Personal Finance
Current refi mortgage rates report for Dec. 1, 2025
The current average refinance rate on a 30-year, fixed-rate home loan is 6.27%, according to data from the popular real estate marketplace Zillow. If you’re a homeowner hoping to refinance your mortgage for a lower rate or perhaps to tap home equity, read on to see average refi interest rates for a variety of loan types and terms. You can also see the prior day’s report here.Check Out Our Daily Rates ReportsDiscover the highest high-yield savings rates, up to 5% for December 8, 2025.Discover the highest CD rates, up to 4.18% for December 8, 2025.Discover the current mortgage rates for December 8, 2025.Discover current refi mortgage rates report for December 8, 2025.Discover current ARM mortgage rates report for December 8, 2025.Discover the current price of gold for December 8, 2025.Discover the current price of silver for December 8, 2025.Current refi rates dataConventional mortgages30-year6.27%20-year6.53%15-year5.59%10-year5.75%Jumbo mortgages30-year7.13%15-year6.43%FHA loans30-year5.62%15-year5.63%VA loans30-year5.72%15-year5.68%Note thatFortunereviewed the most recent Zillow data available as of Nov. 28.How mortgage refinancing worksA mortgage refinance essentially pays off your existing home loan with a new one. Just like when you applied for a mortgage the first time around, you’ll need to apply and meet lender criteria regarding your credit profile, proof of income, your debt-to-income (DTI) ratio, and more. Note that this means your credit score will likely take a small hit due to the hard inquiry. And it also means if you don’t meet the lender’s requirements, you can be denied for a refi loan.What’s happening with mortgage rates in the market?Some observers hoped mortgage interest rates would fall in tandem cuts made by the Federal Reserve to the federal funds rate late last year. But, that didn’t happen, and mortgage rates remained stubbornly near the 7% mark—looking at the nationwide average for 30-year, fixed-rate loans—for months.Rates have remained well above the pandemic-era lows, when some homeowners snagged loans with rates in the 2% and 3% range. Many remain locked in, unwilling to move or refinance in the current environment. A report from Redfin showed that as of the third quarter of 2024, 82.8% of homeowners with a mortgage had a rate below 6%.Still, homeowners finally started getting some relief in late August and early September of 2025, when mortgage rates started trending noticeably downward ahead of the Fed’s Sept. 16-17 meeting—at which the central bank delivered the year’s first rate cut. The Fed followed up with a second cut to the federal funds rate at the end of October, as well.When it might make sense to refinance your mortgageAs we’ll cover more in the next section, it’s not free to refi your home loan. So, when does it make sense to accept the upfront costs and refinance? One common guideline is that if you can get a new rate that’s a full percentage point lower than your current rate, it’s worth refinancing. Using recent market conditions as an example, someone who took out a home loan at 7% might find it worth their while to refinance if rates drop and they can get a new loan with a 6% rate.It may also be worth refinancing to tap your home equity through a cash-out refi. Note that you’ll typically need to have at least 20% equity in your home for this. So, if you purchased the place with the 5% minimum down payment—or 3% for first-time homebuyers—typically available on conventional loans, it could take a while before you’re eligible for a cash-out refi.Yet another situation where you might benefit from refinancing is to change your loan term. For example, maybe you took out a 15-year mortgage intending to save on interest charges in the long run in exchange for higher monthly payments. But life is unpredictable, and maybe you’ve decided the monthly payments are spreading your budget too thin. Refinancing to a 30-year loan may offer the flexibility to make smaller monthly payments that fit your budget better.There are also cases where it can make sense to switch loan types. If you have an FHA loan with a lifetime requirement to pay mortgage insurance, for instance, refinancing so you can change your mortgage to a conventional loan could provide an opportunity to ditch that insurance cost (called MIP on an FHA loan or PMI on a conventional). Or, if you initially took out an adjustable-rate mortgage (ARM) and you’ve realized you intend to keep the loan for a significant number of years, refinancing to switch to a fixed-rate mortgage might be a smart way to avoid rate hikes when your ARM’s adjustment period kicks in.Costs to refinance your mortgageMuch like a traditional home loan taken out to purchase a property, refinancing a mortgage involves closing costs that run about 2% to 6% of the loan amount. For instance, if you do a rate-and-term refi on a $300,000 loan, you might pay anywhere from $6,000 to $18,000 in refi closing costs. Here are some of the costs you might see on your refinance loan estimate:Lender origination fees.Appraisal fees.Title search and insurance fees.Loan application fees.Survey fees.Attorney fees (if required in your state).Recording fees.Prepayment penalties (if your current loan servicer charges one).Different types of mortgage refi loansThere are a wide variety of mortgage refinance loans on the market, and the right one for your needs will depend on what you’re aiming to accomplish and what type of mortgage you currently