What does it mean to be prequalified or preapproved for a mortgage? One lets a future homebuyer dream, and the other takes that homebuyer one giant step closer to reality. Here’s a look at how these two steps vary, how each can play a part in a home-buying strategy, and how one in particular can increase the chances of having a purchase offer accepted.
What Does Prequalified Mean?
Getting prequalified is a way of finding out how much you might be able to borrow to purchase a home, using the most basic information about your finances. Getting prequalified by phone or online usually takes just minutes.
Here’s how it goes: You provide a few financial details to mortgage lenders. The lenders use this unverified information, usually along with a soft credit inquiry, which does not affect your credit scores, to let you know how much you may be able to borrow and at what interest rate.
Getting prequalified can give homebuyers a general idea of loan programs, the amount they may be eligible for, and what monthly payments might look like, the way a home affordability calculator provides an estimate based on a few factors.
You might want to get prequalified with several lenders to compare monthly payments and interest rates, which vary by mortgage term. But because the information provided has not been verified, there’s no guarantee that the mortgage or the amount will be approved.
What Does It Mean to Be Preapproved?
After you get prequalified, you can consider the options before you from a range of lenders. You’ll want to brush up on types of mortgage loans, and then zero in on the lender — and loan — you feel is the best fit. Then you’ll face the probe known as mortgage preapproval.
Preapproval for a mortgage loan requires a more thorough investigation of your income sources, debts, employment history, assets, and credit history. Verification of this information, along with a hard credit pull from all three credit bureaus (which may cause a small, temporary reduction in your credit scores) allows the lender to conditionally preapprove a mortgage before you shop for homes.
A preapproval letter from a lender stating that you qualify for a loan of a specific amount can be useful or essential in a competitive real estate market. When sellers are getting multiple offers, some will disregard a purchase offer if it isn’t accompanied by a preapproval letter.
When seeking preapproval, besides filling out an application, you will likely be asked to submit the following to a lender for verification:
• Social Security number and card
• Photo ID
• Recent pay stubs
• Tax returns, including W-2 statements, for the past two years
• Two to three months’ worth of documentation for checking and savings accounts
• Recent investment account statements
• List of fixed debts
• Residential addresses from the past two years
• Down payment amount and a gift letter, if applicable
The lender may require backup documentation for certain types of income. Freelancers may be asked to provide 1099 forms, a profit and loss statement, a client list, or work contracts. Rental property owners may be asked to show lease agreements.
You should be ready to explain any negative information that might show up in a credit check. To avoid surprises, you might want to order free credit reports from www.annualcreditreport.com. A credit report shows all balances, payments, and derogatory information but does not give credit scores.
Those who have filed for bankruptcy may have to show documentation that it has been discharged.
Calculate Your Potential Mortgage
Use the following mortgage calculator to get an idea of what your monthly mortgage payment would look like.
Do Preapproval and Prequalification Affect Credit Scores?
Getting prequalified shouldn’t affect your credit scores. Only preapproval requires a hard credit inquiry, which can affect scores. But the good news for mortgage shoppers is that multiple hard pulls are typically counted as a single inquiry as long as they’re made within the same 14 to 45 days.
Newer versions of FICO® allow a 45-day window for rate shoppers to enjoy the single-inquiry advantage; older versions of FICO and VantageScore 3.0 narrow the time to 14 days.
You might want to ask each lender you apply with which credit scoring model they use.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
Do I Have to Spend How Much I’m Preapproved for?
No! The preapproval amount is your maximum house-hunting budget. Staying well under that number can’t hurt and might free up money for, say, a college fund, retirement, or — groan — emergency home repairs.
Are Prequalification and Preapproval the Same Thing?
By now you know that they are not one and the same. Here’s a visual on what’s needed for each:
Prequalification
Preapproval
Info about income
Recent pay stubs
Basic bank account information
Bank account numbers and/or recent bank statements
Down payment amount
Down payment amount and desired mortgage amount
No tax information needed
Tax returns and W-2s for past two years
Do I Need a Prequalification Letter to Buy a House?
