front of houses

What to Look for When Buying a New House

Having a list of what you want in your dream house makes house hunting fun and exciting. But to be a smart homebuyer and get the most for your money, it’s important to focus on some of the more mundane, nuts-and-bolts aspects of a house as you tour. Looking for potential flaws that could be pricey to fix will help put your mind at ease. After all, maintenance and repair costs are the top concern of would-be homeowners, according to an April 2024 SoFi survey of 500 people. The concern — expressed by 47% of respondents — even beat out worries over mortgage costs or utility bills.

While home inspections play an important role in making sure you don’t buy a money pit, you can do a bit of detective work yourself. Follow this guidance on what to look for when buying a house.

1. The Exterior

While you’re focusing on where you might put a basketball hoop or admiring the property’s beautiful trees, you’d be wise to take a look at these things to consider when buying a house as well.

Roof Damage

Your roof protects you and your possessions from sun, rain, and snow. And roof damage can quickly turn homeownership dreams into a pricey nightmare. To put a price tag on it, a new roof can run $10,000.

Check for obviously cracked or missing shingles. Look for signs of water damage on the ceilings inside, indicating that the roof isn’t keeping rain out. Later, since the roof is hard to see from the ground, you may want to have your home inspection professional take a closer look. You might also invest in a pro roof evaluation to determine how many years the roof has before it needs to be replaced.

You can also avoid future problems by eyeballing the gutters. Are there telltale depressions, muddy spots, or rust stains outside the house which might indicate gutters are leaking?

Siding Issues

Be on the lookout for cracked or warped siding, or for blisters or bubbles that have formed underneath, which can indicate hidden water damage. Siding’s job is to prevent water from entering the house, so water stains on the inside could also signal siding issues.

Bad Foundation

Obvious cracks in the foundation or exterior walls are a warning sign, but pay attention when you step inside the house as well. Signs a foundation might be faulty include: floors that slope, crack, or sink; cabinets that are pulled away from the wall; interior cracks; and doors that stick.

Yard Problems

Most yard issues can be fixed with a little landscaping muscle, but drainage issues can be more costly to resolve. Look for standing water or soggy, low-lying areas in the yard, signs that the space has drainage problems that can compromise the foundation or cause mosquitoes to invade.

💡 Quick Tip: With SoFi, it takes just minutes to view your rate for a home loan online.

2. The HVAC

You’ll want to find out how the home is heated and cooled, and if possible, learn as much as you can about the annual or monthly cost. Then look for these red flags.

Damaged A/C Unit or Furnace

When touring with your real estate agent, ask the agent to turn on the heating and air conditioning system. Listen for any loud noises. Watch for water around the unit itself, a sign of possible drain line or refrigerant problems.

Broken Thermostat

Locate the thermostat and confirm that it appears to be receiving power. If the heat or air cycles on and off in brief cycles while you are touring the home, there may be a thermostat or power issue.

3. The Plumbing

Problems related to water are one of the most important things to look for when buying a house. Be aware of these issues:

Strong Smells (Good or Bad)

As you walk through a potential home, give it a good sniff. Your nose might know if mold or a damp basement is present. If you notice air fresheners or potpourri, don’t assume the homeowner is just a big fan of floral scents. Scents could be a sign that a plumbing issue, water drainage problem, or basement leak will siphon away a lot of your hard-earned cash. Buying a house out of state? Ask your real estate agent to sniff around for you, but plan on visiting in person once you have narrowed the field.

Recommended: Housing Market Trends By Location

Water Spots and Stains

Look at the ceilings and walls, especially those adjacent to bathrooms, for hints of water seeping in. Do you smell fresh paint? It might be covering up mildew. Ask the seller’s real estate agent if any new color is covering up any old mold or possibly water-damaged walls or ceilings.

Rusty or Corroded Pipes

Poke around the basement as well as under and behind bathroom and kitchen fixtures. Look for rust stains in sink basins, or blue stains under pipes, which may be a sign of corrosion.

Low Water Pressure

Ask the real estate agent if you can run the water in the kitchen and bathrooms, then run the sink and shower simultaneously. You’re doing an informal check for low water pressure. If the water is coming from a well on the property, taste it. While unpleasant flavor or odor in well water isn’t always a sign of problems, you’ll want to be aware of it before buying, and you’ll also want to have well water tested for contaminants by a professional during a home inspection. Most well water issues can be fixed, but it would be important to factor the costs into any offer you might make.

Slow Drainage

While the water is running, check that it is also draining properly.

Recommended: What Are the Most Common Home Repair Costs?

4. The Electrical System

Particularly in an older home, you’ll want to have the electrical system evaluated as part of the home inspection. Here are some things you can look for before that stage.

Small Electrical Panel

Ask the real estate agent to show you the panel where the electrical service comes into the home. There is usually a number on it to indicate the number of amps the home has. (Ask the agent if you don’t see it.) An older single-family home, especially, may not have adequate service. To power a small home without electric heating, 100 amps could be sufficient. But 200 amps is the standard for newer homes and updated ones. And even that may not be enough power for an electric heating system, depending on the size of the house. If you plan to add electric heat, a home workshop, or do an addition, you’ll probably need 300-amp service. The cost to upgrade the panel can range from $1,300 to $3,000.

While you are at the panel, look for signs of rust or rodents. Are circuit breakers corroded? If you see visible wiring, is it free from cracks or other damage?

Inadequate Outlets

Outlets in the kitchen or bath that are likely to be exposed to water should be ground fault circuit interrupter (GFCI) protected. (Look for “test” and “reset” buttons in the middle of the outlet.) Plugs that sit loosely in an outlet may indicate the outlets are old. Look for outlets with power strips or splitters plugged in, or with many electrical appliances crowded around them — all signs that the home doesn’t have adequate outlets for modern life.

5. The Functionality

Knowing whether a home would need costly upgrades, especially to the kitchen or baths, is important to your overall budget. If you’re in a hot real estate market and are likely to get into a bidding war, nailing down potential extra costs before you get into negotiations will be especially important.

Number of Bedrooms

Make sure the home has adequate sleeping space for your present needs, and don’t forget to think about the future (are kids in the plan?) as well as the occasional guest when you’re buying a house.

Kitchen Conditions

Kitchens are a big-ticket item, so survey the design and functionality of the kitchen, eyeballing the appliances and cabinetry especially. A major renovation, with new appliances, cabinets, and countertops, can run $14,000 to $40,000, according to home-improvement site Angi. To keep kitchen remodeling costs down, evaluate if the bones of a kitchen are good. Is there enough countertop space to do meal prep? Could you repaint or refinish the cabinets rather than rip them out?

