What is Renters Insurance and Do I Need It?

Renters insurance protects your possessions if they’re stolen or damaged while you’re renting.

In addition to burglaries and vandalism, renters insurance protects you against unfortunate events, such as electrical surges, floods, and fires.

While many tenants assume they have ample coverage under their landlord’s property insurance, this is actually not typically true.

Without renters insurance, you could take a major financial hit in the event of a burglary or fire by having to pay out of pocket for everything you own that is lost or ruined.

Renters insurance also offers other financial protections, such covering personal injuries to others and temporary accommodation if you ever need to move out due to home damage.

Whether you rent an apartment, house, townhouse or condo, here’s what you need to know about renters insurance.

What is Renters Insurance?

Renters insurance provides a number of protections, which typically include:

Personal Possessions

Renters insurance protects against losses to your personal property (think furniture, clothing, luggage, jewelry, electronics), or items that aren’t built into the property unit.

Even if you don’t own much, it may add up to more than you realize

Liability

In the event that someone other than you is injured on your rental property, renters insurance can cover expenses related to personal injuries, such as healthcare bills and legal expenses should that person sue you.

Most policies provide at least $100,000 of liability coverage, along with a smaller amount to cover medical payments. You can purchase higher coverage limits for a fee.

Temporary Living Expense

If your home becomes uninhabitable as a result of one of the covered perils, your renters insurance policy may reimburse you for the cost of any extra living expenses that occur while you’re unable to reside in the rental property, such as hotels or meals out.

Your Belongings When You Travel

Your personal belongings are not only covered when you’re at home, but also when you are away from home.

Your possessions are typically covered from loss due to theft and other covered losses wherever you may travel.

What Catastrophes Does Renters Insurance Cover?

Renters policies protect against a long list of unfortunate events.

While each policy’s level of coverage will vary, a standard rental policy may cover losses to property from perils including:

•  Fire
•  Smoke
•  Theft
•  Vandalism or malicious mischief
•  Lightning
•  Windstorms
•  Explosions
•  Water from internal sources (such as plumbing leaks)
•  Windstorm or hail
•  Falling objects

Typically, renters insurance doesn’t cover damage caused by earthquakes or floods from external sources.

You may need to purchase a separate policy or rider to get coverage for these events.

A separate rider might also be necessary to cover wind damage in areas that are prone to hurricanes.

Rental policies also do not typically cover losses due to your own negligence or intentional acts.

Why is Renters Insurance Important?

One of the main benefits of renting versus owning is that there is less responsibility involved.

If there is a leak in the kitchen or a noisy neighbor causing problems, in theory, the landlord should handle those issues.

When renting, it’s easy to fall under the impression that your landlord will handle everything that goes wrong.

Unfortunately, that isn’t always the case.

Your landlord’s property insurance policy covers losses to the building itself, whether it’s an apartment, a house, or a duplex.

Renters insurance provides financial protection for many of the things that landlords aren’t insured for, or would likely be willing to cover out of their own pocket.

Is Renters Insurance Mandatory?

In some cases, yes.

While renters insurance isn’t a requirement by law, landlords are legally allowed to require it in their rental agreements.

Basically, if a landlord says a tenant needs it, they have to get it. If the landlord doesn’t require it in the lease agreement, the choice is up to the renter.

If a landlord requires renters insurance, it’s probably because they are looking after their own best interests. If a tenant has renters insurance, the landlord will be less likely to get hit with a lawsuit regarding injury or theft.

Even in cases where a landlord doesn’t require renters insurance, they may still favor applicants who have it over those who don’t.

So if you’re looking to rent a home in a competitive area, having renters insurance may help you stand out amongst a sea of applicants.

Renters Insurance Policy Options

Exactly what renters insurance covers depends on the policy type. There are two main types of renters insurance policies that renters will likely come across:

•  Actual Cash Value. This type of policy pays to replace possessions minus an amount for depreciation up to the limit of the policy. In other words, they reduce the value of the possession based on its age and use.
•  Replacement Cost. This policy pays for the actual cost of replacing the possessions, and doesn’t deduct for depreciation, up to the limit of the policy. Generally, a Replacement Cost policy costs around 10% more than an Actual Cash Value coverage policy, but this higher cost may be worthwhile.

How Much Does Renters Insurance Cost?

The price will depend on what type of policy you choose, as well as how much coverage you need.

Depending on the state you live in, the average cost of renters insurance can vary between $12 and $37 per month (or $139 to $442 per year).

To determine how much coverage is necessary, it helps to know the value of all your personal possessions.

Let’s say the worst happens and the rental property burns down to the ground. How much would all of the furniture, electronics, art, jewelry, clothing, appliances, and everyday items like towels cost to replace? Ideally, the policy will be enough to replace all possessions.

Creating a home inventory of all of your personal possessions and their estimated value can help determine this number.

Keeping this inventory up-to-date can make it easier and faster to file an insurance claim down the road.

How to Buy Renters Insurance

If you decide you want to purchase renters insurance, here are some ways to get started.

Comparison Shopping

Renters insurance policy prices can vary greatly depending on the provider, so it can be worthwhile to shop around.

It’s a good idea to get at least three price quotes, but the more the merrier.

You can call the company directly or submit an online form if available to get a quote, and then compare the different offers to see which one provides the best coverage for the best price.

Varying the Search

You may want to get quotes from different types of insurance companies, including those that sell policies through their own agents, and those that sell directly to the consumer without using agents.

You can also consult independent agents who offer policies from multiple insurance companies.

Looking Past Price

While getting the best deal possible sounds great, price shouldn’t be a renter’s only concern.

An insurance provider’s customer service, claim process, and customer reviews are all important factors to take into account.

Asking for Referrals

Alongside looking at customer reviews, you may also want to ask friends or relatives for their recommendations. This is especially helpful if they have dealt with processing a renters insurance claim before.

The Takeaway

Renters insurance can provide coverage for your personal belongings, whether they are in your home, your car, or while you are on vacation.

In addition, renters insurance can provide liability coverage in case someone is injured in your home or if you accidentally cause injury to someone

To determine if buying renters insurance is worth it for you, you may want to consider whether it would be financially devastating for you to have to replace all, or even some, of your personal possessions if they were stolen or damaged.

If the answer is yes, then a renters insurance policy may be a wise investment.

Renters insurance can also provide peace of mind, which some renters may feel is worth the cost.

If you decide to purchase a policy, you’ll want to understand what the policy covers, and also ask the company or agent about available discounts, deductibles, and coverage limits.

Thinking about renters insurance but worried about how to fit it into your budget?

You may want to consider signing up for a SoFi Money® cash management account.

With SoFi Money, you can easily see your weekly spending on your dashboard in the app. This can help you stay on top of your spending, and make sure you are staying on track with your budget.

Learn how you can earn competitive interest, spend and save all in one account with SoFi Money.



SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank.
SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
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.
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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Source: sofi.com

How to Coupon for Beginners

Using coupons as often as you can when you’re shopping can help you reduce your everyday spending, and make it easier to stick to your grocery budget.

