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Apache is functioning normally

December 6, 2023 by Brett Tams

When you look at your investment portfolio, does Rube Goldberg come to mind? Goldberg was a Pulitzer Price winning cartoonist famous for drawing complicated contraptions designed to perform simple tasks. In fact, Webster’s New World Dictionary defines a “Rube Goldberg” as a “comically involved, complicated invention, laboriously contrived to perform a simple operation.”

Investing should be simple. It’s not necessary to have a dozen or more mutual funds covering a wide range of asset classes. Such “diversity” complicates the management of your investments and isn’t likely to increase your returns or lower your risk.

Rube Goldberg came to mind when I recently read an email from a reader named Jason:

This is a great email on an important topic. Are we going to invest to mimic the overall market, or are we going to collect a dozen or more holdings? What’s the right approach?

I addressed Jason’s question about “value” funds in the podcast. In short, an index is designed to determine value versus growth based on math. They use ratios such as the p/e (price to earnings), p/b (price to book), and other objective measures of value.

But let’s get back to Jason’s main question – how complicated should investing be? The starting point is the 3-Fund Portfolio.

1. Three-Fund Portfolio

There’s a group loosely referred to as the Bogleheads (named after Vanguard founder, John Bogle)who advocate the Three-Fund Portfolio. The three-funds cover the three main asset classes (I’ve included Vanguard ETFs one could use to build a 3-fund portfolio, but mutual funds and investments from other companies could be used, too):

Total Market US Equities (Example: VTI)
Total Market Intl EquitiesExample: VGTXS)
Total Bond Market (Example: VBMFX)

With those three ETFs, you’d have the investment markets covered, but only three funds to manage, allocate and rebalance. This is the direction I’m heading as I simplify my investing. Note that you could simplify this even further with a target-date retirement fund. Vanguard’s target-date funds, for example, use the above three investment types along with an international bond fund.

2. Slice and Dice

Many investors aren’t satisfied with the above 3-Fund portfolio. They look to further diversify their investments into sub-asset classes. Frankly, I’ve taken the slice and dice approach for more than two decades.

While there is no one way that one can construct a portfolio that goes beyond the core asset classes, here are five common sub-asset classes that many investors want more exposure:

Small-Cap – Smaller companies historically have produced higher returns, but also come with more volatility.
Value Funds – These funds seek to invest in undervalued companies, and historically have outperformed growth companies (although there is some debate on the relative performance between value and growth).
Emerging Markets: As with small caps, emerging markets historically have generated higher returns in exchange for greater volatility.
REITs – real estate investment trusts offer stock-like returns with some measure of diversity.
Commodities – While the returns aren’t as rich, many believe commodities offer valuable diversity to a portfolio.

I have positions in all of these sectors, although as I mentioned I’m working to simplify my portfolio.

3. Diversity Has Nothing to Do With the Number of Mutual Funds in a Portfolio

It’s critical to understand that even a 3-Fund Portfolio has exposure to each of these asset classes. As an example, a total U.S. equity fund has exposure to small caps, value, REITs, and even commodities. Simply by owning multi-national companies gives exposure to many asset classes.

In the case of VTI, one gets exposure to the following according to Morningstar:

Micro-cap: 2.62%
Small-cap: 6.47%
Mid-cap: 29.02%
Real Estate: 3.72%

Further, VTI gives equal weighting to value and growth stocks.

Similarly, a totally international market will have exposure to emerging markets. VGTXS, for example, has 14.52% in emerging markets. The point: Most investors will get little if any benefit from seeking additional exposure to these sub-asset classes beyond what a total market fund provides.

4. Why slice and dice

Having said all of that, there are times when exposure to sub-asset classes is justified. The first is that an investor’s personality is drawn to this type of investing. While this may surprise some, the behavioral side of investing should never be ignored. Those that like to dabble in more complex asset allocation plans won’t hurt themselves, so long as they keep costs low and stick to their plan.

Second, a good argument can be made for additional exposure to real estate. REITs enjoy stock-like returns and add diversity to a portfolio.

5. Problems with slice and dice

There are some realities to a complicated portfolio that should be considered:

There’s absolutely no guarantee that it will improve your returns or lower your risk compared to a basic three-fund portfolio. Just because small caps outperformed the general market in the past doesn’t mean they will in the future. In his book Don’t Count on It!: Reflections on Investment Illusions, Capitalism, “Mutual” Funds, Indexing, Entrepreneurship, Idealism, and Heroes, John Bogle says that small caps have outperformed the general market mainly because there were a couple of years where they did very well compared to the overall market. There’s no guarantee such performance will repeat itself.
Each additional investment added to a portfolio increases the portfolio’s complexity. Additional funds add to the burden of monitoring investments and rebalancing them. It often requires one to allocate across multiple account types, which further complicates the whole affair. (See the Rube Goldberg image above for more details.)

My own feeling is both the three-fund portfolio and the slice and dice portfolio will work, but complication is the real difference. And for what it’s worth, robo advisors like Betterment use somewhat complicated portfolios. The difference is that they handle all of the rebalancing for you.

6. My Own 401(k) plan

Portfolio allocations can be more complicated with 401(k) plans. Unlike an IRA, we have limited investment options, many of which are expensive. Nevertheless, I’ve worked hard to simplify my own 401(k) portfolio by investing in just three funds. In the process, I’ve tried to create a standalone portfolio that doesn’t require additional allocations from non-retirement assets or other retirement plans. The plan will be fully diversified on its own.

Here are the three funds I use in my plan:

Dodge and Cox International Stock Fund (DODFX) – 40%
Fidelity S&P Index Fund (FXSIX) – 40%
Vanguard Total Bond Fund (VBTLX) – 20%

The Dodge and Cox fund is an actively managed fund with an expense ratio of – .64%. It’s a great fund in my opinion, and the fee is actually not high for actively managed funds. My total cost for keeping all three funds is .29%, even with the Dodge and Cox fund. With just three funds, rebalancing is easy. I don’t feel that slicing and dicing into a variety of funds will have a material effect on the long-term performance of my 401(k).

I’m not entirely closed to the idea of adding some additional asset classes to my plan, particularly REITs. Whatever you choose, however, work hard to keep it simple.

Rob Berger is the founder of Dough Roller and the Dough Roller Money Podcast. A former securities law attorney and Forbes deputy editor, Rob is the author of the book Retire Before Mom and Dad. He educates independent investors on his YouTube channel and at RobBerger.com.

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Apache is functioning normally

November 23, 2023 by Brett Tams

The average rate of return on 401(k)s is typically between 5% and 8%, depending on specific market conditions in a given year. Keep in mind that returns will vary depending on the individual investor’s portfolio, and that those numbers are a general benchmark.

While not everyone has access to a 401(k) plan, those who do may wonder if it’s an effective investment vehicle that can help them reach their goals. The answer is, generally, yes, but there are a lot of things to take into consideration. There are also alternatives out there, too.

Key Points

• The average rate of return on 401(k)s is typically between 5% and 8%, depending on market conditions and individual portfolios.

• 401(k) plans offer benefits such as potential employer matches, tax advantages, and federal protections under ERISA.

• Fees, vesting schedules, and early withdrawal penalties are important considerations for 401(k) investors.

• 401(k) plans offer limited investment options, typically focused on stocks, bonds, and mutual funds.

• Asset allocation and individual risk tolerance play a significant role in determining 401(k) returns and investment strategies.

Some 401(k) Basics

To understand what a 401(k) has to offer, it helps to know exactly what it is. The IRS defines a 401(k) as “a feature of a qualified profit-sharing plan that allows employees to contribute a portion of their wages to individual accounts.”

In other words, employees can choose to delegate a portion of their pay to an investment account set up through their employer. Because participants put the money from their paychecks into their 401(k) account on a pre-tax basis, those contributions reduce their annual taxable income.

Taxes on the contributions and their growth in a 401(k) account are deferred until the money is withdrawn (unless it’s an after-tax Roth 401(k)).

A 401(k) is a “defined-contribution” plan, which means the participant’s balance is determined by regular contributions made to the plan and by the performance of the investments the participant chooses.

This is different from a “defined-benefit” plan, or pension. A defined-benefit plan guarantees the employee a defined monthly income in retirement, putting any investment risk on the plan provider rather than the employee.

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Benefits of a 401(k)

There are a lot of benefits that come with a 401(k) account, and some good reasons to consider using one to save for retirement.

Potential Employer Match

Employers aren’t required to make contributions to employee 401(k) plans, but many do. Typically, an employer might offer to match a certain percentage of an employee’s contributions.

Tax Advantages

As mentioned, most 401(k)s are tax-deferred. This means that the full amount of the contributions can be invested until you’re ready to withdraw funds. And you may be in a lower tax bracket when you do start withdrawing and have to pay taxes on your withdrawals.

Federal Protections

One of the less-talked about benefits of 401(k) plans is that they’re protected by federal law. The Employee Retirement Security Act of 1974 (ERISA) sets minimum standards for any employers that set up retirement plans and for the administrators who manage them.

Those protections include a claims and appeals process to make sure employees get the benefits they have coming. Those include the right to sue for benefits and breaches of fiduciary duty if the plan is mismanaged, that certain benefits are paid if the participant becomes unemployed, and that plan features and funding are properly disclosed. ERISA-qualified accounts are also protected from creditors.

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

Boost your retirement contributions with a 1% match.

SoFi IRAs now get a 1% match on every dollar you deposit, up to the annual contribution limits. Open an account today and get started.

Only offers made via ACH are eligible for the match. ACATs, wires, and rollovers are not included. Offer ends 12/31/23.

401(k) Fees, Vesting, and Penalties

There can be some downsides for some 401(k) investors as well. It’s a good idea to be aware of them before you decide whether to open an account.

Fees

The typical 401(k) plan charges a fee of around 1% of assets under management. That means an investor who has $100,000 in a 401(k) could pay $1,000 or more. And as that participant’s savings grow over the years, the fees could add up to thousands of dollars.

Fees eat into your returns and make saving harder — and there are companies that don’t charge management fees on their investment accounts. If you’re unsure about what you’re paying, you should be able to find out from your plan provider or your employer’s HR department, or you can do your own research on various 401(k) plans.

Vesting

Although any contributions you make belong to you 100% from the get-go, that may not be true for your employer’s contributions. In some cases, a vesting schedule may dictate the degree of ownership you have of the money your employer puts in your account.