Bathroom Basics

One homebuyer’s cute retro tile and toilet is another’s remodeling nightmare. And adding a bathroom or moving plumbing lines can get time-consuming and expensive. So check to see if the home has the right number of baths and think about how much work, if any, they might need to suit your style.

Whether your taste trends to luxurious rainfall showers or you’re happy with fixtures from the local home center, it’s unlikely to be a low-budget endeavor to redo a bathroom that’s dated or worn. The average bath remodel can cost approximately $11,000 before special fixtures or features.

The price tag heads farther north if you are planning to add a bath. Moving plumbing lines around a structure can get quite time-consuming and expensive. You’ll need permits, and ratcheting up the number of baths can also send your property taxes soaring. Home-improvement shows may make bathroom remodels and additions seem like no big deal, but it could actually wind up being a major endeavor.

Stairs

You probably already know whether a relaxed, one-floor ranch or a tall townhouse suits your style. But while you are touring a home, think about the number of stairs and how you might use the space in the house as you live there. Are the washer and dryer two flights down from the bedrooms, where most of the laundry originates? Is the main bedroom a flight below what would be the baby’s room?

Hardwood or Carpet?

You might tour a home that is fully carpeted and picture in your mind’s eye the gleaming hardwood floors you would reveal in a renovation. Don’t assume that hardwood hides under all carpets. Homes built in the 1950s and after may have carpet over plywood. Ask the real estate agent what is underneath the carpeting.

First-time homebuyers can
prequalify for a SoFi mortgage loan,
with as little as 3% down.



💡 Quick Tip: Not to be confused with prequalification, preapproval involves a longer application, documentation, and hard credit pulls. Ideally, you want to keep your applications for preapproval to within the same 14- to 45-day period, since many hard credit pulls outside the given time period can adversely affect your credit score, which in turn affects the mortgage terms you’ll be offered.

6. The Aesthetic

Creating your homebuying wish list can help you zero in on the things that are important to you in a new home.

Views

There are as many ideal vistas as there are homebuyers, but as you look at a home’s views, think about the seasons. If trees lose their leaves, will the neighbor’s messy backyard be front and center? Especially in urban areas, think about who owns adjoining properties, what might be built there in the future, and how that could affect the view.

Natural Light

Take note of a home’s windows, and especially whether natural light is abundant in the rooms where you will spend the most time. You might love lots of natural light, but in the summer, it can mean high air-conditioning costs. Take window coverings into consideration in your budget.

Water Access

A water view or water access might be a priority for you. Normally, water views are a good thing — picturesque and calming. But in this era of “crazy weather,” a tranquil bay or babbling creek could soon swamp your home. According to a report by the National Oceanic and Atmospheric Administration, rising sea levels are accelerating instances of flooding.

So before you feel as if you’ve got to have a home that’s near a body of water, do your due diligence. Check the home’s flood factor; also find out if your lender would require flood insurance (which typically costs $700 a year but can go much higher) in addition to homeowners insurance before approving a loan.

Recommended: How Much of a House Can I Afford?

Noise

You’ll want to listen as well as look when you tour a property. Can you hear the sound of cars on the nearby road? How heavy is the traffic? Is the house near a train track or an airport, which could mean low-flying planes? In an urban setting, who are your neighbors? A bar or concert venue could mean late-night noise.

Essential Questions to Ask When Buying a House

Most real estate agents will offer some basic information about a house right upfront. By law, they are required to disclose the possible presence of lead hazards if a residence was built prior to 1978; some states also require disclosure of asbestos. Ask these questions to dig a little deeper. If there are already multiple offers on a house, you’ll want to choose priorities from this list — asking too many questions could work against you if you decide to throw your hat in the ring.

•   How old is the heating and air-conditioning system?

•   When was the water heater last replaced?

•   How old is the roof?

•   If there is a septic system, when was the tank last replaced or inspected?

•   What is the water source? Does the home have city water or rely on a well?

•   Does the home have any history of flooding or mold?

•   Is the seller aware of any materials containing asbestos on the property?

•   What comes with the house? (Sellers sometimes remove fixtures, appliances, sheds, or play equipment so don’t rely on things being left behind.)

•   Has the owner made any major improvements in the home since the last property tax assessment? (This could result in a tax hike on the next assessment.)

•   What do you know about the neighbors?

•   Are there any easements on the property? (For example, if power lines cross the property the local electrical supplier may have an easement which allows them to prune or remove trees.)

•   Is there a homeowners association? If so, what are the annual fees?

•   When touring a co-op or condominium, ask whether there are any special assessments currently in place or being discussed.

Becoming a Homeowner

Whether you’re a first-time homebuyer or a home-buying pro, you’ll want to be careful and comprehensive when buying a house. Keeping your eye out for potential problems can save you from falling in love with the wrong house.

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 five most important things to look for in a new home?

Make sure the home’s size, floor plan, and general aesthetic suit your lifestyle and budget. Then consider the amount of work a home might need. (Maintenance and repair costs are the top concern for homebuyers, with 47% of shoppers worried about these expenses according to an April 2024 SoFi survey of 500 adults.) Factor any big-ticket needs such as a bad roof or foundation, or a kitchen or bathroom that require remodeling, into your overall budget.

What should you look for in an initial walk-through of a new home?

Don’t just look at a home: Use all your senses. Listen for dripping water or traffic noises. Sniff the air — does it smell musty or moldy? Feel the floor underneath you. Does it slope or squeak? And listen to your gut as you will likely feel quickly whether a home is right for you.

What are must-haves when buying a new home?

Must-haves are unique to every buyer. For one person, a great view is essential while another may require a certain school district. The important thing is to talk about these early in your home search, and revisit the list as you begin to see properties.


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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.


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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.

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.

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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Guide to Brokerage Accounts

Key Points

•   A brokerage account is an investment account that allows individuals to buy, sell, or trade various financial securities, including stocks and bonds.

•   Different types of brokerage firms offer varying levels of service, including full-service, discount, and online brokers, each with distinct fees and features.

•   Investing through a brokerage account has no contribution limits or withdrawal restrictions, but capital gains from profits are subject to taxation.

•   Four main types of brokerage accounts include cash accounts, margin accounts, joint accounts, and discretionary accounts, each serving different investment needs.

