Oct
02
2024
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How to Roll Over Your 401(k): Knowing Your Options

By | Budgeting & Goals, Building Your Career, Growing Wealth, invest, Investing, Life & Career | No Comments

It’s pretty easy to rollover your old 401(k) retirement savings to an individual retirement account (IRA), a new 401(k), or another option — yet millions of workers either forget to rollover their hard-won retirement savings, or they lose track of the accounts. Given that a 401(k) rollover typically takes minimal time and, these days, minimal paperwork, it makes sense to know the basics so you can rescue your 401(k), roll it over to a new account, and add to your future financial security.

Whether you’re starting a new job and need to roll over your 401(k), or are looking at what other options are available to you, here’s a rundown of what you need to know.

Key Points

•   Rolling over a 401(k) to an IRA or new 401(k) is typically straightforward and your retirement funds will continue to have the opportunity to grow.

•   Moving 401(k) funds to another 401(k) is often the simplest option and allows you to continue to have a higher contribution limit.

•   Moving 401(k) funds to an IRA may provide more investment choices and control over those investments.

•   Leaving a 401(k) with a former employer is an option but may involve additional fees and complications.

•   Direct transfers are simpler and generally preferred over indirect transfers, which run the risk of incurring tax liabilities and penalties.

401(k) Rollover Options

For workers who have a 401(k) and are considering next steps for those retirement funds — such as rolling them to an IRA or another 401(k), here are some potential avenues.

1. Roll Over Money to a New 401(k) Plan

If your new job offers a 401(k) or similar plan, rolling your old 401(k) funds into your new 401(k) account may be both the simplest and best option — and the one least likely to lead to a tax headache.

That said, how you go about the rollover has a pretty major impact on how much effort and paperwork is involved, which is why it’s important to understand the difference between direct and indirect transfers.

Here are the two main options you’ll have if you’re moving your 401(k) funds from one company-sponsored retirement account to another.

Direct Rollover

A direct transfer, or direct rollover, is exactly what it sounds like: The money moves directly from your old account to the new one. In other words, you never have access to the money, which means you don’t have to worry about any tax withholdings or other liabilities.

Depending on your account custodian(s), this transfer may all be done digitally via ACH transfer, or you may receive a paper check made payable to the new account. Either way, this is considered the simplest option, and one that keeps your retirement fund intact and growing with the least possible interruption.

Indirect Rollover

Another viable, but more complex, option, is to do an indirect transfer or rollover, in which you cash out the account with the expressed intent of immediately reinvesting it into another retirement fund, whether that’s your new company’s 401(k) or an IRA (see above).

But here’s the tricky part: Since you’ll actually have the cash in hand, the government requires your account custodian to withhold a mandatory 20% tax. And although you’ll get that 20% back in the form of a tax exemption later, you do have to make up the 20% out of pocket and deposit the full amount into your new retirement account within 60 days.

For example, say you have $50,000 in your old 401(k). If you elected to do an indirect transfer, your custodian would cut you a check for only $40,000, thanks to the mandatory 20% tax withholding.

But in order to avoid fees and penalties, you’d still need to deposit the full $50,000 into your new retirement account, including $10,000 out of your own pocket. In addition, if you retain any funds from the rollover, they may be subject to an additional 10% penalty for early withdrawal.

Pros and Cons of Rolling Over to a New 401(k)

With all of that in mind, rolling over your money into a new 401(k) has some pros and cons:

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Pros:

•   Often the simplest, easiest rollover option when available.

•   Should not typically result in any tax liabilities or withholdings.

•   Allows your investments to continue to grow (hopefully!), uninterrupted.

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Cons:

•   New employer may change certain aspects of your 401(k) plan.

•   There may be higher associated fees or costs with your new plan.

•   Indirect transfers may tie up some of your funds for tax purposes.

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

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.

2. Roll Over Your 401(k) to an IRA

If your new job doesn’t offer a 401(k) or other company-sponsored account like a 403(b), you still have options that’ll keep you from bearing a heavy tax burden. Namely, you can roll your 401(k) into an IRA.

The entire procedure essentially boils down to three steps:

1. Open a new IRA that will accept rollover funds.

2. Contact the company that currently holds your 401(k) funds and fill out their transfer forms using the account information of your newly opened IRA. You should receive essential information about your benefits when you leave your current position. If you’ve lost track of that information, you can contact the plan sponsor or the company HR department.

3. Once your money is transferred, you can reinvest the money as you see fit. Or you can hire an advisor to help you set up your new portfolio. It also may be possible to resume making deposits/contributions to your rollover IRA.

Pros and Cons of Rolling Over to an IRA

This option also has its pros and cons, however.

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Pros:

•   IRAs may have more investment options available.

