. Understanding the implications of sales and keeping capital gains taxes in mind when planning sales can help investors make tax-smart decisions.

Because there are so many different rules regarding taxes, some investors find it helpful to work with a tax professional. Tax law also varies by state, and a tax professional should be able to help an investor with those taxes as well.

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Feb

2024

How to Invest Your 401(k)

By Samuel Becker | Growing Wealth, invest, Preparing for Retirement | No Comments

Utilizing your 401(k) retirement account can seem daunting to beginner investors, but there are numerous strategies and tactics you can use to improve returns. Before any of that happens, though, investors will want to be sure to sign up for a 401(k) retirement account through your employer, which is often as simple as filling out a form.

As for the rest? Investing in your 401(k) doesn’t have to be complicated. From understanding your investment options and choosing your portfolio, to common mistakes to avoid, read on to get into the nitty-gritty.

How to Invest Your 401(k)

Investing in your 401(k) can often be as simple as making some basic investment choices. But it’s also good to know exactly how the account works.

As a refresher, a 401(k) is a type of tax-deferred retirement account sponsored by your employer. If you work for a non-profit, a school district, or the government instead of a company, your retirement plan might be a 403(b) or a 457(b) plan. All of these plans are employer-sponsored, meaning they pick the plan — and most of the information here applies to all three types of accounts.

You and your employer can both contribute to a 401(k). Many employers match employee contributions to some degree, and some may even contribute a portion of company profits to employees’ accounts (that’s known as a 401(k) profit-sharing plan).

Contributions are capped by the IRS: For the 2024 tax year, the maximum amount an individual might contribute to a 401(k) is $23,000, with an additional $7,500 in catch-up contributions allowed for people over age 50. The total amount that might be contributed to a 401(k), including matching funds and other contributions from an employer, is $69,000 (or $76,500 for people over age 50).

For the 2023 tax year, the maximum amount an individual could contribute to a 401(k) is $22,500, with an additional $7,500 in catch-up contributions allowed for people over age 50. The total amount that might be contributed to a 401(k), including matching funds and other contributions from an employer, is $66,000 (or $73,500 for people over age 50).

With all of that in mind, here are some things to remember as you start to invest in your 401(k), or look for ways to improve your returns.

Assess Your Goals

Investors should really take the time to assess their overall investment goals, and think about how their 401(k) fits into achieving those goals. Each investor will have different goals, and that means they’ll be willing to take different risks and be on different timelines as to when they want to reach those goals.

Again, this will vary from investor to investor, but before making any moves, it can be helpful to think more deeply about goals. Talking to a financial professional may be helpful, too.

Determine Your Risk Tolerance

Every investment comes with risk. The key is assessing your comfort level with risk now, and going forward. Whether you’re picking a target date fund or making your own mix of investments, you’ll want to allocate your money based on your needs and risk tolerance.

One rule of thumb when it comes to retirement investments is that the younger you are, the more risk you might be able to handle. The thinking goes that you will have more time to recover from market drops to allow riskier investments to pay off.

On the other hand, people closer to retirement may choose to adjust their investments. There, the goal would be to minimize risk, so that the savings they will soon need would not be overly impacted by a market downturn.

Look at Diversification

Diversification is critical when building a portfolio, so investors should keep an eye on what’s in their portfolio. An individual employee may not have a whole lot of say as to what exactly is going into their 401(k) investment mix, but you’ll want to keep an eye on things and stay abreast of the way that your portfolio manager is diversifying for you.

Target-Date Funds

A target-date fund is a mutual fund with a passive mix of investments aimed at a “target” retirement date. The mix of assets (stocks and bonds) typically becomes more conservative as your target retirement date nears. For people who prefer a hands-off approach, these funds might be a good investment option.

Something to keep in mind is that you don’t necessarily have to pick the target date based on when you actually plan to retire. If you feel the mix of assets is too aggressive, you might choose to select an earlier retirement year to take less risk.

Factors to Consider

Additionally, there are many factors investors will need to consider as it relates to their 401(k), such as their time horizon, expenses, and contribution levels.

• Time horizon: How long do you plan to invest? Investors will want to keep long-term returns in mind, and their investment mix and other choices can have an impact on their returns.