•   Opening a brokerage account typically requires personal information, an initial deposit, and agreement to specific terms, with options for funding through various methods.

What Is a Brokerage Account?

A brokerage account is a type of investment account typically opened with a brokerage firm. Brokerage accounts allow owners to invest their money, and buy, sell, or trade stocks, bonds, and other types of financial securities. There are different types of brokerage accounts, and they’re offered by a range of financial firms.

For prospective investors, knowing what a brokerage account is and how they work is important. For seasoned investors, learning even more about them can help deepen their knowledge, too.

What is a Brokerage Account Used For?

As noted, brokerage accounts allow owners to invest in stocks and other financial securities. They’re offered by different types of financial firms, too. In fact, there are many brokerage firms that investors can choose from. While all offer brokerage accounts, they usually come with different fees and services:

•   A full-service brokerage firm usually provides a variety of financial services, including allowing you to trade securities. Full-service firms will sometimes provide financial advice and automated investing to customers.

•   A discount brokerage firm doesn’t usually provide any additional financial consulting or planning services. Thanks to their pared down services, a discount brokerage firm often offers lower fees than a full-service firm.

•   Online brokerage firms provide brokerage accounts via the internet, although some also have brick and mortar locations. Online brokers often offer the lowest fees and give investors freedom to trade online with ease. They also tend to make information and research available to consumers.

Opening a brokerage account generally starts out as a similar experience to opening any other type of cash account. Consumers can simply start an account either online or in person.

💡 Quick Tip: Look for an online brokerage with low trading commissions as well as no account minimum. Higher fees can cut into investment returns over time.

Get up to $1,000 in stock when you fund a new Active Invest account.*

Access stock trading, options, alternative investments, IRAs, and more. Get started in just a few minutes.


*Probability of Member receiving $1,000 is a probability of 0.028%.

Some brokerage firms require investors to use cash to open their accounts and to have enough funding in their account to cover the cost of stocks or bonds, as well as any commission fees. There are some however, that don’t require any initial deposit.

In order to make their first investment however, consumers usually need to deposit money. They can do this by moving money from another account, such as from their checking or savings accounts. From then on, the brokerage firm can help individuals execute buy or sell orders on stocks, exchange-traded funds (ETFs), bonds, or mutual funds.

Unlike a retirement account, there are generally no restrictions on how much money a consumer can put in. There are also typically no restrictions on when individuals can withdraw their cash from brokerage accounts. Investors do need to claim any profits — or “capital gains” — as taxable income.

Here’s a closer look at how brokerage firms differ from other types of money accounts.

Brokerage Accounts vs Retirement Accounts

The primary difference between a retirement account and a brokerage account is if there’s any tax advantage at play.

For stocks, bonds, exchange traded funds, mutual funds, options etc, brokerage account holders are liable to pay capital gains taxes on most of their profits from trading these securities. That’s why brokerage accounts are also known in the industry as “taxable accounts.”

Retirement accounts are set up with money that has some kind of tax advantage and can be used to buy securities. For example, 401(k)s are set up by an employer and funded with money that comes from an employee’s paycheck before taxes and can be matched by an employer.

These accounts, which also include traditional and Roth IRAs, have specific rules about the amount that can be contributed and when money can be withdrawn. Meanwhile, with brokerage accounts, there are few limits on funding or withdrawals.

Brokerage Accounts vs Checking Accounts

Brokerage accounts and checking accounts have one important thing in common: they can both have cash in them. Sometimes brokerage accounts will “sweep” your cash into a money market fund managed by that same brokerage, allowing you to earn interest. Meanwhile, in a traditional bank checking account, you don’t earn any interest but you do have easy access to your cash.

An important distinction between brokerage and checking accounts is the level of protection you get from them. A checking account offered by a bank will typically have insurance provided by the Federal Deposit Insurance Corporation (FDIC), which protects the first $250,000 deposited at a bank that has a charter from the FDIC. This means that $250,000 deposited can be withdrawn even if the bank itself goes out of business.

Brokerage accounts, on the other hand, typically have insurance provided by the Securities Investors Protection Corporation (SPIC), which unlike the FDIC, is not a government agency. What SIPC insurance does is protect the custody of stocks, bonds, and other securities as well as cash in a brokerage account, not their value.

This means that if a brokerage fails, the SIPC insurance will protect cash deposited in a brokerage account up to $250,000 and securities and cash combined up to $500,000.

This simply means you get your cash deposited in the account and the securities back, not that you have insurance from the value of those securities going down.

Pros and Cons of Opening a Brokerage Account

Brokerage accounts can be powerful financial tools, but they can have their advantages and drawbacks, too.

Pros and Cons of Brokerage Accounts

Pros

Cons

Ability to trade securities Can’t be used for transactions
High liquidity Slow transaction times
No limits on contributions and withdrawals No tax advantages

Pros of Brokerage Accounts

The most obvious advantage of a brokerage account is that it allows its owner to trade financial securities and invest their money. They tend to have a high degree of liquidity, too, meaning that it’s relatively easy to buy and sell securities. There are also no general requirements for contributions or withdrawals.

Cons of Brokerage Accounts

Cons of brokerage accounts include the fact that they can’t be used for traditional transactions, like, say, a checking account. While your account may have a cash balance, you can’t use it to purchase a soda from the corner store.

Further, getting your money in and out of a brokerage account may take some time. There are often fraud checks and other elements at play when transacting a cash balance in or out of an account, and it may take a couple of days. There are also no tax advantages — something that may be present for certain retirement accounts.

A couple of other things that may be worth considering, especially if you’re interested in investing for beginners.

Before you consider opening a brokerage account, make sure you have sufficient money set aside for an emergency fund. Common financial advice recommends setting aside three to 12 times your streamlined monthly expenses. It’s also good practice to contribute to your 401(k) or IRA before opening a brokerage account.

If you have an emergency fund stashed away and are making regular contributions to a retirement account, think about what types of assets you plan on investing in. A brokerage account would only be required if you plan to buy stocks, bonds, or other securities. If you only plan on investing in mutual funds, you might not need a brokerage account.

Top 3 Types of Brokerage Accounts Explained

There are also a few distinct types of brokerage accounts, though they all work in a similar fashion — trading securities, after all, is what brokers do. They are cash brokerage accounts, margin accounts, joint brokerage accounts, and discretionary accounts.

1. Cash Brokerage Accounts

A cash brokerage account is the “vanilla” option. If you open a cash brokerage account, you deposit money and start trading securities.