No. Nor do you have to have a preapproval letter when making an offer on a house.
But getting prequalified can allow you to quickly get a ballpark figure on a mortgage amount and an interest rate you qualify for, and preapproval has at least three selling points:
1. Preapproval lets you know the specific amount you are qualified to borrow from a particular lender.
2. Going through preapproval before house hunting could take some stress out of the loan process by easing the mortgage underwriting step. Underwriting, the final say on mortgage approval or disapproval, comes after you’ve been preapproved, found a house you love and agreed on a price, and applied for the mortgage.
3. Being preapproved for a loan helps to show sellers that you’re a vetted buyer.
The Takeaway
Prequalified vs. preapproved: If you’re serious about buying a house, it’s important to know the difference. Getting prequalified and then preapproved may increase the odds that your house hunt will lead to a set of jangling keys.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
SoFi Mortgages: simple, smart, and so affordable.
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
External Websites: The information and analysis provided through hyperlinks to third-party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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.
If you’re thinking about buying an apartment, you’ll probably look at co-ops and condos rather than single-family homes.
Read on to understand the difference between condos and co-ops, the forms an apartment might take, and who might be best suited to buy one.
What Is an Apartment?
An apartment is a property within a larger building, and especially in big cities, it’s not uncommon to hear that someone is buying an apartment.
When a buyer is considering different types of homes, the price of an apartment often beats that of a single-family home with land.
Both co-ops and condos allow residents to use the common areas, including pools, gyms, and courtyards. If you buy a condo, you’ll own everything within your unit and have an interest in the common elements. If you “buy a co-op apartment,” that really means you’ll hold shares in the residents’ housing cooperative, a nonprofit corporation that owns the property, and will have the right to live in one of the co-op units. Shares are based on the market value of each unit.
Getting a mortgage loan for a co-op might be harder than for a condo. You aren’t actually buying real estate with the former. (A home loan help center may, well, help.)
And monthly fees tend to be higher at a co-op than for a condo.
Then again, the co-op fee may cover more, co-op units tend to cost less per square foot, and the closing costs of a co-op deal are often lower.
First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.
What Are the Types of Apartments?
Diving further into the definition, the apartment shape-shifts. While they may all technically be apartments, each comes with its own quirks and defining characteristics. Especially if you’re a first-time homebuyer, you’ll want to get comfortable with the lingo. Layouts or terminology may vary by building or region.
Studio
The ultimate open-concept space, a studio is a one-room apartment with a bathroom. The bedroom, living room, dining room, and kitchen are all in a single room.
Alcove Studio
An alcove studio, if L shaped, has a built-in nook to signify where a bed and small dresser could go. Older units might put the alcove in the middle of the room. If an average studio is 550 square feet, the alcove might add 40 — not much, but a big dose of privacy.
Alcove studio apartments are often more expensive than studios but cheaper than true one-bedroom units.
Convertible Apartment
A step up, size-wise, from a traditional studio, a convertible apartment may have a bedroom or a flex space that could be used as an office. The space might have a sliding glass door or partial wall that has an opening instead of a door.
By some definitions, a convertible apartment is bigger than a typical studio but doesn’t quite have the square footage of a one-bedroom unit. A bedroom, according to New York City regulations, must be at least 80 square feet and have space for at least one window of 12 square feet or larger.
Micro-Apartment
The micro-apartment might be the perfect fit for a minimalist. Usually micro-apartments are even smaller than studios, at about 350 square feet, and are popular in densely populated, high-cost cities. Micro-apartments offer enough space for a bed, sitting area, kitchenette, and tiny bathroom.
A micro-apartment might have a Murphy bed or a futon that folds into a bed at night.
Loft
Lofts are typically retrofitted from a factory or other commercial building. In one open space (except the bathroom), lofts have high ceilings, large windows, and perhaps an overall industrial feel.