•   You’ll have more control over how you allocate your investments.

•   You could potentially reduce related expenses, depending on your specifications.

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Cons:

•   May require you to liquidate your holdings and reinvest them.

•   Lower contribution limit compared to 401(k).

•   May involve different or higher fees and additional costs.

•   IRAs may provide less protection from creditor judgments.

•   You’ll be subject to new distribution rules – namely, you’ll need to be 59 1/2 before withdrawing funds to avoid incurring penalties.

3. Leave Your 401(k) With Your Former Employer

Leaving your 401(k) be – or, with your former employer – is also an option.

If you’re happy with your portfolio mix and you have a substantial amount of cash stashed in there already, it might behoove you to leave your 401(k) where it is.

You’ll also want to dig into the details and determine how much control you’ll have over the account, and how much your former employer might.

You might also consider any additional fees you might end up paying if you leave your 401(k) where it is. Plus, racking up multiple 401(k)s as you change jobs could lead to a more complicated withdrawal schedule at retirement.

Pros and Cons of Leaving Your 401(k) Alone

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Pros:

•   It’s convenient – you don’t do anything at all, and your investments will remain where they are.

•   You’ll have the same protections and fees that you previously had, and won’t need to get up to speed on the ins and outs of a new 401(k) plan.

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Cons:

•   If you have a new 401(k) at a new employer, you could end up with multiple accounts to juggle.

•   You’ll no longer be able to contribute to the 401(k), and may not get regular updates about it.

4. Cash Out Your Old 401(k)

Cashing out, or liquidating your old 401(k) is another option. But there are some stipulations investors should be aware of.

Because a 401(k) is an investment account designed specifically for retirement, and comes with certain tax benefits — e.g. you don’t pay any tax on the money you contribute to your 401(k), depending on the specific type — the account is also subject to strict rules regarding when you can actually access the money, and the tax you’d owe when you did.

Specifically, if you take out or borrow money from your 401(k) before age 59 ½, you’ll likely be subject to an additional 10% tax penalty on the full amount of your withdrawal — and that’s on top of the regular income taxes you’ll also be obligated to pay on the money.

Depending on your income tax bracket, that means an early withdrawal from your 401(k) could really cost you, not to mention possibly leaving you without a nest egg to help secure your future.

This is why most financial professionals generally recommend one of the next two options: rolling your account over into a new 401(k), or an IRA if your new job doesn’t offer a 401(k) plan.

Pros and Cons of Cashing Out Your 401(k)

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Pros:

•   You’ll have immediate access to your funds to use as you like.

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Cons:

•   Early withdrawal penalties may apply, and there will likely be income tax liabilities.

•   Liquidating your retirement account may hurt your chances of reaching your financial goals.

When Is a Good Time to Roll Over a 401(k)?

If there’s a good time to roll over your 401(k), it’s when you change jobs and have the chance to enroll in your new employer’s plan. But you can generally do a rollover any time.

That said, if you have a low balance in your 401(k) account — for example, less than $5,000 — your employer might require you to do a rollover. And if you have a balance lower than $1,000, your employer may have the right to cash it out without your approval. Be sure to check the exact terms with your employer.

When you receive funds from a 401(k) or IRA account, such as with an indirect transfer, you’ll only have 60 days from the date you receive them to then roll them over into a new qualified plan. If you wait longer than 60 days to deposit the money, it will trigger tax consequences, and possibly a penalty. In addition, only one rollover to or from the same IRA plan is allowed per year.

The Takeaway

Rolling over your 401(k) — to a new employer’s plan, or to an IRA — gives you more control over your retirement funds, and could also give you more investment choices. It’s not difficult to rollover your 401(k), and doing so can offer you a number of advantages. First of all, when you leave a job you may lose certain benefits and terms that applied to your 401(k) while you were an employee. Once you move on, you may pay more in account fees for that account, and you will likely lose the ability to keep contributing to your account.

There are some instances where you may not want to do a rollover, for instance when you own a lot of your old company’s stock, so be sure to think through your options.

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

Help grow your nest egg with a SoFi IRA.

FAQ

How can you roll over a 401(k)?

It’s fairly easy to roll over a 401(k). First decide where you want to open your rollover account, then contact your old plan’s administrator, or your former HR department. They typically send funds to the new institution directly via an ACH transfer or a check.

What options are available for rolling over a 401(k)?

There are several options for rolling over a 401(k), including transferring your savings to a traditional IRA, or to the 401(k) at your new job. You can also leave the account where it is, although this may incur additional fees. It’s generally not advisable to cash out a 401(k), as replacing that retirement money could be challenging.

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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.