2. Margin Brokerage Accounts

A margin brokerage account may require approval from a brokerage. These types of accounts let owners use “margin” when trading. That means that they can effectively borrow money to trade with from the brokerage. These obviously come with a higher degree of risk, too.

3. Joint Brokerage Accounts

Joint brokerage accounts are more or less cash brokerage accounts that are opened by more than one person. It’s like a joint bank account, in many respects.

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

Investing with SoFi

Brokerage accounts allow owners to buy and sell investments and financial securities. They are offered by a number of financial institutions, and come in a few different types. By and large, though, they’re a very popular choice for investors looking to get their money in the markets.

They do have their pros and cons and associated risks, however. It may be beneficial to speak with a financial professional to learn more about how you can use a brokerage account to your advantage in pursuit of your financial goals.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

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

FAQ

How do I open a brokerage account?

Most brokerage firms allow prospective customers to open an account online or in person. Opening a brokerage account generally requires some personal information related to identity and financials, and some money to make an initial deposit.

Is there a minimum deposit to open a brokerage account?

Different brokerage firms will have different rules regarding minimum deposits, but there are many that don’t require a minimum deposit. Again, it’ll depend on the specific firm.

Do brokerage accounts have fees?

Yes, most brokerage accounts have some sort of associated fees. There may be commission fees involved, though they’re less common today than they once were, but there can be other types of fees to be aware of, too.


SoFi Invest®

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

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

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

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

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A Guide to Bitcoin ETPs

Spot Bitcoin ETPs are a type of investment vehicle that seeks to track the spot price of Bitcoin. ETPs, or exchange-traded products, are a broader basket of investments that include both exchange-traded funds (ETFs) and exchange-traded notes (ETNs), and are listed on an exchange, and can be purchased or sold much like a stock.

But what’s critical to know is that generally, ETFs are regulated by the Investment Company Act of 1940 (the “1940 Act”). While the most common type of ETPs are structured as ETFs, not all are, and spot Bitcoin ETPs are a specific type of ETP that are not registered under the 1940 Act. As such, these ETPs are not subjected to the 1940 Act’s rules, and investors holding shares of Bitcoin ETPs do not have the same protections as those that are regulated by the 1940 Act, which means these investments have relatively higher associated risks.

What Is a Bitcoin ETP?

As noted, Bitcoin ETPs are a type of exchange-traded fund or product that allow investors to gain exposure to Bitcoin without directly owning it. These seek to track the price of Bitcoin. That means when the price of Bitcoin in U.S. dollars goes up, a spot Bitcoin ETP, trading on the stock exchange should also see its share values go up, and vice versa.

But it’s critical to note that Bitcoin ETPs have a much narrower focus than most other exchange-traded products, which started out with the aim of giving investors broad exposure to the stock market. But, like all investments, they have various risks associated with them. In fact, it’s possible that an investor could lose the entirety of their investment.

An Introduction to Bitcoin ETPs

Bitcoin ETPs are exchange-traded products that, effectively, allow investors to gain exposure to the crypto markets as easily as they would buy or sell a stock, as discussed. Again, a Bitcoin ETP seeks to track the price or value of Bitcoin, and so the value of a Bitcoin ETP share is designed to rise or fall in relation to the change in value of the underlying cryptocurrency.

It also means that investors don’t necessarily need to directly own Bitcoin to gain exposure to the market in their portfolio — they can invest in a security, the ETP, that seeks to track it, instead. Note, too, that all ETPs have related fees and expenses, which vary.

💡 Quick Tip: How to manage potential risk factors in a self-directed investment account? Doing your research and employing strategies like dollar-cost averaging and diversification may help mitigate financial risk when trading stocks.

Get up to $1,000 in stock when you fund a new Active Invest account.*

Access stock trading, options, alternative investments, IRAs, and more. Get started in just a few minutes.


*Probability of Member receiving $1,000 is a probability of 0.028%.

What Are Spot Bitcoin ETPs?

Spot Bitcoin ETPs are investment vehicles that trade at “spot” value. “Spot” value, in this case, refers to the price of the underlying asset at any given time. So, if a buyer and seller come together to make a trade, they would do so at the spot price. There are spot markets for all sorts of commodities.

Where Can Investors Buy Spot Bitcoin ETP Shares?

Investors can buy spot Bitcoin ETP shares via numerous exchanges and platforms. While previously, investors interested in Bitcoin or other cryptocurrencies would need to trade on platforms that supported cryptocurrencies, since Bitcoin ETPs are exchange-traded vehicles, investors are likely to find them available on many other platforms — that includes SoFi, which allows investors to buy spot Bitcoin ETP shares as well.

Are There Other Spot Crypto ETPs?

Spot Bitcoin ETPs seek to track the price of a fund’s Bitcoin holdings, and other spot crypto ETPs, if and when they are approved and hit exchanges, will do the same.

Spot Bitcoin ETPs were first approved for trading by regulators in early 2024. There are ETPs that seek to track Bitcoin-exposed or Bitcoin-adjacent companies, too, as well as Bitcoin futures. Spot Ethereum ETPs – or Ether ETPs, as they would actually track Ether (ETH), the Ethereum blockchain’s native cryptocurrency – could be similar vehicles to to spot Bitcoin ETPs, in that they would seek to track the price of Ether, and allow investors to gain exposure to Ether in their portfolios without owning it directly.

What Are Bitcoin Futures ETPs?

Bitcoin futures ETPs are another type of ETP that give investors exposure to the price movements of Bitcoin via futures contracts. Futures are a type of contract that dictates the terms of a trade at a future date, and typically have underlying assets such as precious metals or other commodities — including crypto.

Accordingly, Bitcoin futures ETPs are crypto futures ETPs that specifically seek to track Bitcoin futures contracts. Regulators approved Bitcoin futures contracts in 2021, but again, investors should know that they don’t seek to track the price or value of the underlying asset exactly — which differentiates them from spot Bitcoin ETPs.

💡 Quick Tip: Look for an online brokerage with low trading commissions as well as no account minimum. Higher fees can cut into investment returns over time.

Are There US-listed Spot Bitcoin ETPs?

There are U.S.-listed spot Bitcoin ETPs. When the Securities and Exchange Commission (SEC) first granted their approval in January 2024, it opened the door to several Bitcoin ETPs hitting the market. As a result, investors were able to start buying and selling them via the stock market.