Garden Apartment
A garden apartment can refer to two distinct types of units, so buyers should pay attention. A garden apartment can be a unit in the basement or on the ground floor of a small apartment building.
A garden apartment can also mean apartment buildings surrounded by greenery in either an urban or suburban area. These buildings are typically no higher than three stories and have access to green space, such as a park or trail.
High-Rise
A high-rise apartment building has 12 floors or more. When apartment buildings enter high-rise territory, residents can expect one or more elevators.
Mid-Rise
A mid-rise apartment building is between five and 11 stories tall. Expect an elevator in the building.
Low-Rise
A low-rise apartment building is anything shorter than five stories. With a low-rise apartment, there’s no guarantee of an elevator.
Railroad Apartment
A railroad apartment is laid out like a train car, meaning one room leads to the next without a hallway. Railroad apartments are typically found in older buildings or converted properties.
Walk-Up
In a walk-up, residents should expect to, well, walk up to their apartment. The designation implies that the building doesn’t have an elevator.
Walk-up apartments are often more affordable than elevator-accessible units, as stairs may be inconvenient or unmanageable.
Should You Live In an Apartment? Who Are Apartments Best Suited for?
Apartment living isn’t for everyone. Those best suited to an apartment might want some or all of the following:
• City living. Apartments are often in densely populated areas, meaning residents want to be near the hustle and bustle.
• Limited space. Apartments typically have less space than traditional family homes, so they are often best suited for small families or singles.
• Low maintenance. Exterior repairs and maintenance, and even some utilities, are up to the building at large, not the resident.
• Relatively good price. Apartments are typically more affordable than nearby single-family homes, meaning they could be a good fit for the price-sensitive buyer.
• Minimal lifestyle. Those who don’t need a lot of space may prefer a condo or co-op unit to a sprawling home.
Pros and Cons of Living in an Apartment
As with any type of home, living in an apartment comes with its benefits and drawbacks.
Pros
Cons
Outdoor space
Residents aren’t responsible for maintaining exterior or green space.
Limited or no private green outdoor space — or no outdoor space at all.
Maintenance
Residents are typically responsible for their unit alone.
The monthly fee can be high and on the rise.
Group living
Neighborly vibe and shared amenities that could include a gym, pool, rooftop patio, and business center or community room.
Close proximity to neighbors, often with one or more shared walls, floors, or ceilings.
Square footage
Apartments are often smaller, which means less upkeep, from cleaning to repairs.
Smaller spaces can mean less storage and room to spread out.
Affordability
Apartments tend to be more affordable than single-family homes in the same area.
Condos and co-op units don’t appreciate as quickly as single-family homes.
The Takeaway
If you’re interested in buying an apartment, you’re probably talking about a condo or co-op unit. Apartments come in all shapes and sizes and can sometimes be a little trickier to finance than traditional homes. But with a bit of smart shopping and some good research skills you’re likely to find both the apartment and the mortgage loan that is the best fit for you.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
SoFi Mortgages: simple, smart, and so affordable.
FAQ
What are the costs of owning an apartment?
Apartments come with a monthly fee. Condo fees are usually lower than a co-op’s, because the latter fee can include payment for the building’s mortgage and property taxes, utilities, maintenance, and security.
Is it a good idea to buy an apartment?
For a buyer focused on less maintenance and typically limited square footage, an apartment may be the right fit.
What should I look for when renting an apartment?
One of the first things to ask when renting an apartment is what is included. Does rent include any utilities, laundry in the unit, or parking?
It’s a good idea to also ask about credit requirements, application fee, security deposit, and terms of the lease.
What credit score do you need to rent an apartment by yourself?
All landlords are different, but many look for a FICO® score above 600. Not all property managers look at credit scores, though.
Photo credit: iStock/hrabar
SoFi Loan Products
SoFi loans are originated by SoFi Bank, N.A., NMLS #696891 (Member FDIC). For additional product-specific legal and licensing information, see SoFi.com/legal. Equal Housing Lender.