• Expenses: Investments often have expense ratios or other fees that can eat into returns, which is another thing to keep in mind.

• Contribution levels: The more you save for retirement and the earlier you start saving, the better off you’ll likely be in retirement. If you’re lucky enough to have an employer that matches your contributions, at a minimum you’ll probably want to take full advantage of your employer match.

Remember: Maximizing your 401(k) tends to benefit you in the long run. 401(k) employer contributions vary, so it makes sense to find out how matching works at your company, and then contribute at least enough to get that “free money.”

401(k) Investing: Things to Keep In Mind

There are a couple of other things that investors may want to try and keep in mind in regard to their 401(k), such as leaving old accounts open, and over-investing in specific funds.

Putting Everything into a Money Market Fund

A money market fund is a mutual fund made up of relatively low-risk, short-term securities. It’s a tempting move, because it feels like you don’t risk losing money. You’ll want to gauge whether your investing returns are outpacing inflation, accordingly. That may be the case if your money is only being invested in a money market fund — in fact, that may be the default if employees don’t make investment selections for their portfolio. You’ll need to check with your plan provider to find out.

Leaving Old 401(k)s Open

When you leave your current employer, it’s often a good idea to roll over your 401(k) into a traditional or Roth IRA. Most 401(k) accounts have fees associated with them. While typically an employer will pay those fees while you work for them, once you’re no longer with the company, many will stop paying them for you.

By moving your money into an account of your choosing, you have more control over the fees you pay. You’ll also generally have a broader range of investment choices.

The Takeaway

Investing in a 401(k) retirement savings account is fairly simple, especially since you can set it up through your employer. Whether you are typically a hands-on investor or prefer a hands-off approach, you can get your 401(k) contributions up and running — and start saving money for your future.

If you have an old 401(k), as noted above, you might want to consider doing a rollover to an IRA account so you can better manage your savings in one place.

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.

🛈 While SoFi does not offer 401(k) plans at this time, we do offer a range of Individual Retirement Accounts (IRAs).

FAQ

Can I invest my 401(k) on my own?

It may be possible to invest in your 401(k) on your own, as some employers offer a self-directed plan option, which gives investors more choice and say over their portfolio.

Is it possible to make my 401(k) grow faster?

To make your 401(k) grow faster, you can look at increasing your contributions (up to a specified limit), or changing your investment mix. But note that many investments with higher growth potential tend to have higher associated risks.

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

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

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

Feb

2024

HSA for Retirement: Rules, Benefits, and Getting Started

By MP Dunleavey | Budgeting & Goals, invest | No Comments

A health savings account, or HSA, not only provides a tax-free way to pay for medical expenses now, those tax savings can extend to retirement as well.

An HSA provides triple tax benefits to the account holder. You set aside money pre-tax (similar to a 401(k) or IRA), it grows tax free, and withdrawals for qualified medical expenses are also tax free.

HSAs can be a boon in retirement because you always have access to the account, even if you change jobs, and you never have to “use it or lose it,” so your savings can grow over time. Thus, you can use HSA funds to pay for qualified medical expenses at any time, tax free, now or when you retire.

The other good news is that after age 65 you can use the funds for non-qualified expenses, too; you just have to pay income tax on the funds you withdraw.

What Is an HSA?

A Health Savings Account is a type of tax-advantaged savings account for individuals with a high-deductible health care plan (HDHP) — defined by the IRS as any plan with a deductible of at least $1,600 for an individual or $3,200 for a family.

That said, not all high-deductible plans are eligible for a health-savings account. When selecting a plan, make sure it says “HSA eligible.”

Anyone who fits the criteria is eligible to open an HSA and save pre-tax dollars: up to $4,150 a year for individuals and up to $8,300 for families for the 2024 tax year — a 7% increase over the 2023 contribution limits. If you’re 55 or older at the end of the tax year, you can contribute an additional $1,000 — similar to the catch-up contributions allowed with an IRA.

An employer can also make a matching contribution into your HSA, though it’s important to note that total employer and employee contributions can’t exceed the annual limits. So if you’re single, and your employer contributes $1,500 to your HSA each year, you can’t contribute more than $2,650 for 2024.