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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Oct
01
2024
Investing for Retirement: Guide to Emerging Markets

Guide to Investing in Emerging Markets

By | invest, Investing, Preparing for Retirement | Comments Off on Guide to Investing in Emerging Markets

Emerging market investments include owning shares in companies from countries like China, India, Brazil, and South Africa, among others. There are pros and cons to owning emerging market investments, but these stocks are a significant part of the global market.

Investing in emerging markets can help diversify your portfolio, which is one of the reasons that some investors do it. There are, however, risks associated with investing in emerging markets that investors should be aware of.

Understanding Emerging Markets

Investing in emerging markets, or even if you plan to open an IRA and use it to add foreign stocks to your portfolio, may prove to be a part of a successful investment strategy. If, that is, you understand what you’re investing in.

Emerging markets are economies that are in the middle between the developing and developed stages. Emerging markets risk can be high since these areas often see rapid growth and high volatility with booms and busts. Some of the most well-known and biggest countries that investors may look to invest in include China, India, Brazil, and South Korea.

Emerging market investments are generally seen as a higher-risk area of the global stock market. Volatility can spike during periods of political upheaval and when emerging market recessions strike.

As investors get older, risk must be managed through diversified investment plans. You might consider reducing emerging market exposure in your portfolio as your time horizon shortens and retirement nears.

Why Invest in Emerging Markets?

Emerging market investments have been popular for decades. It became easy to own a broad emerging market index fund within an investment portfolio in the early, when exchange-traded funds (ETFs) gained popularity.

The decade of the 2000s featured strong outperformance from the high-risk, high-reward profile of emerging market investments. But volatility in these markets has also been a factor.

People like to invest in areas of the stock market that exhibit rapid growth potential along with having the potential for diversification. High economic growth rates, such as those in China and India, often attract investors seeking to benefit from stocks of those nations. Indeed, there can be periods like the 2000s when strong bull markets take place.

Moreover, owning high-growth areas within a tax-advantaged account can be a savvy retirement savings strategy. This can be helpful when choosing a retirement plan.

Can You Build a Retirement Portfolio With Emerging Markets?

It’s possible to build a segment of a retirement portfolio by investing in emerging markets. Also consider that emerging market bonds are a growing piece of the global fixed-income market.

In addition, owning emerging market investments in retirement accounts is possible via ETFs and both active and passive mutual funds. Moreover, many 401(k) plans offer an emerging markets fund, too.

When thinking about investing in emerging markets, keep in mind that emerging market stocks comprise a fraction of the overall market. Emerging markets stocks represent 27% of the global stock market.

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

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.

Pros of Investing in Emerging Markets

There are many pros and cons of investing in emerging markets. When you start saving for retirement, it may be a good time to think about investing in emerging market stocks, since you’d likely have a relatively long time horizon to weather volatility.

Here are some of the pros of investing in emerging markets.

Opportunity to Generate Returns

Investing in emerging markets may present the opportunity to generate returns in your portfolio, although it does assume risks, too.

Also consider that more than 80% of the world’s population lives in emerging market countries, while just 27% of the global stock market is weighted to them. Investing for retirement could have at least some exposure to this area for risk-tolerant individuals.

Diversification Benefits

International investments can help offset the ebbs and flows of U.S. stocks through diversification. Consider that the domestic equity market is more than 60% of the global market. So if the U.S. goes into a bear market, foreign shares might outperform. Retirement investing should have a diversified approach.

Cons of Investing in Emerging Markets

Emerging markets can be volatile, and they expose investors to a host of risk factors. Political, economic, and currency risks can all hamper emerging market investments’ growth.

Due to the many risks, it’s common for retirement investors to tone down their stock allocation as they approach retirement. Here are some potential downsides to investing in emerging markets.

Potential Underperformance

Emerging market stocks have underperformed in recent years for a host of factors – such as the global pandemic, and military conflicts in Europe and the Middle East. So, it’s important to consider that these stocks could underperform domestic stocks in the future as well.

Correlations Might Be Changing

Some argue that emerging markets today have more correlation to other markets, so having exposure might simply expose someone to the risks and not the benefits.

High Volatility

Investors of all experience levels might want to steer away from the boom-and-bust nature of emerging markets. The process of evolving from an emerging market to a developed market is usually fraught with risk. In some areas, political turmoil might cascade into a full-blown economic recession.

Emerging market fixed-income investors can also suffer when high-risk currency values fall during such periods of volatility. Back in 1998, the “Asian Contagion” was an emerging markets-led debacle that caused a big decline in markets across the globe.

Uncertainty in China

China is now the biggest weighting in many emerging market indexes, up to one-third in some funds. That can be a lot in just one country, particularly in one as uncertain as China, given its one-party controlled economy.