have. Here are some common refi options:Rate-and-term refinance:This is the most popular refi option that allows you to lower your interest rate and/or shorten your loan term. While shortening your loan term does typically earn you a lower rate and hefty lifetime interest savings, you’ll be locked into higher monthly mortgage payments.Cash-out refinance:With a cash-out refi, you can tap your home’s equity by replacing your existing loan balance with a new, larger one and withdraw the difference in cash. You can use the money for home improvements, consolidating high-interest debt or other financial goals.No-closing-cost refinance:With this option, your lender covers your closing costs in exchange for charging you a higher interest rate. If you don’t have cash upfront for closing costs and could otherwise benefit from a refinance, this option may be worth looking into.Streamline refinance:Available to existing FHA, VA and USDA loan borrowers, these refi options involve less documentation and a more straightforward application and approval process.Refinancing with your existing lender vs. a new oneThere’s no requirement that you refinance with the same lender you got your original mortgage from. Thus, it’s worth shopping around for the lowest rate and best service you can find. However, some lenders may offer incentives if you stick with them, such as waiving a portion of the closing costs. Since these charges can be an expensive upfront cost, it’s worth checking with your existing lender about incentives—as that might reduce the barrier to refinancing and allow you to refi more easily than you’d otherwise be able to. Finally, know that if your mortgage was purchased by Fannie Mae or Freddie Mac, you might be eligible for programs such as Refi Now and Refi Possible.Fortune Brainstorm AIreturns to San Francisco Dec. 8–9 to convene the smartest people we know—technologists, entrepreneurs, Fortune Global 500 executives, investors, policymakers, and the brilliant minds in between—to explore and interrogate the most pressing questions about AI at another pivotal moment. Register here.
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Rocket Mortgage review 2025
Rocket Mortgage is a popular mortgage lender thanks in large part to its generally excellent customer satisfaction and its variety of discount and assistance programs. However, it may not be right for buyers who need an exceptionally fast closing or who are seeking a specialty type of home loan, such as a USDA loan or a home equity line of credit (HELOC).Here’s a look at what Rocket Mortgage has to offer.Lender details checked Nov. 21, 2025 and subject to change.Rocket MortgageTrustpilot Rating4.6 out of 5Trustpilot Reviews38,411Loan origination volume as of July 31$29.1 billionView offerat Rocket MortgageCompany insightsYear Founded: 1985Company Headquarters: Detroit, MICEO: Jay BrayFortune Rankings#619on the 2025 Fortune 500 list#28on Fortune’s 2025 100 Best Companies to Work For list#29on Fortune’s 2024 Best Large Workplaces for Parents list#62on Fortune’s 2024 Best Large Workplaces for Women list#2on Fortune’s 2024 Best Large Workplaces in Real Estate list#92on Fortune’s 2024 Best Large Workplaces for Millennials list#2on Fortune’s 2023 Best Large Workplaces in Financial Services and Insurance listWho is Rocket Mortgage best for?With its nationwide popularity and strong customer reviews, Rocket Mortgage can be well worth considering for most homebuyers—particularly those who don’t mind a fully digital experience. Rocket Mortgage is an online lender with no physical locations.Rocket Mortgage also has options specifically meant for first-time homebuyers and lower-income borrowers, with several programs that can help customers in these situations to overcome common obstacles—such as a minimal down payment and limited credit history.Rocket may also be a good choice for those willing to limit their selection of real estate agents in exchange for a rate reduction or closing cost assistance. For example, when you use Redfin and Rocket Mortgage for your new home, you’ll get 1% off your mortgage rate for a year (up to $6,000 in savings).On the other hand, Rocket Mortgage is not a good choice for anyone needing a USDA loan or a home equity line of credit (HELOC) as it does not offer those. Also, its rates may be slightly above average in some cases, meaning those with great credit might be able to get a better deal elsewhere.Rocket Mortgage pros and consN/AProsStrong customer satisfaction ratingsConvenient online mortgage processDiscount programsTypically offers prequalification with soft credit inquiryConsNo USDA loans or HELOCsNo physical locationsRates may be higher than some competitors (though this will vary by customer)Rocket Mortgage home loan optionsRocket Mortgage has a wide selection of mortgage options to suit the needs of many financial situations. Here are some borrower profiles and related loan options you can get through Rocket Mortgage.Lender details checked Nov. 21, 2025.Affordable payments30-year mortgagesAmerican homebuyers overwhelmingly prefer 30-year mortgages over shorter terms. Though you end up paying more interest over the life of the loan, the longer repayment term can help keep your monthly mortgage payments lower. Rocket Mortgage offers 30-year, conventional loans that borrowers with good-to-excellent credit may find suit them well. Baseline criteria you’ll want to meet to apply for this type of loan include:A down payment of at least 3% A credit score of 620 or higher0 (usually)A