The SEC’s approval led to new spot Bitcoin ETPs being listed on a few different exchanges. Here’s a list of the first 11 spot Bitcoin ETPs that gained approval from the SEC:

•   Grayscale Bitcoin Trust (GBTC)

•   Bitwise Bitcoin ETF (BITB)

•   Hashdex Bitcoin ETF (DEFI)

•   ARK 21Shares Bitcoin ETF (ARKB)

•   Invesco Galaxy Bitcoin ETF (BTCO)

•   VanEck Bitcoin Trust (HODL)

•   WisdomTree Bitcoin Fund (BTCW)

•   Fidelity Wise Origin Bitcoin Fund (FBTC)

•   Franklin Bitcoin ETF (EZBC)

•   iShares Bitcoin Trust (IBIT)

•   Valkyrie Bitcoin Fund (BRRR)

Note, too, that it’s anticipated that additional spot cryptocurrency ETPs will become available.

How Are Bitcoin ETPs Regulated?

Bitcoin ETPs are regulated by the SEC, which sets out guidance in terms of legality. Regulation in the crypto space is and has been murky — it’s been largely unregulated for the entirety of the crypto space’s existence. But the advent of crypto ETPs is likely to change that to some degree, as spot Bitcoin ETPs’ underlying asset is and can be Bitcoin itself, rather than Bitcoin derivatives.

Remember, too, that Bitcoin ETPs are not regulated under the Investment Company Act of 1940, as discussed. That differentiates them from most ETFs on the market.

That’s another important distinction investors should note: Spot and futures Bitcoin ETPs may be regulated under slightly different terms, as futures are derivatives. Investors should pay attention to the space and to any SEC guidance released regarding crypto regulation, as it may impact the value of their holdings in crypto ETPs, too.

Pros & Cons of Bitcoin ETPs

Like all investments, there are pros and cons of ETFs and ETPs — including Bitcoin ETPs.

Benefits of Bitcoin ETPs

Proponents of Bitcoin ETPs appreciate that they can give investors exposure to the complicated and volatile cryptocurrency market, without the need to personally hold actual crypto.

Convenience and Ease

Buying a spot Bitcoin ETP requires little tech know-how beyond knowing how to use a computer, open a brokerage account, and place a buy order.

ETPs provide a way for investors to indirectly add exposure to certain assets — like Bitcoin, in this case — to their portfolio. That may result in a return on investment, or a possible loss of principal. On the other hand, holding actual Bitcoin may require a somewhat advanced level of technical expertise.

Secure Storage Options

Some cryptocurrency exchanges might be trustworthy, but some users have also had a controversial history of being hacked, stolen from, or defrauded. Even reliable exchanges open investors up to risk.

Securely storing cryptocurrencies — for example, storing the private keys to a Bitcoin wallet — is most often done by using either a paper wallet that has the keys written in the form of a QR code and a long string of random characters, or by using an external piece of hardware called a hardware wallet.

Risks of Bitcoin ETPs

First and foremost, investors should be aware that it’s possible that they could lose the entirety of their investment when investing in Bitcoin ETPs. There are, of course, other risks to consider as well, including volatility, costs, and the unpredictable and still largely-unregulated nature of the crypto market.

Volatility

The volatility comes from the occasional wild swings experienced in the price of Bitcoin and Bitcoin futures against most other currencies. This could scare investors that have a lower risk tolerance, enticing them to panic and sell.

Fees

One of the risks that comes from holding an ETP of any kind involves its expense ratio. This number refers to the amount of money a fund’s management charges in exchange for providing the opportunity for investors to invest in their fund.

If a fund comes with an expense ratio of 2%, for example, the fund management would take $2 out of a $100 investment each year. This figure is usually calculated after profits have been factored in, cutting into investors’ gains. In other words, some Bitcoin ETPs could be relatively expensive for investors to hold, but it’ll depend on the specific fund.

There can be other various types of fees that may apply to an investment in ETPs as well. While the specific fees will vary from ETP to ETP, investors will likely encounter one or a combination of commissions, account maintenance fees, exchange fees, and wrap fees (a type of management fee). Again, investors will want to look at an ETP’s prospectus or related documents to get a better sense of the costs associated with a specific ETP.

Fraud and Market Manipulation

Regulators have cited fraud and market manipulation as reasons for why they were cautious about approving a spot market Bitcoin ETP. It’s unclear how the SEC’s approval of spot Bitcoin ETPs may affect fraud and market manipulation in the crypto space, but it’s something investors should be aware of.

The Takeaway

Spot Bitcoin ETPs were approved for trading by the SEC in early 2024, and as a result, it’s likely that many more crypto ETPs will also hit markets and exchanges in the future — though nothing is guaranteed. Investors may use them to gain exposure to the crypto markets. For investors curious about the cryptocurrency market but not yet ready to invest in crypto itself, a Bitcoin ETP may represent another option. It may be best to speak with a financial professional before investing, too.

If you’re ready to bring crypto into your portfolio, you can invest in a Bitcoin ETP with SoFi. Along with many other types of investments, SoFi’s platform offers investors access to the crypto space through spot Bitcoin ETPs.

Ready to invest in your goals? It’s easy to get started when you open an investment account with SoFi Invest. You can invest in stocks, exchange-traded funds (ETFs), mutual funds, alternative funds, and more. SoFi doesn’t charge commissions, but other fees apply (full fee disclosure here).

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

FAQ

What are the options for Bitcoin ETPs?

There are Bitcoin futures ETPs and spot Bitcoin ETPs listed in the U.S., which investors can buy. Given the SEC’s approval of Bitcoin ETPs for trading in early 2024, there may soon be additional spot crypto ETPs available to investors in the future.

Are there US-listed Bitcoin ETPs?

As of July 2024, there are U.S.-listed spot Bitcoin ETPs after the SEC approved an initial batch of them, and it’s likely there will be more in the subsequent months and years.

Where can Bitcoin ETP shares be purchased?

Crypto ETPs can be purchased and traded on the stock market, alongside other ETPs.


Photo credit: iStock/JuSun

SoFi Invest®

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

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

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

Exchange Traded Funds (ETFs): Investors should carefully consider the information contained in the prospectus, which contains the Fund’s investment objectives, risks, charges, expenses, and other relevant information. You may obtain a prospectus from the Fund company’s website or by email customer service at https://sofi.app.link/investchat. Please read the prospectus carefully prior to investing.
Shares of ETFs must be bought and sold at market price, which can vary significantly from the Fund’s net asset value (NAV). Investment returns are subject to market volatility and shares may be worth more or less their original value when redeemed. The diversification of an ETF will not protect against loss. An ETF may not achieve its stated investment objective. Rebalancing and other activities within the fund may be subject to tax consequences.