Start Investing for Retirement With SoFi

Building a retirement portfolio often includes owning many areas of the global stock market. Emerging market investments can play a pivotal role to ensure your allocation has higher growth potential, but you must be mindful of the risks.

It’s possible to invest in emerging markets through a variety of means, including through a retirement account, such as an IRA. But keep the risks in mind, along with your overall investment goals and time horizon.

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).

FAQ

Is it worth investing in emerging markets?

Strong growth potential and diversification benefits are reasons to own emerging markets for your retirement portfolio. That said, emerging markets are a small part of the global stock market. A diversified retirement portfolio should include this slice of the market, but investors also must recognize the risks. There are periods during which emerging market investments can underperform the U.S. stock market.

What is the best emerging market to invest in?

When figuring out emerging markets, you might be curious which one is the best. It is hard to say there is one in particular. Emerging market risk can be high, so to help mitigate that, owning the entire basket can help ensure the benefits of diversification.

Should my entire retirement portfolio be in emerging markets?

Building a retirement portfolio with emerging markets is common but putting all your eggs in the emerging market basket might not be the wisest move. Young investors can perhaps own a larger weight in this volatile equity area, but older investors should think about winding down their emerging markets stock exposure as they near retirement.

Photo credit: iStock/Kateywhat

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.

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Aug
27
2024

23 Easy Ideas to Pay It Forward

By | Family Finances, Life & Career, money | Comments Off on 23 Easy Ideas to Pay It Forward

You’re likely familiar with the term “pay it forward.” It describes an act of kindness and giving, from passing along soccer cleats to the younger player next-door to volunteering in a soup kitchen, as a way of giving back. It’s all about putting generosity into action and participating in a cycle of giving that empowers both you and others.

By paying your good fortune (financial, healthwise, or otherwise) forward, you both help others and may inspire people to also give what they can to assist others and lift spirits.

As part of their ActNow campaign, the United Nations lists 17 Sustainable Development Goals, along with small things individuals can do in their daily lives that can improve life for all of us. They note that “a lot” can happen “when millions of people act together for our common future.”

Interested in joining this movement towards positive change? Read on to learn 23 ways to pay it forward, including:

•   Gestures that lift spirits, from running errands to letting people take your place in line

•   Giving back to your community

•   Passing on meaningful possessions instead of tossing them.

Is Paying It Forward the Same as Karma?

The concepts of paying it forward and karma are similar yet different.

Paying it forward involves helping others without expecting anything in return, except the hope, perhaps, that the recipient might keep the cycle going, thus making the world a better place. You may also have heard of this concept called “random acts of kindness.”

The word karma, on the other hand, comes from the Hindu and Buddhist religious concept that a person’s actions in this and previous states of existence decide their future fate when reincarnated.

In everyday usage, the idea is that if we send the universe positive energy, also known as good karma, it will come back to us. On the flip side, bad karma is often believed to bring more bad events or bad luck.

💡 Quick Tip: Tired of paying pointless bank fees? When you open a bank account online you often avoid excess charges.

Simple Ways to Pay It Forward

If you’d like to test-drive some pay-it-forward ideas, there are plenty of options. Here, you’ll find 23; notice how doing one can make you want to try another.

1. Letting Someone Go in Front of You in Line

This is a present to a harried parent with a sick child at the pharmacy or a driver merging into a crowded highway toll lane. Kindness is connection in a busy world and is applicable anywhere, from an airport restroom to Home Depot aisles.

2. Paying for a Stranger’s Coffee or Meal

At Starbucks, numerous customers have kept drive-through pay-it-forward chains going, each covering the tab of the customer in the car behind them. But you could also buy someone a java at any coffee shop or drive-through, or be kind and give the cashier money to pay for a full meal of another patron, just to make their day.

3. Sharing Your Green Thumb

Tend the flowers in a public patch to give beauty to your town. Donate homegrown veggies to a food pantry, or leave extra zucchini, beans, rhubarb, and more by your mailbox for others to take for free. It could really help someone who is struggling to pay for groceries in a given month.

4. Donating Blankets, Pajamas, Socks, and Toiletries to Shelters

Unhoused families might move from shelter to shelter for available beds. Consider donating new blankets, PJs, socks, and unopened mini shampoos, lotions, and soaps from hotel stays for the gift of personal care.

Recommended: How to Make End-of-Year Donations

5. Leaving a Big Tip for a Server or Waiter

Servers and waitstaff are on their feet, catering to our whims (dressing on the side, hold the onions), and their base salary is generally low. Tips help even the score. Yes, there are guidelines of how much you should tip, but occasionally, it can be nice to go a bit overboard. For a server that goes above and beyond, consider slipping them a generous cash bonus before you leave.