Early Withdrawal Penalties

Don’t forget, when you start withdrawing retirement funds, some of the money in your tax-deferred retirement account will finally go toward taxes. That means it’s in Uncle Sam’s interest to keep your 401(k) savings growing.

So, if you decide to take money out of a 401(k) account before age 59 ½, in addition to any other taxes due when there’s a withdrawal, you’ll usually have to pay a 10% penalty. (Although there are some exceptions.) And at age 73, you’re required to take minimum distributions from your tax-deferred retirement accounts.

Potentially Limited Investment Options

One more thing to consider when you think about signing up for a 401(k) is what kind of investing you’d like to do. Employers are required to offer at least three basic options: a stock investment option, a bond option, and cash or stable value option. Many offer more than that minimum, but they stick mostly to mutual funds. That’s meant to streamline the decision-making. But if you’re looking to diversify outside the basic asset classes, it can be limiting.

How Do 401(k) Returns Hold Up?

Life might be easier if we could know the average rate of return to expect from a 401(k). But the unsatisfying answer is that it depends.

Several factors contribute to overall performance, including the investments your particular plan offers you to choose from and the individual portfolio you create. And of course, it also depends on what the market is doing from day to day and year to year.

Despite the many variables, you may often hear an annual return that ranges from 5% to 8% cited as what you can expect. But that doesn’t mean an investor will always be in that range. Sometimes you may have double-digit returns. Sometimes your return might drop down to negative numbers.

Issues With Looking Up Average Returns As a Metric

It’s good to keep in mind, too, that looking up average returns can create some issues. Specifically, averages don’t often tell the whole story, and can skew a data set. For instance, if a billionaire walks into a diner with five other people, on average, every single person in the diner would probably be a multi-millionaire — though that wouldn’t necessarily be true.

It can be a good idea to do some reading about averages and medians, and try to determine whether aiming for an average return is feasible or realistic in a given circumstance.

Some Common Approaches to 401(k) Investing

There are many different ways to manage your 401(k) account, and none of them comes with a guaranteed return. But here are a few popular strategies.

60/40 Asset Allocation

One technique sometimes used to try to maintain balance in a portfolio as the market fluctuates is a basic 60/40 mix. That means the account allocates 60% to equities (stocks) and 40% to bonds. The intention is to minimize risk while generating a consistent rate of return over time — even when the market is experiencing periods of volatility.

Target-Date Funds

As a retirement plan participant, you can figure out your preferred mix of investments on your own, with the help of a financial advisor, or by opting for a target-date fund — a mutual fund that bases asset allocations on when you expect to retire.

A 2050 target-date fund will likely be more aggressive. It might have more stocks than bonds, and it will typically have a higher rate of return. A 2025 target-date fund will lean more toward safety. It will likely be designed to protect an investor who’s nearer to retirement, so it might be invested mostly in bonds. (Again, the actual returns an investor will see may be affected by the whims of the market.)

Most 401(k) plans offer target-date funds, and they make investing easy for hands-off investors. But if that’s not what you’re looking for, and your 401(k) plan makes an advisor available to you, you may be able to get more specific advice. Or, if you want more help, you could hire a financial professional to work with you on your overall plan as it relates to your long- and short-term goals.

Multiple Retirement Accounts

Another possibility might be to go with the basic choices in your workplace 401(k), but also open a separate investing account with which you could take a more hands-on approach. You could try a traditional IRA if you’re still looking for tax advantages, a Roth IRA (read more about what Roth IRAs are) if you want to limit your tax burden in retirement, or an account that lets you invest in what you love, one stock at a time.

There are some important things to know, though, before deciding between a 401(k) vs. an IRA.
💡 Quick Tip: Can you save for retirement with an automated investment portfolio? Yes. In fact, automated portfolios, or robo advisors, can be used within taxable accounts as well as tax-advantaged retirement accounts.

How Asset Allocation Can Make a Difference

How an investor allocates their resources can make a difference in terms of their ultimate returns. Generally speaking, riskier investments tend to have higher potential returns — and higher potential losses. Stocks also tend to be riskier investments than bonds, so if an investor were to construct a portfolio that’s stock-heavy relative to bonds, they’d probably have a better chance of seeing bigger returns.

But also, a bigger chance of seeing a negative return.

With that in mind, it’s going to come down to an investor’s individual appetite for risk, and how much time they have to reach their financial goals. While there are seemingly infinite ways to allocate your investments, the chart below offers a very simple look at how asset allocation associates with risks and returns.

Asset Allocations and Associated Risk/Return
Asset Allocation	Risk/Return
75% Stock-25% Bonds	Higher risk, higher potential returns
50% Stock-50% Bonds	Medium risk, variable potential returns
25% Stock-75% Bonds	Lower risk, lower potential returns

Ways to Make the Most of Investment Options

It’s up to you to manage your employer-sponsored 401(k) in a way that makes good use of the options available. Here are some pointers.

Understand the Match

One way to start is by familiarizing yourself with the rules on how to maximize the company match. Is it a dollar-for-dollar match up to a certain percentage of your salary, a 50% match, or some other calculation? It also helps to know the policy regarding vesting and what happens to those matching contributions if you leave your job before you’re fully vested.

Consider Your Investments

With or without help, taking a little time to assess the investments in your plan could boost your bottom line. It may also allow you to tailor your portfolio to better accomplish your financial goals. Checking past returns can provide some information when choosing investments and strategies, but looking to the future also can be useful.

Plan for Your Whole Life

If you have a career plan (will you stay with this employer for years or be out the door in two?) and/or a personal plan (do you want to buy a house, have kids, start your own business?), factor those into your investment plans. Doing so may help you decide how much to invest and where to invest it.

Find Your Lost 401(k)s

Have you lost track of the 401(k) plans or accounts you left behind at past employers? It may make sense to roll them into your current employer’s plan, or to roll them into an IRA separate from your workplace account. You might also want to review and update your portfolio mix, and you might be able to eliminate some fees.

Know the Maximum Contributions for Retirement Accounts

Keep in mind that there are different contribution limits for 401(k)s and IRAs. For those under age 50, the 2023 contribution limit is $22,500 for 401(k)s and $6,500 for IRAs. For those 50 or older, the 2023 contribution limit is $30,000 for 401(k)s and $7,500 for IRAs. Other rules and restrictions may also apply.

Learn How to Calculate Your 401(k) Rate of Return

This information can be useful as you assess your retirement saving strategy, and the math isn’t too difficult.

For this calculation, you’ll need to figure out your total contributions and your total gains for a specific period of time (let’s say a calendar year).

You can find your contributions on your 401(k) statements or your pay stubs. Add up the total for the year.

Your gains may be listed on your 401(k) statements as well. If not, you can take the ending balance of your account for the year and subtract the total of your contributions and the account balance at the beginning of the year. That will give you your total gains.

Once you have those factors, divide your gains by your ending balance and multiply by 100 to get your rate of return.

Here’s an example. Let’s say you have a beginning balance of $10,000. Your total contributions for the year are $6,000. Your ending balance is $17,600. So your gains equal $1,600. To get your rate of return, the calculation is:

(Gains / ending balance) X 100 =

($1,600 / $17,600) X 100 = 9%

Savings Potential From a 401(k) Potential by Age

It can be difficult to really get a feel for how your 401(k) savings or investments can grow over time, but using some of the math above, and assuming that you keep making contributions over the years, you’ll very likely end up with a sizable nest egg when you reach retirement age.

This all depends, of course, on when you start, and how the markets trend in the subsequent years. But for an example, we can make some assumptions to see how this might play out. For simplicity’s sake, assume that you start contributing to a 401(k) at age 20, with plans to start taking distributions at age 70. You also contribute $10,000 per year (with no employer match, and no inflation), at an average return of 5% per year.

Here’s how that might look over time:

401(k) Savings Over Time
Age	401(k) Balance
20	$10,000
30	$128,923
40	$338,926
50	$680,998
60	$1,238,198
70	$2,145,817

Using time and investment returns to supercharge your savings, you could end up with more than $2 million through dutiful saving and investing in your 401(k). Again, there are no guarantees, and the chart above makes a lot of oversimplified assumptions, but this should give you an idea of how things can add up.

Alternatives to 401(k) Plans

While 401(k) plans can be powerful financial tools, not everyone has access to them. Or, they may be looking for alternatives for whatever reason. Here are some options.

Roth IRA

Roth IRAs are IRAs that allow for the contribution of after-tax dollars. Accordingly, the money contained within can then be withdrawn tax-free during retirement. They differ from traditional IRAs in a few key ways, the biggest and most notable of which being that traditional IRAs are tax-deferred accounts (contributions are made pre-tax).

Learn more about what IRAs are, and what they are not.

Traditional IRA

As discussed, a traditional IRA is a tax-deferred retirement account. Contributions are made using pre-tax funds, so investors pay taxes on distributions once they retire.

HSA

HSAs, or health savings accounts, are another vehicle that can be used to save or invest money. HSAs have triple tax benefits, in that account holders can contribute pre-tax dollars to them, allow that money to grow tax-free, and then use the holdings on qualified medical expenses — also tax-free.

Retirement Investment

Typical returns on 401(k)s may vary, but looking for an average of between 5% and 8% would likely be a good target range. Of course, that doesn’t mean that there won’t be up or down years, and averages, themselves, can be a bit misleading.

While your annual return on your 401(k) may vary, the good news is that, as an investor, you have options about how you save for the future. The choices you make can be as aggressive or as conservative as you want, as you choose the investment mix that best suits your timeline and 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), 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 is the typical 401(k) return over 20 years?

The typical return for 401(k)s over 20 years is between 5% and 8%, assuming a portfolio sticks to an asset mix of roughly 60% stocks and 40% bonds. There’s also no guarantee that returns will fall within that range.

What is the typical 401(k) return over 10 years?

Again, the average rate of return for 401(k)s tends to land between 5% and 8%, with some years providing higher returns, and some years providing lower, or even negative returns.

What was the typical 401(k) return for 2022?

The average 401(k) lost roughly 20% of its value during 2022, as increasing interest rates and shifting economic conditions over the course of the year (largely due to increasing inflation) caused the economy to sputter.