Fund Fees
If you invest in Exchange Traded Funds (ETFs) through SoFi Invest (either by buying them yourself or via investing in SoFi Invest’s automated investments, formerly SoFi Wealth), these funds will have their own management fees. These fees are not paid directly by you, but rather by the fund itself. these fees do reduce the fund’s returns. Check out each fund’s prospectus for details. SoFi Invest does not receive sales commissions, 12b-1 fees, or other fees from ETFs for investing such funds on behalf of advisory clients, though if SoFi Invest creates its own funds, it could earn management fees there.
SoFi Invest may waive all, or part of any of these fees, permanently or for a period of time, at its sole discretion for any reason. Fees are subject to change at any time. The current fee schedule will always be available in your Account Documents section of SoFi Invest.


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

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How to Open Your First IRA

How to Open an IRA: Beginners Guide

Saving for retirement may be the biggest financial goal many of us will ever set. So it makes sense to explore all retirement savings options, including an IRA, or individual retirement account. Individual retirement accounts are tax-advantaged tools that can be opened by virtually anyone with earned income, unlike employer-sponsored 401(k) plans. The sooner you open your first IRA, the more opportunity your savings have to grow over time, potentially leading to a nice nest egg upon retirement.

There are other benefits to opening an IRA. For one, it can deliver attractive tax perks — either up front or in retirement — and it can be especially attractive to individuals who don’t have an employer-sponsored 401(k) plan, or have maxed it out already.

This article will walk you through the steps of opening an IRA — whether a traditional, Roth, or SEP IRA.

Key Points

• Opening an IRA provides a tax-advantaged way to save for retirement, allowing individuals with earned income to benefit regardless of employer-sponsored plans.

• Selecting the right investing style, either through a robo-advisor for automation or an online broker for hands-on management, is crucial when setting up an IRA.

• Different types of IRAs, including Traditional, Roth, and SEP IRAs, offer various tax benefits and contribution limits based on income and employment status.

• The process of opening an IRA involves providing personal information, identification, and selecting beneficiaries, followed by funding the account through transfers or rollovers.

• Choosing the right investments within an IRA, such as stocks, bonds, or target date funds, should align with individual risk tolerance and retirement goals for optimal growth.

How to Open an IRA

1. Choose Your Investing Style

When setting up an IRA, you have the option to select the investing style that aligns with your preferences and goals. You can choose between two primary methods: using an online broker for self-directed investing or opting for a robo-advisor for automated investing.

•   Consider a robo-advisor for a hands-off approach: If you find the array of investment choices daunting or you’re unsure where to begin, a robo-advisor might be the ideal solution. This option allows you to take a more hands-off approach and automate your investments. Simply share your retirement and investment objectives, and the robo-advisor will create and maintain a tailored portfolio specifically designed to meet your needs.

•   Choose an online broker to take control of your investments: For those who prefer to be more involved and make their own investment decisions, using an online broker for self-directed investing is the way to go. This method allows you to directly manage your investments and typically comes with the benefit of commission-free trades. This is a great choice for individuals who want to actively participate in the management of their IRA investments.

2. Choose Where to Open Your IRA

You can open an IRA at a brokerage, a bank, mutual fund company, or other financial services provider. Typically, the more personal care and advice you get, the higher the account fees will be. A robo-advisor, for instance, might charge lower fees than a brokerage.

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.

3. Choose the Type of IRA You Want to Open

Traditional IRA

If you have earned income, you can open a traditional IRA regardless of how much you make per year. An IRA can be a good next step if you’ve maxed out your 401(k), for instance.

One notable difference between traditional and Roth IRA accounts is that traditional IRAs allow you to deduct your contributions on your tax returns now, meaning you pay taxes on distributions when you retire. You’ll pay a 10% penalty tax (in addition to regular income tax) on any money you withdraw from a traditional IRA before age 59 ½, with a few exceptions.

It may be better to go with a traditional IRA if you think you’ll be in a lower tax bracket after retirement. This is because you’ll be saving on a higher tax rate now (vs. the lower rate you’d be paying later, since you’d be in a lower tax bracket in retirement).

Roth IRA

Unlike traditional IRAs, there are income limits on who can open a Roth IRA. For 2024, individuals can only contribute the full amount — $7,000, with an additional $1,000 for people age 50 or over — to a Roth IRA if their income is below $146,000 for single filers. Those earning more than $146,000 but less than $161,000 can contribute a reduced amount. For married people who file taxes jointly, the limit is $230,000; those who earn up to $240,000 can contribute a reduced amount.

Roth IRA contributions are made with after-tax income. While that doesn’t offer any tax advantages now, it does mean that when you withdraw money upon retirement, you won’t have to pay taxes on it. As such, a Roth IRA may make sense for eligible individuals who typically get a tax refund and expect to be in a similar or higher tax bracket when they retire (for example, if they plan to have substantial income from a business, investments, or work).

SEP IRA

A SEP IRA, or simplified employee pension, can be set up by either an employer at a small business or by someone who is self-employed.

Employers get a tax deduction when they contribute to their employees’ IRAs, and they’re also allowed to contribute on a “discretionary basis” (meaning the employer doesn’t have to contribute in years where it’s not as financially feasible for the company.) For employees, this option may allow you to contribute a greater amount than other IRAs, depending on your income.

4. Open an IRA Account

Once you decide where to open an IRA, you’ll need to follow through with doing so. The process to open an IRA can vary a bit from provider to provider, but it’s generally pretty straightforward.

What You’ll Need to Open an IRA

•   A copy of your government-issued ID

•   Personal information, including contact information and Social Security number

•   Details on intended beneficiaries

5. Fund Your Account

Once your account is opened, you’ll receive guidance on funding an IRA. If you want to fund your account through an electronic transfer, you’ll be asked to provide banking information. It’s also possible to roll over existing retirement accounts — and yes, it is possible to open an IRA if you have a 401(k) already.

As of 2024, you can contribute up to $7,000 a year to a traditional or Roth IRA, or up to $8,000 if you’re 50 or older. If you take home more than the maximum earnings allowed for a Roth IRA but still prefer a Roth IRA over a traditional account, you might be able to contribute a reduced amount of Roth IRA contribution limits. An IRA contribution calculator can help you get an idea of how much you can contribute this year.

In many cases, it’s a good idea to invest as much as you can up to that amount each year to take full advantage of the power of compound growth.