6. Returning Another Person’s Shopping Cart

Here’s an easy way to pay it forward with a random act of kindness: Grab another customer’s card after they are done with it. This saves them the extra steps and, if you’re on your way on, you won’t have to hunt for a cart.

7. Sending an Email of Gratitude

Amid spam, advertising, and billing statements, a note of gratitude is a grace. Maybe it’s time to thank unheralded people like the school reading teacher or your family doctor for all they do every day.

8. Sharing Your Food With Someone

If you enjoy getting bargain prices but Costco multipacks are just too big to store, consider sharing a few with a friend or neighbor free of charge.

Recommended: 31 Tips for Cutting Your Grocery Bill

9. Learning the Names of People You See Every Day

Get to know the crossing guard, train conductor, and neighbor who walks her poodle by your house every morning. (Learn the poodle’s name, too.) This is a sign of respect and appreciation that says “I see you and notice you. You are not anonymous.”

10. Leaving Extra Quarters at the Laundromat

These shiny silver timesavers can be a real boon for the next person lugging in dirty wash and detergent.

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11. Asking for Charitable Donations Instead of Gifts for Your Birthday

More and more kids and adults share this kind of gift request on Facebook and in party invitations. Money goes to good causes, from the Breast Cancer Research Foundation to the World Wildlife Fund, rather than material gifts. Need inspiration? Spend a bit of time researching the best charities to support.

12. Helping Someone With a Task

Give a neighbor a hand raking leaves, shoveling snow, or with a work-related task, such as proofreading a resume or printing a document. Offering to help without any payment expected can deepen your bonds.

13. Writing a Recommendation for a Coworker

Leave a golden review on LinkedIn or write a glowing letter someone can take along when leaving a job. This can help them move ahead in their professional pursuits.

Recommended: 22 Money Moves To Make This Month

14. Writing a Message to Someone Who Made a Difference in Your Life

Did your fifth-grade teacher see in you skills other people missed? Did your first boss train you in a way that’s made your work life so much easier? A handwritten note or card sent by snail mail is one of the best pay-it-forward examples. You’ll probably make their day and then some.

15. Giving Away Items Online

Your daughter’s riding boots from all those lessons at the horse barn deserve a good home. So does the dollhouse your brother built her. Instead of tossing them in haste, consider posting them on sites like Freecycle, Nextdoor, or a local Facebook group, so someone else can nab them. Reduce/reuse/recycle helps the planet, too.

16. Encouraging Someone Who Needs It With a Few Words

We all need some positive encouragement now and then. You can offer it by saying “You got this” to a parent who is job-hunting or “Good for you, walking” when you pass someone on a steep hill.

Recommended: 5 Ways to Achieve Financial Security

17. Leaving Coupons Next to Corresponding Products in the Grocery Store

That diaper coupon you can’t use because your baby is too big now? Leave the coupon on a package for another shopper. Same with any other coupons that could brighten someone else’s day.

18. Purchasing Extra Food to Leave at Shelters

When you go grocery shopping, you might add some shelf-stable products, like pasta, sauce, rice, nuts, boxed milk, nut butters, wholesome cereals, and canned fruit, to your cart for others in need. You can then drop them off at a local shelter or other nonprofit.

Recommended reading: Things to Do with Your Tax Refund

19. Cleaning Up Your Local Beach or Public Area

Bring trash bags, gloves, and perhaps family members to help collect garbage that clogs our natural areas. You can also help keep plastic out of our bodies of water this way.

20. Running an Errand for a Busy Loved One

Is your sister a full-time nurse raising two kids? Once a week, drop off a heat-and-eat dinner or shuttle kids home from activities.

21. Volunteering Your Time

Whether you make it a regular or a once-in-a-while activity, an easy and rewarding way to pay it forward is to give a couple of hours of your time. Help at a religious institution, the school library, or the local soup kitchen, or pitch in at a town park or garden cleanup. Volunteering can prove to be a fun, free way to spend your leisure time.

22. Donating Blood

Sign up to donate blood or give platelets (the latter takes longer but meets critical needs.) You leave on a high, knowing hospitals, patients, and their families are waiting for your vital gift.

23. Giving up Your Seat to Someone

Do it on the subway, bus, or train. If you’re hailing a taxi and other people are waiting, too, why not let them get the first one? It’s an easy way to be charitable.

Banking With SoFi

Paying it forward can help improve our world, little by little. You might give money, time, skills, or all of the above. A random act of kindness in your apartment or office building, or even with courteous driving, can turn someone’s bad day around. Looking out for another person, not just for yourself, makes everyone feel better.

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

How do I pay it forward at work?

In the office, you might treat co-workers to coffee and fruit as an act of friendship and gratitude. If everyone on your team is now remote, consider making a donation in their names to a nonprofit near company headquarters.