Rules and Restrictions on HSA Contributions

You have until the tax-filing deadline to make your annual HSA contribution.

• For tax year 2023, you have until April 15, 2024.

• For tax year 2024, you have until April 15, 2025.

It’s important to know the amount you can contribute to your account, both so you can take advantage of your HSA and to make sure you’re not penalized for excess contributions. If the amount you deposit for the year in your HSA is over the defined limit, including any employer contributions and catch-up contributions, you’ll owe ordinary income tax on that amount, plus a 6% penalty.

Another caveat: Once you enroll in or become eligible for Medicare Part A benefits, you can no longer contribute money to an HSA.

What Are HSA Withdrawals?

You can withdraw funds from your HSA to pay for qualified medical and dental health care expenses, including copays for office visits, diagnostic tests, supplies and equipment, over-the-counter medications and menstrual care products. Health insurance premiums are not included as qualified expenses, however.

One significant benefit of HSA accounts is that, unlike flexible spending accounts (FSA), the money in an HSA doesn’t have to be used by the end of the year. Any money in that account remains yours to access, year after year. Even if you change jobs, the account comes with you.

Before age 65, there is a 20% penalty for withdrawing funds from an HSA for non-medical expenses, on top of ordinary income tax. After age 65, HSA holders can also make non-medical withdrawals on their account, though ordinary income tax applies.

How Do Health Savings Accounts Work?

HSAs are designed to help consumers play for medical expenses when they have a high-deductible health plan (HDHP). That’s because typically an HDHP only covers preventive care before the deductible, so most types of medical care would have to be paid out of pocket as they’re applied to the deductible amount.

Having a tax-advantaged plan like an HSA gives people a bit of a break on medical expenses because they can save the money pre-tax (meaning any money you save in an HSA lowers your taxable income), and it grows tax free, and you withdraw the money tax free as well, as long as you’re paying for qualified expenses.

As noted above, you can withdraw your HSA funds at any time. But if you’re under age 65 and paying for non-qualified expenses, you’ll owe taxes and a 20% penalty on the amount you withdraw.

After age 65, you simply owe taxes on non-qualified withdrawals, similar to withdrawal rules for a 401(k) or traditional IRA.

💡 Quick Tip: It’s smart to invest in a range of assets so that you’re not overly reliant on any one company or market to do well. For example, by investing in different sectors you can add diversification to your portfolio, which may help mitigate some risk factors over time.

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.

Can an HSA Be Used for Retirement?

HSAs are not specifically designed to be a retirement planning vehicle, but you can use HSA funds in retirement, since the money accumulates in your account until you withdraw it tax-free for qualified medical expenses.

There’s no “use it or lose it” clause with an HSA account, so any unused funds simply rollover to the following year. This offers some potential for growth over time.

That said, the investment options in an HSA account, unlike other designated retirement accounts, tend to be limited. And the contribution caps are lower with an HSA.

You could also use your HSA funds to pay for other retirement expenses after age 65 — you’ll just have to pay income tax on those withdrawals.

Recommended: How to Set Up a Health Savings Account

3 Reasons to Use an HSA for Retirement

Though they aren’t specifically designed to be used in retirement planning, it’s possible to use an HSA for retirement as a supplement to other income or assets. Because you can leave the money you contribute in your account until you need it for qualified medical expenses, the funds could be used for long-term care, for example.

Or, if you remain healthy, you could tap your HSA in retirement to pay for everyday living expenses.

There are several advantages to including an HSA alongside a 401(k), Individual Retirement Account (IRA), and other retirement savings vehicles. An HSA can yield a triple tax benefit since contributions are tax-deductible, they grow tax-deferred, and assuming you withdraw those funds for qualified medical expenses, distributions are tax-free.

If you’re focused on minimizing your tax liability as much as possible prior to and during retirement, an HSA can help with that.

Using an HSA for retirement could make sense if you’ve maxed out contributions to other retirement plans and you’re also investing money in a taxable brokerage account. An HSA can help create a well-rounded, diversified financial plan for building wealth over the long term. Here’s a closer look at the top three reasons to consider using HSA for retirement.

1. It Can Lower Your Taxable Income

You may not be able to make contributions to an HSA in retirement, but you can score a tax break by doing so during your working years. The money an individual contributes to an HSA is deposited pre-tax, thus lowering their taxable income.

