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Jun

2024

What Are Intermediary Banks? What Do They Do?

By Dan Miller | Family Finances, money, Terminology | Comments Off

An intermediary bank is a bank that acts as a go-between, connecting two different banks as transactions are processed. Smaller banks require intermediary banks or correspondent banks to facilitate transactions with other banks, while larger banks may have enough connections to serve as their own intermediaries.

Intermediary banks are commonly used for international wire transfers and handling multiple types of currencies. Generally, retail bank customers do not have to worry about finding intermediary banks — instead, they work behind the scenes with the banks themselves. Read on to learn more about these important financial institutions.

What Is an Intermediary Bank?

An intermediary bank is a third-party bank that helps facilitate transfers and transactions between two other banks. Often, intermediary banks are dealing with international transactions such as wire transfers between different countries. If you are sending money to others abroad, your bank may end up using an intermediary bank.

You may not be aware of how the intermediary banks work behind the scenes, but it’s important to note that you may be charged additional bank fees for the work that intermediary banks are doing.

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How Do Intermediary Banks Work

If you are doing a bank account transfer, especially to an account in a different country than the one where your own bank is located, it is likely that an intermediary bank will be involved. During a monetary transfer between accounts at different banks, an intermediary bank works in between the sender’s checking or savings account and the account at the receiving bank.

Here’s how the transaction might work:

• A person with an account at Bank A wants to send money to another person, a client with an account at Bank B.

• However, Bank A doesn’t have an account or banking relationship with Bank B.

• Bank A and Bank B do, however, each have an account with Bank C.

• Funds can be funneled through Bank C, the intermediary bank, to make the transaction successful.

Intermediary Bank Example

Intermediary banks are like an international travel hub through which transfers flow. They are especially important for fund transfers made via the SWIFT (Society for Worldwide Interbank Telecommunications) network.

Here’s a simple example to show how intermediary banks usually work.

• Say that John is an importer-exporter based in the United States who banks at the Acme Bank. He needs to make a payment to Angela, a supplier of his based in Germany, who banks with Big Bank.

• He gives Angela’s bank’s information to his bank to make the transfer. If Acme Bank does not have an account at or a relationship directly with Big Bank (Angela’s bank), it will use an intermediary bank called Central Bank. This intermediary bank will have accounts at both Acme Bank, John’s bank in the United States, as well as Big Bank, Angela’s bank in Germany.

• Central Bank can transfer the money between the two banks. It will likely charge a fee for its role in the transaction. The transaction will be completed by the three banks working together.

Recommended: How Retail Banking Works

When Is an Intermediary Bank Required?

Any time that money is being transferred between two banks that do not have an existing relationship, an intermediary bank is usually involved. Whether you have a single account or a joint bank account, when you transfer money to a user at a different bank (especially internationally), an intermediary bank will generally be required.

This is likely to occur as a commercial banking transaction. In other words, the use of an intermediary bank is not something the consumer has to initiate.

The Need for Intermediary Banks

Intermediary banks are important as part of the global financial system. Since banks generally do not have accounts with every single bank around the world, there is a need for intermediary banks to help facilitate monetary transfers.

The good news is that you typically do not have to worry about finding an intermediary bank yourself. Instead, the banks themselves have intermediary banks that they use to move money between other banks.

When Will an Intermediary Bank Be Involved in a Transaction?

An intermediary bank will usually be involved whenever there is a need to transfer money between accounts at two separate banks. If the sending bank does not have its own account with the receiving bank, it will usually use an intermediary bank.

Even if a business thought it could get around the need for intermediary banks (and save money; see more on fees below) by opening multiple bank accounts, its main bank would still probably use an intermediary bank at some point to transfer funds on its behalf.

Difference Between Intermediary and Correspondent Banks

When considering how bank transfers work, you may hear two different terms: intermediary banks and correspondent banks. Depending on which part of the world you’re in, there may or may not be a difference between the terms “intermediary bank” and “correspondent bank.”

• In some countries, the terms correspondent banks and intermediary banks are used interchangeably.

• In the U.S. as well as in a few other countries, correspondent banks are often ones that handle multiple types of currencies.

• Intermediary banks may be smaller banks that only typically handle transactions in one currency.

What Are Some Typical Intermediary Bank Fees?

Because intermediary banks typically do not work directly with consumers, they also do not regularly post a breakdown of the fees they charge. Instead, you can look at your own bank’s fees for financial transactions such as domestic wire transfers or international wire transfers.

The wire transfer fees and other charges that you pay for these transactions generally include the fees that your bank pays to the intermediary bank it uses. These bank fees can range anywhere from $15 to $50 or more.

Recommended: How Do Banks Make Money?

Who Pays for Intermediary Bank Fees?

Intermediary bank fees are paid in different ways, depending on the specific transaction. Let’s say Person A is sending money to Person B. There are three ways the fees may be handled, depending on what the parties involved agree upon:

• “OUR” is the code used when the sender will pay all fees. The fee for an international transfer can be as high as $70.

• “SHA” is the code indicating shared costs. Person A will likely pay their bank charges (perhaps $15 to $30 on a typical transaction) and then Person B pays the rest: their bank’s and the intermediary bank’s charges.

• “BEN” indicates that Person B, the recipient of the funds, will pay all charges.

The Takeaway

If a bank customer wants to send money to someone at a different bank and the two banks involved are not connected, an intermediary bank typically plays a role. Intermediary banks work to help facilitate monetary transactions such as domestic and especially international wire transfers. You, as a consumer, usually do not have to hire your own intermediary bank. However, your bank will likely pass along any intermediary bank fees if you initiate a transaction that requires one.

International money transfers are likely just one aspect of the services you use with your bank.

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FAQ

What is an example of an intermediary bank?

An intermediary bank is one that moves funds between other banks. They do not typically work directly with consumers, so you likely neither need to know their names nor contact them. For instance, Bank of America might offer this service, or it might be provided by a foreign bank with which you are not familiar.

Why do you need an intermediary bank?