SoFi Mortgages
Terms, conditions, and state restrictions apply. Not all products are available in all states. See SoFi.com/eligibility-criteria for more information.
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
Third-Party Brand Mentions: No brands, products, or companies mentioned are affiliated with SoFi, nor do they endorse or sponsor this article. Third-party trademarks referenced herein are property of their respective owners.
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
When you open an individual retirement account (IRA) or 401(k), you can generally choose from a variety of different types of investments, such as stocks, bonds, options, real estate, and more. You may also be able to put some of the money in a money market account, where it will typically earn a higher annual percentage yield (APY) than in a traditional savings account yet still remain liquid.
While you might choose to keep most of your retirement savings in potentially higher-return investments, it may make sense to keep some of your retirement funds in a money market account, since it is a relatively low-risk place to store cash. Even if the return may be lower than other investments, it’s predictable.
Another reason to have some of your retirement money in a money market account is to serve as a holding place as you sell investments or transfer money between investments.
Unlike a regular money market account, a money market account that is offered as a component of a retirement account is subject to the benefits and restrictions of those accounts. Here’s what else you need to know about retirement accounts that offer a money market component.
What Is a Money Market Account That Can Be Used for Retirement?
While there is no such thing as a “retirement money market account,” some retirement accounts allow you to keep some of your money in a money market within the account. The money market account (MMA) could be within a traditional, rollover, or Roth IRA, a 401(k), or other retirement account, which means those funds are governed by the rules of that account.
If the MMA is a component of a traditional IRA, that means you can contribute pre-tax dollars (up to certain limits), your money can grow tax deferred, and you won’t be able to withdraw funds before age 59 ½ without paying taxes and penalties.
Money held in the money market component is liquid. This is usually where money is held when you first transfer money into your retirement account, or when you sell other investments in your account. You can use the funds in the money market to purchase investments within the retirement account.
Bear in mind an important distinction: A money market fund, which is technically a type of mutual fund, is different from a money market account. A money market fund is an investment that holds short-term securities (and is not insured by the Federal Deposit Insurance Corporation, or FDIC). For example, these funds may hold government bonds, municipal bonds, corporate bonds, cash and cash equivalents.
A money market account is essentially a type of high-yield savings account and it’s FDIC insured up to $250,000.
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.
How Does a Money Market Within Your IRA Work?
If you are starting a retirement fund that has a money market component to it, you’ll want to make sure that you understand how these money market accounts work. One major way they differ from regular money market accounts is that they are governed by a retirement plan agreement.
This can place some limits on what you can do with the money. Typically, that will mean that you can’t withdraw the money until you have reached a certain age. But one advantage is that the money in the account will grow tax-free or tax-deferred (depending on what type of retirement account it is in).
For example, a money market account in a Roth IRA would follow different rules than money in a traditional IRA.
• You can deduct contributions to a traditional IRA, but a Roth IRA is funded with after-tax money.
• You can’t withdraw money from a traditional IRA until you’re 59 ½, except under special circumstances.
• Because contributions to a Roth are post tax, you can withdraw your contributions at any time (but not the earnings).
Advantages of a Money Market Account Held Within a Retirement Account
• Since these accounts are held at a bank, they are insured by the FDIC up to $250,000. By contrast, money held in a brokerage account is not FDIC-insured.
• The money market component can be used to store proceeds of the sales of stocks, bonds, or other investments.
• Many money market accounts offer the ability to write checks against the account (just keep in mind that withdrawals are subject to restrictions).
Disadvantages of a Money Market Account Held Within a Retirement Account
• Money market accounts offer a relatively low rate of return compared to what you might be able to earn in the market over time.
• Opening this type of money market account requires opening a retirement account.
• You may not be able to withdraw money until retirement age without paying a penalty.
Money Market Account Within a Retirement Account vs Traditional Money Market Account
The biggest difference between a money market account that is a component of a retirement account vs. a traditional money market account is where they are held. Unlike a regular money market account, the money market component is held inside a retirement account, such as a 401(k) or IRA account.