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Apache is functioning normally

November 23, 2023 by Brett Tams

There once was a time was when retirement meant leaving your job permanently, either when you reached a certain age or you’d accumulated enough wealth to live without working. Today’s retirement definition is changing, and it can vary widely depending on your vision and your individual financial situation.

It’s important for each person to develop their own retirement definition. That can help you establish a roadmap for getting from point A to point B, with the money you have, and in the time frame you’re expecting.

Key Points

• Retirement’s definition may vary based on individual financial situations and personal visions.

• Retirement has both financial and lifestyle aspects that need to be considered in its definition.

• Being retired means relying on savings, investments, and perhaps federal benefits for income instead of a regular paycheck.

• Retirement doesn’t necessarily mean individuals completely leave the labor force, as some retirees may have part-time jobs or pursue new careers.

• Retirement statistics show that a significant portion of retirees rely on Social Security, and savings levels vary among individuals.

Retirement Definition

Retirement’s meaning may shift from person to person, but the bottom line is that retirement has a financial side and a personal or lifestyle side. It’s important to consider both in your definition of retirement.

Retirement and Your Finances

Being retired or living in retirement generally means that you rely on your accumulated savings and investments to cover your expenses rather than counting on a paycheck or salary from employment. Depending upon your retirement age, your income may also include federal retirement benefits, such as Social Security and other options.

Retiring doesn’t necessarily mean you stop working completely. You might have a part-time job or side hustle. You may choose to start a small business once you retire from your career. But the majority of your income may still come from savings or federal benefits.

Retirement and Your Lifestyle

Some people embark on a new life or a new career in retirement, complete with new goals, a new focus, sometimes in a brand-new location. But retirement doesn’t have to be a period of reinvention. It depends on how you view the purpose and meaning of retirement. Many people enjoy this period as a time to slow down and enjoy hobbies or priorities that they couldn’t focus on before.

Consider the notion of moving in retirement. While strolling on sandy, sunlit beaches is depicted as a retirement ideal, many people don’t want to move to get there. In fact, 53% of retirees opt to remain in the house where they were already living, according to a 2022 study by the Center for Retirement Research.

Boost your retirement contributions with a 1% match.

SoFi IRAs now get a 1% match on every dollar you deposit, up to the annual contribution limits. Open an account today and get started.

Only offers made via ACH are eligible for the match. ACATs, wires, and rollovers are not included. Offer ends 12/31/23.

Qualified Retirement Plan Definition

A qualified retirement plan provides you with money to pay for future expenses once you decide to retire from your job. The Employment Retirement Security Act (ERISA) recognizes two types of retirement plans:

Defined Contribution Plans

In a defined contribution plan, the amount of money you’re able to withdraw in retirement is determined by how much you contribute during your working years, and how much that money grows as it’s invested. A 401(k) plan is the most common type of defined contribution plan that employers can offer to employees.

There are other kinds of retirement plans that fall under the defined contribution umbrella. For example, if you run a small business, you might establish a Simplified Employee Pension (SEP) plan for yourself and your employees. Profit sharing plans, stock bonus plans, and employee stock ownership (ESOP) plans are also defined contribution plans.

A 457 plan is another defined contribution option. They work similar to 401(k) plans, in that you decide how much to contribute, and your employer can make matching contributions. The main difference between 457 and 401(k) retirement accounts is who they’re designed for. Private employers can offer 401(k) plans, while 457 plans are reserved for state and local government employees.

Defined Benefit Plans

A defined benefit plan (typically a pension) pays you a fixed amount in retirement that’s determined by your years of service, your retirement age, and your highest earning years. Cash balance plans are another type of defined benefit plan.

Generally speaking, defined benefit plans have been on the wane in the last couple of decades, with more of the responsibility for saving falling to workers, who must contribute to defined contribution plans.

Retirement Statistics

Retirement statistics can offer some insight into how Americans typically save for the future and when they retire. Here are some key retirement facts and figures to know, according to the Federal Reserve’s Report on the Economic Well-Being of U.S. Households in 2021 – May 2022:

• 27% of adults considered themselves to be retired in 2021, though some were still working in some capacity.

• 49% of adults said they retired to do something else, while 45% said they’d reached their normal retirement age.

• 78% of retirees relied on Social Security for income, increasing to 92% among retirees age 65 or older.

• 55% of non-retired adults had savings in a defined contribution plan, while just 22% had a defined benefit plan.

• 40% of non-retirees felt that they were on track with their retirement savings efforts.

So, how much does the typical household have saved for retirement? According to the Transamerica Center for Retirement Studies, the estimated median retirement savings among American workers is $54,000. Just 27% of adults who are traditionally employed and 24% of self-employed individuals have saved $250,000 or more for retirement.

Retirement Age

In simple terms, your retirement age is the age when you decide to retire. For example, you might set your target retirement date as 62 or 65 or 66 — all of which are related to Social Security benefits in some way.

Social Security has largely shaped how we view retirement age in the U.S. because that monthly payout is what enables the majority of people to leave work. As noted above, some 92% of retirees age 65 and older say they depend on Social Security. While retiring at 62 is the earliest age when you can claim Social Security, that’s not your “full retirement age.”

Your full retirement age depends on the year you were born. If you were born between 1943 and 1954, your full retirement age is 66. If you were born from 1955 to 1960, it increases until it reaches 67. And if you were born in 1960 or later, your full retirement age is 67. Claiming Social Security at your full retirement age gives you a higher monthly benefit vs. starting at age 62, which is considered a reduced benefit.

Every year you delay getting benefits gives you a little bit more — about 8% more — up until age 70. There’s no additional amount for claiming after age 70.

Saving for Retirement

Saving for retirement is an important financial goal. While Social Security may provide you with some income, it’s not likely to be enough to cover all of your expenses in retirement — particularly if you end up needing extensive medical care or long-term care. In 2022, according to the Social Security Administration, the average monthly benefit amount was $1,542.22.

Financial experts often recommend saving 15% of your income for retirement but your personal savings target may be higher or lower, depending on your goals. The longer you have to save for retirement, the longer you have to take advantage of compounding interest. That’s the interest you earn on your interest and it’s one of the keys to building wealth.

Selecting a retirement plan is the first step to getting on track with your financial goals. When saving for retirement, you can start with a defined benefit or defined contribution plan if your employer offers either one. Defined contribution plans can be advantageous because your employer may match a percentage of what you save. That’s free money you can use for retirement.

If you don’t have a 401(k) or a similar plan at work, or you do but you want to supplement your retirement savings, you could open a retirement investment account, otherwise known as an individual retirement account (IRA).

Is your retirement piggy bank feeling light?

Start saving today with a Roth or Traditional IRA.

Retirement Investment Accounts

A retirement investment account is an account that enables you to save money for the future, but it isn’t considered a federally qualified retirement plan, like a 401(k). IRAs are tax-advantaged investment accounts that you can use to purchase mutual funds, exchange-traded funds (ETFs), and other securities.

There are two main types of IRAs you can open: traditional and Roth IRAs. A traditional IRA allows for tax-deductible contributions in the year that you make them. Once you retire and begin withdrawing money, those withdrawals are taxed at your ordinary income tax rate.

Roth IRAs don’t offer a deduction for contributions because you contribute after-tax dollars. You can, however, make 100% tax-free qualified withdrawals in retirement. This might be preferable if you think you’ll be in a higher tax bracket once you retire.

Both traditional and Roth IRAs are subject to annual contribution limits. The annual limit for 2022 is $6,000, or $7,000 if you’re 50 or older (the extra amount is often called a catch-up provision). There’s an increase for 2023 to $6,500 for the base amount; the catch-up provision is still $1,000 more, for a total of $7,500.

You can open an IRA online, or at a brokerage, alongside a taxable investment account for a comprehensive retirement savings picture.

Pros of Retirement Investment Accounts

Opening an IRA could make sense if you’d like to save for retirement while enjoying certain tax benefits.

• If you’re in a higher income bracket during your working years, being able to deduct traditional IRA contributions could reduce your tax liability.

• And not having to pay tax on Roth IRA withdrawals in retirement can ease your tax burden as well if you have income from other sources.

• IRA accounts often give you more flexibility in terms of your investment choices.

Cons of Retirement Investment Accounts

While IRAs can be good savings vehicles for retirement, there are some downsides.

• Both types of accounts have much lower contribution limits compared to a 401(k) or 457 plan. For example, the maximum you can contribute to a 401(k) in 2022 is $20,500, with an additional $6,500 catch-up provision. For 2023, you can contribute $22,500 per year, plus an additional $7,500 if you’re 50 and up.

• With traditional IRAs, you must begin taking required distributions (RMDs) based on your account balance and life expectancy starting at age 72 (401(k)s have a similar rule). If you fail to do so, you could incur a hefty tax penalty.

• Roth IRAs don’t have RMDs, but your ability to contribute to a Roth may be limited based on your income and tax filing status.

Investing for Retirement With SoFi

However you choose to define your retirement, making a financial roadmap will help you get the retirement you want.

SoFi Invest offers traditional and Roth investment accounts to help you build the future you envision. You can also open a SEP IRA if you’re self-employed and want to get a jump on retirement savings. Another way to keep track your retirement savings is to roll over your old accounts to a rollover IRA, so you can manage your money in one place.

SoFi makes the rollover process seamless and straightforward. There are no rollover fees, and you can complete your 401(k) rollover without a lot of time or hassle.

Help grow your nest egg with a SoFi IRA.

FAQ

What is the meaning of retirement?

Retirement generally means leaving your job or the workforce, and living off your savings and investments, but that definition is changing for some. Some people may choose to continue working in retirement, though it may not be their primary source of income. Others may shift their work to focus more on lifestyle changes.

How common is retirement?

According to the Federal Reserve, about 27% of adults considered themselves to be retired in 2021, though some were still working in some capacity. Of these, 49% said they had retired to do something else, while 45% said they’d reached their normal retirement age.

How does retirement work?

When someone retires, they stop working at their job. Or, in the case of a business owner, they hand the business over to someone else. At that point, it’s up to them to decide how they want to spend their retirement, which might include taking care of family, traveling, working part-time, or exploring new hobbies. Their sources of income might include savings, investments, a pension, and Social Security benefits.

Photo credit: iStock/Alessandro Biascioli

SOIN0722010

Source: sofi.com

Apache is functioning normally

November 9, 2023 by Brett Tams

Inside: Are you looking for ways to make money quickly and easily? This guide has you covered with tips on how to double your money in 24 hours.