Furthermore, any employer contributions to an HSA are also excluded from a person’s gross income. Meaning: You aren’t taxed on your employer’s contributions.

The money you’ve deposited in an HSA earns interest and contributions are withdrawn tax-free, provided the funds are used for qualified medical expenses. In comparison, with a Roth IRA or 401(k), account holders are taxed either when they contribute (to a Roth IRA) or when they take a distribution (from a tax-deferred account like a traditional IRA or 401(k)).

Using HSA for retirement could help you manage your tax liability.

2. You Can Save Extra Money for Health Care in Retirement

Unlike Flexible Spending Accounts that allow individuals to save pre-tax money for health care costs but require them to use it the same calendar year, there is no “use it or lose it” rule with an HSA. If you don’t use the money in your HSA, the funds will be available the following year. There is no time limit on spending the money.

Because the money is allowed to accumulate, using an HSA for retirement can be a good way to stockpile money to pay for health care, nursing care, and long-term costs (all of which are qualified expenses) if needed.

While Americans can enroll in Medicare starting at age 65, most long-term chronic health care needs and services aren’t covered under Medicare. Having an HSA to tap into during retirement can be a good way to pay for those unexpected out-of-pocket medical expenses.

3. You Can Boost Your Retirement Savings

Beyond paying for medical expenses, HSAs can be used to save for retirement. Unlike a Roth IRA, there are no income limits on saving money in an HSA.

Some plans even allow you to invest your HSA savings, much like you would invest the funds in a 401(k).

The investments available in any given HSA account depend on the HSA provider. And the rate of return you might see from those investments, similar to the return on a 401(k), depends on many factors.

Investing can further augment your retirement savings because any interest, dividends, or capital gains you earn from an HSA are nontaxable. Plus, in retirement, there are no required minimum distributions (RMDs) from an HSA account — you can withdraw money when you want or need to.

Some specialists warn that saving for retirement with an HSA really only works if you’re currently young and healthy, rarely have to pay health care costs, or can easily pay for them out of your own pocket. This would allow the funds to build up over time.

If that’s the case, come retirement (or after age 65) you’ll be able to use HSA savings to pay for both medical and non-medical expenses. While funds withdrawn to cover medical fees won’t be taxed, you can expect to pay ordinary income tax on non-medical withdrawals, as noted earlier.

HSA Contribution Limits

If you are planning to contribute to an HSA — whether for immediate and short-term medical expenses, or to help supplement retirement savings — it’s important to take note of HSA contribution limits. If your employer makes a contribution to your account on your behalf, your total contributions for the year can’t exceed the annual contribution limit.

2023 Tax Year HSA Contribution Limits: Remember that you can contribute to your HSA for tax year 2023 until April 15, 2024.

• $3,850 for individual coverage

• $7,750 for family coverage

• Individuals over age 55 can contribute an additional $1,000 over the annual limit

As with opening an IRA, you have until the tax filing deadline to make a contribution for the current tax year. So if you wanted to contribute money to an HSA for tax year 2023, you’d have until April 15, 2024 to do so.

2024 Tax Year HSA Contribution Limits: Remember that you can contribute to your HSA for tax year 2024 until April 15, 2025.

• $4,150 for individual coverage

• $8,300 for family coverage

• Individuals over age 55 can contribute an additional $1,000 over the annual limit

How to Invest Your HSA for Retirement

An HSA is more than just a savings account. It’s also an opportunity to invest your contributions in the market to grow them over time. Similar to a 401(k) or IRA, it’s important to invest your HSA assets in a way that reflects your goals and risk tolerance.

That said, one of the downsides of investing your HSA funds is that these accounts may not have the wide range of investment options that are typically available in other types of retirement plans. Investment fees are another factor to keep in mind.

It’s also helpful to consider the other ways you’re investing money to make sure you’re keeping your portfolio diversified. Diversification is important for managing risk. From an investment perspective, an HSA is just one part of the puzzle and they all need to fit together so you can make your overall financial plan work.

HSA for Retirement vs Other Retirement Accounts

Although you can use an HSA as part of your retirement plan, it’s not officially a retirement vehicle. Here are some of the differences between HSAs and other common types of retirement accounts. Note: All amounts reflect rules/ limits for the 2024 tax year.