Intermediary banks are usually used when someone needs to send money to a person with an account at a different bank. An intermediary bank can serve as a middleman and facilitate the transaction. One common example is sending a wire transfer, especially internationally.

How do you find an intermediary bank?

In most cases, you will not need to find your own intermediary bank. The bank you use will have its own intermediary bank that it collaborates with as needed.

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SoFi members with Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Eligible 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 (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below).

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider 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 Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.

As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% 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 Eligible 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 an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% 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 Eligible 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 Eligible 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 Eligible 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 Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.

Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% 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 1/24/25. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet.
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Jun

2024

Tips for Paying Off Outstanding Debt

By Janet Schaaf | Debt Payoff, personal_loan | Comments Off

A car loan, a mortgage, student loans, credit cards. It might feel like a dark debt cloud is looming over you sometimes. If you carry some debt on your personal balance sheet, you’re not alone.

Total household debt in the U.S. rose to $17.69 trillion in the first quarter of 2024, according to the latest statistics from the Federal Reserve Bank of New York.That includes everything from mortgages to credit cards to student loans. We’re a heavily indebted nation, and for some, it may take a psychological toll. If that’s you, here’s the comforting news: There are some tried-and-true strategies for paying back outstanding debt.

What Is Considered Outstanding Debt?

Outstanding debt refers to any balance on a debt that has yet to be paid in full. It is money that is owed to a bank or other creditor.

When calculating debt that’s outstanding, you simply add all debt balances together. This could include credit cards, student loans, mortgage loans, payday loans, personal loans, home equity lines of credit, auto loans, and others. You should be able to find outstanding balance information on your statements.

How to Find Outstanding Debt

When paying off outstanding debt, you first might need to track it all down.

As you move throughout the debt payoff journey, you may find it helpful to start a file for your statements and correspondence. Also, you could create a list or input information into a spreadsheet. Organizing your information is necessary for building a debt payoff strategy.

It can be a good idea to build a list of all debts with the most useful information, such as the outstanding balance, the interest rate, the monthly payment, the type of debt, and the creditor. If you have an installment loan, such as a personal loan, the principal amount of the loan is another helpful piece of information.

What if I Can’t Find All My Outstanding Debts?

If you feel as though you’ve lost track of some debts, you may want to start by requesting a credit report from at least one of the three major reporting agencies, Experian®, TransUnion®, or Equifax®. You are legally entitled to one free copy of your credit report from each of the three agencies per week. It’s easy to request a credit report from AnnualCreditReport.com.

A credit report includes information about each account that has been reported to that particular agency, including the name of the creditor and the outstanding debt balance.

It is possible that some outstanding debts may have been sold to a collection agency. The name of the original creditor may be included on the credit report. If that is not the case, you may need to investigate further.

Some outstanding debts may not appear on a credit report. Creditors are not required to report to the agencies, but most major creditors do. That said, a creditor could choose to report to none, one, two, or all three of the agencies. If you’re in information-collecting mode, you may want to consider requesting reports from more than one agency, or all three.

Outstanding Debt Amounts

Aside from how a debt is structured — revolving or installment debt — it can also be thought of as “good” debt or “bad” debt.

Generally, if borrowing money (and thus incurring debt) enhances your net worth, it’s considered good debt. A mortgage is one example of this. Even though you might incur debt to purchase a home, the value of the home will likely increase. As it does, and as you pay down the mortgage balance, your net worth has the potential to increase.

Bad debt, on the other hand, is debt taken on to purchase something that will depreciate, or lose value, over time. Going into debt to purchase consumer goods, such as cars or clothing, will not enhance your net worth.

Each person has a unique financial situation, level of comfort with debt, and ability to repay debt. What one person may be able to justify may be completely unacceptable to another.

How Does an Outstanding Debt Impact Your Credit

One thing lenders may consider during loan processing is the applicant’s debt-to-income ratio (DTI), which compares how much you owe each month to how much you earn. Lenders will often look at this number to determine their potential risk of lending. Different lenders have different stipulations about this ratio, so asking a potential lender about theirs is a good idea.

Calculating DTI is done by dividing monthly debt payments by gross monthly income.

• Monthly debt payments can include rent or mortgage payment, homeowners association fee, car payment, student loan payment, and other monthly payments. (Typically, monthly expenses such as utilities, food, or auto expenses other than a car loan payment are not included in this calculation.)

• Gross income is the amount of money you earn before taxes and other deductions are taken out of your paycheck.

Someone with monthly debt payments of $1,000 and a gross monthly income of $4,000 would have a DTI of 25% ($1,000 divided by $4,000 is 25%).

Generally, a DTI of 35% or less is considered a healthy balance of debt to income.

Should I Pay Down Outstanding Debt?

Barring extenuating circumstances, it’s a good idea to make regular, consistent payments on your debt. Whether or not you decide to pay the debt back on an expedited schedule is up to you.

Some may not feel the need to aggressively tackle their outstanding debt. They may be just fine to continue paying off a balance until the loan’s maturity date. This may apply to people with manageable debt payments, those who have debts with lower interest rates, or those focusing on other financial goals.

For example, someone with a low-interest-rate mortgage loan may not feel the need to pay it down faster than the agreed-upon schedule. So they continue to make regular, scheduled payments that make up a manageable percentage of their monthly budget. Therefore, they are able to work on other financial goals in tandem, such as saving for retirement or starting a fund for a child’s college.

Other scenarios may call for a more aggressive strategy to pay down debt. Some reasons to consider an expedited plan:

• Your debt levels, and therefore monthly payments, feel unmanageable.

• You’re carrying debts with higher interest rates, like credit cards.

• You want to avoid missed payments and added fees.

• You simply want to have zero debt.

You’ll also want to keep in mind that carrying a large debt load could negatively affect your credit. One factor in a credit score calculation is the ratio between outstanding debt balances and available credit on revolving debt, like a credit card — the credit utilization rate.