Doubling your money is an aspiration many investors feasibly target, and it’s critical to your future financial stability.

This enticing objective involves transforming a small amount of money and doubling it for tomorrow. You need cash fast, so that is why you are reading this post.

You will quickly learn there are easy ways to double money in 24 hours and others that over time you can be skilled at and easily double your cash.

Given that 58% of borrowers struggle to meet basic monthly expenses and 70% of borrowers are using loan money for rent and other basic expenses. ¹

You want to learn how to double your money before you actually need to, so by inevitably secure financial confidence for upcoming expenses.

This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.

How can I double my money quickly?

Doubling your money in less than 24 hours isn’t straightforward, but it is possible if you’re willing to take high risks.

These are popular methods to double your money:

Engagement in day trading. It’s risky but one of the fastest ways to double your investment.
Try your hand at gambling. Remember, the house typically has the upper hand. This is not recommended as you are more likely to lose more money than you prefer.
Consider investing in digital real estate. This is similar to real-life property flipping.

Most importantly, avoid get-rich-quick schemes; they’re mostly scams. So, do your homework before diving in!

20 Easy Ways to Double Money in 24 Hours

As inflation rises and people are struggling with their budgets, the question of how to double money in just 24 hours often comes up.

While it may sound like a lofty goal, there exist strategies that can significantly boost your financial growth in a surprisingly short time.

However, keep in mind these are not risk-free endeavors, and they each require a good understanding and judicious implementation to yield profitable results.

1. Invest in Stocks

If you’re hunting for opportunities to double your money fast – investing in stocks could be your ticket, especially with the current volatility.

Although there’s a risk factor involved, it’s a time-tested strategy for impressive returns. Learn how fast you can make money in stocks.

Honestly, one of the best ways to improve your net worth is learning how to invest in the stock market. Yet, many people shy away from the idea.

By not investing in stocks, you are slowing your pace to financial freedom. So, why not learn how to invest in stocks for beginners?

The choice entirely depends on your risk appetite, investment horizon, and personal preferences. Start by evaluating your risk tolerance. Personally, I can tell you this is one of the ways I double money in 24 hours consistently.

Motley Fool

The Motley Fool is dedicated to helping the world invest — better.

They help millions of people attain financial freedom through their site, podcasts, and premium investing services.

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2. Options Trading

Options trading can double your cash in a mere 24 hours, thanks to its inherent rapid return benefits. However, with the potential for high returns, it also poses significant risks.

Options trading is an advanced strategy for buying stocks with an option contract. Thus, you get the right but not a duty to buy (call options) or sell (put options) a stock at a specific price.

It presents the possibility of doubling, tripling, or quadrupling your money.

This is an avenue to pursue if you want the potential for huge profits, but you must take this investing course to learn the proper way to trade options.

However, you run the high risk of losing the entire investment! So, this is risky for novice investors and you need a brokerage for this type of trading.

Trade & Travel

Learn to trade stocks with confidence.

Whether you want to:

Retire in peace without financial anxiety
Pay your bills without taking on a side hustle
Quit your 9-5 and do what you love
Or just make more than your current income….

Making $1,000 every.single.day is NOT a pie-in-the-sky goal.

It’s been done over and over again, and the 30,000 students that Teri has helped to be financially independent and fulfill their financial dreams are my witnesses…

3. Flip Items for Arbitrage

Retail arbitrage, essentially the practice of buying and reselling goods, is a beneficial way of doubling one’s money in a short time. This can be particularly effective by taking advantage of clearance sales in mainstream stores like Walmart and Kohl’s, and then reselling the products on online marketplaces.

Notable items often flipped include apparel, books, electronics, and toys. You can check a full list of popular items to flip.

According to the Flea Market Flippers, you can use a variety of platforms to sell your flipped items.

4. Rent Out Your Property

Renting out unused property or space can be a lucrative form of passive income. This may include a spare room, or underutilized sections like a garage, with various platforms facilitating such financial transactions like Neighbor or VRBO.

Another example is it is financially beneficial to rent out items, like a lawn mower which costs $500 but brings in $15-20 for each rental. Thus, paying for itself in a short amount of time.

Despite the potential risks associated with property investments, including unpredictability in the real estate market and tenant issues, leveraging a good understanding of the local market can make it quite possible to double your investment over time.

5. Become A Side Hustles Expert

Becoming a side hustle expert requires a clear understanding of your goals and the willingness to trade your time for money. You can identify profitable opportunities which can range from ridesharing to teaching English as a second language (ESL) online.

Honestly, this is best to set up BEFORE you are desperate for cash.

Patience is key as nurturing a side hustle often takes time before it becomes an efficient income-generating endeavor.

To help you out, here are specific side hustles based on your stage of life:

6. Rent Out Your Skills

Renting out your skills is a smart quick-fix to double your money within 24 hours. It’s all about capitalizing on what you can do best and offering it to those who need it.

Start by identifying a skill or knowledge you’re proficient in. Are you a wizard in web design? A maven of SEO?
Select the right platform. Websites like Fiverr, Freelancer.com, and TaskRabbit are excellent for freelancers.
Promote your services. Reach out to your networks or use social media to boost your visibility.

This is a great way to earn $300 fast if you know what you are doing.

TaskRabbit

Find local jobs that fit your skills and schedule.

With TaskRabbit, you have the freedom and support to be your own boss.

Plus set your own rates!

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7. Deliver with DoorDah or GrubHub

Double your income in a day by delivering with platforms like DoorDash or GrubHub. As a courier, you get paid for each delivery – so the more you do, the higher your earnings.

With a smartphone and transportation, you can start making extra cash immediately. Some top delivery options:

Working with DoorDash
Serving with GrubHub

Remember, it’s all about completing as many deliveries as possible. Every order increases your day’s earnings, potentially doubling them if you put in enough hours.

8. Invest in Cryptocurrencies

Invest in cryptocurrencies like Bitcoin, Ethereum, and Bitcoin Cash holds the potential to double your money in 24 hours due to their volatile nature.

To start:

Keep tabs on crypto trends through monitoring websites or apps.
Buy popular or promising cryptocurrency during their low-cost phase.
The trick to doubling your funds is selling at peak prices.

Remember, trends can change rapidly, so only invest what you can afford to lose. For newbies, it’s beneficial to seek advice from a financial advisor knowledgeable in the crypto market.

9. Take Surveys

Looking to double your money in a day? Consider taking paid surveys. However, you will have to take quite a few surveys to make a significant amount of cash.

To boost your earnings:

Seek high paying surveys – Survey Junkie could bring in up to $3 per survey.
Use free time efficiently – complete quick tasks on Swagbucks.
Refer friends – earn 10% of their earnings on Swagbucks.

Remember, more effort equals higher rewards!

Swagbucks

Swagbucks is a fun rewards program that gives you free gift cards and cash for the everyday things you already do online.

Earn points when you shop at your favorite retailers, watch entertaining videos, search the web, answer surveys, and more!

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Get $10 Sign Up Bonus

10. Lend Money on Peer-to-peer platforms

Lending money on Peer-to-Peer (P2P) platforms can be a profitable strategy, offering a unique method for individuals to loan and borrow money without traditional financial institution interference.

Users can sign up as lenders on recognized P2P platforms like LendingClub, Prosper, and Upstart, and yield high-interest returns based on their borrower’s creditworthiness.

However, this process also poses risks such as potential defaults, making it important for the lenders to do their research and diversify their loans across multiple recipients.

11. Do Odd Jobs

Engaging in odd jobs is a practical approach to earning additional income. Whether it’s mowing neighbors’ lawns or offering handyman services, these simple tasks can often pay upward to $30 per hour.

Digital platforms, like TaskRabbit, even allow you to list your talents locally, extending your reach for potential earnings.

All in all, odd jobs provide an accessible door to financial gain without requiring a significant starting capital.

12. Selling High Demand Printables

Selling printables online is a viable way to generate income. It’s important to create a follower base or an email list to successfully promote and sell your products.

With strategic pricing and high-quality content, you could potentially double your initial investment in a short span of time.

Here are the digital products that sell on Etsy that are in high demand.

By creating high-demand printables, you can buy low, sell high, and double your money all within 24 hours!

13. Max Out you 401(k) Match

Maxing out your 401(k) match can double your money in no time. While this may not happen in 24 hours, it can happen the next time you get paid and greatly increase your retirement savings.

When you contribute to your 401(k) plan, your employer might match it by 50% or 100%. You will have to check your Human Resources department to see what your company offers.

Contribute the maximum amount your employer is willing to match. This is free money for you. For instance, if you’re making $100,000 and your employer’s match is up to 3.5% of your salary, put in at least $3,500.

Are you one of the 5 people making this costly mistake? ²

14. Sell Courses and Subscriptions

Selling courses and memberships online is a highly profitable low-risk venture that requires just a small initial investment of your time and money. Once the course is developed, it can continue to generate passive income every month.

Tools such as Podia or Teachable allow you to easily sell and manage your courses, while also offering additional benefits such as digital downloads, subscription plans, and an opportunity to begin selling directly to your followers.

15. Work for Employers

In case you haven’t heard, time is money. And you can trade your time for money at any point.

Working for employers often ensures a steady income which can be supplemented by various benefits.

One of the greatest advantages is the employer match on a 401(k) account, which allows employees to double their contributions effortlessly. This means that if an employee contributes 5 percent of their salary to the retirement account, the employer adds another 5 percent.

Expert Tip: Continually upgrade your skill set to increase your value to employers. More demanding or specialized tasks often command higher pay, propelling you towards your double-money goal quicker.

16. Sell Your Goods

Selling goods online provides a dynamic platform for entrepreneurs, allowing them to reach a wider audience. This involves identifying high-demand products, purchasing from a reliable supplier, and selling them on popular e-commerce platforms like Amazon, eBay, and Etsy.

Get involved in flea market flipping. Hunt for undervalued items at yard sales or flea markets and resell online. Facebook Marketplace could be a goldmine.
Unload used or vintage items. These platforms can help you earn huge profits, especially from expensive items. Don’t let seller fees deter you; big profits are still achievable.
Books are an easy sell. Buy used ones from local or online stores and sell them in different areas or on different platforms. Diversifying the categories you offer can potentially boost your profits.