debt-to-income ratio of less than 50%If you want to pay off your mortgage before the full 30-year term is up, Rocket Mortgage doesn’t charge an early payment penalty.HomeReady and Home PossibleHomeReady and Home Possible loans, programs through Fannie Mae and Freddie Mac, respectively, are designed for low- to moderate-income borrowers. They are 30-year conventional fixed mortgages that make home buying more accessible with features such as:Low down payment requirements (3% rather than the typical 5%)The potential to receive a credit toward your down payment or reduced closing costsRelaxed restrictions for down payment sourcesLower private mortgage insurance (required with down payments under 20%) costsYou’ll need a credit score of 620 and above and what Rocket refers to as a “manageable” debt-to-income ratio to qualify.Interest savings15-year mortgagesIn contrast with a 30-year mortgage, a 15-year mortgage will come with considerably higher monthly payments for the same home—but if you can swing it, you’ll likely save tens of thousands (possibly even hundreds of thousands) of dollars in interest over the life of your loan.Rocket Mortgage’s 15-year fixed home loans require:A down payment of at least 3%A credit profile above 620A debt-to-income ratio of less than 50%Adjustable-rate mortgagesMost borrowers prefer fixed-rate mortgages, where the interest rate stays the same for the life of the loan. By contrast, an adjustable-rate mortgage (ARM) may offer a low initial fixed rate during a specified period of time—but after that period the loan is subject to a rate that can change based on the market and other factors. Rocket Mortgage offers the following 30-year ARM structures: 5/1:A five-year fixed interest rate, followed by annual adjustment periods5/6:A five-year fixed interest rate, followed by adjustment periods every six months7/1:A seven-year fixed interest rate, followed by annual adjustment periods7/6:A seven-year fixed interest rate, followed by adjustment periods every six months10/1:A 10-year fixed interest rate, followed by annual adjustment periods10/6:A 10-year fixed interest rate, followed by adjustment periods every six monthsAgain, you’ll need a credit score of 620 and a debt-to-income ratio below 50% to qualify.Borrow cash from your equityHome equity loansRocket Mortgage offers home equity loans, which allow you to tap into your existing home equity without doing a cash-out refinance. Rocket Mortgage offers borrowers from $45,000 to $350,000. You’ll apply for a term length of 10 or 20 years.You can use the money for nearly any purpose, from debt consolidation to home renovations to large purchases. Just note that you won’t qualify if:You don’t have sufficient equity to take out at least $45,000Your credit score is below 680Your debt-to-income ratio is above 45%Before taking out a Rocket Mortgage home equity loan, consider that you’ll now be making two monthly payments: your mortgage and your new loan. You’ll also pay closing costs.Bridge loanA bridge loan allows you to put equity from your current home toward a down payment of another home. This can be helpful for those who want to buy a house before their current one sells.Bridge loans may offer a less stressful selling process, as you can get settled in your new home and wait for a great offer on your old one to come along. It also prevents you from tacking a sale contingency onto your listing.Rocket Mortgage offers a six-month loan of up to $500,000 (depending on your equity). You’ll pay interest each month, and you can pay off the loan when your house sells.Less-than-perfect creditFHA loansA Federal Housing Administration (FHA) helps those with lower credit scores to buy a home. If your credit score is above 580 and your debt-to-income ratio is less than 57%, you may qualify for a 15- or 30-year mortgage. You’ll pay at least a 3.5% down payment. And in addition to closing costs, you’ll pay an initial mortgage insurance premium (MIP) of 1.75% (and an ongoing monthly MIP).If you think you might struggle to qualify for a conventional mortgage, this could be what you need to become a homeowner.Larger-than-normal home loanJumbo loansA jumbo loan is one that exceeds conforming loan limits set by the Federal Housing Finance Agency (FHFA).Rocket Mortgage offers jumbo conventional, FHA, and VA loans for up to $3 million. You’ll have to make a minimum down payment starting at just over 10% and will need a credit score of at least 680. You’ll also need a debt-to-income ratio of less than 45%.Military-specificVA loansVA loans, issued by private lenders and backed by the U.S. Department of Veterans Affairs, are exclusively for eligible U.S. military members and veterans, including surviving spouses. You can open a fixed-rate loan with a 15, 20, 25, or 30-year term. You can also open a 5-year ARM or a jumbo loan.No down payment is required for a VA loan, and you won’t be charged for private mortgage insurance (PMI). Plus, you don’t necessarily need a great credit score to qualify; a 580 or above credit score may be sufficient.Rocket Mortgage also recommends a debt-to-income ratio of less than 50%.RefinancingRocket Mortgage offers refinance loans to help you replace your current mortgage. You can refinance a conventional loan, FHA loan, VA loan, or jumbo loan. Rocket Mortgage also offers both 30-year- and 15-year refinances, including fixed-rate loans and ARMs.When refinancing, you can choose between a standard refinance or a cash-out refinance, which is when you borrow more than your current