And you don’t have to become an “extreme couponer” to start saving significant cash at the supermarket, drug store and other retailers.

Simply taking a few minutes to leaf through the Sunday paper inserts, checking out some coupon sites, and/or using a coupon app is all you need to get started. It also helps to know a few tricks for bumping up coupon savings.

Here are some easy tips for how to find, use, and seriously save with coupons.

Where to Find Coupons

A great way to begin couponing is to scan your kitchen pantry and bathroom cabinet and make a list of the products and brands that you purchase regularly.

You can then start looking specifically for coupons for as many of those items as you can. Here are some key places to look.

Newspapers

Even in today’s digital world, it’s still worthwhile to go old-school and check out the Sunday newspaper coupon inserts.

What makes newspapers such a rich source of savings is the fact that they offer a wide variety of different types of coupons, including product coupons, manufacturer coupons and competitor’s coupons.

If this week’s paper has a lot of good coupons, consider buying extra copies. Dollar stores often sell papers at a discount and can be a good place to stock up. But even if you have to pay full price it could still be worth it.

Magazines

Magazines are still around, and can be a great source of coupons, particularly manufacturer coupons. You may want to flip through some of the magazines stocked at the checkout aisle next time you’re waiting in line at the supermarket.

Some women’s magazines even put together an index of all the coupons that each issue includes.

To up the odds of finding coupons for products you enjoy, consider browsing magazines that represent your lifestyle.

Based on what you find, you might decide that getting a subscription (usually low cost, and a better deal than buying single issues) could be worthwhile.

Websites

If clipping isn’t your cup of tea, you can print coupons from websites that aggregate coupons, such as coupons.com , retailmenot , and valpak . These sites make it easy to search for and find deals.

Another online resource is P&G Everyday . This site offers printable coupons exclusively for Proctor & Gamble brands (e.g., Crest, Pampers, Tide). You will need to create an account before you can print coupons.

You may also want to look at the list of items you typically stock in your home and head to the manufacturers’ websites.
Many companies have coupons you can print from their site. Some also reward you with coupons if you sign up for their e-newsletter.

Store sites are also worth checking out. Many grocery and drug store websites offer both manufacturer and store-specific coupons.

You may even be able to download these coupons directly to your store loyalty card, and redeem them simply by presenting your store card at checkout.

Some department store sites also offer printable coupons and savings passes you can use that same day in store, and you may also be able to sign up to have coupons emailed to you directly.

Inside Stores

Many grocery stores, drug stores and supercenters provide coupons in circulars and flyers available inside the store. These can be a great place to find coupons that you’ll actually use.

You can also often find printable coupons in the red kiosks situated through the store, as well as coupons on the products themselves (which you can clip at home and use next time). You may also want to check for coupons at the bottom or back of your receipts.

Coupon Apps

You can use your cellphone to save even more at the store

Coupon apps, such as Vons , Yowza , and Coupon Sherpa , can make it easy to snag coupons for things you’d buy anyway. You can then simply have the cashier swipe your phone to redeem your coupons.

Some stores, such as Target, have their own app that you can download to your phone and then show at checkout for discounts on items you are buying that day. These offers can often be combined with manufacturer and store coupons to create really good deals.

There are also cashback apps, such as ibotta and Checkout51 , which allow you to earn cash back on many of the products you buy.

All you have to do is link your loyalty card to the app or snap a picture of your receipts. Once you earn a certain amount (such as $20) you can redeem your cash back.

Keeping Coupons Organized

Coupons aren’t worth anything if you don’t have them on you, or you can’t find them, when you need them.
Whether you clip all the coupons you come across, snip only the ones you are certain you will use, or keep coupon inserts intact, you’ll want to come with an organizational system that works for you.

A good first step is to find a way to contain the chaos, such as using zip lock bags, a binder, a coupon wallet, a recipe box or any other storage container.

The idea is to simply have a single landing spot for all coupons. If possible, it’s wise to file them away as you get them, so you don’t have a big mess to deal with all at once.

You may also want to come up with a filing system, such as grouping coupons by grocery category (e..g, dairy, produce, frozen foods), or by aisle, or by coupon expiration date.

It’s also a good idea to go through and edit your collection periodically. Stores typically don’t take expired coupons, so it’s best not to let them eat up space in your filing system. Consider setting a certain day each or month to go through and purge.

Maximizing Your Coupon Savings

Shaving off just a little here and a little can be nice, but may not make a major change in your buying habits, but the real savings that comes with couponing is when you combine coupons with other coupons, as well as other sales offers.

Here are some tricks:

Matching Coupons to Sales

In order to really save money with coupons, you ideally only want to use them on sale items that are not over budget.

You can hold onto a coupon until the item goes on sale, or if you see that a store is having a sale on something you buy regularly, you can then check the store circular, manufacturer’s websites, or your app to see if you can find a manufacturer’s coupon for it.

Stacking Coupons

This means using more than one coupon for the same item. For example, you can significantly increase your savings by combining a manufacturer coupon with a store coupon for the same item. You might be able to then amp up savings even more by using a cashback app.

Keep in mind that not all stores allow coupon stacking. You may want to review each store’s coupon policy to see where you can employ this trick.

Using Competitor’s Coupons

Lots of stores accept competitor coupons. It’s a good idea to find out which ones in your area do, and then work those coupons and sales to your advantage.

The Takeaway

Using coupons can be a great way to save money on the products you love, and help keep your everyday spending in line with your budget.

You can often find useful coupons in Sunday newspaper circulars, magazines, coupon websites, as well as store and manufacturers’ websites. Coupon apps can also help you find coupons for your favorite products quickly.

To really rack up savings with couponing, it pays to go beyond just using a coupon here and there. Consider combining a manufacturer’s coupon with a store coupon, a sale, and a cashback or coupon app.

Now, what to do with all that money you are saving?

Consider opening up a SoFi Money® cash management account.

With SoFi Money, you can earn a competitive interest rate, save, and spend all in one account.

And while you’re in the saving money mode, you may enjoy the fact that SoFi Money doesn’t have any account fees, monthly fees, or many other common fees. Plus, withdrawing cash is fee-free at 55,000+ ATMs worldwide.

Check out everything a SoFi Money cash management account has to offer today!



SoFi Money®
SoFi Money is a cash management account, which is a brokerage product, offered by SoFi Securities LLC, member FINRA / SIPC .
Neither SoFi nor its affiliates is a bank.
SoFi has partnered with Allpoint to provide consumers with ATM access at any of the 55,000+ ATMs within the Allpoint network. Consumers will not be charged a fee when using an in-network ATM, however, third party fees incurred when using out-of-network ATMs are not subject to reimbursement. SoFi’s ATM policies are subject to change at our discretion at any time.
Third Party Brand Mentions: No brands or products 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.
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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Source: sofi.com

Comparing the SIMPLE IRA vs. Traditional IRA

One of the most popular retirement accounts is an IRA, or Individual Retirement Account. IRAs allow individuals to put money aside over time to save up for retirement, with tax benefits similar to that of other retirement plans.