Pricing is set considering the purchase cost, overheads, and the competitive market.

17. Invest in Collectibles

Investing in collectibles presents a thrilling opportunity to generate significant profit in a short span. The key is identifying profitable niches, such as vintage comic books, rare coins, or baseball cards.

The rarity and condition of an item directly influence the price it can command.

The strategy involves buying low, often from garage sales or online platforms like eBay or Etsy, and selling high. However, one must perform diligent research and be aware of market trends, as failure to do so can lead to risks.

18. Get Rid of Your Most Valuable Items

Selling your own possessions is an effective way to declutter your home while also generating a potential cash flow.

This is one way to accumulate over $1,000 in cash earnings.

This may not be what you want to do, but your possessions are worth money and it may be necessary.

19. Save Money and Increase It

You’ve heard it said: a penny saved is a penny earned. This principle isn’t just about saving but also growing your money as an effective way to double your income.

Here’s how:

First, begin with saving. The more you can put away, the better. Remember, your coffee can strategy may not earn interest, so consider a deposit into a savings account.
Next, let’s talk about compound interest. Suppose you invest $1000 at a 5% interest rate. After a year, your money grows to $1050. The next year, you earn interest on this increased amount. Over time, the effect snowballs, significantly augmenting your investment.
Lastly, protection against inflation is key. Always aim for an interest rate higher than the rate of inflation. This means, in real terms, your money is consistently growing.

Done right, these steps can effectively increase your savings rapidly.

Raisin

Simply select one of the high-yield savings products offered by their network of federally insured banks and credit unions to begin your savings journey.

You can open a free Raisin account in just a few minutes!

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20. Game or Bet on A Sport

While it’s often overlooked, betting on sports or games could be a fast track to doubling your money in less than a day. This risky Vegas plan may be worth the potentially rewarding pursuit.

Beware – while some have been successful, this method is heavily debated due to the significant risk factors. As such you may be better off becoming a referee for youth sports, which is a popular side hustle for men.

Remember, it’s all fun and games until the cash is lost – don’t stake what you can’t afford to lose.

FAQ

Doubling $1,000 quickly calls for some calculated risks and smart choices.

One way is investing in stocks, potentially high-return yet high-risk assets. Another route could be starting a side hustle, like an online course or freelance work, where initial investment is low but returns could be impressive.

This is a hard ask given many people this month. However, doubling $3000 fast can be achieved through smart investments and income diversification.

Using online platforms and flipping high-demand items may yield quick profits. Additionally, utilizing skills for a freelance portfolio or selling an online course can quickly boost initial capital.

Doubling your $5000 swiftly may seem like a daunting task, but with strategic planning, connection establishment, and careful investments, it’s more achievable than you might think.

Here’s how you can try it:

Start by investing in stocks. Rapid-growth stocks or volatile currency pairs can double your money. Invest wisely based on market analyses.
Try real estate flipping. Buy undervalued properties, renovate, then sell.
Entrepreneurship is another avenue. Turn your skills or ideas into a profitable business.
Peer-to-peer lending platforms yield high return rates with the right borrower.
Playing the lottery or gambling could work, but highly risky.

Remember, to double up money quickly, ensure you are knowledgeable in your chosen method and anticipate potential downsides. Do comprehensive research first.

Is Doubling Money in 24 Hours Possible?

Yes, you, dear reader, can indeed double your money in 24 hours! It won’t be a cakewalk though, requiring specific skills, solid strategies, and of course a pinch – maybe a handful – of luck.

You could tap into high-growth potential fields like day trading, selling high-demand goods online, or capitalizing on your skills as a content creator. Remember, this quick win has its fair share of risks too.

Now, make sure to do proper due diligence and check the integrity of whatever way you choose to make more or dive into the gig economy.

Now, learn how to double 10k quickly.

Source

Federal Reserve Bank of St. Louis. “Fast Cash and Payday Loans.” https://research.stlouisfed.org/publications/page1-econ/2019/04/10/fast-cash-and-payday-loans#:~:text=However%2C%207%20of%2010%20borrowers,difficulty%20meeting%20basic%20monthly%20expenses. Accessed November 7, 2023.
Motley Fool. “1 in 5 Americans Are Making a Terrible 401(k) Mistake.” https://www.fool.com/investing/2018/02/09/1-in-5-americans-are-making-a-terrible-401k-mistak.aspx. Accessed November 7, 2023.

Did the post resonate with you?

More importantly, did I answer the questions you have about this topic? Let me know in the comments if I can help in some other way!

Your comments are not just welcomed; they’re an integral part of our community. Let’s continue the conversation and explore how these ideas align with your journey towards Money Bliss.

Source: moneybliss.org

Apache is functioning normally

November 3, 2023 by Brett Tams

How much wealth could you have by maxing out retirement accounts? We show you the numbers.

Everywhere you look, experts are telling you to contribute to your retirement accounts. Whether it’s advice from newspapers, blogs, financial planners, or friends, any advice that is worth taking must include planning for retirement. Why? Because it’s that important!

Over time, setting aside a small portion of your monthly income can mean the difference between living a comfortable retirement and not being able to retire at all. But how much should you put away?

One of the most common rules of thumb is to stick 10% of your income into a retirement account. If you have a work-sponsored plan, like a 401(k), you should always invest enough to at least meet your company match. But again, these numbers are a bare minimum for retirement savings. Why not save more if you can?

While the advice to save for your retirement is certainly sound, few people actually consider what saving more could mean for their future. Why stop at saving 10%? Why not save 15-20%? Heck, what would happen if you got really aggressive? How rich could you be if you actually maxed out your retirement accounts each year? Let’s take a look.

2024 IRS Contribution Limits for 401(k) Plans and IRAs

Every few years, the Internal Revenue Service adjusts the total amount of money that you are allowed to place into your retirement accounts. Contribution limits are going up in 2024, increasing to $23,000 for 401(k) and other workplace retirement plans and $7,000 for IRA and Roth IRA accounts. In addition, the IRS allows taxpayers who are 50 and older to make “catch-up” contributions. In 2024, these allow an additional $7,500 contribution for 401(k) plans and $1,000 for IRAs. We can expect these limits to increase in the future, although it is not certain when that will happen.

Our Assumptions

That being said, we need to make a few assumptions in order to calculate the amount of wealth we can build by maxing out our retirement plans. To begin, we’ll assume that we’re going to be making regular contributions only, so we will not be adding additional money for “catch-up” contributions.

Additionally, we’ll make all of our calculations based on the current contribution limits — $23,000 for 401(k) plans and $7,000 for IRAs. Again, if history repeats itself, those limits will be increased in the future. (We won’t account for that here, though.) Furthermore, we’ll assume that our investments will compound on an annual basis. And, finally, we’ll assume a very conservative growth rate of 5%.

Maxing Out Your 401(k)

Using a free compound interest calculator, let’s take a look at 401(k) plans. First, let’s assume that you are currently saving $4,000 a year in your plan and have been doing so since you were 25 years old. Based on our current set of assumptions, you would end up with just over $500,000 in your retirement account at age 65. Not bad, right?

And had you started saving this much at age 20, you would end up with $670,740 by the time 65 rolled around. Better yet, if you can stick it out for just 5 more years, you’ll end up with $879,261 over a 50-year time period. As you can see, compound interest plays a huge role, especially over the last few years.

Related: The Power of Compound Interest

But, what if you get really aggressive? What if you take a page out of the extreme early retirement book, cut your spending to the bone, and max out your 401(k) account? Here’s what you’ll save:

After 10 Years – $303,756
After 20 Years – $798,542
After 30 Years – $1,604,498
After 40 Years – $2,917,314
After 50 Years – $5,055,754

Amazing, right? By maxing out your 401(k), you could save about $300,000 more in 20 years than you would have saved in 40 with just a $4,000 a month contribution. You’ll have over $5 million more over a 50-year period.

Maxing Out Your IRA

Of course, maxing out a 401(k) plan can seem totally out of reach for most individuals. It’s much more feasible for someone to max out their IRA plan at $7,000 per year. If you did that, here’s an estimate of what you’d end up with:

After 10 Years – $92,447
After 20 Years – $243,034
After 30 Years – $488,325
After 40 Years – $887,878
After 50 Years – $1,538,707

Again, you’ll notice the compound interest coming in strong toward the end. Your savings almost doubled over just the last 10 years. So, the longer you can hang in there, the better off your finances will be.

Maxing Out Both Your 401(k) and IRA Plans

Now, let’s imagine that you have done extremely well for yourself and are able to max out both your 401(k) plan and your IRA. How much wealth can you build then?

After 10 Years – $396,203
After 20 Years – $1,041,577
After 30 Years – $2,092,823
After 40 Years – $3,805,192
After 50 Years – $6,594,461

Obviously, this type of money should provide you with a wonderfully comfortable retirement.

The Takeaway

Remember, these numbers are all for individual investors. Married couples can combine their retirement savings to increase their wealth-building power. So, while saving $23,000 a year by yourself may not be within reach, it could be achievable as a household.

Rather than deflate or discourage you, hopefully, these numbers will motivate you to save as much as you can for as long as you can do it. The power of compounding interest is real, and you can make it work to your advantage. The more you are able to save, the better off you’ll be in retirement.

More so than anything else, these numbers should be a reminder that putting money away for retirement is a long-term proposition. The earlier you start saving, the more success you’ll have. You have to play the long game with your focus firmly set on the future. If you ride the ups and downs of the market, save until it hurts, and remember to be patient, you could end up being extremely wealthy in the end.

Greg Johnson is a writer and entrepreneur who leveraged his online business to quit his 9-5 job, spend more time with his family, and travel the world. As a money nerd, he focuses most of his writing on topics that relate to budgeting, frugality, and investing. With his wife Holly, Greg co-owns two websites: Club Thrifty [http://clubthrifty.com] and Travel Blue Book [http://travelbluebook.com]. Find him on Pinterest and Twitter @ClubThrifty.