Where did the concept of “pay it forward” begin?

The phrase can be traced back to the 1916 book In the Garden of Delight by Lily Hardy Hammond. In it, she wrote: “You don’t pay love back; you pay it forward.” There was a movie with the title “Pay It Forward” in 2000. Then in 2007, a Pay It Forward Day was launched in Australia. The idea has since been adopted by many counties as an opportunity to do acts of kindness.

How often should you pay for kindness?

The term “pay for kindness” is a misnomer. We do not pay for kindness. Rather, we can pay forward to others the thoughtful gestures and generosity we received by keeping the cycle going. And if we receive an act of kindness, we can repay it by doing one too.

Photo credit: iStock/Vladimir Vladimirov

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SoFi members with direct deposit activity can earn 4.00% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a recurring deposit of regular income to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government benefit payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, or are non-recurring in nature (e.g., IRS tax refunds), do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate. SoFi members with direct deposit are eligible for other SoFi Plus benefits.

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.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.00% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

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.

Interest rates are variable and subject to change at any time. These rates are current as of 12/3/24. There is no minimum balance requirement. Additional information can be found at https://www.sofi.com/legal/banking-rate-sheet.

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

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

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08
2024
Understanding a Retirement Gap Analysis

Understanding a Retirement Gap Analysis

By | invest, Investing, Preparing for Retirement | Comments Off on Understanding a Retirement Gap Analysis

A retirement gap analysis helps individuals identify a potential shortfall between how much they have saved and what they will need in retirement.

Tallying all accounts, projecting ahead, then comparing that amount to how much a fully funded retirement costs, given your unique circumstances, can help people bridge the financial gap between the present and retirement. It’s a great way to visualize how you are tracking towards your retirement goals.

What Is a Retirement Analysis?

A retirement analysis is typically a report a financial advisor creates for individuals who want to know if they are on track for retirement. The analysis can also be done using online tools. Saving for retirement is an important process for those who are looking forward to a secure future with a steady stream of income.

Knowing the difference between what you have saved versus what you will need in order to retire on time is valuable information to determine if you are on track for retirement. If necessary, you can then take extra steps to boost your savings rate once you have a retirement gap analysis and risk assessment performed. This might include such actions as changing your investing strategy or considering annuities, for instance.

A retirement gap analysis considers a range of retirement assets. Your 401(k) through your employer, any individual retirement accounts you might own, annuities, individual taxable brokerage accounts, and even Social Security are common assets to tally in a retirement gap analysis. The sum of those assets is then compared to what you will need in the future, so that you can retire with confidence.

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How Do You Conduct a Retirement Gap Analysis?

Conducting a retirement analysis can be done using online tools or by meeting with a financial advisor. It’s all about knowing when you can retire. Often, individuals will take action to improve their financial habits and retirement savings when they see what they must do.

What Goes Into a Retirement Gap Analysis?

For example, a retirement gap on a chart can be a powerful visual to inspire people to save more. Performing a retirement analysis requires careful input of all assets and some assumptions about future rates of return, as well as a person’s spending habits and goals in order to determine how long their savings and other assets may last.

Assets and liabilities are analyzed, and future cash flow is projected. Conducting a retirement analysis also includes estimating how long somebody might live. Longevity risk is a key consideration, and Social Security and annuities can help reduce the risk of running out of money. There are many facets to performing a retirement gap analysis. Seeking out the help of an experienced fiduciary advisor may be helpful so that you are confident in your retirement plan.

How Does Communication Come Into Play?

A critical factor of a retirement analysis is the communication aspect. This is where a financial planner could potentially show their skills.

Simply looking over investment accounts and seeing numbers on a spreadsheet might not cause people to change course on their journey to retirement. Communicating a retirement gap in the right context can help drive home the message that saving more today will lead to a better tomorrow.

How Does a 401(k) Plan Factor Into the Analysis?

A high-level retirement gap analysis should be mixed in with detailed cash flow planning.

Your 401(k) plan is a major account that is assessed during a retirement analysis. An employer-sponsored retirement account is a large part of many workers’ overall retirement plan. A 401(k) gap can be found by analyzing the value of a participant’s pre-tax and Roth accounts versus what they will need to retire.

A 401(k) account often features an employer matching contribution, which is almost like free money so long as you meet the plan’s matching contribution requirements. Many plans will match, say, 50% of the employee’s contribution up to 6%. For a $100,000 salary, that means $3,000 per year of employer contributions, in addition to $6,000 from the employee. That’s $9,000 per year.

A 401(k) account, among other retirement plans offered through work, is typically a major piece of someone’s retirement asset pie. The process to increase contributions to it is generally easy to do. Moreover, the auto-enrollment and auto-escalation features are tools that can help more people save more for retirement so that their 401(k) gap shrinks over time. A 401(k) analysis can be helpful for workers young and old.