loan balance and take the rest out in cash. A standard refinance can be a good option if you simply want to lower your interest rate or monthly payment. But if you want cash for debt consolidation, home renovations, or some other purpose, then a cash-out refinance could be what you need.Does Rocket Mortgage offer discounts or assistance?One feature of Rocket Mortgage that really stands out from the competition is the number of different discount and assistance programs it offers. Whether you’re a low-income borrower or perhaps have only a small nest egg saved toward your down payment, Rocket Mortgage may have a program that can help make homeownership a reality for you.ONE+ by Rocket MortgageRocket Mortgage’s ONE+ program empowers qualifying low-income borrowers to get a 30-year conventional loan with less money down. If you fall under the income threshold and meet the other loan requirements, you’ll be required to put just 1% down on your loan. Rocket Mortgage will cover an additional 2% (or $2,000) of your down payment. Rocket’s contribution is capped at $7,000.To qualify, you must meet the following requirements:Your loan must be no more than $350,000You must have an income that falls at or below 80% of your Area Median Income (AMI)You must be purchasing a single-family home as your primary residenceHave a credit score of at least 620Have a debt-to-income ratio of less than 50%Of course, you’ll still pay closing costs for your loan.BorrowSmart by RocketThose with qualifying income who live in eligible states may qualify for the Freddie Mac BorrowSmart program through Rocket Mortgage. It offers a credit of up to $10,000 to help you with the down payment required for refinancing.HomeReady and Home Possible mortgagesIf you qualify for a HomeReady loan from Fannie Mae or a Home Possible loan from Freddie Mac, you may be able to buy a home with a lower down payment and more affordable PMI requirements than you first expected. Qualifying buyers may also be able to get a loan-level price adjustment (LLPA) credit of 1% of the loan amount up to $2,500 from Rocket. Rocket RentRewardsRentRewards is a program that helps you to transition from renter to owner. It offers 10% of your yearly rent (up to $5,000) as a credit on your closing costs. Let Rocket know how much you pay for rent, and you may be able to get the credit when purchasing a primary residence.Check Out Our Daily Rates ReportsDiscover the highest high-yield savings rates, up to 5% for December 8, 2025.Discover the highest CD rates, up to 4.18% for December 8, 2025.Discover the current mortgage rates for December 8, 2025.Discover current refi mortgage rates report for December 8, 2025.Discover current ARM mortgage rates report for December 8, 2025.Discover the current price of gold for December 8, 2025.Discover the current price of silver for December 8, 2025.How to apply for a home loan with Rocket MortgageIf you’re considering a mortgage from Rocket Mortgage, start by viewing its rates online and comparing them to those of other lenders on the market. Rocket Mortgage shares example rates on its website.You can also get a personalized rate based on your location, home price, and credit profile. Getting an estimated rate doesn’t affect your credit and is more accurate than looking at the rates listed on the lender’s website. You’ll have to enter some personal information, though.Once you’re actually ready to apply for your loan, here’s how to get started:Open the application.Click “Apply Now” in the upper right-hand corner of the Rocket Mortgage website.Complete the prequalification form.Rocket Mortgage will ask you a few questions about your financial situation, and then you’ll speak to a loan officer to find out how much you may be able to get approved for. This step should only require a soft credit inquiry, which won’t affect your credit score.Apply for your loan.If you’re happy with your prequalification from Rocket Mortgage, you can move on to the official application. This will require more in-depth information about your finances, as well as a hard inquiry on your credit report, which will affect your credit score.Provide additional information:During your application and underwriting process, a loan officer at Rocket Mortgage may request additional information to help make a decision about and close on your loan. Make sure to respond to these requests in a timely manner — this will help you close on your loan as quickly as possible.Is Rocket Mortgage reputable?In 2024, Rocket Mortgage was the second-highest-producing mortgage originator behind United Wholesale Mortgages, according to HousingWire.Rocket Mortgage also comes highly recommended by third-party companies. The lender scored first place first in J.D. Power’s 2025 U.S. Mortgage Servicer Satisfaction Study. It also landed in the top six in the 2024 U.S. Mortgage Origination Satisfaction Study. These rankings suggest that borrowers who choose Rocket Mortgage are pleased with their service.Rocket Mortgage has impressive reviews from past and current borrowers. It has 4.6/5 stars on Trustpilot. Out of more than 38,000 reviews, 82% of them have five-star ratings, and only 5% have one-star or two-star ratings.Alternatives to Rocket MortgageDespite its popularity, Rocket Mortgage won’t be right for everyone (nor is any lender, for that matter). It’s always important to shop around rate quotes to find the best deal. Here are a couple of other lenders to consider as alternatives to Rocket Mortgage.Rate Mortgage vs. Rocket MortgageLike Rocket