Two common IRAs are the SIMPLE IRA and the traditional IRA, both of which have their own benefits, downsides, and rules around who can open an account. For investors trying to decide which IRA to open, it helps to know the differences between SIMPLE IRAs and traditional IRAs.

SIMPLE IRA vs Traditional IRA: Side-by-Side Comparison

Although there are many similarities between the two accounts, there are some key differences. This chart details the key attributes of each plan.

SIMPLE IRA Traditional IRA
Offered by employers Yes No
Who it’s for Small-business owners and their employees Individuals
Eligibility Earn at least $5,000 per year Under 70 ½ years old and earned income in the past year
Tax deferred Yes Yes
Tax deductible contributions Yes, for employers and sole proprietors only Yes
Employer contribution Required No
Fee for early withdrawal 10% plus income tax
25% if money is withdrawn within two years of an employer making a deposit
10% plus income tax
Contribution limits $13,500 per year
10% plus income tax
$6,000 per year
10% plus income tax
Catch-up contribution $3,000 additional per year for people under 50
10% plus income tax
$$1,000 additional per year for people under 50

What is a SIMPLE IRA?

The SIMPLE IRA, which stands for Savings Incentive Match Plan for Employees, is set up to help small-business owners help both themselves and their employees save for retirement. It’s a retirement plan that small businesses with fewer than 100 employees can offer employees who earn at least $5,000 per year.

A SIMPLE IRA is similar to a traditional IRA, in that a plan participant can make tax-deferred contributions to their account, so that it grows over time with compound interest. When the individual retires and begins withdrawing money, then they must pay income taxes on the funds.

With a SIMPLE IRA, both the employer and the employee contribute to the employee’s account. Employers are required to contribute in one of two ways: either by matching employee contributions between 1% and 3% of their salary, or to contribute a flat rate of 2% of the employee’s salary—even if the employee doesn’t contribute. With the matching option, the employee must contribute money first.

There are yearly employee contribution limits to a SIMPLE IRA; in 2021 the annual limit is $13,500, with an additional $3,000 in catch-up contributions for people over age 50.

Pros and Cons of SIMPLE IRA

It’s important to understand both the benefits and downsides of the SIMPLE IRA in order to make an informed decision about retirement plans.

SIMPLE IRA Pros

There are several benefits—to both employers and employees—to choosing a SIMPLE IRA, including:

•  For employers, it’s easy for employers to set up and manage, including online set-up through most banks.
•  For employers, management costs are low compared to other retirement plans.
•  For employees, taxes on contributions are deferred until the money is withdrawn.
•  Employers can take tax deductions on contributions. Sole proprietors can deduct both salary and matching contributions.
•  For employees, there is an allowable catch-up contribution for those over 50.
•  For employers, the IRA plan providers send tax information to the IRS, so there is no need to do any reporting.
•  Employers and employees can choose how the money in the account gets invested based on what the plan offers. Options may include mutual funds aimed towards growth or income, international mutual funds, or other assets.

SIMPLE IRA Cons

Although there are multiple benefits to a SIMPLE IRA, there are some downsides as well, such as:

•  Employers must follow strict rules set by the IRS.
•  Other employer-sponsored retirement accounts have higher limits, such as the 401(k), which allows for $19,500 per year. (Check out our IRA calculator to see what you can contribute to each type of IRA.)
•  If account holders withdraw money before they reach age 59 ½ they must pay a 10% fee and income taxes on the withdrawal.
•  There is no option for a Roth contribution to a SIMPLE IRA, which would allow account holders to contribute post-tax money and avoid paying taxes later.

What is a Traditional IRA?

The traditional IRA is set up by an individual to contribute to their own retirement. Employers are not involved in traditional IRAs in any way. The main requirements to open an IRA are that the account holder must have earned some income within the past year and they must be younger than 70 ½ years old at the end of the year.

Pros and Cons of Traditional IRA

When it comes to benefits and downsides, there’s not too much difference between traditional vs SIMPLE IRAs—though there are a few that are unique to this type of plan.

Traditional IRA Pros

•  It allows for catch-up contributions for those over age 50.
•  One can choose how the money in the account gets invested based on what the plan offers. Options may include mutual funds aimed towards growth or income, international mutual funds, or other assets.
•  Contributions are tax-deferred, so taxes aren’t paid until funds are withdrawn.

Traditional IRA Cons

•  Much lower contribution limits than a 401(k) or a SIMPLE IRA, at $6,000 per year.
•  Penalties for early withdrawal are also the same: withdraw money before age 59 ½ and pay a 10% fee plus income taxes on the withdrawal.

Can I Have Both a SIMPLE IRA and a Traditional IRA?

Yes, it is possible for an individual to have both a SIMPLE IRA through their employer and also a traditional IRA on their own—though they may not be able to deduct all of their traditional IRA contributions. The IRS sets a cap on deductions per calendar year.

Single people with an AGI (adjusted gross income) of more than $66,000 are restricted to a partial deduction; those with AGI above $76,000 may not take a deduction at all. Married couples filing jointly with an AGI of $105,000 to $125,000 may take a partial deduction; those with AGI above $125,000 may not take a deduction at all.

The Takeaway

The SIMPLE IRA and traditional IRA are both individual retirement accounts, but the SIMPLE is set up through one’s employer—typically a small business of 100 people or less—while the traditional IRA is set up by an individual.

There are many similarities in attributes of the plans, though some major distinctions is that the SIMPLE IRA requires employer contributions (though not necessarily employee contributions) and allows for a higher amount of employee contributions per year.

Understanding the differences between retirement accounts like the SIMPLE and traditional IRA is one more step in creating a personalized retirement plan that works for you and your goals. If you’re looking to start saving for retirement now, or add to your investments for the future, SoFi Invest® online retirement accounts offers both traditional and Roth IRAs that are simple to set up and manage.

Find out how to further your retirement savings goals with SoFi Invest.


SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Digital Assets—The Digital Assets platform is owned by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, http://www.sofi.com/legal.

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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Source: sofi.com

How Much Can You Put in an IRA This Year?

If you have an IRA, or are considering opening one, you might be wondering how much you can contribute every year. How much you can contribute to an Individual Retirement Account (IRA) depends on your age, your income, the IRA type, and whether you also contribute to an employer-sponsored retirement plan.

There are two types of IRAs: traditional and Roth IRAs. Both have set contribution limits, as well as other guidelines. With an IRA, an investor typically has to find one that fits their needs. A report from 2019 reveals that only 36 percent of U.S. households owned an IRA.

Related: What Is an IRA?

According to the Internal Revenue Service, for tax years 2020 and 2021, investors can contribute a total of $6,000 into IRA accounts. (If you’re 50 or older, you can contribute $7,000.)

What Is an IRA?

An IRA stands for Individual Retirement Account. IRAs allow people to make tax-deferred investments that they can use in retirement. There are several different types of IRAs, including traditional IRAs and Roth IRAs. You can set up an IRA with a bank, insurance company, or other financial institution.