A retirement calculator can help you figure out whether you’re on track for retirement. A quick rule of thumb: By the time you’re 30, it’s typically good to have the equivalent of one year’s salary saved.

Rolling Over a 401(k) into an IRA

If you’re leaving a job with an employee-sponsored retirement plan, you can roll over your 401(k) into a traditional IRA. When you roll money over from a 401(k), there’s no limit to how much you can add to an IRA at that time. Going forward, additional contributions will be capped at the typical IRA contribution limit.

Bonus Step: Choose Your Investments

Investors can choose to invest in stocks, bonds, mutual funds, low-cost index funds, or exchange-traded funds (ETFs) — or a combination thereof – through a financial institution.

One popular type of investment fund geared toward retirement savings is a “target date fund.” A target date fund is calibrated to the year you plan to retire, and it’s meant to automatically update your mix of assets, like stocks and bonds, so they’re more aggressive earlier in life and more conservative as you approach retirement.

Ultimately, the mix of investments in your IRA should depend on your personal risk tolerance, lifestyle, and retirement goals.

Investing in Your Retirement

Once you’re familiar with how to open an individual retirement account, the process itself is pretty straightforward — possibly the biggest lift involved is deciding which IRA suits your personal situation and retirement goals best: a traditional, Roth, or SEP IRA. From there, you’ll need to decide where to start a Roth IRA or other type or IRA, then go through the formal process of starting an IRA, which includes providing certain information, funding the account, selecting a contribution amount, and deciding where to invest your funds.

That can all sound like a lot, but getting started on saving for your retirement doesn’t have to be difficult. SoFi Invest makes opening an IRA simple — it’s possible to sign up in less than five minutes. You can be as involved in the investment process as you want to be — either with hands-on investing or our automated investing technology, in which our algorithm will recommend an appropriate mix of investments based on your age and retirement goals.

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

FAQ

How much money is required to open an IRA?

There’s no universal minimum amount required to open an IRA. That being said, some providers will have minimum requirements.

Can you open an IRA all on your own?

Yes, it’s definitely possible to open an IRA on your own. The process is simple, similar to opening a bank account, and you can do so at most banks, brokerages, or other financial institutions. Often, it’s possible to start an IRA online.

Can you open an IRA at a bank?

Yes, many banks offer IRAs. You can also open an IRA at credit unions, brokerages, and investment companies.


About the author

money management guide for beginners

Rebecca Lake

Rebecca Lake has been a finance writer for nearly a decade, specializing in personal finance, investing, and small business. She is a contributor at Forbes Advisor, SmartAsset, Investopedia, The Balance, MyBankTracker, MoneyRates and CreditCards.com. Read full bio.



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

SoFi Invest®

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

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

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

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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2022 Hourly Wage Inflation Calculator Table

2024 Hourly Wage Inflation Calculator Table

We all feel the effects of inflation: Groceries cost more, childcare seems to be a luxury service. But that’s subjective. To nail down the real-world impact of inflation, economists like to compare rising prices to salaries, which are more static. This is where the wage inflation calculator comes in. The tool illustrates how much buying power your earnings currently have compared to past years.

We’ll take a closer look at how wage inflation calculators work and what they can tell us about making a living in the U.S. in 2024. We’ll also examine what inflation is and how much wages have grown compared to home prices, gold, and other metrics.

What Goes Behind an Hourly Wage Inflation Calculator

A wage inflation calculator may go by other names, such as an inflation wage calculator, hourly wage inflation calculator, minimum wage inflation calculator, or a wage adjusted for inflation calculator. But they’re all the same. You can see an example at https://www.bls.gov/data/inflation_calculator.htm.

The calculator is one way to represent inflation, which is the change in price of goods and services. It tells you how much buying power a dollar amount has on a certain date compared to another date — usually today or a year-over-year equivalent. For example, someone may enter their hourly wage on Jan. 1, 2010, and then compare how much that same wage bought them on Jan. 1, 2024.

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Historical Inflation Rates, Compared

The table below shows the annual rate of inflation from 1920 to present. See the next section for more information on how to read the table.

Year

Annual Average CPI-U

Annual Percent Change (Rate of inflation)

1920 20.0 15.6%
1921 17.9 -10.9%
1922 16.8 -6.2%
1923 17.1 1.8%
1924 17.1 0.4%
1925 17.5 2.4%
1926 17.7 0.9%
1927 17.4 -1.9%
1928 17.2 -1.2%
1929 17.2 0.0%
1930 16.7 -2.7%
1931 15.2 -8.9%
1932 13.6 -10.3%
1933 12.9 -5.2%
1934 13.4 3.5%
1935 13.7 2.6%
1936 13.9 1.0%
1937 14.4 3.7%
1938 14.1 -2.0%
1939 13.9 -1.3%
1940 14.0 0.7%
1941 14.7 5.1%
1942 16.3 10.9%
1943 17.3 6.0%
1944 17.6 1.6%
1945 18.0 2.3%
1946 19.5 8.5%
1947 22.3 14.4%
1948 24.0 7.7%
1949 23.8 -1.0%
1950 24.1 1.1%
1951 26.0 7.9%
1952 26.6 2.3%
1953 26.8 0.8%
1954 26.9 0.3%
1955 26.8 -0.3%
1956 27.2 1.5%
1957 28.1 3.3%
1958 28.9 2.7%
1959 29.2 1.08%
1960 29.6 1.5%
1961 29.9 1.1%
1962 30.3 1.2%
1963 30.6 1.2%
1964 31.0 1.3%
1965 31.5 1.6%
1966 32.5 3.0%
1967 33.4 2.8%
1968 34.8 4.3%
1969 36.7 5.5%
1970 38.8 5.8%
1971 40.5 4.3%
1972 41.8 3.3%
1973 44.4 6.2%
1974 49.3 11.1%
1975 53.8 9.1%
1976 56.9 5.7%
1977 60.6 6.5%
1978 65.2 7.6%
1979 72.6 11.3%
1980 82.4 13.5%
1981 90.9 10.3%
1982 96.5 6.1%
1983 99.6 3.2%
1984 103.9 4.3%
1985 107.6 3.5%
1986 109.6 1.9%
1987 113.6 3.7%
1988 118.3 4.1%
1989 124.0 4.8%
1990 130.7 5.4%
1991 136.2 4.2%
1992 140.3 3.0%
1993 144.5 3.0%
1994 148.2 2.6%
1995 152.4 2.8%
1996 156.9 2.9%
1997 160.5 2.3%
1998 163.0 1.6%
1999 166.6 2.2%
2000 172.2 3.4%
2001 177.1 2.8%
2002 179.9 1.6%
2003 184.0 2.3%
2004 188.9 2.7%
2005 195.3 3.4%
2006 201.6 3.2%
2007 207.3 2.9%
2008 215.3 3.8%
2009 214.5 -0.4%
2010 218.1 1.6%
2011 224.9 3.2%
2012 229.6 2.1%
2013 233.0 1.5%
2014 236.7 1.6%
2015 237.0 0.1%
2016 240.0 1.3%
2017 245.1 2.1%
2018 251.1 2.4%
2019 255.7 1.8%
2020 258.8 1.2%
2021 271.0 4.7%
2022 294.4 8.6%
2023 304.7 4.1%
2024 314.4 3.2%