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Source: doughroller.net

Apache is functioning normally

October 26, 2023 by Brett Tams

Lender	Loan Amount	APR Range	Term Lengths
LendingClub	$1,000-$40,000	9.57%-35.99%	3-5 years
SoFi	$5,000-$100,000	8.99%-25.81%	2-7 years
Best Egg	$2,000-$35,000	8.99%-35.99%	3-5 years
OneMain Financial	$1,500-$20,000	18.00%-35.99%	2-5 years
Avant	$2,000-$35,000	9.95%-35.99%	2-5 years
Upgrade	$1,000-$50,000	8.49%-35.99%	2-7 years

6 Alternative Ways to Get a Loan With No Credit

Here are some alternatives to no-credit-check loans that are ideal for individuals with little to no credit history.

Search for Lenders Who Take Alternative Credit Backgrounds Into Account

While credit history is typically used to assess a borrower’s risk, some banks will accept alternative data to determine your eligibility such as salary, rent, or utility payment history and bank statements. Remember that most lenders will only accept alternative data for smaller loans like credit cards, personal loans, and auto loans as opposed to larger loans like mortgages.

To find a lender that accepts alternative credit backgrounds, contact financial institutions in your area or apply for loans online. Make sure to have important documents such as bank statements, W-2s, tax returns, and rent payments readily available.

You can also opt to have alternative data reflected in your credit history. For example, you can sign up for a service that reports your rent and utility payments to the three credit bureaus. This is an excellent way to start building your credit.

Credit tip: You may have better luck if you consult with a lender face-to-face rather than over the phone.

Request a Payday Alternative Loan (PAL) Through Your Credit Union

Some credit unions offer payday alternative loans that are typically lower-cost substitutes to pricey payday loans. PALs are small loans granted in amounts ranging from $200 to $1,000, and they have a maximum APR of 28%. To qualify, you must have been a member of a credit union for at least one month.

Credit tip: You can research credit unions to join by visiting MyCreditUnion.gov.

Apply for a Secured Loan

Secured loans involve putting down a valuable asset as collateral. Assets typically used as collateral include cars, houses, or savings accounts. While these types of loans are beneficial because they have less strict credit history requirements, they are risky in the sense that you could potentially lose the asset you put down as collateral if you’re unable to pay the loan back.

Credit tip: Assess whether you can avoid losing the asset before putting it down as collateral.

Borrow Money From Your Retirement Account

If you have a 401(k) plan, you can take out a loan against your account. Most plans allow you to borrow up to 50% of your savings up to $50,000. Since you are essentially borrowing money from yourself, you won’t need to show credit history to take out a 401(k) loan.

While taking this route could cost you in investment earnings, it is generally a better option than other no-credit-check loans that charge high interest rates. Just make sure to repay the loan within five years to avoid paying taxes and penalties.

Credit tip: Avoid taking out a 401(k) loan if you plan on leaving the company, as you may have to pay it off right away.

Find a Trustworthy Cosigner

If you lack credit history, including a trustworthy family member or friend as a cosigner might help you secure a loan. For a cosigner to improve your chances of being approved, they need to have a good credit score and preferably a long credit history.

However, getting someone to agree to cosign may prove to be difficult, because if you miss payments or default, the cosigner’s own credit will be hurt. Note that this could strain your relationship with the cosigner if you get behind on payments.

Credit tip: If someone in your life agrees to cosign, consider scheduling a reminder to make payments on time.

Turn to a Family Member

If you’re in a position where you need money to cover an expense, consider asking a family member or close friend for a loan. While it might be tough to bring it up, this route can help you avoid getting stuck in a situation with a predatory lender.

Credit tip: When borrowing money from family, consider drafting up a contract to ensure everyone is on the same page about the loan amount, repayment timelines, and any interest that may be charged.

How to Get a Loan With No Credit FAQ

Below, we’ve answered some common questions regarding getting a loan with no credit.

Can I Get a Loan With No Credit?

Yes, it’s possible to get a loan with no credit, although it will be more difficult to get approved, and you may incur a higher interest rate.

What Loans Can I Get With No Credit?

Types of loans you can get with no credit include no-credit-check loans, secured loans, online loans, credit union loans, and family loans.

How Much Can I Borrow With No Credit?

The exact amount you can borrow with no credit will depend on the type of credit account you’re approved for. Remember that the higher your credit score, the more money you’ll be able to borrow.

What Is a Good Credit Score to Get a Loan?

While the exact credit score to get a loan varies, borrowers need a FICO® score of at least 670 to fall within the good credit score range.

How to Build Credit

Establishing credit from the ground up can seem daunting. Here are some ways to start building credit so you can get approved for loans more easily in the future:

Become an authorized user: Ask a trusted person in your life to add you as an authorized user to their credit card account so that you can establish credit history.
Apply for a secured credit card: A secured credit card is a type of beginner-friendly card that requires you to put down a refundable deposit. Since these cards pose less risk to the lender, they’re easier to get approved for when first establishing credit.
Report rent or utilities: While most companies don’t report to the credit bureaus, you can sign up for a rent and utility reporting service that reports these payments to build credit faster.
Apply for a credit-builder loan: A credit-builder loan is an installment loan specifically geared to individuals looking to build credit history. When you take out a credit builder loan, the borrowed funds are placed in a secure savings account or certificate of deposit (CD) and held as collateral until you repay the loan.

Ready to start building your credit? ExtraCredit® is a tool that provides complete credit coverage, including rent and utility reporting and other credit profile-building offers. Try it for free today.

Source: credit.com

Apache is functioning normally

September 27, 2023 by Brett Tams

But here’s the big takeaway: That money is yours, and those savings stay with you whenever you quit a job.

If you have less than $1,000 in your 401(k)

If your 401(k) has less than $1,000 when you quit a job, the IRS allows the plan administrator to automatically withdraw your money and send you a check, minus 20% in taxes, per the IRS.

You can also initiate a rollover: a direct transfer of your money from a 401(k) account to another tax-advantaged retirement account. (More on rollover deadlines and tax implications later.) The easiest way to roll over your money is to contact your 401(k) administrator and have them handle it.

Communicate your preferences quickly, though — if your 401(k) account has a low balance, most companies won’t delay closing the account and cutting you a check, according to CNBC.

If you have between $1,000 and $5,000 in your 401(k)

If your 401(k) has between $1,000 and $5,000 when you quit, your employer may move your money into an individual retirement account, or IRA, according to the IRS.

If you don’t have an IRA, some employers will automatically open an account for you and deposit your funds into the account. If you do have an IRA, you initiate the rollover by contacting your 401(k) administrator.

You can also withdraw your money, but you’ll pay 20% in federal income tax, as well as a 10% early withdrawal penalty (unless you’re at least 59 ½ years old), according to the IRS.

🤓Nerdy Tip

An IRA is a tax-advantaged retirement account that an individual typically sets up, unlike a 401(k) account, which an employer sets up.

If you have at least $5,000 in your 401(k)

If your 401(k) account has at least $5,000 when you quit a job, your employer isn’t allowed to move your money without your consent. What happens next is up to you. There are a few things you can do with your money, according to the investment advisor Vanguard:

Roll over your money into a new retirement account
Leave your money in your old 401(k)
Cash out your 401(k) — and potentially pay a 10% federal penalty tax

Let’s dig into those options.

Rolling your money into a new 401(k) or IRA

What is a rollover?

Reminder: A 401(k) rollover is the process of moving money from your 401(k) account into another retirement account.

So, say you’re leaving your job for a different position, and your new employer offers a 401(k) plan. You can roll over your old 401(k)’s funds into a new 401(k) account, if your new employer allows this, according to the IRS.

Or you can roll over your old 401(k) to an IRA. This type of account typically offers more investment options than a 401(k), says Christopher Manske, a certified financial planner and the president and founder of Manske Wealth Management in Houston.

“In your individual retirement account, you’re going to have a lot more flexibility to tailor the investments to the wide world of what’s available out there,” Manske says.

Whether you roll over your retirement savings into an IRA or new 401(k), moving your money to a single fund can make it easier to manage your money and keep track of your retirement savings.

That’s as opposed to simply keeping your old 401(k) open, which becomes one more account to manage. (We’ll dive into that option in a bit.)

How to roll over funds — and avoid tax missteps

If a rollover sounds like a solid option, contact the administrators of both your old 401(k) and the other retirement account — either your new 401(k) or an IRA. Tell them you’d like to roll over your funds.

They’ll collect information from you and initiate a direct rollover, which means one institution directly transfers funds to another institution, according to Fidelity.

This is as opposed to an indirect rollover, meaning your 401(k) plan administrator sends you a check, and you personally deposit the 401(k) funds into another retirement account. In that case, your plan administrator would likely withhold 20% of your 401(k) funds for taxes.

With this indirect rollover, you then have 60 days to deposit the complete 401(k) account balance — including the amount kept for taxes — into the new account. So to deposit the full amount, you would need to come up with the 20% portion yourself. Then you’d get a refund for that amount come tax time.

If you miss the 60-day deadline, you’d likely get penalized for early withdrawal and have to pay income taxes on the distribution, according to Capitalize, a 401(k) rollover resource.

One last important note: Whether you choose a direct or indirect rollover, if you move money from your old 401(k) account to a Roth IRA — a specific kind of IRA — you’ll have to pay income tax on that transfer, according to the IRS. (This doesn’t apply if you’re rolling over your funds from a Roth 401(k), though.)

Leaving your money in your old 401(k)

Another option? Do nothing.

Your 401(k) account isn’t going to disappear once you quit a job; that money will always be there. But once you leave the job that set up the 401(k) account, you can’t make any more deposits, per Vanguard.

While leaving your 401(k) on autopilot is the simplest option, it may not be in your best interest. Assuming you’ll continue investing in another account or have a new 401(k) at your next employer, it will be harder to track your finances in more places.

And some 401(k) plan providers may charge you fees if you’re no longer an active employee, according to Charles Schwab, the financial services firm.

“I can’t think of any pros of leaving it there,” Manske says. “You’re not really connected formally to that company anymore, so why would you keep your money there? They don’t have a reason to keep you happy.”

Cash out your 401(k) — which is rarely recommended

Yes, you can withdraw the cash from your 401(k) whenever you want. But there are significant downsides to this option.

Pulling out money from your 401(k) before retirement can trigger hefty taxes, says Joe Buhrmann, certified financial planner and senior financial planning consultant at Fidelity’s eMoney Advisor.

Any withdrawals from a 401(k) before you reach the age of 59 ½ are considered early withdrawals and are slapped with a 10% penalty tax, per the IRS. That’s in addition to federal income taxes and, depending on where you live, state income taxes.