What types of IRAs are available?

Traditional IRA

A retirement investor’s contributions to a traditional IRA are typically tax-deductible. Investors won’t pay taxes on earnings with a traditional IRA. When investors reach retirement age, they’ll pay taxes on withdrawals because they’re taxed like income. It’s almost like paying yourself a salary in retirement and paying income taxes on those payments.

Related: How an IRA Works

Roth IRA

Contributions to a Roth IRA are made after taxes and aren’t tax-deductible. With a Roth IRA, earnings aren’t typically taxed, but investors won’t have to pay taxes on withdrawals from a Roth IRA when they reach retirement age and start using the funds in one of these accounts.

Sep IRA

A Sep IRA is a simplified employee pension IRA. These IRA accounts help small businesses or self-employed retirement investors make contributions to an IRA in the employee’s name.

Simple IRA

A SIMPLE IRA plan (Savings Incentive Match PLan for Employees) is an account that most resembles a traditional 401K. This savings incentive match plan for employees can be set up by small businesses that don’t have any other retirement plans. Like a 401(k), this IRA lets employees and employers contribute, but with lower costs and fewer administration fees than a typical 401(k).

Related: How to Open Your First IRA

How Much Can You Contribute to an IRA Each Year?

If you’re younger than 50, you can contribute a combined maximum of $6,000 annually to a traditional IRA or a Roth IRA.

After 50, you’re allowed to make “catch-up” contributions, so the cap goes up to $7,000 a year. Previously, you could not make contributions to a traditional IRA once you reached the age of 70.5. But starting in 2020, there is no age limit; there’s also no age limit for a Roth IRA.

Limits for Roth IRA and traditional IRA contributions for the tax year 2020 and 2021:

•  Under age 50: $6,000
•  Age 50 and older: $7,000

Related: What Is a Roth IRA?

However, there are a few exceptions to the retirement contribution limits. If you make less than the limit in taxable income, you can only contribute up to that amount. On the other end of the spectrum, if you make too much, you can’t contribute to a Roth IRA or may only be able to contribute a reduced amount.

If you’re younger than 50, you can contribute a maximum of $6,000 annually into any type of IRA.

For 2020, if you’re single, you can put in a reduced amount into a Roth IRA if you make between $122,000 and $137,000; above that, you can’t contribute anything.

Related: Traditional vs. Roth IRA: How to Choose the Right Plan

For a married person filing jointly, you can contribute a reduced amount into a Roth IRA if you make between $193,000 and $205,000. (The limits are based on modified adjusted gross income .)

If you already contribute to a 401k or another retirement plan at work, you can still contribute to an IRA.

However, you may not be able to deduct all of your traditional IRA contributions if you or your spouse participates in another retirement plan at work. Roth IRA contributions might be limited if your income exceeds a certain level.

Related: 3 Easy Steps to Starting a Retirement Fund

Still unsure which IRA account you can contribute to? Use SoFi’s IRA Calculator to help you make an informed decision.

How Do I Open an IRA?

Investors thinking about opening an online IRA may want to consider whether a Roth or a traditional IRA makes sense.
Roth IRAs have some limitations that might preclude investors from getting one.

Investors who make more than $206,000 in adjusted gross income a year filing taxes jointly or $139,000 a year filing single may not be eligible to open a Roth IRA.

Vital information needed to open an IRA includes a driver’s license or ID, Social Security number, banking info like routing numbers to fund the account, name, and address of employer, and beneficiary information. After that, investors choose an asset mix and investment type that makes sense for their goals.

Related: The 7 Most Common Questions About IRAs

How Do I Roll Over Funds into an IRA?

Some investors might be thinking about opening a traditional IRA because they have left a job where they had a retirement account and want to move those funds to a new account (or they want to open a Roth IRA and roll over a Roth 401k). Reasons for doing this include the new investment company offers more investment options or the employee seeks more control over the funds or wants to combine funds from another retirement account with the employer-sponsored account.

Generally, funds from this type of account can be rolled over into a new account within 60 days.
The advantage of rolling over one retirement to another account is that investors don’t lose those funds’ tax-deferred status. If investors don’t roll over the funds, they do become taxable.
There are three ways investors can rollover retirement funds into an IRA.

Related: IRA Rollover Rules

Direct rollover

An investor’s old retirement funds administrator, perhaps at a previous job, sends funds directly to the new to an IRA or new employer-sponsored retirement plan. The investor won’t pay taxes or a penalty on this transfer as long as the transferred funds are going to a similarly classified account (Roth to Roth or 401k to traditional IRA).

Trustee-to-trustee transfer

If an investor is getting funds from an IRA, they can ask the financial institution that administers the old IRA to send funds to the new IRA. The investor won’t pay taxes or a penalty on this transfer.

Late or 60-day rollover

The IRS gives people 60 days from the date they receive a distribution from an IRA or retirement plan to roll it over to another plan or IRA. If you roll over after the 60 days has passed, it’s considered “late,” and the distribution will be taxed—and you’ll have to pay a penalty if you are younger than 59.5 years.

Related: IRA Transfer vs. Rollover: What’s the Difference?

Can You Withdraw from an IRA Before Retirement?

It depends. With a Roth IRA, there are situations–like buying your first home, adoption costs, or paying for higher education–where you can withdraw your contributions with no penalties or taxes. For example, an investor can take out up to $10,000 from a traditional IRA—or in earnings from a Roth IRA—without penalties for expenses associated with buying a first home.

Investors can also withdraw funds penalty-free for qualifying medical or educational expenses. And once you hit the age of 59.5, distributions will always be penalty-free.

Here are all the exceptions for early distributions:

•  Made to a beneficiary or estate on account of the IRA owner’s death
•  Made because you’re totally and permanently disabled
•  Made as part of a series of substantially equal periodic payments for your life (or life expectancy) or the joint lives (or joint life expectancies) of you and your designated beneficiary
•  Qualified first-time homebuyer distributions
•  Not in excess of your qualified higher education expenses
•  Not in excess of certain medical insurance premiums paid while unemployed
•  Not in excess of your unreimbursed medical expenses that are more than a certain percentage of your adjusted gross income
•  Due to an IRS levy of the IRA under section 6331 of the Code
•  A qualified reservist distribution
•  Excepted from the additional income tax by federal legislation relating to certain emergencies and disasters (see the Instructions for Form 5329 for more information), or
•  Not in excess of $5,000, and the distribution is a qualified birth or adoption distribution (see the Instructions for Form 5329 for more information)

Related: Should You Use Your Roth IRA to Buy Your First Home?

Are There Ways to Get Around IRA Contribution Limits?

Sometimes. There’s no limit to how much you can put into an IRA when you’re rolling over funds from a 401(k) or 403(b) account.

Some people also use what’s called a “backdoor Roth IRA” to get around the income limits to contribute to a Roth IRA. This involves contributing the maximum to a traditional IRA, then converting it into a Roth. (There’s no income limit for conversions.) Consult a tax professional to understand all the tax implications.