Using no more than 30% of your available credit is recommended. So, if a person has a $5,000 credit limit on a card, that would mean using no more than $1,500 at any given time throughout the month. Using more could result in a ding on their credit score.

Carrying debt also means paying interest. While some interest may not be avoidable, it’s generally a sound financial strategy to pay as little in interest as possible.

Credit cards tend to have some of the highest interest rates on unsecured debt. The average interest rate on a credit card is 27.65%, as of June 6, 2024. With high rates, it’s worth seriously considering paring back debt balances.

Outstanding Debt Management Strategies

The next step is to pick a debt reduction plan.

Two popular strategies for paying off debt are called the debt snowball and the debt avalanche. Both ask that you isolate one source of debt to focus on first.

Simply put, you’ll make extra payments or payments larger than the minimum monthly payment on that debt until the outstanding balance is eliminated. You’ll continue making the minimum monthly payment on all your other debts.

Debt Snowball

A debt snowball payoff plan involves listing all of your debt in order of size, from smallest to largest, ignoring interest rate. You then put extra funds towards the debt with the smallest balance, while making the minimum required payments on the rest. Once that debt is paid off, you put extra money towards the next-smallest debt, and so on.

The idea here is that there’s a psychological boost when a card is paid off, so it makes sense to go after the smallest first. That way, when a person works up to the card with the next highest balance, they can focus singularly on it, without a bunch of annoying, smaller payments getting in the way of the ultimate goal.

It’s called a snowball because the strategy starts small, gaining momentum as it goes.

Debt Avalanche

Alternatively, the debt avalanche method starts by listing debt in order of interest rate, from highest to lowest. You then put extra money towards the debt with the highest interest rate. Because this source of debt costs the most to maintain, it is a natural place to focus. Once that debt is paid off, you focus your extra payments towards the debt with the next-highest interest rate.

The debt avalanche is the debt payoff strategy of choice for those who prefer to look at things from a purely mathematical standpoint. For example, if a person has one credit card with a 27% annual percentage rate (APR) and another with a 22% APR, they’d focus on that 27% card with any extra payments, no matter the balance.

Of course, it is also possible to modify these strategies to suit personal preferences and needs. For example, if one source of debt has a prepayment penalty, maybe it drops to the bottom of the list. If there’s a particular credit card you tend to overspend with, perhaps that’s a good one to focus on.

Outstanding Debt Payoff Methods

Once you decide on a strategy, whether it’s one discussed above or something that works better for your financial situation, you’ll need to figure out where the money will come from to pay down outstanding debt.

A good first step is to simply list your monthly income and expenses. If you find that you have enough money to begin making extra payments toward your outstanding debt balances, then you might choose to start right away.

Some people choose to keep a 30-day spending diary to get a clear picture of what they spend their money on. This can be a good way to pinpoint areas you might be able to cut back on to have more money to apply to outstanding debt.

If your existing budget is already tight and won’t accommodate extra payments, you might consider looking for some other financial strategies.

Increasing Income

Sometimes the answer is just to make more money. That could mean getting a part-time job or selling things you no longer need or want. You might also think about asking for a pay raise at your regular job.

Using Personal Savings

Tapping into money you’ve saved can be another way to pay down outstanding debt. Savings account interest rates, even high-yield savings accounts, generally pay much less interest than you’re paying on your outstanding debts. Keeping enough money in a savings account as an emergency fund is recommended, but if you have a surplus in your personal savings, putting that money toward your debt balances is a good way to make headway on outstanding debt.

Consolidating With a Credit Card

Using a credit card to pay off debt may seem like an unwise choice, but it can make sense in some situations. If your credit score is healthy enough to qualify for a credit card with a zero- or low-interest promotional rate, you might consider transferring a higher-rate balance to a card like this.

The benefit of this strategy is having a lower interest rate during the promotional period, potentially resulting in savings on the overall debt.

There are some drawbacks to transferring a balance in this way though. One is that promotional periods are limited, and if you don’t pay the balance in full during this period, the remaining debt will revert to the card’s regular rate. Also, it’s typical for a promotional-rate card to charge a balance transfer fee, which can range from 3% to 5%, or more, of the balance transferred. This fee will increase the amount you will have to repay.

Consolidating With a Personal Loan

Using one new loan to pay off multiple outstanding debt balances is another debt payoff method. A personal loan with a lower overall rate of interest and a straightforward repayment plan can be a good way to do this.

In addition to one fixed monthly payment, a personal loan provides another benefit — the balance cannot easily be increased, as with a credit card. It’s easy to swipe a credit card for an additional purchase, potentially undoing the progress you’ve made on your debt repayment plan.

To consolidate your outstanding debt with a personal loan, you might want to look around at different lenders to get a sense of what interest rates they might offer for you. Typically, lenders will provide a few options, including loans of different lengths.

The Takeaway

Outstanding debt can be a heavy burden. Many people owe large amounts of debt, but don’t know how to start making a dent in their balances. A good place to begin is by identifying your current income and expenses to see your overall financial picture. From there, you may decide to focus on paying down certain debts over others. You can then choose the best paydown method for your financial situation.

Ready to kick-start your debt payoff strategy? With low fixed interest rates on loans of $5K to $100K, a SoFi Personal Loan for credit card debt could substantially decrease your monthly bills.

SoFi’s Personal Loan was named NerdWallet’s 2024 winner for Best Personal Loan overall.

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.

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

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.

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May

2024

10 Online Banking Alerts to Turn On

By Emma Diehl | Budgeting & Goals, money | Comments Off

When it comes to managing your financial life, technology can be your friend. By toggling on banking alerts, you can stay on top of your bank accounts and possibly avoid such issues as overdraft, late fees, and unauthorized use of your banking details.

Setting up automated alerts can be quick and easy, but you may need help knowing which are the right ones to use to suit your needs. Here’s a guide to 10 of the most valuable online banking alerts that you may find useful.

Key Points

• Mobile banking alerts can enhance financial management and security by notifying users of important account activities.