“Hypothetically, on a $50,000 401(k), you might lose as much as $20,000 to taxes and penalties and be left with $30,000,” Buhrmann says.

If you urgently need cash, that might be a reason to withdraw some money from your 401(k). But doing so should be regarded as a last resort, Manske says.

There are other ways to get money quickly that don’t come with taxes and penalties, such as community loans, gig work, and more.

Buhrmann encourages individuals to not just consider the immediate losses that come with withdrawing your 401(k), but also the long-term earnings they’re missing out on.

“They’re not just having to pay some taxes and pay some penalties,” Manske says.

Source: nerdwallet.com

Apache is functioning normally

September 9, 2023 by Brett Tams

For many people, college is the first time they’re truly in charge of their own finances. While it’s often a challenge, creating and maintaining a savings account for students is a foundational lesson for building healthy financial habits that last a lifetime.

And saving money as a student has its short-term, practical benefits, too.

“Life throws a lot of expenses our way that are hard to plan for—like when your car suddenly refuses to start when you’re running late for class,” says Jacqueline DeMarco, a freelance writer specializing in personal finance content. “That’s why building out a solid emergency fund is something that every college student should prioritize.”

So, how can you save money as a student in college? These savings tips can help give you some monetary breathing room and a financially secure start in adulthood.

Can you make your bank accounts work for you?

First things first: Make sure you have a good place to keep your savings. That means finding a bank that’s convenient and offers the features and benefits that work best for you.

DeMarco notes that students may feel limited to banks available on or near campus.

“If they aren’t happy with their on-campus bank options, college students may find that an online bank is a better fit for them,” DeMarco says. “Not only do online-only banks offer all of their services digitally, they also tend to have lower fees and offer higher interest rates than banks with expensive brick-and-mortar locations to pay for.”

Whichever bank you choose, DeMarco says there are two accounts every new student should strongly consider opening: a checking account and a savings account.

Setting up both a savings account and a checking account can be done online within a few hours at the bank of your choice.

How can students save money?

Once you’ve set up your checking and saving accounts, it’s time to take the next step toward financial responsibility. One of the best ways to save money for students is by setting up a budget.

How much should a college student spend per month? To determine that, DeMarco recommends subtracting your monthly expenses (essentials like food, utility bills, etc.) from your monthly income (whether it’s from a part-time job, student loans, or money from a parent). Doing this simple math will help reveal how much you can safely spend each month on fun stuff like new clothes or going to the movies—after you’ve put aside a portion for your savings, of course.

Looking to add more wiggle room to your budget? Try these money-saving tips for students:

Shop at consignment and thrift stores

Consignment and thrift stores offer previously owned clothes and other items at a discount. The primary differences are that thrift stores tend to be nonprofit organizations, accept more donations, and are generally less selective in what they choose to sell. Consignment stores are often more selective about the donations they accept, and they pass a portion of the sale to the person who donated—or consigned—the product.

DeMarco notes that consignment stores are not only a smart option for saving money—they’re also a way for students to make extra money by selling unwanted items.

Buy used textbooks

Textbooks can cost students hundreds of dollars if they’re new. Instead of paying full price, consider buying or renting used textbooks. “Many college bookstores offer used options, and online platforms often provide affordable alternatives,” DeMarco says.

You might also be able to recoup some of the money you spent once you’ve finished a class by reselling your textbooks to a used bookstore or an online vendor. “Sometimes I could even sell a book for more than I bought it,” DeMarco says, referencing her time as a student. Cha-ching!

Think about meal planning

So busy with classes and assignments that you find spending money at vending machines for on-the-go snacks easier than planning ahead? Stop, shop, and save. Set aside a few hours each weekend to prepare all of your meals for the week to come. Or, if you live in a dorm, hoard some extra items from the dining hall so you’re ready when those late-night study session cravings inevitably strike.

“Planning meals in advance gives students the chance to make a shopping list and stick to it,” DeMarco says. “As a bonus, having their meals planned will make it easier to avoid the temptation to dine out after a long day of classes.”

Explore free activities

Who says you need to splurge to have a good time? There are plenty of ways to have fun without spending money. Chances are, multiple free activities are happening on and around your campus on any given night. You can look up event calendars online or keep an eye out for announcements. Groups and clubs are always looking for participants and potential new members, so you can bet they’ll be happy to have you. (Plus, a lot of these events have free food.)

Ask for student discounts

It’s common for stores on and off campus to offer student discounts. To reap the benefits, always keep your student ID in your wallet, purse, or cellphone case so you can flash it and save some money.

“You’d be surprised how many retailers, restaurants, theaters, and entertainment venues offer discounts specifically for students,” says DeMarco, who relied on student discounts to help build her professional wardrobe as she neared graduation. “Plenty of major mall brands offer these discounts.”

Get a cheap coffee maker

Relying on caffeine to get through those late-night study sessions—or just to get moving each morning? Save money on java by buying a coffee maker and becoming your own barista. DeMarco says that a cheap or used French press is easy to use and could save you hundreds of dollars over the course of a year.

Rethink the car

It can be tempting to bring a car to college—whether for grocery runs or the occasional road trip. But the costs of gas, maintenance, and parking can add up quickly, DeMarco says. So leaving that set of wheels at home is another way for students to save money. Most college campuses are great for biking and walking. And many also provide shuttle buses and rides to essential off-campus places like grocery stores—as well as safe rides at night.

Track your savings

As you put these ways for students to save money into practice, DeMarco suggests tracking their positive impact on your budget. That way, you can see how your small saving techniques can add up over time. There are even money-saving apps for students you can download to measure your progress.

Where should college students keep their savings?

As you’re finding new ways to trim your budget, where should you put the money you’ve set aside? DeMarco says you’ve got a few options to consider:

Rewards checking account

While there are better places for long-term savings, rewards checking accounts are a valuable tool for college students as they begin to manage their own finances. Certain online checking accounts will provide cash back rewards based on how much you spend. For example, the Discover^® Cashback Debit Account provides a 1% cash back bonus¹ as well as overdraft protection if you overdraw your account.

Checking accounts are an ideal place to keep your spending money, funds for paying bills, and income earnings from part-time jobs or side hustles since they allow you to access the cash you need at any time.

High-yield savings account

Starting a high-yield savings account, like the Discover Online Savings Account, in college can make a dramatically positive impact on the rest of your financial life.

DeMarco recommends a high-yield savings account for any money that students may not immediately need but still want to keep available. “That way, their savings can earn interest, but they can access those funds if needed,” she says.

Call it a sunny day fund—online savings with no monthly fees

Discover Bank, Member FDIC

And putting aside a set amount of money each month into a high-yield savings account can start earning you compound interest. Even depositing a small amount of savings while you’re in college can add up over the years to make a sizable stash down the line.

CD

CDs, or certificates of deposit—especially those with a longer maturity term—can provide a higher return than a savings account. Use CDs for savings that you don’t expect to need over the CD’s term. The term length for CDs can vary widely. For example, Discover Certificate of Deposit terms range between three months and 10 years, with competitive annual percentage yields.

“If a student has a solid chunk of savings they know they won’t touch for a while, they may want to consider keeping their money safe in a CD, where it’s guaranteed to experience growth,” DeMarco suggests.

Retirement account

If you’re ready to start preparing for the more distant future (always a good idea), you can start by contributing money to an IRA, or individual retirement account. While some college students wait until they have a full-time job that offers a 401(k) plan to begin saving for retirement, the sooner you can get a head start, the better.

Discover offers both IRA CDs and IRA savings accounts.

Why not start saving while in college?

There’s really no better time to start saving than in college. To make your savings dreams a reality, set goals at the start of each semester and check your progress periodically. Maybe even reward yourself (nothing too extravagant, of course) for staying on track. Something as small as the occasional special meal or an activity that doesn’t blow your budget can be a fun way to celebrate those financial milestones.

Saving money can also create some amazing memories with the new friends you’ll be making. Ramen might seem dull, but challenging friends to see who can come up with the best recipe using cheap instant noodles can spice up the fun.

College can be a wonderful experience. And weaving these saving tips into that experience can help build the foundation for a comfortable and secure financial future. Just think: It could all start with a high-yield savings account.

Articles may contain information from third parties. The inclusion of such information does not imply an affiliation with the bank or bank sponsorship, endorsement, or verification regarding the third-party or information.

¹ATM transactions, the purchase of money orders or other cash equivalents, cash over portions of point-of-sale transactions, Peer-to-Peer (P2P) payments (such as Apple Pay Cash), online sports betting and internet gambling transactions, and loan payments or account funding made with your debit card are not eligible for cash back rewards. In addition, purchases made using third-party payment accounts (services such as Venmo® and PayPal®, who also provide P2P payments) may not be eligible for cash back rewards. Apple Pay® is a trademark of Apple Inc. Venmo and PayPal are registered trademarks of PayPal, Inc. Samsung Pay is a registered trademark of Samsung Electronics Co., Ltd. Google, Google Pay, and Android are trademarks of Google LLC.

Source: discover.com

Apache is functioning normally

September 1, 2023 by Brett Tams

You have probably heard (multiple times) that saving money for your future is important, but do you know how much you are actually socking away? There’s a formula to calculate your own specific personal savings rate (aka the percentage of your after-tax dollars that you’re putting away).

It’s not too complex and can be a helpful tool to see how your money management is tracking. Find out how to calculate your savings rate here.

What Information is Included in the Savings Rate Formula?

The basic formula to calculate savings rate is:

Your savings / your after-tax income = your savings rate

Once you’ve calculated your savings rate, you can use it to:

• Review how you’re doing from month to month or year to year.

• See how your current spending habits are affecting your future goals and financial independence.

• Motivate yourself to do better with your savings.

• Compare your efforts to others.

You can gather up the numbers you need to determine your savings rate (which is sometimes referred to as a savings ratio) in just a few steps:

Step 1: Add Up Your Income for the Month

Your income streams might include, after taxes: your monthly salary, the money you earned from any side gigs or from selling homemade items online, or rental income if you’re renting out a room of your home to get extra funds. Don’t forget to include money you earned that’s automatically deducted from your pay and added to a retirement account, such as a 401(k) or a traditional or Roth IRA. And add in your employer’s matching retirement plan contributions, as well.