Is an IRA a Replacement for a 401(k)?

American workers have access to a 401(k) retirement plan through their employers. And, some investors might even be able to get additional 401(k) contributions in the form of an employer match. Investors who have access to a 401(k) and an IRA might be able to accelerate their retirement savings and put themselves in a better financial situation when they reach retirement age.

Related: Should You Open An IRA If You Already Have A 401(k)?

The Takeaway

The rules of IRAs can be complicated, but investing in one doesn’t need to be. SoFi Invest® is all about empowering you and your financial future. Prepare for retirement with a SoFi active or automated Roth or Traditional IRA from SoFi Invest.

Need tips on IRAs or saving for retirement in general? SoFi members can schedule a complimentary personal consultation with one of our credentialed financial advisors to answer their questions.

Looking to open a SoFi traditional or Roth IRA? Learn more about SoFi Invest today.



SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Digital Assets—The Digital Assets platform is owned by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, http://www.sofi.com/legal.

Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
WM17123

Source: sofi.com

What is Cardano (ADA)? How to Buy ADA

Cardano (ADA) is a cryptocurrency that lets its owners help operate the network and vote on changes to it. Developers are able to make use of the Cardano blockchain to write smart contracts and decentralized applications (dApps). ADA crypto is required to run programs like dApps. Cardano boasts a large library of academic research that its founders point to as a factor that makes the blockchain unique. Cardano’s creators also hope that the platform will be used by “innovators and visionaries” to create positive change in the world. This article serves as a cryptocurrency guide for ADA.

What is ADA Cryptocurrency?

In 2017, Cardano was created by two technologists named Jeremy Wood and Charles Hoskinson. Hoskinson co-founded Ethereum (ETH), the second-largest cryptocurrency by market cap. It makes sense, then, that Cardano and Ethereum have a lot of similarities. Namely, both networks are primarily used for programming based on smart contract technology.

A smart contract is a program that initiates a digital transfer between parties when specific conditions have been met. It’s not unlike a regular, written paper contract. The big difference lies in the fact that smart contracts require no third-party intermediary and can be programmed to execute automatically when the right conditions are met.

Cardano claims to be different by focusing its design on research and academics, believing this could help accelerate its adoption. Cardano is written in a sophisticated programming language known as Haskell, which is also used by banks and governments.

The company that built Cardano, IOHK, has a strong reputation in the world of academia. IOHK has published over 60 academic research papers (as of 2020) describing its technology. Research can be found on the official website of Cardano , where the team also publishes blogs posts and videos to educate users.

ADA Crypto Proof-of-Stake Blockchain

Cardano (ADA) is a proof-of-stake blockchain. This differs from Bitcoin and most mineable cryptocurrencies which use the proof-of-work consensus method. On the Bitcoin network, miners solve complex mathematical problems to process transactions (“work”) in a race to solve the next block and receive the rewards that it yields. Mining difficulty is constantly increasing and there is a limited amount of bitcoin that can ever be created.

On Cardano, things work a little differently. All of the ADA coins that will ever exist have already been created. ADA was a “pre-mined” coin, meaning there’s no work to be done to mine additional coins.

Instead, ADA holders can participate in the Cardano network and “stake” their coins, effectively locking them up for a period of time, in hopes of receiving the next reward in a lottery-like format. The more “stake” one has in ADA, the greater their chances of receiving winning the next block.

Proof-of-stake blockchains have a few advantages over proof-of-work blockchains. Perhaps most notably, they use far less energy. Mining requires servers to be running at all times, consuming a huge amount of electricity. There is a constant “search” for more bitcoin. Proof-of-stake removes the search aspect, since the coins already exist.

What is Cardano ADA Used For?

Like many other cryptographic tokens and coins, ADA cryptocurrency can be used as a medium of exchange. People can send each other ADA through digital wallets for whatever purposes they like. ADA can also be used for speculative purposes. Traders can try to buy coins when the price is low and sell them after the price rises.

When asking the question “what is Cardano cryptocurrency,” however, it’s important to look at the specific use case for ADA on the Cardano blockchain. The ADA crypto is used as fuel to run programs, much like ETH is used as “gas” on Ethereum.

Ethereum and Cardano are both smart contract platforms. Because smart contracts represent decentralized agreements that execute themselves when certain conditions are met, there is no intermediary (like a bank or a notary) to facilitate the transaction. Instead of paying a fee to a third-party provider, users on these blockchains must use the appropriate crypto token as a tool to conduct business, run programs, play games, etc.

Some examples of projects that have been created on the platform include a workplace incentive platform and an enterprise traceability solution.

Is Cardano ADA a Good Investment?

Ultimately, the question of whether Cardano ADA is a good investment is one the individual investor must answer for themselves.

Investing in any cryptocurrency like ADA crypto is generally seen as a speculative investment that comes with high risk and lots of volatility.

Someone with a high risk tolerance who doesn’t mind the potential losses might see ADA as a good investment, if they’re looking for potentially quick profits without a dividend.

Like all cryptocurrencies, ADA doesn’t yield any interest or pay a dividend. Some investors assert that based on this metric alone, the entire crypto asset class doesn’t qualify as an investment. Altcoins like ADA also aren’t accepted by many online merchants, so the only way to profit is to buy low, sell high, and take profits in bitcoin or a stablecoin like USDT. (Here are 6 things to know before investing in crypto.)

On the other hand, when considering any of the other hundreds of altcoins, by some metrics Cardano (ADA) might be considered a better choice than many. The coin currently sits in the 6th spot for largest cryptocurrencies by market cap, meaning there are only 5 cryptos in the world larger than ADA. Cardano has remained in the top ten cryptocurrencies spot since its inception in 2017.

Investors who believe in technology that enables decentralized applications might find ADA to be a more appealing investment than other types of cryptocurrency. And crypto enthusiasts who believe in the future of proof-of-stake blockchains might also decide to hold ADA.

What is the Price of Cardano?

At the time of writing, one ADA coin is worth about $0.31. To reach a valuation of $1 would imply a rise of roughly 220%. Such moves are not unheard of in the cryptocurrency space. But they tend to take some time, unless there is a big news item that causes people to rush into a particular digital asset.

In the case of ADA crypto specifically, the one factor most likely to drive higher prices might be use of the platform itself. That’s because people need ADA tokens to run decentralized applications (dApps) on the Cardano network. So, the more people use the network, the more demand for tokens increases, and the price of ADA could, in theory, keep rising.

This is the dynamic thought to be behind the rise of Ether (ETH), the token of the Ethereum network, which is used for much the same purpose. ETH has soared from under $10 in 2016 to over $1,100 at the time of writing.

How to Buy ADA Cryptocurrency

Now that we’ve answered the question “what is Cardano cryptocurrency,” let’s quickly run down how to buy ADA.

Buying ADA is not unlike buying any other cryptocurrency. ADA is traded on many of the prominent crypto exchanges. Binance, Upbit, and Huobi all trade ADA, for example. There are often both ADA/BTC and ADA/USDT trading pairs available, meaning users can exchange either bitcoin or the Tether stablecoin for ADA.