• Alerts for low balances help avoid overdraft fees by notifying users when funds are low.

• Direct deposit alerts confirm when wages are deposited, aiding in financial planning and bill payments.

• Unusual activity alerts provide immediate notifications of atypical transactions, helping to prevent fraud.

• Large purchase alerts inform users of high-value transactions, offering a chance to block unrecognized purchases promptly.

What Are Mobile Banking Alerts?

Mobile banking alerts are typically alerts sent by email and/or text that keep you updated on the status of your accounts. They can share important information about your finances (such as, say, you are about to overdraft your account) or they can help protect your account by informing you of a new log-in.

In many cases, you can customize how you want to receive mobile banking alerts, whether by email, text message, and/or push notification. You can also personalize the alerts. For example, one person might want a low balance alert when their account balance falls under $200, while another person might want to be notified when their account gets down to $25.

💡 Quick Tip: Want to save more, spend smarter? Let your bank manage the basics. It’s surprisingly easy, and secure, when you open an online bank account.

What Are the Benefits of Online Banking Alerts?

benefits of turning on online banking alerts

These alerts can help keep your bank account safe online and protect your financial status in the following ways:

• Allow you to monitor your banking activity

• Help you avoid unauthorized activity

• Prevent scams and fraud

• Alert you to low balances so you can steer clear of overdraft and related fees

• Help you manage debit card purchase behavior

• Know when an important payment or debit is made

• Feel more in control and secure of your finances.

Mobile Banking Alerts You Should Turn On

10 mobile banking alerts to turn on

Here are 10 important mobile banking alerts. See which ones might suit your particular situation and needs.

1. Low Balance

Cars have gas lights to warn drivers when fuel is close to empty, so why shouldn’t bank accounts?

• A low balance alert lets you know when funds have dipped below a predetermined amount—it could be $20, $1,000, or any amount you set. This can help keep you from overspending and triggering expensive overdraft fees.

• When you receive an overdraft alert, you can then decide if you want to transfer money into your account or hold off on making a purchase until your next paycheck clears. You can potentially avoid having a negative bank balance.

2. Direct Deposit

Constantly checking your account to see if your paycheck has been deposited can be a nuisance, particularly if you only recently set up direct deposit (which can take one or two pay cycles to get going).

If you sign up for a direct deposit notification, however, you’ll know exactly when money sent electronically to your account has been deposited and is ready to use.

Being notified of direct deposits each pay cycle can also help you make sure that your employer is paying on time and that you have enough money in your account to cover bills and automatic expenses.

3. Unusual Activity Alert

Unfortunately, millions of people report fraud and identity theft to the Federal Trade Commission (FTC) each year.

Setting up an unusual activity mobile account alert can save account holders a lot of headaches, as well as time and money, should their accounts ever become compromised.

An unusual activity alert notifies consumers when there’s a change in their account status that’s outside the norm. For example, if a large amount of money gets transferred out of the account all at once and this is something that rarely occurs, you would receive an unusual activity alert.

Or, an alert might let you know if purchases are being made outside your typical travel area.

By alerting you the moment a potential fraud takes place, you can take action quickly, report the transaction, or even freeze your account.

4. New Log-In Alert

Another helpful way to protect your accounts against bank fraud and theft is to set up a new log-in account alert.

This alert lets you know when someone has logged into your account from a computer or device that has never been used to access your account before.

If you weren’t the one logging in, you can possibly stymie the fraudster by immediately changing your password and even freezing your account to prevent spending.

Some financial institutions also allow customers to set up multifactor authentication on their account (which requires users to provide multiple pieces of identifying information, not just a username and password to access an account), which can even further protect your money.

5. Large Purchase Alert

Some banks allow users to set up a customizable large purchase alert. With this kind of online banking alert, you will usually receive a message whenever a purchase over a certain dollar amount (which typically you determine) is about to be charged to your account.

If you see the alert and don’t recognize the purchase, you may then be able to block the transaction.

Having a large purchase alert set up can help prevent fraud, but also human error. If a restaurant server accidentally adds an extra zero to a dinner bill, a large purchase alert could go off. That could save you the hassle of reporting the purchase later and trying to have it reversed.

This mobile bank alert may be especially helpful if you are not in the habit of monitoring your bank account on a regular basis.

6. Overdraft Alert

If you overdraw your account using a check or debit card, your bank might allow the transaction, letting you spend more money than you actually have in your account.

Typically, this comes with a price — an overdraft or NSF fee (which can often exceed $35). And, if you don’t realize you’re overdrafting your account, you might continue to make purchases, and incur a fee on each one.

Depending on the bank, if your account remains in a negative balance for an extended number of days, your account could even be closed.

To avoid these problems, If you get an overdraft alert, you may want to:

• Add money to your account as quickly as possible to prevent any more overdrafts. If you move quickly, you might possibly be able to avoid the first overdraft fee (check if your bank has a deadline to deposit money that might help you avoid an overdraft fee).

• Some banks have no overdraft fees up to a certain dollar amount; check and see if yours offers this feature.

7. Profile Changes Alert

Profile change bank alerts notify you if someone has tried to change your password, username, or any personal information in your profile, such as contact information or opting out of bills through mail.

If you see something was changed and you didn’t make the changes, you’ll likely want to change your password ASAP and alert the bank to help protect your account.

8. Large ATM Withdrawal Alert

Setting an alert for withdrawals from an ATM or debit card lets a person know when cash has left their account.

This might be helpful in the event that there are multiple authorized users on the card (so you are aware of a change in the account balance) but also if the card has been stolen.

According to the FTC, the maximum loss for a person who reports their card as lost within two days of discovery is $50. That means even if a thief steals a debit or ATM card and wipes out the account’s balance, the account holder would not be out more than $50.

If a person doesn’t notice their ATM or debit card has gone missing, a withdrawal notification could be the first thing to alert them.

9. Debit Card Alert

This kind of alert clues you in to debit card transactions. It can tell you in real time about your debit card’s usage. It can be especially helpful as it can indicate when someone is using a debit card online that belongs to you.