Recommended: 39 Ways to Earn Passive Income Streams

Step 2: Add Up the Money You Put into Savings Each Month

This is about what you’re saving for the long-term, not next week. So it would include the money that’s automatically coming out of your check for retirement savings, plus your employer’s matching contributions, along with any funds you’re putting into separate savings or brokerage accounts.

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

Step 3: Do the Math

Divide the total amount of your long-term savings (Step 2) by the total amount of your after-tax income (Step 1). Turn the number you get into a percentage (.10 is 10%, for example), and that’s your savings rate.

You may hear or see a few variations on what’s included in the calculation. Some people don’t include their employer’s 401(k) contributions in their calculations, for instance, and some might add in extra payments they’re putting toward the principal on a student loan or other debt. The point is to be consistent with what you do or don’t include from month to month.

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How About an Example?

Let’s use Jane, whose hypothetical after-tax Income every month is $4,500. She brings in another $500, after taxes, by renting the extra bedroom in her apartment to her cousin, for a total of $5,000 a month.

Jane’s employer doesn’t offer a 401(k) plan, but on her own, Jane puts $500 a month into a Roth IRA. And she always puts another $100 a month in an online savings account she has earmarked for long-term goals. Jane’s savings amount totals $600 a month.

Using the savings rate formula, that’s $600 / $5,000 = .12, which makes Jane’s personal monthly savings rate 12%.

Of course, everyone’s numbers may not be quite so straightforward. Couples, for instance, may have to consider two or more paychecks and, possibly, two or more retirement accounts. Some individuals work more than one job or earn income from multiple sources. Some might count their emergency fund as savings, and others don’t. But the idea is the same: An individual’s or a household’s savings rate measures how much disposable income (defined by the U.S. Bureau of Economic Analysis (BEA) as after-tax income) is being set aside for long-term savings and retirement.

Why Is Knowing Your Personal Savings Rate Important?

The BEA tracks the nation’s personal savings rate from month to month to monitor Americans’ financial health and better predict consumer behavior. And you can do much the same thing with your own savings rate.

By tracking your rate on a regular basis, you can assess how you’re doing in real-time. If you’re consistently falling short of the savings goals you’ve set for yourself, you can look at what behaviors might need changing or if you need to rework your budget. You also can use the information as an incentive to do better. And you might even find it’s a fun way to compete with others close to you, with the nation’s average personal savings rate, or just against yourself.

If you saved 8% in 2023, for example, could you bump that amount to 9% or 10% in 2024? What if you got an unexpected raise or bonus: Would you have the discipline to put that amount into your savings to keep your rate the same or improve it?

Knowing your savings rate can help you make those kinds of financial decisions.

💡 Quick Tip: Most savings accounts only earn a fraction of a percentage in interest. Not at SoFi. Our high-yield savings account can help you make meaningful progress towards your financial goals.

What’s a Good Savings Rate?

The average personal savings rate in the U.S. was about 4.03% in mid 2023, according to the Fed. But financial experts generally advise savers to stash away at least 10% of their income every month ($500 of a $5,000 monthly salary, for example). The popular 50/30/20 budget rule created by Sen. Elizabeth Warren suggests saving 20% of after-tax income.

If that seems extreme, it’s probably more useful to simply target a number you’re sure you can stick to monthly or annually. Just having a positive savings rate — anything above zero — can be a good starting point for building good fiscal habits and a nest egg. You can always make adjustments as you accomplish other financial goals, such as paying off student loans or credit card debt.

Isn’t Having a Good Budget Enough?

A personal budget can be a useful guide when it comes to reaching financial goals. And tracking your spending with a spreadsheet or an app can help you see where your dollars (and dimes) are actually going, as opposed to where you think they’re going—those two places might be very different.

Many people who make a budget include the amount they plan to put toward savings in their budget as a monthly expense. But that’s different from knowing your savings rate.

A savings rate provides a separate, wide-angle view of how much of what you make is going into savings. And that can help you further evaluate how you’re doing.

How Can Someone Improve Their Savings Rate?

The answer is simple: Spend less and save more.

Here are some steps that could help improve an individual’s or household’s savings rate.

Opening or Contributing More to a Retirement Account

One of the easiest ways to save more money can be to open a 401(k) or IRA, or to boost the amount that’s automatically deposited to an account you already have. After all, if you never see the money, you likely won’t be as tempted to spend it. And if you’re a long way from retirement, the money you invest should have lots of time to grow with compound interest. If your employer offers a 401(k) with a matching contribution, a goal might be to save as much as possible to maximize those funds.

Recommended: How an Employer 401(k) Match Works

Opening an Online Savings Account

If you’ve been saving s-l-o-w-l-y with a traditional type of savings account, it might be time to consider other options. Many online financial institutions, for example, offer higher interest rates for deposit accounts because they have lower overhead costs than brick-and-mortar banks, and they pass those savings on to their customers. Online accounts also may offer lower fees than traditional banks—or, in some cases, no fees.

Cut Back on Discretionary Spending

The thought of squeezing out additional dollars for savings each month might be daunting if you’re already on a tight budget. But even a little spending cut can go a long way toward nudging up your savings rate.

Let’s go back to our hypothetical saver, Jane, for an example. If Jane could manage to save just $50 more every month (or about $12 a week), she could increase her savings rate by a full percentage point — from 12% to 13%. That might mean getting takeout one less time every week. Or one less night out with the girls every month. Or maybe cutting back on streaming services she seldom uses.

Lowering Fixed Expenses

Lowering the bills that have to be paid every month can increase the amount of money that’s available for savings. That could include:

• Shopping for cheaper car insurance or a less expensive cell phone carrier

• Keeping your paid-off car for an extra year or two instead of jumping right back into another auto loan

• Refinancing to a lower interest rate on a mortgage or student loans

• Cutting the cord on cable

• Doing your own landscaping.

Ditching the Credit Card Debt

Yes, credit cards are convenient, and using your cards wisely can have a positive effect on your credit score. But the interest on credit cards is typically higher than for other types of borrowing, and it compounds, which means you could be paying interest on the interest charged on previous purchases.

If you’re carrying a balance from month to month and paying interest, you’re giving money to the credit card company that could be going into your savings account. Using a debt payoff strategy or consolidating your credit card debt with a personal loan could help you dump those credit card bills and get your savings back on track.

Putting Pay Raises Toward Savings, Not Spending

No one is suggesting that you should live ultra frugally like when you were scraping by in college or starting your career, but it might not hurt to hold on to some of those money-saving habits you had then. Otherwise, if your pay goes up and your savings stay static, your savings ratio is doomed to drop.

One last example using our hypothetical friend, Jane: If Jane got a $100-a-month raise (after taxes), but she continued putting $600 a month into savings, her savings rate would fall from 12% to just below 10%.

The Takeaway

Saving money might not be considered exciting by everyone, but the thought of being financially secure is pretty appealing. Think of your savings rate as a mirror you can hold up every month to see how you’re doing.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

Better banking is here with up to 4.50% APY on SoFi Checking and Savings.

Photo credit: iStock/fizkes

SoFi® Checking and Savings is offered through SoFi Bank, N.A. ©2023 SoFi Bank, N.A. All rights reserved. Member FDIC. Equal Housing Lender.

The SoFi Bank Debit Mastercard® is issued by SoFi Bank, N.A., pursuant to license by Mastercard International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.

SoFi members with direct deposit activity can earn 4.50% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.

SoFi members with Qualifying Deposits can earn 4.50% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.

SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.50% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.

SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.

Members without either Direct Deposit activity or Qualifying Deposits, as determined by SoFi Bank, during a 30-Day Evaluation Period and, if applicable, the grace period, will earn 1.20% APY on savings balances (including Vaults) and 0.50% APY on checking balances.

Interest rates are variable and subject to change at any time. These rates are current as of 8/9/2023. There is no minimum balance requirement. Additional information can be found at http://www.sofi.com/legal/banking-rate-sheet..

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Source: sofi.com

Apache is functioning normally

September 1, 2023 by Brett Tams

It’s not too complex and can be a helpful tool to see how your money management is tracking. Find out how to calculate your savings rate here.

What Information is Included in the Savings Rate Formula?

The basic formula to calculate savings rate is:

Your savings / your after-tax income = your savings rate

Once you’ve calculated your savings rate, you can use it to:

• Review how you’re doing from month to month or year to year.

• See how your current spending habits are affecting your future goals and financial independence.

• Motivate yourself to do better with your savings.

• Compare your efforts to others.

You can gather up the numbers you need to determine your savings rate (which is sometimes referred to as a savings ratio) in just a few steps:

Step 1: Add Up Your Income for the Month

Recommended: 39 Ways to Earn Passive Income Streams

Step 2: Add Up the Money You Put into Savings Each Month

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

Step 3: Do the Math

Ready for a Better Banking Experience?

Open a SoFi Checking and Savings Account and start earning up to 4.50% APY on your cash!

How About an Example?

Using the savings rate formula, that’s $600 / $5,000 = .12, which makes Jane’s personal monthly savings rate 12%.

Why Is Knowing Your Personal Savings Rate Important?

Knowing your savings rate can help you make those kinds of financial decisions.

What’s a Good Savings Rate?

Isn’t Having a Good Budget Enough?

Many people who make a budget include the amount they plan to put toward savings in their budget as a monthly expense. But that’s different from knowing your savings rate.

A savings rate provides a separate, wide-angle view of how much of what you make is going into savings. And that can help you further evaluate how you’re doing.

How Can Someone Improve Their Savings Rate?

The answer is simple: Spend less and save more.

Here are some steps that could help improve an individual’s or household’s savings rate.

Opening or Contributing More to a Retirement Account

Recommended: How an Employer 401(k) Match Works

Opening an Online Savings Account

Cut Back on Discretionary Spending

Lowering Fixed Expenses

Lowering the bills that have to be paid every month can increase the amount of money that’s available for savings. That could include:

• Shopping for cheaper car insurance or a less expensive cell phone carrier

• Keeping your paid-off car for an extra year or two instead of jumping right back into another auto loan

• Refinancing to a lower interest rate on a mortgage or student loans

• Cutting the cord on cable

• Doing your own landscaping.

Ditching the Credit Card Debt

Putting Pay Raises Toward Savings, Not Spending

The Takeaway

Better banking is here with up to 4.50% APY on SoFi Checking and Savings.

Photo credit: iStock/fizkes

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Source: sofi.com