To buy ADA, a user will need to take the following steps:

1. Create an account on an exchange that trades ADA.
2. Deposit some BTC or USDT to your wallet.
3. Exchange your BTC or USDT for ADA.

After the third step, you will hold ADA in your exchange-hosted wallet. From there, users can either hold coins, send them to another secure cryptocurrency wallet, or trade them for a different cryptocurrency.

The Takeaway

Cardano ADA is a proof-of-stake cryptocurrency that currently ranks as the 6th largest cryptocurrency by market cap. Developed in 2017, the Cardano platform was intended to be used by “innovators and visionaries” to create positive change in the world, according to its founders.

Cardano is just one of many cryptocurrencies investors might explore as they look to investing in this relatively new digital asset class. Others include Ethereum, Bitcoin, Litecoin, and more.

Buying cryptocurrency with SoFi Invest® is simple—and the app safely stores your crypto investments for you.

Find out how to get started with SoFi Invest today.



SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Digital Assets—The Digital Assets platform is owned by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, http://www.sofi.com/legal.

Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments.
Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.

SOIN21014

Source: sofi.com

Guide to Investing in Ethereum

Cryptocurrency may be the new kid on the block in terms of investing, but some cryptos are rapidly gaining value. And while Bitcoin may get the lion’s share of attention among cryptocurrencies, other alternative assets, like Ethereum, are hot on its heels. For aspiring crypto investors, one of the first questions that comes to mind is how to buy Ethereum.

Before learning how to invest in Ethereum, however, it’s important to get to know the history, attributes, and other details of this popular cryptocurrency. In this article, we’ll address:

•  What is Ethereum?
•  How to buy Ethereum
•  What Investors Should Keep in Mind

What is Ethereum?

Ethereum is a blockchain based platform used to make peer-to-peer transactions and to build applications. It may be easier to think of Ethereum as an application marketplace, rather than a currency. “Ether” is the platform’s native currency, and it can be bought and sold by investors, like Bitcoin or other cryptos.

Ethereum is often referred to as a cryptocurrency, similar to Bitcoin, Ripple, or other types of cryptocurrency on the market. But when comparing Ethereum versus Bitcoin, for example, it’s necessary to note that the underlying technology and utility of the two cryptos is quite different.

What is Ethereum, exactly? It was created with the goal of giving programmers and developers a way to build decentralized programs. That is, a way to create applications without getting involved with the middlemen who generally control access to the apps—like how Google or Apple have control over their respective app stores.

Some deem Ethereum as valuable for two key reasons. One, it has intrinsic value (people are willing to pay for it with cash, for example). And two, it’s an actual platform with a degree of utility—which many other cryptos cannot claim. Today, it’s used by hundreds, if not thousands, of businesses and industries.

How to buy Ethereum

Getting started buying or investing in Ethereum isn’t difficult. While Ethereum itself is something of a complicated asset, buying or investing in it is more straightforward—particularly for investors who already have cryptocurrency among their assets, too. Here is a simplified, step-by-step guide to investing in Ethereum.

1. Get a digital wallet

Anyone serious about Ethereum investing will want to get a digital wallet, which allows cryptocurrencies to be safely stored. Digital assets can be vulnerable to theft, so it’s important to make sure that assets can be kept safe. Some wallets are made by the coin developers themselves, others are made by a third-party developer.

2. Create an Account on an Exchange

Likewise, investors will need to find and create an account on a crypto exchange that allows them to buy and sell cryptocurrencies including Ethereum. Think of a crypto exchange as similar to a stock exchange. Crypto exchanges are either centralized, decentralized, or hybrid. Some investors find centralized exchanges useful because of third-party involvement that helps make sure transactions go through properly, and also allows for exchanging “fiat” currency (like US dollars) for cryptocurrency.

3. Fund your account

With a wallet and an exchange account, the next step is to have a medium to exchange for Ethereum. For most people, that simply means funding their account with good old dollars and cents (or fiat currency, in crypto parlance). The process is similar to funding a brokerage account in order to buy stocks or bonds. Fund an account, and the resources will be at hand with which to start making trades.

4. Start buying Ethereum

With a verified and funded account, investors should be ready to start buying Ethereum. While the specific steps to start buying or selling cryptocurrency will depend on the exchange, it’s generally similar to buying stocks through a brokerage.

No matter the exchange, investors will be in a position to start trading or buying Ethereum. Once the trades have settled and the transactions have been completed, remember to withdraw the assets into the aforementioned digital wallet for safekeeping.

Buying Ethereum: What Investors Should Keep in Mind

With the basics of buying Ethereum covered, it’s also important to discuss some of the other things investors should keep in mind. Most notably, that cryptocurrencies, and assets like Ethereum, are inherently risky investments.

While Ethereum, as a platform, is being used by a number of large companies, as an investment, it still has risks. It’s still an evolving platform, for one, and exists in the same gray area as others when it comes to cryptocurrency regulations. That is, there is none—so the government won’t be there to bail investors out if things go south.

Cryptos and related assets also tend to be highly volatile investments. So, if investors don’t have much of a stomach for wild value fluctuations, that is something to consider before buying Ethereum.

Other risks to consider include the possibility of theft , and that Ethereum could “fork”.

Forks are an entire topic in and of themselves. But in short, there are hard and soft forks, and it means that a change in protocol has been made to a blockchain network. Effectively, it creates a new “chain,” meaning that all users need to upgrade to the latest software and protocols.

Basically, a fork is a change in the rules. And they can happen at any time , and can cause some issues for Ethereum users who are caught unaware.

Finally, investors will need to remember that they may owe taxes on their Ethereum holdings—the last thing anyone wants to do is draw the ire of Uncle Sam!

The Takeaway

Ethereum was created to give programmers and developers a way to create applications without going through third parties who control access to the apps. But while its origins may be different from Bitcoin or other cryptocurrency, its appeal to investors is much the same.

Is Ethereum a good investment? There’s no way to answer this question for any investment, Ethereum or otherwise. The answer depends on an individual investor’s goals and the asset’s performance over time.
If you’re ready to add Ethereum to your portfolio or get started building one, SoFi Invest® can help you get started.

Start investing in cryptocurrency with SoFi.



SoFi Invest®
The information provided is not meant to provide investment or financial advice. Investment decisions should be based on an individual’s specific financial needs, goals and risk profile. SoFi can’t guarantee future financial performance. Advisory services offered through SoFi Wealth, LLC. SoFi Securities, LLC, member FINRA / SIPC . The umbrella term “SoFi Invest” refers to the three investment and trading platforms operated by Social Finance, Inc. and its affiliates (described below). Individual customer accounts may be subject to the terms applicable to one or more of the platforms below.
1) Automated Investing—The Automated Investing platform is owned by SoFi Wealth LLC, an SEC Registered Investment Advisor (“Sofi Wealth“). Brokerage services are provided to SoFi Wealth LLC by SoFi Securities LLC, an affiliated SEC registered broker dealer and member FINRA/SIPC, (“Sofi Securities).