If this is an unauthorized transaction, you can take action to contact your bank and freeze your account as needed. Remember, if you report misuse of your card number within two days of the event, you are not liable for more than $50, per the Electronic Funds Transfer Act. In this way, online banking activity alerts could help you avoid having to pay for fraudulent charges.

10. Upcoming Payment Alert

An upcoming payment alert can be a good way to stay posted on recurring or one-time scheduled payments. For instance, if you had scheduled a payment of a medical bill a couple of weeks ago to happen right now, the alert could nudge you to check your balance and make sure you’re in good shape to cover the expense.

Or an upcoming payment alert could remind you that you are paying for, say, a streaming channel you haven’t been watching and you might decide to cancel and save some money.

What to Do After Getting an Online Banking Alert or Bank Notification?

If you receive a mobile banking alert or bank notification, you may or may not need to take action.

• If the message tells you something you already knew or expected (say, that you received your paycheck or your mortgage was paid per your instructions), no action is needed.

• If you receive an alert that your bank account is low and/or you are tisk of overdraft, you can transfer funds to avoid problems and fees.

• If you are informed that a transaction or log-in occurred that you do not recognize, you can (and should) alert your bank’s customer service ASAP to avoid fraudulent activity and consequent issues, such as identity theft. In addition, you may want to change passwords or freeze your account.

The Takeaway

Online banking alerts can help you manage your financial life more conveniently. Automatic bank alerts can provide you with important and timely account information, such as when your account balance falls below a certain amount or when your paycheck has been electronically deposited.

This can help you keep track of your account and your spending, as well as avoid costly overdraft fees. They can also notify you right away if there’s unusual activity on your account, which can help you resolve any fraudulent activity on your account. Setting up alerts is a personal decision and can be changed as your needs evolve.

Better banking is here with SoFi, NerdWallet’s 2024 winner for Best Checking Account Overall.* Enjoy up to 3.80% APY on SoFi Checking and Savings.

FAQ

What types of bank accounts are eligible for account alerts?

Typically, a variety of bank accounts are eligible for alerts, including checking and savings accounts as well as certificates of deposit (CDs). You can also have alerts for your ATM and debit card.

Is it a good idea to set up mobile alerts on your checking account?

It can be a smart move to set up mobile alerts for your checking account since they can alert you to low balances, direct deposits, upcoming automated payments, and unusual activity. These can help protect your financial wellness.

How do you know if a bank alert is real?

Here are some ways to tell if a bank alert is real or if it’s phishing: Ask yourself if you have opted into this kind of message from your bank. Know that your bank will not ask for confidential information by text. Be aware that a sense of urgency or needing to send money to resolve a “problem with your account” right away can signal a scam. Also look for slight misspellings, such as Citiibank instead of Citibank. You can contact your bank directly to know if an alert is real.

How can you tell if someone is tracking your bank account?

If you are concerned that someone might be tracking your bank account, you can opt into online banking alerts that let you know when there are profile changes or new log-ins.

How do I get bank alerts on my phone?

The process may vary, but typically you get bank mobile alerts by logging into your account and going to your account or account services. Click on “manage alerts” or a similar tab and follow the instructions.

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SoFi members with Eligible Direct Deposit activity can earn 3.80% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Eligible 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 (“Eligible Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below).

Although we do our best to recognize all Eligible Direct Deposits, a small number of employers, payroll providers, benefits providers, or government agencies do not designate payments as direct deposit. To ensure you're earning 3.80% APY, we encourage you to check your APY Details page the day after your Eligible Direct Deposit arrives. If your APY is not showing as 3.80%, contact us at 855-456-7634 with the details of your Eligible Direct Deposit. As long as SoFi Bank can validate those details, you will start earning 3.80% APY from the date you contact SoFi for the rest of the current 30-day Evaluation Period. You will also be eligible for 3.80% APY on future Eligible Direct Deposits, as long as SoFi Bank can validate them.

Deposits that are not from an employer, payroll, or benefits provider 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 Eligible Direct Deposit activity. There is no minimum Eligible Direct Deposit amount required to qualify for the stated interest rate. SoFi members with Eligible Direct Deposit are eligible for other SoFi Plus benefits.

As an alternative to Direct Deposit, SoFi members with Qualifying Deposits can earn 3.80% 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 Eligible 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 an Eligible Direct Deposit or receipt of $5,000 in Qualifying Deposits to your account, you will begin earning 3.80% 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 Eligible 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 Eligible 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 Eligible 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 Eligible Direct Deposit or Qualifying Deposits until SoFi Bank recognizes Eligible Direct Deposit activity or receives $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Eligible Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Eligible Direct Deposit.

Separately, SoFi members who enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days can also earn 3.80% APY on savings balances (including Vaults) and 0.50% APY on checking balances. For additional details, see the SoFi Plus Terms and Conditions at https://www.sofi.com/terms-of-use/#plus.

Members without either Eligible Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, or who do not enroll in SoFi Plus by paying the SoFi Plus Subscription Fee every 30 days, will earn 1.00% 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 1/24/25. There is no minimum balance requirement. Additional information can be found at http://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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May

2024

Catch-Up Contributions, Explained

By Laurel Tincher | invest, Investing, Preparing for Retirement | Comments Off

Catch-up contributions allow individuals 50 and older to contribute additional money to their workplace retirement savings plans like 401(k)s and 403(b)s, as well as to individual retirement accounts (IRAs).

Catch-up contributions are designed to help those approaching retirement age save more money for their retirement as they draw closer to that time.

Learn how catch-up contributions work, the eligibility requirements, and how you might be able to take advantage of these contributions to help reach your retirement savings goals.

Key Points

• Catch-up contributions allow individuals 50 and older to contribute additional money to their workplace retirement savings plans and individual retirement accounts (IRAs).

• Catch-up contributions were created to help older individuals “catch up” on their retirement savings if they haven’t been able to save enough earlier in their careers.