	HSA	Traditional IRA	401(k)
2024 annual contribution limit	$4,150 (individual) $8,300 (family)	$7,000	$23,000
Catch up contribution	+ $1,000 for those 55 and older	+ $1,000 for those 50 and older (total: $8,000)	+ $7,500 for those over 50 (total: $30,500)
Contributions & tax	Pre-tax	Pre-tax	Pre-tax
Withdrawals	Can withdraw funds at any age, tax free, for qualified medical expenses.	After age 59 ½ withdrawals are taxed as income.	After age 59 ½ withdrawals are taxed as income.
Penalties/taxes	Withdrawals before age 65 for non-qualified expenses incur a 20% penalty and taxes. Withdrawals after age 65 for non-qualified expenses are only taxed as income.	Before age 59 ½ withdrawals are taxed, and may incur an additional 10% penalty. Some exceptions apply.	Before age 59 ½ withdrawals are taxed, and may incur an additional 10% penalty. Some exceptions apply.
RMDs	No	Yes	Yes

As you can see, an HSA is fairly similar to other common types of retirement accounts, like traditional IRAs and 401(k)s, with some key differences. For example, you can generally contribute more to an IRA and to a 401(k) than you can to an HSA, as an individual.

While contributions are made pre-tax in all three cases, an HSA offers the benefit of tax-free withdrawals, at any time, for qualified medical expenses.

Note that Roth IRAs also have a tax-free withdrawal structure for contributions, but not earnings, unless the account holder has had the Roth for at least 5 years and is over 59 ½. The rules governing Roth accounts, including Roth IRAs and Roth 401(k)s can be complicated, so be sure you understand the details.

In addition, HSA rules allow the account holder to maintain the account even if they leave their job. There is no need to do a rollover IRA, as there is when you leave a company and have to move your 401(k).

💡 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.

What Happens to an HSA When You Retire?

An HSA doesn’t go away when you retire; instead, the money remains available to you until you need to use it. As long as withdrawals pay for qualified medical expenses, you’ll pay no taxes or penalties on the withdrawals. And your invested contributions can continue to grow as long as they remain in the account.

One advantage of using an HSA for retirement versus an IRA or 401(k) is that there are no required minimum distributions. In other words, you won’t be penalized for leaving money in your HSA.

How Much Should I Have in an HSA at Retirement?

The answer to this question ultimately depends on how much you expect to spend on healthcare in retirement, how much you contribute each year, and how many years you have to contribute money to your plan.

Say, for example, that you’re 35 years old and making contributions to an HSA for retirement for the first time. You plan to make the full $4,150 contribution allowed for individual coverage for the next 30 years.

Assuming a 5% rate of return and $50 per month in HSA medical expenses, you’d have just over $242,000 saved in your HSA at age 65. Using an HSA calculator to play around with the numbers can give you a better idea of how much you could have in your HSA for retirement if you’re saving consistently.

When Can I Use My HSA Funds?

Technically your HSA funds are available to you at any time. So if you have to pick up a prescription or make an unscheduled visit to the doctor, you could tap into your HSA to pay for any out-of-pocket costs not covered by insurance.

If you’re interested in using an HSA in retirement, though, it’s better to leave the money alone if you can, so that it has more opportunity to grow over time.

The Takeaway

A health savings account can be a valuable tool to help pay for qualified out-of-pocket medical costs, tax-free right now. But an HSA can also be used to accumulate savings (and interest) tax-free, to be used on medical and non-medical expenses in retirement.

While an HSA can be useful for retirement, especially given the rising cost of long-term care and other medical needs, note that the annual contribution limit for individuals is much lower than other retirement accounts. Also, the investment options in an HSA may be limited compared with other retirement plans.

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.

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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.

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

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

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Feb

2024

What Are the Different Types of Taxes?

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

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

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

What Are Taxes?

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

💡 Quick Tip: Don’t think too hard about your money. Automate your budgeting, saving, and spending with SoFi’s seamless and secure mobile banking app.

Different Types of Taxes to Know

Here’s a detailed look at what are many of the different types of taxes that can be levied and the ways in which they’re typically calculated and imposed.