Data courtesy of the U.S. Bureau of Labor Statistics

How to Read Our Historical Inflation Rate Table

To understand the table shared above, first you need to know what CPI means. The Consumer Price Index comes from the U.S. Bureau of Labor Statistics (BLS), which began collecting family expenditure data in 1917. The annual average CPI-U in the second column represents Urban CPI data. The annual percent change between each year’s CPI represents the rate of inflation.

How to Calculate Hourly Wage Adjusted for Inflation

Using a wage inflation calculator is an easy way to see how our income’s buying power changes with inflation. Just enter the starting year of your choice, your hourly wage, and then the current year.

Let’s say someone was making $25 per hour in 2018 and wants to know what the equivalent hourly rate is in 2024. In this case, making $25 per hour in August 2018 is equivalent to making $31.21 in August 2024. Assuming the individual makes the same money today, this shows that the buying power of their hourly wage has decreased over the years.

If you’re negotiating a raise, you could argue that $31.21 is the minimum you should be making to keep up with the cost of living.

What Is Inflation and How Does It Work?

Inflation represents changes in prices of services and goods throughout the economy. The way the government measures inflation is by comparing the current cost of goods and services to prices in previous years.

Inflation weakens the purchasing power of the dollar, as consumers have to pay more for things than they did in previous months and years. Inflation can also deflate the value of cash held in savings accounts.

What Is Actual Inflation?

Actual inflation is a term used to refer to what the current rate of inflation really is versus what consumers perceive the current rate to be, or their “inflation expectations.” Consumer expectations influence actual inflation.

Hyperinflation

Hyperinflation is a term used when rapid inflation occurs. This is when prices rise uncontrollably over a period of time. Hyperinflation is extreme — 50% a month or more — and fortunately rare.

The U.S. has never experienced hyperinflation, and no one believes it’s on the horizon. The most recent example of hyperinflation is Venezuela, where inflation reached 65,000% in 2018.

Deflation

Deflation is the opposite of inflation, when prices of goods and services go down. The U.S. experienced deflation of 7% (or -7% inflation) during the first few years of the Great Depression.

Recommended: What Is Stagflation?

How Is Inflation Calculated?

The formula for measuring inflation is:

•   Percent Inflation Rate = (Final CPI Index Value/Initial CPI Value) x 100

How Is Wage Adjusted for Inflation Calculated?

It’s complicated. The easiest way to calculate a wage adjusted for inflation is to use an online wage inflation calculator.

How Inflation Impacts You

There’s some confusion surrounding whether inflation is good or bad. Some inflation is normal, and shows that the economy is growing. But for consumers it feels like a bad thing. It can be especially worrisome for borrowers with variable-rate-interest debt like student loan debt.

Economists can measure the impact of inflation on consumers in a number of ways. You’ve probably seen articles discussing college tuition vs. inflation, which show how American incomes have not kept up rising education costs. Other metrics tell similar stories.

Let’s look at a few different metrics that reveal how consumers may feel the impact of inflation.

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How Your Wage Is Doing Relative to the Housing Market

Inflation can sneak up on consumers when prices at grocery stores rise slightly. But they really feel it when making a large purchase, such as buying a home. People who have saved for many years to buy a house find that their income and savings are no longer enough to reach their home buying goals.

That’s because median home prices have far outstripped median wages: Nationwide home prices have grown 129% since 1960, while household income increased only 39%. This may have been great news for our parents and grandparents, who saw their real estate investments soar. But for today’s first-time homebuyers, it’s a disaster.

Also, mortgage interest rates can rise during periods of inflation.

Recommended: Should I Sell My House Now or Wait?

How Your Wage Is Doing Relative to Gold

Because gold tends to hold its value, it makes a good unit of measurement for economists. By converting wages to gold, we can get a better sense of how wages have held up, or not, over the years.

In 1965, the minimum wage was equal to 71 ounces of gold annually. Given the price of gold in 2024, that’s equal to a salary of $179,491.55. Compare that to the current federal minimum wage of $7.25 per hour, or $15,080 annually.

How Your Wage Is Doing Relative to CPI

Remember, CPI represents consumer prices. Inflation impacts prices of essential goods and services such as groceries, gas, and childcare. This means that salaries and savings don’t extend as far as they used to. This is why many people push for raising the minimum wage during periods of inflation.

If you’re looking to take control of your money during inflation, a money tracker app can help you gain valuable insight into your financial life.

The Takeaway

Inflation, and the rising prices that come with it, means your income doesn’t buy as much as it used to. Using a wage inflation calculator is one way for consumers to get a more objective idea of how much buying power their hourly wage has during periods of inflation. Of course, inflation doesn’t affect all prices equally. That’s why economists use different metrics to measure inflation’s impact, such as the Consumer Price Index (CPI), the housing market, and gold.

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

See exactly how your money comes and goes at a glance.

FAQ

How do you calculate wages adjusted for inflation?

Using a wage inflation calculator can make it easier to get insight into how much buying power an hourly wage has in the current economy. With a wage adjusted for inflation calculator, it’s easier to understand what someone’s income is currently worth compared to prior years.

How much is $15 an hour in 2000?

According to the CPI Inflation Calculator from the U.S. Bureau of Labor Statistics, $15 an hour in August 2000 is equivalent to $27.33 of buying power in August 2024.

What is the inflation rate for 2024?

The current inflation rate for 2024 is 2.5%. This is based on the 12 months ending August 2024.

How do you calculate real hourly wage from CPI?

Wage inflation calculators take the current CPI and past CPI into account to help consumers calculate their real hourly wage.


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

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.

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