Mortgage, Rate Mortgage is one of the top lenders in the country. It has many of the same loan types as Rocket Mortgage, with the added bonus of USDA loans, non-qualified mortgages, and HELOCs, which Rocket Mortgage doesn’t offer.Rate offers a convenient online mortgage process. It also offers a couple of other loan perks, including its same-day mortgage, which offers the chance for same-day approval and closing in as little as 10 days for select borrowers.It’s worth considering Rate if you want a fast approval process and closing or you want a loan option that Rocket Mortgage doesn’t offer.CrossCountry Mortgage vs. Rocket MortgageCrossCountry Mortgage ranked fourth in HousingWire’s top 25 mortgage lenders of 2024, just a few spots behind Rocket Mortgage. It offers a solid selection of loan types, including some that Rocket Mortgage doesn’t offer, including HELOCs, reverse mortgages, USDA loans, and non-qualified mortgages.CrossCountry Mortgage can also be a great option for first-time homebuyers to consider. It has several down payment assistance programs specifically aimed at helping first-time buyers with what is for many the single biggest challenge to purchasing a home. You could potentially get up to $5,250 in down payment assistance and closing costs without having to pay it back.Like Rate, CrossCountry Mortgage may also be a good option if you want a fast closing process. Its FastTrack Credit Approval program allows qualified customers to close on a home in as few as 10 days.Is Rocket Mortgage right for you?There’s no single mortgage lender that’s right for everyone, but Rocket Mortgage can be a good option for most borrowers, as made clear by its excellent customer satisfaction ratings and top ranking in the J.D. Power 2025 U.S. Mortgage Servicer Satisfaction Study..When you’re choosing a mortgage lender, whether it’s Rocket Mortgage or a different institution, it’s important to think about the type of loan you need—then you can seek out reputable lenders that offer that mortgage type. Make sure to shop around for rate quotes to find out if Rocket Mortgage can offer you the best rate.Rocket Mortgage may be an especially good option for borrowers who qualify for one of the many discount and assistance programs or those for whom customer satisfaction is a top priority.How we evaluated this mortgage lenderWhen evaluating Rocket Mortgage, we looked at features that are important to borrowers, including its variety of loan types, customer satisfaction, availability, and more. We looked closely at how accessible Rocket Mortgages loans are. For example, does it have loan offers for people of all credit and income levels, and does it offer any programs to make it easier for people to qualify for mortgages?Finally, we evaluated Rocket Mortgage’s borrower experience, from initially searching for interest rates to getting a personalized rate quote to ultimately applying for and closing on a loan.Frequently asked questionsWhat fees does Rocket Mortgage charge?Rocket Mortgage doesn’t disclose its exact loan fees, but it states that average closing costs range from 3% to 6% of the loan amount. Keep in mind that some of these are lender fees, while others are third-party fees.What credit score do I need to get a loan from Rocket Mortgage?You may be able to qualify for a FHA or VA loan from Rocket Mortgage with a credit score as low as 580, assuming you meet the other eligibility criteria. However, if you’re applying for a conventional loan, you’ll need a credit score of at least 620.Will applying for a mortgage with Rocket Mortgage hurt my credit score?Applying for a mortgage with Rocket Mortgage (or any lender) can temporarily lower your credit score. Applying for a mortgage results in a new hard inquiry on your credit report, which affects your credit score. However, if you’re shopping with multiple lenders, you can apply for multiple mortgages within a 45-day period, and they’ll all appear as one hard inquiry on your credit report, minimizing the impact on your credit score.How quickly can I get a home loan from Rocket Mortgage?The amount of time it takes to get a loan from Rocket Mortgage depends on several factors, including the complexity of your loan and financial situation and how responsive you are to the lender’s requests for additional information or documents. According to Rocket Mortgage’s website, the underwriting process typically takes between 30 and 45 days from start to finish.What types of support does Rocket Mortgage offer customers?Rocket Mortgage offers several different types of customer support, including telephone and online chat. Existing customers can speak to a representative at 800-603-1955 between 8:30 a.m. and 9 p.m. Eastern Time from Monday to Friday or between 9 a.m. and 4 p.m. Eastern Time on Saturdays.Borrowers shopping for loans can reach customer service at 888-452-8179 between 7 a.m. and 12 a.m. Eastern Time Monday through Friday, 9 a.m. to 8 p.m. Eastern Time on Saturdays, and 9 a.m. to 7 p.m. Eastern Time on Sundays.The chat feature is available on the Rocket Mortgage website, and while you start off talking to the AI assistant, you can be transferred to a customer service representative, often quickly.Fortune Brainstorm AIreturns to San Francisco Dec. 8–9 to convene the smartest people we know—technologists, entrepreneurs, Fortune Global 500 executives, investors, policymakers, and the brilliant minds in between—to explore and interrogate the most pressing questions about AI at another pivotal moment. Register here.