Income Tax

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

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

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

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

Property Tax

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

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

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

Payroll Tax

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

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

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

Inheritance/Estate Tax

These are actually two different types of taxes.

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

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

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

Regressive, Progressive, and Proportional Taxes

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

What’s a Regressive Tax?

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

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

What’s a Progressive Tax?

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

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

What’s Proportional Tax?

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

Capital Gains Tax

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

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

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

It’s also important for investors to know the difference between short-term and long-term capital gains taxes. In the U.S. tax code, short-term is one year or less, while long-term is anything longer. For tax year 2023, the federal tax rate on gains made by short-term investments are taxed as ordinary income. For long-term investment gains, the rates will be between 0% and 20%, based on filing status and taxable income.

Recommended: Capital Gains Tax Guide

Ideas For Tax-Efficient Investing

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

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

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

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

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

VAT Consumption Tax

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

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

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

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

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

Sales Tax

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

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

Excise Tax

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

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

Luxury Tax

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

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

Corporate Tax

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

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

Tariffs

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

Surtax

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

Tax Filing Ideas

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

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

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

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

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

◦ Proof of any mortgage interest paid or property taxes

◦ Retirement account contributions

◦ Interest earned on investments or money held in bank accounts

◦ State and local taxes paid

◦ Donations to charities

◦ Educational expenses

◦ Medical bills that were not reimbursed

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

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

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

The Takeaway

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

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

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 4.00% APY on SoFi Checking and Savings.

FAQ

What are the most common taxes people use?

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

How many categories of taxes are there?

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

Will I use all of these forms of taxes?

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

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As an alternative to direct deposit, SoFi members with Qualifying Deposits can earn 4.00% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant. SoFi members with Qualifying Deposits are not eligible for other SoFi Plus benefits.

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SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

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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.

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

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Feb

2024

What Is a Stag in the Stock Market?

By Rebecca Lake | Growing Wealth, invest, Investing | Comments Off

A stag is an investor who engages in speculative trading activity. When discussing a stag in stock market terms, you’re using a slang term to talk about day traders who buy and sell securities with a goal of reaping short-term profits.

Stags base their trading strategies around current market movements, relying on technical analysis to help them identify trends, with a focus on initial public offerings (IPOs). That sets them apart from bull and bear speculators, who take a longer view of the market when anticipating price movements.

Stag Definition

Stag isn’t an acronym for anything; instead, it’s a slang term used to describe investors who engage in short-term, speculative trading. Stags aim to benefit from short-term price movements by buying low and selling high. They can trade different types of securities and employ different strategies, either bullish or bearish, in executing trades to achieve maximum profit.

Stags and Market Speculation

To understand stag in stock market terms, it’s helpful to look at the difference between investing and speculation. Investing typically means putting money into the market in the hopes of seeing a long-term result, usually capital appreciation. For example, an investor may purchase 100 shares of a value stock in the hope that those shares will have increased in price by the time they’re ready to sell them 10, 20 or 30 years down the road.

Speculation is different. Investors who engage in market speculation, including stags, focus more on what’s happening in the short term and how they can leverage those trends when trading. Stags will generally accept a higher degree of investment risk in order to turn a profit within a fairly short time frame. They use technical analysis, rather than fundamental analysis, to help them make educated guesses about which way a security is most likely to move.

Is a Stag a Day Trader?

Investors who follow a day trading strategy buy and sell securities to capitalize on large or small price movements throughout the day. For example, they may buy 100 shares of XYZ stock in the morning and sell those shares in the afternoon before the trading day closes. Some day traders may buy and sell the same stock minutes or even seconds apart in order to lock in profits from fluctuating prices.

Following that line of thought, a stag could be considered to be a type of day trader. Both stags and day traders typically require a sizable amount of capital in order to execute trades aimed at making a short-term profit. They also have to be relatively savvy when it comes to using online brokerage platforms to buy and sell securities. And, of course, they have to be willing to accept the risk that goes along with engaging in speculative day trading.

The stag meaning in the stock market isn’t limited to retail investors, however. Institutional investors can also fall under the stag umbrella if they engage in speculative trading activity. Institutional day traders can work with different financial institutions such as private equity funds and hedge funds to execute speculative trades on their behalf.