• The catch-up contribution limits for 2023 and 2024 vary depending on the retirement savings plan, such as 401(k), 403(b), and IRAs.

• To be eligible for catch-up contributions, individuals need to be age 50 or older, and certain retirement plans may have additional allowances based on years of service.

• Catch-up contributions can provide benefits such as increased retirement savings, potential tax benefits, and additional financial security as retirement approaches.

What Is a Catch-Up Contribution?

A catch-up contribution is an additional contribution individuals 50 and older can make to a retirement savings plan beyond the standard allowable limits. In addition to 401(k)s, 403(b)s, and IRAs, catch-up contributions can also be made to Thrift Savings Accounts, 457 plans, and SIMPLE IRAs.

Catch-up contributions were created as a provision of the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001. They were originally planned to end in 2010. However, catch-up contributions became permanent with the Pension Protection Act of 2006.

The idea behind catch-up contributions is to help older individuals who may not have been able to save for retirement earlier in their careers, or those who experienced financial setbacks, to “catch up.” The additional contributions could increase their retirement savings and improve their financial readiness for their golden years.

While employer-sponsored retirement plans are not required to allow plan participants to make catch-up contributions, most do. In fact, nearly all workplace retirement plans offer catch-up contributions, according to a 2023 report by Vanguard.

💡 Quick Tip: Want to lower your taxable income? Start saving for retirement with an IRA account. The money you save each year in a Traditional IRA is tax deductible (and you don’t owe any taxes until you withdraw the funds, usually in retirement).

Catch-Up Contribution Limits: 2023-2024

Each year, the IRS evaluates and modifies contribution limits for retirement plans, primarily taking the effects of inflation into account. The standard annual contribution limit for a 401(k) in 2023 is $22,500, and $23,000 for 2024. For a traditional or Roth IRA, the standard contribution limit is $6,500 in 2023, and for 2024 the limit is $7,000.

Catch-up contributions can be made on top of those amounts. Here are the catch-up contribution limits for 2023 and 2024 for some retirement savings plans.

Plan	2023 Catch-Up Limit	2024 Catch-Up Limit
IRA (traditional or Roth)	$1,000	$1,000
401(k)	$7,500	$7,500
403(b)	$7,500	$7,500
SIMPLE IRA	$3,500	$3,500
457	$7,500	$7,500
Thrift Savings Account	$7,500	$7,500

This means that you can make an additional $7,500 in catch-up contributions to your 401(k) for a grand total of up to $30,000 in 2023 and $30,500 in 2024. And with traditional and Roth IRA catch-up contributions of $1,000 for both years, you can contribute up to $7,500 in 2023 and $8,000 in 2024 to your IRA.

Catch-Up Contribution Requirements

In order to take advantage of catch-up contributions, individuals need to be age 50 or older — or turn 50 by the end of the calendar year. If eligible, they can make catch-up contributions each year after that if they choose to — up to the annual contribution limit.

Certain retirement plans may have other allowances for catch-up eligibility. For instance, with a 403(b), in addition to the catch-up contributions for participants based on age, employees with at least 15 years of service may be able to make additional contributions, depending on the rules of their employer’s plan.

To maximize the advantages of catch-up contributions, it’s a good idea to become familiar with the rules of your plan as part of your retirement planning strategy.

Benefits of Catch-Up Contributions

There are a number of benefits to making catch-up contributions to eligible retirement plans.

• Increased retirement savings: By helping to make up for earlier periods of lower contributions to your retirement savings plan, catch-up contributions allow you to increase your savings and potentially grow your nest egg in the years closest to retirement.

• Possible tax benefits: Making catch-up contributions may help lower your taxable income for the year you make them. That’s because contributions to 401(k)s and traditional IRAs are made with pre-tax dollars, giving you a right-now deduction. And contributions beyond the standard limits could lower your taxable income for the year even more. (Of course, you will pay tax on the money when you withdraw it in retirement, but you may be in a lower tax bracket by then.)

• Additional security: Making catch-up contributions may give you an extra financial cushion as you approach retirement age. And those contributions may add up in a way that could surprise you. For instance, if you contribute an additional $7,500 to your retirement account from age 50 to 65, assuming an annualized rate of return of 7%, you could end up with more than $200,000 extra in your account.

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

How to Make Catch-Up Contributions

To make catch-up contributions to an employer-sponsored plan, contact your plan’s administrator or log into your account online. The process is typically incorporated into a retirement savings plan’s structure, and you should be able to easily indicate the amount you want to contribute as a catch-up.

To make IRA catch-up contributions, contact your IRA custodian (typically the institution where you opened the IRA) to start the process. In general, you have until the due date for your taxes (for example, April 15, 2024 for your 2023 taxes) to make catch-up contributions.

Finally, keep tabs on all your retirement plan contributions, including catch-ups, to make sure you aren’t exceeding the annual limits.

The Takeaway

For those 50 and up, catch-up contributions can be an important way to help build retirement savings. They can be an especially useful tool for individuals who weren’t able to save as much for retirement when they were younger. By contributing additional money to their 401(k) or IRA now, they can work toward a goal of a comfortable and secure retirement.

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

Help grow your nest egg with a SoFi IRA.

FAQ

Do you get employer match on catch-up contributions?

It depends on whether your plan allows employer matching for catch-up contributions. Not all plans do. Even if your employer does match catch-up contributions, they might set a limit on the total amount they will match overall. Check with your plan administrator to find out what the rules are.

Are catch-up contributions worth it?

Catch-up contributions can be beneficial to older workers by helping them potentially build a bigger retirement nest egg. These contributions may be especially helpful for those who haven’t been able to save as much for retirement earlier in their lifetime. Making catch-up contributions might also provide them with tax benefits by lowering their taxable income so that they could possibly save even more money.

How are catch-up contributions taxed?

For retirement savings plans like 401(k)s and traditional IRAs, catch-up contributions are typically tax deductible, lowering an individual’s taxable income in the year they contribute. However, catch-up contributions to Roth IRAs are made with after-tax dollars. That means you pay taxes on the money you contribute now, but your withdrawals are generally tax-free in retirement.