While you can generally access money in a traditional money market account at any time, early withdrawal from a money market that is part of a retirement account can trigger taxes and penalties.
What Should I Know About Money Market Accounts Held Within IRAs?
If you are wondering how to save for retirement, there are a few things to keep in mind before opening a retirement account with a money market component.
The most important is that money put into the money market component is subject to the same conditions as any other money you invest into a retirement account. You generally will not be able to access it without penalty until you retire.
You’ll also want to bear in mind that these are low-risk, generally low-return accounts. The money that you deposit, or money that is automatically transferred, is not going to provide much growth.
In some cases, when you open a retirement account, the funds will be automatically deposited in the money market component. In these instances, be sure to check that the money in that part of your account is then used to purchase the securities you want. Given the relatively low yield of an MMA, you may only want a certain portion of your savings to remain there.
Opening a Money Market Account That Is Part of an IRA
If you want to put some of your retirement savings in a money market account, you likely won’t be able to open the account separately, as you can with a traditional MMA.
Instead, you would open a retirement account with your bank, brokerage firm, or company provider. Depending on your IRA custodian, they may automatically include a retirement money market account as an investment option inside your IRA account.
Does It Make Sense to Put Retirement Funds in a Money Market?
There are many different types of retirement plans, so you’ll want to make sure to choose the options that make the most sense for you. While it might make sense to put some money into the money market component of your 401(k) or IRA, you might not want to put much money in it.
The reason for this is due to the relatively low interest rate that money market accounts pay. In some cases, the interest rate may be lower than the rate of inflation. If so, the money kept in the money market component will lose purchasing power over time.
The one exception to this rule would be retirees who are currently living off of the money in their retirement accounts. These investors already in retirement will often want to keep some of their money in money market accounts so they have to worry less about market volatility.
Alternatives to Money Market Accounts Held Within Retirement Accounts
There are any number of low-risk alternatives to money market accounts within retirement accounts, including vehicles outside a retirement account, such as a high-yield savings account. For similar alternatives within a retirement account, you could consider investing in bonds, bond funds, and other lower risk investment options.
The Takeaway
A money market account is often a component of a retirement account, such as an IRA or 401(k). This type of account has the advantages of being FDIC-insured and fairly liquid. However, it may not earn enough interest to outpace inflation. Many investors will want to keep the money in their retirement accounts in investments that can provide higher rates of return. That said, one advantage to keeping some of your retirement funds in a money market is that it can become part of the low-risk, cash/cash equivalents portion of your portfolio.
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
Can you keep some of your retirement funds in a money market account?
Yes, some retirement accounts offer a money market component. To keep some of your retirement savings in a money market account, you’ll need to open up an individual retirement account (IRA), 401(k), or other type of retirement account. Many retirement account custodians will include a money market account as one “investment“ option for your account.
What is the difference between an IRA and a money market account?
A standard money market account is similar to a regular savings account. An Individual Retirement Account (IRA) is an account that allows you to save for retirement with tax-free growth or on a tax-deferred basis. An IRA account can be used to invest in a variety of different ways. Many IRAs will have a money market component to them.
What is the difference between a money market account and a 401(k)?
A money market account is similar to a savings account in that the money is liquid and earns interest. A 401(k) is a special tax-advantaged account designed to help people prepare for retirement.
With a 401(k), contributions are typically tax-deductible and the money grows tax-deferred until retirement. By contrast, a money market account is funded with after-tax dollars, and there are no tax benefits associated with these accounts. The only exception is if the money market account is a component of a retirement account. In that case, it is governed by the rules of the retirement account it’s in.
Photo credit: iStock/Pixelimage
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.
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.
Social security is a right and even a rite of passage ahead for many Americans, and one it’s never too early to start better understanding and planning for.