💡 Quick Tip: Are self-directed brokerage accounts cost efficient? They can be, because they offer the convenience of being able to buy stocks online without using a traditional full-service broker (and the typical broker fees).

Understanding Stag Trading Strategies

Stag investing revolves around active trading strategies and there are different approaches an investor may take in their efforts to secure short term stock profits. The goal with active trading is to beat the market’s performance whenever possible. Stag investors approach that goal by paying attention to market trends and momentum.

For example, if a security’s price is steadily trending upward a stag investor may speculate as to whether that trend will continue or whether a pullback might happen. If the security’s price drops, the investor may choose to buy shares if they believe that the price will rebound and they can sell those shares at a profit later. They can employ a similar strategy with stocks that are in decline already, if they believe that a price reversal lies ahead.

A stag investor may use a stacking strategy to maximize profits. Stack meaning in stock market terms can refer to different things but when discussing day trading, it means aligning trades to move in the same direction. Assuming the investor’s guess about a security’s price movement proves correct, this strategy could help them to multiply profits.

Stag traders may study stock trading charts in order to identify points of support and points of resistance when tracking price movements. They may be looking for signs that a stock is approaching a breakout, which could suggest a substantially higher price in the future. Stock charts can also be useful for telling a stag investor whether a security’s trading volume is moving bearish or bullish, which can hint at which way prices are likely to move in the near term.

Differences Between Stags, Bulls, and Bears

Stags, bulls, and bears are all different animals, so to speak, when it comes to trading. While stag investors focus primarily on the short term, bull and bear speculators take a longer view of the markets.

Bullish speculators are banking on a rise in stock prices over time. So they may buy securities with the expectation that they can turn around and sell them at a higher price. Bearish speculators, on the other hand, have a more pessimistic outlook in that they expect prices to drop. They may sell off short positions in stocks in anticipation of being able to buy those same securities later at a lower price.

Stag investors can act bullish or bearish in their approach to trading, depending on the overall mood of the market. They may even change from bullish to bearish and back again several times over the course of the same trading day as stock prices rise and fall. Again, that’s not unusual considering the short-term nature of stag trading versus the longer outlook assumed by bull and bear traders.

Do Stags Trade IPO Stocks?

An initial public offering, or IPO, marks the first time a company makes its shares available for trade on a public exchange. Investing in IPOs can be highly speculative, as IPO valuations don’t always align with a company’s performance once it goes public. Some highly anticipated IPOs can end up being flops while other IPOs that fly under the radar initially end up delivering better than expected results to investors.

Stag investors may buy IPO stocks if they believe there’s an opportunity to capitalize on volatility in price movements during the first day or first few days of trading. The challenge with IPO investing is that there isn’t a lengthy track record of performance for the investor to study and analyze. Since the stock hasn’t traded yet, the same technical analysis rules don’t apply.

That means stag investors who are interested in IPOs must do a certain amount of homework beforehand. Specifically, they have to study the financial statements and documents released as part of the IPO process. They also have to take the temperature of the markets to get a feel for how well the company is likely to do once it goes public before deciding what type of bet they’re going to make on that stock’s debut.

IPO Flipping

Since stags typically aren’t looking for long-term positions, it’s not unusual for them to buy IPO shares then resell them in a short period of time. For example, they may buy shares of an IPO in the morning and sell before the first day of trading ends if pricing volatility works in their favor. It’s also possible for stag traders to buy into an IPO before the company begins trading on an exchange, then sell their holdings once trading opens.

This practice is referred to as IPO flipping and it works similar to house flipping, in that the investor seeks to buy low and sell high quickly. Flipping IPO stocks isn’t an illegal practice as far as the Securities and Exchange Commission (SEC) is concerned, though it is generally frowned upon.

Brokerage platforms can enforce an IPO flipping policy that outlines what investors are and aren’t allowed to do in order to discourage this practice. For example, SoFi’s flipping policy may impose limits on future IPO investments and/or fees for traders who are identified as flippers.

Stag Trading Strategy Example

Here’s a simple example of how a stag trading strategy might work.