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I Make $150,000 in Southern California But It Feel Like I’m Drowning Financially
It should go without saying that no matter how much money you make, it’s perfectly reasonable to feel stressed out about finances these days. This is especially true if you feel like you make a good living but also live in a high-cost-of-living area that leaves you feeling house-poor. nextstayCCSettingsOffArabicChineseEnglishFrenchGermanHindiPortugueseSpanishFont ColorwhiteFont Opacity100%Font Size100%Font FamilyArialText ShadownoneBackground ColorblackBackground Opacity50%Window ColorblackWindow Opacity0%WhiteBlackRedGreenBlueYellowMagentaCyan100%75%50%25%200%175%150%125%100%75%50%ArialGeorgiaGaramondCourier NewTahomaTimes New RomanTrebuchet MSVerdanaNoneRaisedDepressedUniformDrop ShadowWhiteBlackRedGreenBlueYellowMagentaCyan100%75%50%25%0%WhiteBlackRedGreenBlueYellowMagentaCyan100%75%50%25%0%-->-->Key PointsThis Redditor lives in Southern California, one of the most expensive places in the country.The family’s combined $150,000 salary leaves them struggling to make ends meet.This family absolutely needs to establish a budget so they can properly account for every dollar they make and spend.It sounds nuts, but SoFi is giving new active invest users up to $1k in stock, see for yourself (Sponsor)-->-->This level of stress over bills is exactly what one Redditor is feeling, according to their post in r/MiddleClassFinance. Living in Southern California is already expensive, but they are worried about how they will continue to earn $150,000 and barely make everything work. $150,000 in Southern CaliforniaFor this Redditor with a family of four, earning $150,000 was already a struggle to live on, but adding a child in college has made everything significantly worse. Unfortunately, their child wasn’t eligible for any kind of financial aid due to the family’s household income, as per FAFSA rules, which means the already struggling budget is even more challenging. As for their overall budget breakdown, the family is paying $2,150 for their mortgage and utility bills, $180 for cell phones, $1,400 for both health and car insurance, spending an average of $800 per month on groceries, and approximately $200 per month on dining out. Now add to this $850 in car loans, $250 for gas every month, plus another $2,200 across 401(k), kids’ college expenses, property taxes, and sports activities, and it’s clear that this family is barely able to survive. Admittedly, the Redditor states that they don’t have a method for tracking spending, which is clearly an issue that needs to be addressed. However, their $1,800 mortgage is manageable, so there is some positive news here. Out of their $7,700 in monthly expenses, they are likely taking home around $8,400 after taxes.This means that their financial buffer after all expenses and savings is just $700, or around 5% of their gross income, so it’s understandable that the family is feeling stressed. Lifestyle Inflation At WorkHere’s the thing for this Redditor, and what is likely making them feel stressed, and it’s something called “lifestyle inflation.” Taking on the responsibility of paying for the kids’ college apartment at $800 for both rent and utilities, as well as other kids’ private lessons and two vehicle payments, all means this family has an inflated sense of what is affordable. If you subtract just some of these things, such as college rent, two vehicle payments, and kids’ activities, they would be at a far more comfortable 46% in fixed costs compared to 67%. Not only would this provide them with a greater financial buffer, but they would also be able to contribute more to a retirement fund. Start With Some Important StepsIn the case of this family and the Redditor, it’s pretty clear what needs to be done first, as the Redditor has already acknowledged: tracking their expenses. Whether it’s through an app on the computer or phone or on a piece of paper every month, this family needs to visualize every dollar coming in and going out to see where they stand. From here, cutting discretionary spending is the next move, but they won’t be able to do this, at least not smartly, without a budget in place. They already have a fairly reasonable mortgage payment, so refinancing isn’t feasible; however, additional financial aid options should be explored for the college student. Is there anything else available from the school that might be helpful? This Redditor’s child isn’t the only one in this position, as $150,000 in Southern California isn’t a huge salary, so someone else has likely explored other financial aid options. Perhaps most importantly, it is to try to figure out a way to lower the vehicle costs. At this point, this