Photo credit: iStock/mapodile

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.

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

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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May

2024

6 Investing Tips and Strategies for Retirees

By Michael Flannelly | Growing Wealth, invest, Investing, Preparing for Retirement | Comments Off

A lot of personal finance advice is about saving for retirement. But the need for saving and investing doesn’t stop once you’re done working; seniors also need to maintain a sound investment strategy during retirement.

Retirees face several challenges that make investing after 65 necessary, including maintaining safe income streams, outpacing inflation, and avoiding the risk of running out of money. Here are some tips seniors may consider as they choose the right path for investing after retirement.

Key Points

• Assessing income sources and budgeting is crucial for retirees to manage financial changes without a steady paycheck.

• Tracking down forgotten 401(k)s can recover significant unclaimed funds.

• Understanding the time horizon and risk tolerance is essential for choosing suitable investments.

• Diversification across various asset classes helps mitigate risks associated with specific investments.

• Regular portfolio rebalancing ensures alignment with changing financial goals and market conditions.

1. Assess Income Sources and Budget

Once in retirement, seniors likely don’t have an income stream from a steady paycheck. Instead, retirees utilize a mix of sources to pay the bills, such as Social Security, withdrawals from retirement and savings accounts, and perhaps passive sources of income such as rental properties. This change, going from relying on a regular salary to relying on savings and investments to fund a particular lifestyle, can be daunting.

Retirees should first understand where their income is coming from and how much is coming in to help navigate this financial change. This initial step can help establish a budget that allows them to comfortably cover typical retirement expenses and map out discretionary spending or new investments in their golden years.

💡 Quick Tip: How do you decide if a certain trading platform or app is right for you? Ideally, the investment platform you choose offers the features that you need for your investment goals or strategy, e.g., an easy-to-use interface, data analysis, educational tools.

2. Track Down Forgotten 401(k)s and Other Lost Money

If you changed jobs during your career, it’s possible that you left an old 401(k) behind. As of May 2023, there were 29.2 million forgotten or left-behind 401(k) accounts, according to estimates by Capitalize, a company that helps with 401(k) rollovers. These forgotten accounts hold about $1.65 trillion in assets.

To determine if you have a forgotten 401(k), make a list of every company you worked for and where you participated in a 401(k) plan. Contact them to see if they still have an account in your name. If a company no longer exists, or if it merged with another company, check with the U.S. Department of Labor (DOL). Visit the DOL website, where you can track down your former company’s Form 5500, which is required to be filed annually for employee benefit plans. That should give you contact information you can reach out to or at least tell you who your 401(k) plan’s administrator was.

If you still can’t find a forgotten 401(k), you could try the National Registry of Unclaimed Retirement Benefits. Be aware that you’ll need to supply your Social Security number to search on their website. Another option is to check the website for the National Association of Unclaimed Property Administrators, which may be able to help you find unclaimed funds, including an old 401(k). Check under every state that you’ve lived and worked in.

If and when you find an old 401(k), you can roll it over into an IRA. If you don’t yet have an IRA, you can set one up online. From there, you can invest the money as you see fit.

3. Understand Time Horizon and Risk

Retirees must consider time horizon and risk in post-retirement investment plans. Time horizon is the amount of time an individual has to invest before reaching a financial goal or needing the investment earnings for living expenses.

Time horizon significantly affects risk tolerance, which is the balance an individual is willing to strike between risk and reward. Generally speaking, seniors with a time horizon of a decade or more might choose to invest in riskier assets, such as stocks, because they feel they may have time to ride out any short-term downturns in the market. Individuals with a short time horizon of just a few years may stick to more conservative investments, such as bonds, where they can benefit from capital preservation and interest income.

4. Consider Diversification

Diversification involves spreading out investment across different asset classes, such as stocks, bonds, real estate, and cash. Diversification also involves spreading investments out among factors such as sector, size, and geography within each asset class.

It is important to consider diversification when investing after retirement. Diversification may help investors protect their portfolios from the risk and volatility unique to a specific type of investment, although there is still risk involved. Retirees do not want to concentrate a portfolio with any one asset, which may increase volatility during a period when they want a low risk tolerance.

5. Rebalance Regularly

A retiree’s financial goals, risk tolerance, and time horizon generally affect the desired asset allocation in an investment portfolio. However, those initial goals and risk considerations can change during a retiree’s golden years.

Additionally, the market is constantly in flux, shifting the proportions of assets a person holds. It may make sense to rebalance the assets inside a portfolio regularly.

Rebalancing a portfolio can be thought of like the routine upkeep of your investments. For example, if a portfolio has an asset allocation of 70% bonds and 30% stocks and the stocks do well during a year, they might make up a higher percentage of a portfolio than planned. By the end of the year, the asset allocation may be 65% bonds and 35% stocks. The investor may want to rebalance by selling stock and buying more conservative assets, such as bonds, to ensure the portfolio’s asset allocation is in line with their goals. Alternatively, they may use other income to make new bond investments.

6. Keep an Eye on Inflation

Retirees living on a fixed income may be negatively affected by rising inflation. As prices increase, the fixed income that an individual relies on will be worth less the following year. For example, if an individual receives $1,000 a month in a fixed income and inflation rises by a 4% annual rate, then that $1,000 monthly income will be worth $960 in today’s money.

Investments that pay out a fixed interest rate, such as bonds, are most vulnerable to inflation risk as inflation may outpace the earned interest rate. Some other assets may outpace inflation, such as stocks, real estate investment trusts (REITs), or inflation-protected securities.

Smart, Safer Investment Options for Retirees

Retirees have a lot of choices when it comes to making new investments. But their financial goals, age, and risk tolerance can impact which investments they choose to make. Here are a few investments for seniors in retirement with those factors in mind.

Cash

Cash is the most stable way to hold money, and it is a necessary part of a retiree’s financial portfolio. Keeping cash on hand can help cover necessities like housing, utilities, food, and clothes.