Say a new company is set to launch its IPO with an expected valuation of $35 per share. After studying the company’s financials and market expectations for the launch, a stag investor decides to buy 1,000 shares of the stock 10 minutes after trading opens. Within an hour of the company going public, investor demand pushes the stock’s price up to $45 per share.

At this point, the stag trader could sell and collect a $10 profit per share, less any commission fees their brokerage charges. But they have a hunch the price may climb even higher before the trading day is done so they hold onto their shares. By 3 pm the stock’s price has climbed to $52 per share, at which point the trader decides to sell.

Of course, this example could have gone the other way. It’s not uncommon for an IPO to open trading at a higher price point and drop throughout the day. If the investor’s hunch had proven wrong and the price dropped to $25 per share, they would have had to decide whether to cut their losses or carry over their position for another trading day to see if the price might turn around.

💡 Quick Tip: How do you decide if a certain trading platform or app is right for you? Ideally, the 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.

The Takeaway

Stag trading is a term used to describe investors who engage in short-term, speculative trading, and stags aim to benefit from short-term price movements by buying low and selling high. This is common when a company issues stock through an IPO, which may allow an opening for a stag to generate quick returns.

IPO investing can be attractive if you’re hoping to get in on the ground floor of an up-and-coming company. You may also be interested in IPO flipping if you’re an active day trader. Given that this is all fairly advanced, it may be best to speak with a financial professional before trying it for yourself.

For a limited time, opening and funding an Active Invest account gives you the opportunity to get up to $1,000 in the stock of your choice.

Photo credit: iStock/AleksandarGeorgiev

SoFi Invest®

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

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

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.

Claw Promotion: Customer must fund their Active Invest account with at least $25 within 30 days of opening the account. Probability of customer receiving $1,000 is 0.028%. See full terms and conditions.

SOIN0124063

Investment Tax Rules Every Investor Should Know

What Is Investment Income?

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Tax Rules for Different Investment Income Types

Capital Gains Taxes on Assets Sold

Dividend And Interest Taxes

Total Investment Income and Net Investment Income Tax (NIIT)

Cases of Investment Tax Exemption

The Takeaway

How to Invest Your 401(k)

How to Invest Your 401(k)

Assess Your Goals

Determine Your Risk Tolerance

Look at Diversification

Target-Date Funds

Factors to Consider

401(k) Investing: Things to Keep In Mind

Putting Everything into a Money Market Fund

Leaving Old 401(k)s Open

The Takeaway

FAQ

Can I invest my 401(k) on my own?

Is it possible to make my 401(k) grow faster?

HSA for Retirement: Rules, Benefits, and Getting Started

What Is an HSA?

Rules and Restrictions on HSA Contributions

What Are HSA Withdrawals?

How Do Health Savings Accounts Work?

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

Can an HSA Be Used for Retirement?

3 Reasons to Use an HSA for Retirement

1. It Can Lower Your Taxable Income

2. You Can Save Extra Money for Health Care in Retirement

3. You Can Boost Your Retirement Savings

HSA Contribution Limits

How to Invest Your HSA for Retirement

HSA for Retirement vs Other Retirement Accounts

What Happens to an HSA When You Retire?

How Much Should I Have in an HSA at Retirement?

When Can I Use My HSA Funds?

The Takeaway

What Are the Different Types of Taxes?

What Are Taxes?

Different Types of Taxes to Know

Income Tax

Property Tax

Payroll Tax

Get up to $300 when you bank with SoFi.

Inheritance/Estate Tax

Regressive, Progressive, and Proportional Taxes

What’s a Regressive Tax?

What’s a Progressive Tax?

What’s Proportional Tax?

Capital Gains Tax

Ideas For Tax-Efficient Investing

VAT Consumption Tax

Sales Tax

Excise Tax

Luxury Tax

Corporate Tax

Tariffs

Surtax

Tax Filing Ideas

The Takeaway

FAQ

What are the most common taxes people use?

How many categories of taxes are there?

Will I use all of these forms of taxes?

What Is a Stag in the Stock Market?

Stag Definition

Stags and Market Speculation

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Is a Stag a Day Trader?

Understanding Stag Trading Strategies

Differences Between Stags, Bulls, and Bears

Do Stags Trade IPO Stocks?

IPO Flipping

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