Many retirees are looking for ways to earn money, whether by doing online or seasonal work, tapping their entrepreneurial streak, or perhaps downsizing in order to raise cash. Here’s why: The average Social Security retirement benefit as of February 2024 is $1,772.51, which probably isn’t enough income to support a comfortable life for most people in the United States, especially older people who can often require more health care services.
Read on for some ideas for discovering extra income sources for retirees, plus tips on how seniors can maximize their money.
Key Points
• Many retirees seek additional income through online jobs, seasonal work, or by starting their own businesses.
• Virtual assistant roles and bookkeeping are viable online job options for retirees seeking flexible work from home.
• Seasonal opportunities during holidays, tax season, or tourist seasons offer potential income without year-round commitment.
• Starting a business post-retirement can utilize one’s professional skills or passions in consulting or service-oriented roles.
• Downsizing personal belongings and reducing fixed costs can also provide financial relief and additional income in retirement.
Online Jobs for Seniors
For people who want to earn money from the comfort of home, there are many online jobs that require varying degrees of experience. Often you can work when you like, in your sweats if you prefer. This is, after all, supposed to be your time. Here, some work-from-home jobs for retirees:
1. Virtual Assistant
Virtual assistants tackle jobs that companies don’t have the money or inclination to hire full-time employees for. This might include anything from handling social media to managing customer emails or handling the CEO’s schedule. Often, they work for small companies, but they may be called in to help large ones as well. Some virtual assistants make very good money; six figures, even. The key is to create a niche, an area where you already have expertise to set you apart from the competition.
2. Bookkeeper
Bookkeeping can be a fairly easy skill to learn; it isn’t accounting, and bookkeepers don’t handle all the tasks of an accountant. A bookkeeper might create new accounts, handle payroll, and pay and issue invoices, usually with the help of bookkeeping software. They probably won’t be responsible for closing out the books, reporting taxes, or other tasks that have the legal liabilities of an accountant. One bookkeeper might be able to handle several clients.
3. Teacher
Even if you haven’t taught before, if you have knowledge to share and have always been good at explaining things to others, online teaching might be for you. You could teach English to non-English speakers, or tutor in any subject in which you have depth of knowledge. Earnings can range from several dollars an hour to more than $25 (or multiples of that) depending on your expertise. An online search can lead you to many options.
4. Customer Service
You’d be surprised how many jobs there are for customer service representatives who want to work from home. You might be hired to help customers via phone, social media, or chat. You could be working with products or services, from selling kitchenware to answering questions about healthcare services. Or if you have management experience, you might manage a team of home-based customer service representatives. This is a job that requires patience and a love of working with people.
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Seasonal Jobs for Retirees
5. Retail, Tax Season, Tourism
You may not want to work all year round. Perhaps just bringing in a little extra money now and again would suit you fine. If so, holidays, tourist season, and tax season may provide all the work you want. For example, US retailers expect to hire many 100,000s of workers for most Christmas seasons, mostly working as sales associates in brick-and-mortar stores. For instance, Walmart alone has hired 40,000 employees during the ramp-up to a recent holiday season.
While Christmas retail may provide the most seasonal jobs, tax season isn’t too far behind and also provides hundreds of thousands of jobs for tax preparers. Many of them must first take a short course and work from the first of the year through Tax Day.
But there are other opportunities, too. All summer and fall people need yard work and gardening help. If you live in a tourist town, attractions need staff, too. Picking up seasonal work means enjoying the leisure of retirement in between picking up extra cash.
Start Your Own Business
The skills you gained during your working years could provide the foundation for your own pursuit, or you could try something different. How many hours you devote to it is your call; flexibility can be a benefit of a side hustle or entrepreneurial business. Some ideas:
6. Consulting
More and more companies are turning to contract work rather than hiring full-time employees. If you have a solid skill set, want to set your own hours, and choose your clients, you can use your connections to begin a consulting company. You may need a website or LinkedIn to promote your services, or you may have a strong enough network you can just reach out to connections and let them know you’re in business!