Retirement Gap Analysis Example

Let’s run through a retirement gap analysis example to better show the steps involved.

Retirement Gap Analysis, Step-by-Step

 Rationale
Retirement Income Assessment: Summing all retirement savings accounts to find a portfolio value. Identifies any potential shortfall between required monthly income and total projected income between Social Security, retirement plans, and other accounts.
Review liabilities and future spending habits. No retirement gap analysis is complete without a thorough assessment of what you owe and current and future spending.
Analyze changes to an individual’s retirement date. Can make arriving at retirement easier if more time is allowed to increase saving.
Strategize about Social Security options. Delaying benefits until age 70 will increase total payout; might reduce longevity risk.
Outlining steps to take to shore up retirement income. Increasing a 401(k) contribution rate can help narrow the retirement gap. Reducing spending and increasing your savings rate are other actions.

How to Calculate Retirement Income

Knowing if your 401(k) is enough is important, but so too is a broader look at your assets and liabilities along with what income to expect in retirement. No retirement gap analysis is complete without it.

Calculating retirement income can be done using various online calculators, but you might want to sit down with a financial planner to map out what income you, personally, will need in retirement. Variables like your spending habits, inflation, discounted cash flow rates, and possible risks all must be considered.

You can also leverage the Social Security Administration’s Retirement Estimator calculator to find out what you should expect to receive when you decide to retire. While the output is just an estimate, it can go a long way toward bridging your retirement gap if you have a gauge of what income you will have in retirement.

Another way to calculate retirement income is to sum up your retirement assets, assume a contribution rate between now and retirement along with a rate of return, then take that asset base as an amount from which to draw income during retirement.

Many planners use the “4% rule”, which states that a retiree can withdraw up to 4% of their retirement account value each year without a high risk of running out of money. This is just a rule of thumb, however, and it might not work as well today as it did decades ago.

Investing for Retirement With SoFi

Identifying where you are on your retirement journey is an important part of financial planning. Doing a retirement gap analysis is an essential part of that process. As time passes, our lives and lifestyles, our goals, and often our physical health can change. All these factors can impact how much we’ll need to spend in the future.

By conducting a retirement gap analysis to identify any shortfalls in savings, it’s possible to make adjustments, and course-correct to get savings goals on track.

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

Easily manage your retirement savings with a SoFi IRA.

FAQ

What is a retirement gap?

A retirement gap is a difference in the amount you have saved for retirement versus how much you will need. A retirement gap analysis can be performed to help identify how much more you will need to save for retirement. Once you know the amount, you can then take steps to boost your savings and investment accounts so that you can retire on time.

How do I find out if I have a retirement account?

Many individuals have a 401(k) or another retirement plan through their employer. Check with your HR department to see if there is an account set up for you. You might also have retirement accounts established on your own through investment brokerage companies. Also consider that you can likely collect a monthly Social Security benefit in retirement. Be sure to check with the Social Security Administration.

Will my retirement account be enough for me?

This is a tough question, but an important one. Knowing how much you will need for retirement is crucial to developing a retirement savings strategy and living a confident retirement. You may want to meet with a financial advisor to develop a plan. You can also use online resources, tools, and calculators to help determine if your current portfolio is enough to fund your retirement.

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

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

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.

SOIN-Q324-020

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Jun
21
2024
How to Claim Unclaimed Money From Deceased Relatives

How to Claim Unclaimed Money From Deceased Relatives

By | Family Finances, Life & Career, relay | Comments Off on How to Claim Unclaimed Money From Deceased Relatives

Claiming unclaimed money from a deceased relative can be fairly straightforward — or more complicated — depending on state inheritance laws and the amount of supporting evidence to back the claim.

When a person dies without a will or other legally binding document outlining the distribution of their financial assets, that money may become “unclaimed” after a designated period of time. Unclaimed money is often turned over to the state where that person lived. However, it is possible for relatives to claim that money through the appropriate channels.

Key Points

•   Claiming unclaimed money from deceased relatives depends on state laws and available evidence.

•   Unclaimed assets may include cash, real estate, stocks, and more.

•   Assets become state property if no direct heir is identified.

•   Claimants may need to provide proof of identity and ownership.

•   The process may involve inheritance tax, but spouses are typically exempt.

What Happens to Unclaimed Money from Deceased Relatives?

When no direct heir is identified, unclaimed money and assets from a deceased relative go to the state government. How soon the money goes to the state after the person dies will vary according to that state’s inheritance laws.