family should have two vehicles they own outright and are just paying insurance for each month. Being able to add 11% of their after-tax budget to the financial pot for retirement or an emergency fund will go a long way. Separately, has the family explored combining both home and vehicle insurance, and if so, is there a discount available that might bring down the cost? All of these things are worth exploring, and it still leaves the door open to look at alternatives like finding a less expensive cell phone carrier, like a prepaid brand, where 4 lines are only $100 instead of $180 for two years locked in. Want Up To $1,000? SoFi Is Giving New Active Invest Users up to $1k in StockLooking to grow your money but unsure where to begin? SoFi Active Invest is offering a limited-time promotion—open an account, fund it with $50 or more, and you could receive up to $1,000 in complimentary stock for Active Invest accounts.From $0 commission trading to fractional shares and automated investing, this app is designed to simplify investing for everyone, whether you’re just starting or already experienced. Its easy to sign up and secure your bonus.(sponsor)DISCLOSURE:INVESTMENTS ARE NOT FDIC INSURED • ARE NOT BANK GUARANTEED • MAY LOSE VALUEBrokerage and Active investing products offered through SoFi Securities LLC, member FINRA(www.finra.org)/SIPC(www.sipc.org).Advisory services are offered by SoFi Wealth LLC, an SEC-registered investment adviser. Information about SoFi Wealth’s advisory operations, services, and fees is set forth in SoFi Wealth’s current Form ADV Part 2 (Brochure), a copy of which is available upon request and at www.adviserinfo.sec.gov.Probability of Member receiving $1,000 is a probability of 0.026%; If you don’t make a selection in 30 days, you’ll no longer qualify for the promo. Customer must fund their account with a minimum of $50.00 to qualify.Other fees, such as exchange fees, may apply. Please view our fee disclosure to view a full listing of fees.Investing in alternative investments and/or strategies may not be suitable for all investors and involves unique risks, including the risk of loss. An investor should consider their individual circumstances and any investment information, such as a prospectus, prior to investing. Interval Funds are illiquid instruments, the ability to trade on your timeline may be restricted. Brokerage and Active investing products offered through SoFi Securities LLC, Member FINRA(www.finra.org) /SIPC(www.sipc.org).There are limitations with fractional shares to consider before investing. During market hours fractional share orders are transmitted immediately in the order received. There may be system delays from receipt of your order until execution and market conditions may adversely impact execution prices. Outside of market hours orders are received on a not held basis and will be aggregated for each security then executed in the morning trade window of the next business day at market open. Share will be delivered at an average price received for executing the securities through a single batched order. Fractional shares may not be transferred to another firm. Fractional shares will be sold when a transfer or closure request is initiated. Please consider that selling securities is a taxable event.Options involve risks, including substantial risk of loss and the possibility an investor may lose the entire investment Before trading options please review the Characteristics and Risks of Standardized Options [HYPERLINK: https://www.theocc.com/getmedia/a151a9ae-d784-4a15-bdeb-23a029f50b70/riskstoc.pdfInvesting in an Initial Public Offering (IPO) involves substantial risk, including the risk of loss. Further, there are a variety of risk factors to consider when investing in an IPO, including but not limited to, unproven management, significant debt, and lack of operating history. For a comprehensive discussion of these risks please refer to SoFi Securities’ IPO Risk Disclosure Statement [HYPERLINK https://www.sofi.com/iporisk/]. This should not be considered a recommendation to participate in IPOs and investors should carefully read the offering prospectus to determine whether an offering is consistent with their investment objectives, risk tolerance, and financial situation. New offerings generally have high demand and there are a limited number of shares available for distribution to participants. Many customers may not be allocated shares and share allocations may be significantly smaller than the shares requested in the customer’s initial offer (Indication of Interest). For more information on the allocation process please visit IPO Allocation [HYPERLINK https://support.sofi.com/hc/en-us/articles/360058602892-How-does-SoFi-allocate-IPO-shares].