7. Service Work
Maybe you love cooking and can create a business providing meals for a handful of families every week. Perhaps you love kids and want to work as a nanny. Perhaps you are good at simple carpentry and can do odd jobs. Many families find they lack the time to take care of jobs, kids, homes, and hobbies and would love a reliable person to take on some of their tasks.
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Downsize in Retirement
Life can get fuller and more complicated as the years pass — buying stuff, accumulating debt, having multiple income streams, gaining complexity. Retirement can be the right time to figure out what brings you joy and start shedding that extra stuff which may have become a burden to manage.
8. Sell Stuff
By retirement age, many people have collected a lot of possessions. Instead of just unloading it for free, you might offer it on a site like eBay or Etsy, or one of the dozens of other possible places to sell your things.
If you donate it, make sure to track what you give away and keep receipts for a possible tax deduction.
Debt is expensive. Whether it’s a credit card, a personal loan, or even a mortgage, it’s wise to find ways to reduce the cost of that debt. That might mean it’s time to refinance your mortgage and perhaps roll other debts into it to cut the interest rate and boost your tax deductions.
It might mean making extra payments on principal or using the extra income you bring in to whittle away at high-interest loans. It might mean seeing if you can get a better rate by using a personal loan for your car. Talk to a financial advisor to find the best ways to reduce the burden of debt.
10. Reduce Fixed Costs
Use a spending tracker or budget tracker to find ways to reduce your fixed monthly expenses like food, housing, transportation, and healthcare. Could you get by with only one car instead of two? Or maybe it’s time to sell your home and move into a smaller one that gives you more money at the end of the month.
Various tools let you check home values to see how much you could get for your current home. You could also eliminate a couple of streaming services or follow store sales to stock up on favorite items at a lower cost.
11. Ask for Discounts
Take advantage of seniors’ discounts everywhere you go. Many mobile phone services have senior discounts; grocery stores have senior discount days; movie theaters, hotels, airlines, all offer discounts to seniors.
Beyond age-related savings, know that you can also sometimes renegotiate bills for things like insurance and internet service. Don’t be shy: Many companies expect it and build it into their customer retention plans so you’re not asking for “special favors.” You might also try negotiating medical bills as well.
Revisit Your Financial Plan
Financial planning has to evolve as the markets evolve. You should ensure you have a retirement plan and that you regularly evaluate your financial portfolio. You may be able to move money around in a way that provides you extra cash each month.
Continuing to Save Money in Retirement
A couple of other moves can help you manage your finances in retirement.
• You might hold off on taking Social Security until you are at full retirement age, so you get the highest possible benefit.
• If you are part of a married couple and want to begin drawing your Social Security benefit, research your options. You may want to have the higher earner hold off and the lower earner claim benefits.
• Invest carefully. Seniors can still invest (perhaps not as much as in the past); be sure to work with a vetted, respected financial professional since scams and fraud can target elders.
The Takeaway
Many retirees are looking for ways to bring in more cash, and there are plenty of ways to do so, from starting a side hustle to selling unwanted items to taking on seasonal work. You might also benefit from taking a fresh look at your budget and reallocating some funds.
Another important facet of thriving during retirement can be to find the right banking partner. SoFi can be that ally.
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.
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FAQ
How can you make extra money after 60?
There are a variety of ways to make extra money after 60, from starting a side hustle to doing seasonal work. Options range from retail to consulting to teaching and beyond.
What is the best side hustle for retirees?
The best side hustle will depend on your skills, interest, and available time and equipment. For instance, if you have a chunk of free time and a car at your disposal, you might drive a rideshare like Uber. If you have deep knowledge on a certain topic, you might teach online.
How to make $1,000 a month in retirement?
A person’s ability to make $1,000 a month in retirement will depend upon how they want to go about earning. Do you have a passive income stream (say, a rental property) you can tap? Can you command top dollar consulting or teaching online? Or can you work for several hours a day at a side hustle or seasonal job? The particulars of your situation (your skill set, available time, and location) will all matter.
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.
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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.
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