2) Active Investing—The Active Investing platform is owned by SoFi Securities LLC. Clearing and custody of all securities are provided by APEX Clearing Corporation.

3) Digital Assets—The Digital Assets platform is owned by SoFi Digital Assets, LLC, a FinCEN registered Money Service Business.

For additional disclosures related to the SoFi Invest platforms described above, including state licensure of Sofi Digital Assets, LLC, http://www.sofi.com/legal.

Crypto: Bitcoin and other cryptocurrencies aren’t endorsed or guaranteed by any government, are volatile, and involve a high degree of risk. Consumer protection and securities laws don’t regulate cryptocurrencies to the same degree as traditional brokerage and investment products. Research and knowledge are essential prerequisites before engaging with any cryptocurrency. US regulators, including FINRA , the SEC , and the CFPB , have issued public advisories concerning digital asset risk. Cryptocurrency purchases should not be made with funds drawn from financial products including student loans, personal loans, mortgage refinancing, savings, retirement funds or traditional investments.
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.

SOIN21002

Source: sofi.com

8 Steps to Buying a Vacation Home

If you’re like many Americans, you dream of having a beach house, a desert escape, or a mountain hideaway. Perhaps you’re tired of staying at hotels and want the comforts of home at your fingertips.

You’re ready to make this dream a reality. Before you do, consider these steps.

How to Buy a Vacation Home

1. Choose a Home That Fits Your Needs

As you begin your search for a vacation home, carefully consider your goals and needs. Start with the location. Do you prefer an urban or rural area? Lots of property or a townhouse with just a small yard to care for?

Consider what amenities are important to be close to. Where is the nearest grocery store? Is a hospital accessible?

Consider your goals for the property. Is this a place that only you and your family will use? Do you plan to rent it out from time to time? Or maybe you plan to be there only a couple of weeks out of the year, using it as a rental property the rest of the time.

The answers to these questions will have a cascade effect on the other factors you’ll need to consider, from financing to taxes and other costs.

2. Figure Out Financing

Next, consider what kind of mortgage works best for you, if you’re not paying cash. You may want to engage a mortgage broker or direct lender to help with this process.

If you have a primary residence, you may be in the market for a second mortgage. The key question: Are you purchasing a second home or an investment property?

Second home. A second home is one that you, family members, or friends plan to live in for a certain period of time every year and not rent it out. Second-home loans have the same rates as primary residences. The down payment could be as low as 10%, though 20% is typical.

Investment property. If you plan on using your vacation home to generate rental income, expect a down payment of 25% or 30% and a higher rate for a non-owner- occupied loan. If you need the rental income in order to qualify for the additional home purchase, you may need to identify a renter and have a lease. A lender still may only consider a percentage of the rental income toward your qualifying income.

Some people may choose to tap equity in their primary home to buy the vacation home. One popular option is a cash-out refinance, in which you borrow more than you owe on your primary home and take the extra money as cash.

3. Consider Costs

While you consider the goals you’re hoping to accomplish by acquiring a vacation home, try to avoid home buying mistakes.

A mortgage lender can delineate the down payment, monthly mortgage payment, and closing costs. But remember that there are other costs to consider, including maintenance of the home and landscape, utilities, furnishings, insurance, property taxes, and travel to and from the home.

If you’re planning on renting out the house, determine frequency and expected rental income. Be prepared to take a financial hit if you are unable to rent the property out as much as you planned. For a full picture of cost, check out our home affordability calculator.

4. Learn About Taxes

Taxes will be an ongoing consideration if you buy a vacation home.

A second home qualifies for mortgage interest and property tax deductions as long as the home is for personal use. And if you rent out the home for 14 or fewer days during the year, you can pocket the rental income tax-free.

If you rent out the home for more than 14 days, you must report all rental income to the IRS. You also can deduct rental expenses.

The mortgage interest deduction is available on total mortgages up to $750,000. If you already have a mortgage equal to the amount you on primary residence, your second home will not qualify.

The bottom line: Tax rules vary greatly, depending on personal or rental use.

5. Research Alternatives

There are a number of options to owning a vacation home. For example, you may consider buying a home with friends or family members, or purchasing a timeshare. But before you pursue an option, carefully weigh the pros and cons.

If you’re considering purchasing a home with other people, beware the potential challenges. Owning a home together requires a lot of compromise and cooperation.

You also must decide what will happen if one party is having trouble paying the mortgage. Are the others willing to cover it?

In addition to second home and investment properties, you may be tempted by timeshares, vacation clubs, fractional ownership, and condo hotels. Be aware that it may be hard to resell these, and the property may not retain its value over time.

6. Make It Easy to Rent

If you do decide to use your vacation home as a rental property, you have to take other people’s concerns and desires into account. Be sure to consider the factors that will make it easy to rent. A home near tourist hot spots, amenities, and a beach or lake may be more desirable.

Consider, too, factors that will make the house less desirable. Is there planned construction nearby that will make it unpleasant to stay at the house?

How far the house is from your main residence takes on increased significance when you’re a rental property owner. Will you have to engage a property manager to maintain the house and address renters’ concerns? Doing so will increase your costs.

7. Pay Attention to Local Rules

Local laws or homeowners association rules may limit who you can rent to and when.

For example, a homeowners association might limit how often you can rent your vacation home, whether renters can have pets, where they can park, and how much noise they can make.

Be aware that these rules can be put in place after you’ve purchased your vacation home.

8. Tap Local Expertise

It’s a good idea to enlist the help of local real estate agents and lenders.

Vacation homes tend to exist in specialized markets, and these experts can help you navigate local taxes, transaction fees, zoning, and rental ordinances. They can also help you determine the best time to buy a house in the area you’re interested in.

Because they are familiar with the local market and comparable properties, they are also likely to be more comfortable with appraisals, especially in low-population areas where there may be fewer houses to compare.

The Takeaway

Buying a vacation home can be a ticket to relaxation or a rough trip. It’s imperative to know the rules governing a second home vs. a rental property, how to finance a vacation house, tax considerations, and more.

Ready to buy? SoFi offers mortgages for second homes and investment properties, including single-family homes, two-unit buildings, condos, and planned unit developments.

SoFi also offers a cash-out refinance, all at competitive rates.

Got two minutes to spare? That’s how long it takes to check your rate for a mortgage with SoFi.



SoFi Home Loans
Terms, conditions, and state restrictions apply. SoFi Home Loans are not available in all states. See SoFi.com/eligibility for more information.

Financial Tips & Strategies: The tips provided on this website are of a general nature and do not take into account your specific objectives, financial situation, and needs. You should always consider their appropriateness given your own circumstances.
External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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.

SOHL21004

Source: sofi.com

Guide to Zcash Cryptocurrency

Zcash is a potentially private cryptocurrency that offers unique “shielded” features. The set-up allows for addresses and amounts in a Zcash transaction to be encrypted on the blockchain. Here’s a guide to its privacy features, price performance, technology and history.