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Why I’m Confused About Backdoor Roth IRAs and Traditional IRA Benefits
One of the most important decisions anyone has to make in achieving their financial goals is how to invest their money. This might sound like something you can decide in just a few minutes, but let this be a reminder that any decision now can have long-standing consequences, so you have to decide carefully what your first or next move is going to be. nextstayCCSettingsOffArabicChineseEnglishFrenchGermanHindiPortugueseSpanishFont ColorwhiteFont Opacity100%Font Size100%Font FamilyArialText ShadownoneBackground ColorblackBackground Opacity50%Window ColorblackWindow Opacity0%WhiteBlackRedGreenBlueYellowMagentaCyan100%75%50%25%200%175%150%125%100%75%50%ArialGeorgiaGaramondCourier NewTahomaTimes New RomanTrebuchet MSVerdanaNoneRaisedDepressedUniformDrop ShadowWhiteBlackRedGreenBlueYellowMagentaCyan100%75%50%25%0%WhiteBlackRedGreenBlueYellowMagentaCyan100%75%50%25%0%-->-->Key PointsThis Redditor is trying to understand the importance of the backdoor Roth account.They don’t quite understand how two things about Traditional IRAs and backdoor Roth accounts can be true.There is nothing that this Redditor can really do until they have a higher MAGI.Are you ahead, or behind on retirement? SmartAsset’s free tool can match you with a financial advisor in minutes to help you answer that today. Each advisor has been carefully vetted, and must act in your best interests. Don’t waste another minute; learn more here.(Sponsor)-->-->For one Redditor posting in r/personalfinance, there is a big question about how to navigate the backdoor Roth and IRA space, especially for someone with a slightly higher income. This backdoor Roth topic is an area where Reddit specializes in responses, so there is no question that this individual is going to get a few different answers. Why Should You Do a Backdoor Roth? In this Redditor’s case, they are understandably confused, which is fair, because the notion of a backdoor Roth might only be familiar to those who have really done their research. As a result, this individual understands that the purpose of this backdoor method is to get around the $0 Roth IRA contribution limit for high earners. This allows you to convert a traditional IRA into a Roth IRA, but they are taking this one step further and believe that it’s better to use the traditional IRA if you earn more. All of this is coming to a head because the Redditor believes that these two ideas cannot live together and are somewhat contradictory. In other words, if you make so much that you cannot contribute to a Roth IRA, why would you turn a traditional IRA into a Roth IRA if the traditional route tends to earn more? Ultimately, this Redditor knows that their MAGI isn’t yet high enough to contribute to a Roth, but they are thinking about the future, and good on them for doing so. Clearing the Air On ContributionsUnsurprisingly, a number of Redditors are jumping in here to make sure the original poster knows exactly what to do and how to understand everything that is taking place. One Redditor in the comments makes it straightforward by saying that there is only a small income window where a tax rate might be high enough to prefer a traditional over a Roth IRA plan. In this case, you need to be somewhere in the 22% tax bracket and under the $77,000 income limit. If you are someone who is in this income and tax window, the Redditor’s original thoughts might hold, but for everyone else, it’s not so simple. Alternatively, if you are someone who has an employee-sponsored retirement plan like a 401(k), you can’t deduct contributions to a Traditional IRA if your MAGI is high enough to meet the threshold limits. This is why someone would consider doing a backdoor Roth IRA, because it allows them to get around these tricky limitations. For this Redditor, the immediate advice is that they file jointly (husband and wife), contribute to a non-deductible Traditional IRA, and then convert it to a Roth IRA. They will only owe taxes on any investment gains during the time the money was in a Traditional IRA and not owe taxes on the original contribution amount. Other Important AdviceUltimately, what the Redditor needs to do if they want to keep this very clean is either follow the advice immediately above, or stay on their current path and work to max out their Traditional IRA as eligible, and take advantage of the tax benefits. After this, they should focus on watching their Modified Adjusted Gross Income (MAGI) and see when they will exceed the income limits for a Roth contribution. Of course, the best advice is really to work with a financial advisor, as these kinds of questions are something a fiduciary can help with. They can advise you on the benefits and downsides of a backdoor Roth IRA regarding tax-free growth in retirement. Finally, it’s super important to remember to keep all of your records of IRA contributions and any conversions for tax purposes. The last thing you want is to find yourself in a sticky position down the road because you went wrong somewhere and end up owing the government more. Get Ready To Retire (Sponsored)Start by taking a quick retirement quiz from SmartAsset that will match you with up to 3 financial advisors that serve your area and beyond in 5 minutes, or less.Each advisor has been vetted by SmartAsset and is held to a fiduciary standard to act in your best interests.Here’s how it works:1. Answer SmartAsset advisor match quiz2. Review your pre-screened matches at your leisure. Check out the advisors’ profiles.3. Speak with advisors at no cost to you. Have an introductory call on the phone or introduction in person and choose whom to work with in the future.