Retirees can put a portion of their cash in a money market account or a high-yield savings account to earn interest while having easy access to their cash. However, the interest paid out in typical savings or checking accounts tends to be very low and may not beat the inflation rate. That means the money in these accounts may slowly lose its value over time.

By comparison, some high-yield savings accounts pay nearly 5% interest, compared to the 0.47% national average rate.

Bonds

Bonds generally don’t offer the same potential for high returns as stocks and other assets, but they may have advantages for investing after retirement. Bonds typically pay interest regularly, such as twice a year, which may provide investors with a predictable income desired in retirement. Also, if investors hold a bond to maturity, they typically get back their entire principal, which can help preserve their savings while investing.

However, it’s important to be aware that while bonds are considered by investors to be a less risky investment, it’s still possible to lose money investing in them. For instance, a bond issuer may fail to make interest payments and default on the bond. Retirees should be aware of the risks involved when considering bonds.

Various types of bonds may help investors preserve capital and realize interest income during retirement, including relatively safe U.S. Treasuries. Additionally, Treasury-Inflation Protected Securities (TIPS) are bonds that hedge against inflation, which can be helpful for retirees worried about rising prices.

Stocks

Stocks are considered a risky investment; they tend to be more volatile than more conservative assets like bonds or certificates of deposit. Though investing in stocks can potentially lead to significant returns, it also means there is the potential for big losses that many retirees may not be able to stomach. However, there may be value in investing in stocks for seniors.

Stock investments may help ensure a portfolio experiences capital gains that outpace inflation and have enough income in the later decades of their retirement. It may not make sense for older investors to chase returns from higher risk stocks like tech start-ups. Instead, retirees may look for proven companies whose stocks offer steady growth. Retirees may consider investing in companies that provide stable dividend payouts that generate a regular income source.

Certificates of Deposit

Certificates of deposit, otherwise known as CDs, are low-risk investments that may offer higher interest rates than typical savings accounts. Investors put their money in a CD and choose a term, or length of time, that the bank will hold their money. The term length is generally anywhere from one month to 20 years, and during this period, the investor can’t touch the money until the term is up. Once the term is over, the investor gets the principal back, plus interest. Typically, the longer the investor’s money is in the account, the more interest the bank will pay.

Fixed Annuities

Fixed annuities may provide retirees with a regular income, bolster the gains from other investments, and supplement savings. In short, an annuity is a contract with an insurance company. The buyer pays into the annuity for a certain number of years, and the insurance company pays back the money in monthly payments. Essentially, an individual is paying the insurance company to take on the risk of outliving their retirement savings.

The Takeaway

Investing for retirement should begin as soon as possible, ideally through a tax-advantaged retirement account. But the need for a sound investing strategy doesn’t stop once you hit retirement. You need to ensure that your savings and investments are working for you throughout your golden years.

Another step that can help you manage your retirement savings is doing a 401(k) rollover, where you move funds from an old account to a rollover IRA. You can even search for a lost or forgotten 401(k) to roll over into an IRA.

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.

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.
For a full listing of the fees associated with Sofi Invest please view our fee schedule.

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.

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

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What Are Intermediary Banks? What Do They Do?

What Is an Intermediary Bank?

How Do Intermediary Banks Work

Intermediary Bank Example

When Is an Intermediary Bank Required?

The Need for Intermediary Banks

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When Will an Intermediary Bank Be Involved in a Transaction?

Difference Between Intermediary and Correspondent Banks

What Are Some Typical Intermediary Bank Fees?

Who Pays for Intermediary Bank Fees?

The Takeaway

FAQ

What is an example of an intermediary bank?

Why do you need an intermediary bank?

How do you find an intermediary bank?

Tips for Paying Off Outstanding Debt

What Is Considered Outstanding Debt?

How to Find Outstanding Debt

What if I Can’t Find All My Outstanding Debts?

Outstanding Debt Amounts

How Does an Outstanding Debt Impact Your Credit

Should I Pay Down Outstanding Debt?

Outstanding Debt Management Strategies

Debt Snowball

Debt Avalanche

Outstanding Debt Payoff Methods

Increasing Income

Using Personal Savings

Consolidating With a Credit Card

Consolidating With a Personal Loan

The Takeaway

10 Online Banking Alerts to Turn On

What Are Mobile Banking Alerts?

What Are the Benefits of Online Banking Alerts?

Mobile Banking Alerts You Should Turn On

1. Low Balance

2. Direct Deposit

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3. Unusual Activity Alert

4. New Log-In Alert

5. Large Purchase Alert

6. Overdraft Alert

7. Profile Changes Alert

8. Large ATM Withdrawal Alert

9. Debit Card Alert

10. Upcoming Payment Alert

What to Do After Getting an Online Banking Alert or Bank Notification?

The Takeaway

FAQ

What types of bank accounts are eligible for account alerts?

Is it a good idea to set up mobile alerts on your checking account?

How do you know if a bank alert is real?

How can you tell if someone is tracking your bank account?

How do I get bank alerts on my phone?

Catch-Up Contributions, Explained

What Is a Catch-Up Contribution?

Catch-Up Contribution Limits: 2023-2024

Catch-Up Contribution Requirements

Benefits of Catch-Up Contributions

How to Make Catch-Up Contributions

The Takeaway

FAQ

Do you get employer match on catch-up contributions?

Are catch-up contributions worth it?

How are catch-up contributions taxed?

6 Investing Tips and Strategies for Retirees

1. Assess Income Sources and Budget

2. Track Down Forgotten 401(k)s and Other Lost Money

3. Understand Time Horizon and Risk

4. Consider Diversification

5. Rebalance Regularly

6. Keep an Eye on Inflation

Smart, Safer Investment Options for Retirees

Cash

Bonds

Stocks

Certificates of Deposit

Fixed Annuities

The Takeaway

Student Loan
Refinancing

Personal
Loans

Online
Investments