What Is Zcash?

Zcash crypto falls under the category of cryptocurrencies known as “privacy coins,” or different types of cryptocurrency that make it hard for outside observers to detect details of the coins’ movements.

Zcash is basically a bitcoin clone with one key difference – the ability for shielded transactions, as mentioned. Zcash relies on a technology known as zk-SNARKS to hide the particulars of Zcash wallet activity.

Zcash transactions are not private by default. For users seeking privacy, the “shielded” feature must be turned on to prevent the transaction from appearing on the public Zcash blockchain.

Zcash Price and Performance

Zcash has soared more than 400% since the end of 2019 to $146.38 in mid-February. Its market cap is $1.62 billion, making it the 47th biggest cryptocurrency market, according to data from CoinMarketCap. Zcash has the third-largest market cap of any privacy coin (with Monero being #1 and DASH being #2).

Zcash Privacy

Zcash was created in response to Bitcoin‘s lack of anonymity. Activity on the Bitcoin blockchain and most other blockchains is transparent. Anyone can see everything that has ever happened on a public blockchain. The details of each transaction, including the parties sending and receiving coins, the time of the exchange, and the amount of value exchanged, are all public knowledge.

Zcash functions differently than Bitcoin in the sense that Zcash activity can be “shielded,” or hidden from the public, so users can transact privately. But if no one can see the details of a transaction, how can they be sure that it even happened? That’s where the privacy tech behind Zcash known as zk-SNARKS comes in.

Zcash is the first large-scale, real-world implementation of a privacy technology called zk-SNARKS. This tech allows for shielded Zcash transactions to be fully encrypted (private) while at the same time being validated under the network’s consensus rules (so everyone knows they really happened).

How “Shielding” Works

Zk-SNARK stands for “Zero-Knowledge Succinct Non-Interactive Argument of Knowledge.” This is a way of sharing data that allows one party to prove to another that they have specific information without revealing what that information is, and without requiring any interaction between the parties.

The exact details of how zk-SNARKs work and how they are applied to the Zcash blockchain are quite technical. Interested readers can reference the Zcash website for all of the intricate workings of this type of encryption technology.

While some people believe this tech offers the best, most comprehensive solution to the issue of private crypto transactions, others have criticized the security of a coin like Zcash.

The fact that the encryption technology used is so new and that the coin was launched using an unorthodox “ceremony” (more on this later) are key points of contention for some crypto observers. On top of that, most Zcash isn’t even private.

As mentioned earlier, transactions made on the Zcash blockchain are not private by default. For the currency to be used privately, a transaction must be “shielded.”

The vast majority of Zcash transactions are not shielded (as of April 2020, only 6% of the Zcash network had been using fully shielded transactions). This could be due to the fact that most wallets and exchanges use public Zcash addresses by default, something many users might not be aware of.

Types of Zcash Transactions

There are four different types of transactions that can be made on the Zcash blockchain. They are:

•  Private
•  Deshielding
•  Shielding
•  Public

Zcash addresses begin with either a Z or a T. Those beginning with a Z are private addresses, and those beginning with a T are transparent. Using different combinations of these two types of addresses allows for the four specific types of transactions.

In a private transaction (Z-to-Z) will be visible on the public blockchain. There’s proof that it occurred and the necessary network fees were paid. The specific details like the transaction amount and addresses involved, however, are encrypted and can’t be seen by the public.

A public transaction (T-to-T) works in the same way that a typical Bitcoin transaction works – everything can be seen on the public blockchain, including the sender, receiver, and amount transacted.

The Zcash website notes that most exchanges and wallets today use T-addresses by default, although more are allegedly moving to shielded addresses over time.

The other two types of transactions involve sending funds between T and Z addresses. In other words, either sending funds from a private address to a public one (Z-to-T, or Deshielding), or sending funds from a public address to a private one (T-to-Z, or Shielding).

Zcash History

Zcash cryptocurrency launched in 2016. The coin was forked from the original Bitcoin code, so both are minable proof-of-work cryptocurrencies that have a hard supply cap of 21 million. The block reward for Zcash also gets cut in half every four years or so to keep the currency deflationary by limiting supply, just like bitcoin.

Zcash has its roots in a 2013 publication called the Zerocoin white paper, which was written by professors Eli Ben-Sasson and Matthew Green. They saw the design of Bitcoin as being a threat to user privacy, and offered their own solutions in response.

But Zerocoin was designed for Bitcoin, meaning Bitcoin developers would have had to implement a lot of complex changes to the Bitcoin blockchain technology to make Zerocoin work. This led to the project being shelved for a time.

Then, in 2015, a cryptographer named Zooko Wilcox created a startup to discover ways that the Zerocoin concept might be successfully implemented in a new cryptocurrency. In 2016, Zcash was announced, and the coin launched in October of that year.

Launch of Zcash

The launch of Zcash is a focal point of many criticisms against the privacy coin. To make its new type of cryptography workable, the Zcash blockchain had to be created using something known as the “Zcash ceremony.”

This “ceremony” involved people from around the world collaborating to create what amounts to a master public key for the blockchain using pieces of a private key. Those involved were instructed to destroy the data they used so that it couldn’t be taken advantage of by someone else in the future, who could potentially use it to compromise Zcash.

Of course, no one has any way to verify that those involved actually destroyed the data they used in this ceremony, and no one can verify that Zcash was created in the way it claims to have been created.

Today, Zcash is operated by the Electric Coin Company with Zooko Wilcox as its CEO. The company employs a team of cryptographers to continue developing the Zcash blockchain. There is also a non-profit organization known as the Zcash Foundation that helps support this work. Both groups are funded in part by the issuance of new Zcash (ZEC) tokens.

Is Zcash a Good Investment?

Privacy coins in particular have a very uncertain future. Coins like Monero, Zcash, and DASH were delisted from the Bittrex exchange at the start of 2021. Because many people associate them with illicit activity, privacy coins could see their use restricted in various ways.

Exchanges could continue to delist coins with privacy features or regulatory authorities could seek to punish anyone who deals with them through new crypto regulations, perhaps claiming that people use privacy coins to avoid paying taxes on crypto, for example.

Many altcoins have gone to zero over the years, so that possibility also can’t be ruled out.

How to Buy Zcash

Some U.S. exchanges offer Zcash on their platform. Here’s a step-by-step guide on how to buy and trade it:

1. Sign up for an account with a cryptocurrency exchange that offers Zcash.
2. Verify your account. This may involve providing documents that confirm your identity and address.
3. Deposit fiat currency or digital money into your account.
4. Buy Zcash with the deposited funds.
5. Withdraw Zcash into your hot or cold wallet.

The Takeaway

Zcash is a privacy coin that allows for completely private or “shielded” transactions. It is the first practical implementation of the zk-SNARK encryption technology. The vast majority of transactions made on the Zcash blockchain are not private and function in the same way as Bitcoin transactions because Zcash was forked from the original Bitcoin code.

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