Once unclaimed money ends up in the hands of the government, the state authority will try to identify any relatives that are entitled to claim the money. Typically, a description of the assets and the name of the deceased are posted to one or several public and searchable websites. Some examples of these websites are:

•  Unclaimed.org

•  MissingMoney.com

•  TreasuryDirect.gov

•  FDIC.gov and NCUA.gov

•  PBGC.gov

•  UnclaimedRetirementBenefits.com

•  ACLI.com

Can You Claim Unclaimed Money From a Deceased Relative?

If you believe you are entitled to an unclaimed financial asset of a deceased relative, you can file a claim with the state government or business that is holding it. If you are specifically named as a beneficiary in the deceased relative’s will, the claim process can be relatively smooth. If not, you may still be able to claim that money but it will require supporting documentation or potentially a decision from a presiding probate court judge to ultimately verify the claim.

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Recommended: How Much Does It Cost to Make a Will?

What Types of Financial Assets Can Be Claimed from Deceased Relatives?

Unclaimed money doesn’t necessarily have to be in the form of cash; it can also include other assets of value such as:

•  Real estate

•  Forgotten bank accounts

•  Bonds

•  Stocks

•  Certificates of deposit

•  Annuities

•  Royalties

•  401(k)s and other retirement plans

•  Vehicles and other physical assets

Recommended: Unclaimed Money from Scholarships and Grants

What to Expect From the Unclaimed Money Process

If you’re planning to claim unclaimed money, the process will vary depending on the state you’re filing in and the asset in question. In some cases, you can file a claim online, provide proof of identity and any documented proof of ownership, and wait for your claim to be processed. Once the claim is approved, you receive the money. A budget planner can help you make the most of any unclaimed money you receive and also provide valuable financial insights.

In situations where the deceased did not have a will or an executor for the will, a probate court will typically appoint someone to oversee any ownership claims and asset transfers. If this is the case, you may have to wait longer or provide more documented proof in court before your claim is approved.

Once your claim is approved and you receive the money owed to you, you may be required to pay inheritance tax. Again, this depends on which state the deceased lived in. However, spouses are exempt from paying inheritance tax in every state.

The Takeaway

Claiming unclaimed money from a deceased relative is entirely possible. However, the complexity of the process will ultimately depend on the circumstances and location of the deceased. If you believe you’re entitled to claim unclaimed money from a deceased relative, leveraging an estate planning attorney or a financial advisor can help demystify the process and any specifics about your claim. Bottom line: It’s never too early to start thinking about your own estate planning needs and long-term financial goals.

Take control of your finances with SoFi. With our financial insights and credit score monitoring tools, you can view all of your accounts in one convenient dashboard. From there, you can see your various balances, spending breakdowns, and credit score. Plus you can easily set up budgets and discover valuable financial insights — all at no cost.

SoFi helps you stay on top of your finances.

FAQ

How do you know if a deceased loved one has left you money?

If a deceased relative has named you as a beneficiary in their will or another legally binding contract, the executor of that document or a probate court will likely reach out to inform you of any unclaimed money you are entitled to. If not, you can still check to see if you are entitled to money by searching one of the public online unclaimed-money databases or by reaching out to the deceased relative’s financial advisor or estate planner.

How do I find assets of a deceased person?

To find the assets of a deceased relative, try looking through their personal property, reach out to relatives and other friends with knowledge of their financial affairs, or inquire with the local probate court or state government agencies.

What happens when you inherit money?

Depending on where you inherit money, you may be required to pay inheritance tax. After that, you are free to do with the money as you please. However, it is often advisable to think hard about how to use that money to support your financial needs or long-term goals.

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SoFi Relay offers users the ability to connect both SoFi accounts and external accounts using Plaid, Inc.’s service. When you use the service to connect an account, you authorize SoFi to obtain account information from any external accounts as set forth in SoFi’s Terms of Use. Based on your consent SoFi will also automatically provide some financial data received from the credit bureau for your visibility, without the need of you connecting additional accounts. SoFi assumes no responsibility for the timeliness, accuracy, deletion, non-delivery or failure to store any user data, loss of user data, communications, or personalization settings. You shall confirm the accuracy of Plaid data through sources independent of SoFi. The credit score is a VantageScore® based on TransUnion® (the “Processing Agent”) data.

*Terms and conditions apply. This offer is only available to new SoFi users without existing SoFi accounts. It is non-transferable. One offer per person. To receive the rewards points offer, you must successfully complete setting up Credit Score Monitoring. Rewards points may only be redeemed towards active SoFi accounts, such as your SoFi Checking or Savings account, subject to program terms that may be found here: SoFi Member Rewards Terms and Conditions. SoFi reserves the right to modify or discontinue this offer at any time without notice.

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.

Non affiliation: SoFi isn’t affiliated with any of the companies highlighted in this article.

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

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

SORL-Q224-1921044-V1

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