SoFi IRA Review

SoFi gives you access to a certified financial planner for free, offers a free robo advisor and alternative investments. That said, I don't like SoFi's investment fees. Also known as expense ratios, this is the percentage of your assets that you pay for the privilege of investing in a mutual fund or exchange-traded fund (ETF). After opening a SoFi IRA account and digging into the details, I found too few of the highly diversified, ultra-low-cost investment options that are perfect for most long-term retirement savers. Many of SoFi’s mutual funds and ETFs charge steep expense ratios and other fees.

With ultra-cheap mutual funds and ETFs available at Vanguard, Fidelity and elsewhere, why spend more? These fees eat up your retirement savings year in and year out. If SoFi’s other perks prompt you to open a SoFi IRA, please make sure to find the lowest-cost investments available.

SoFi IRA pros & cons

Retirement account types

If you’re looking for a traditional, Roth or rollover IRA, SoFi’s got you. It even offers SEP IRAs for self-employed folks. If, however, your sitch is slightly more complex — you’ve got a kid who works so you want to open a custodial IRA, or you’ve inherited an IRA — then you’re better off with one of the bigger brokers.

SoFi doesn’t mention “spousal IRA” by name, but these types of IRAs are simply regular old traditional or Roth IRAs — there’s no specific “spousal IRA” account that you need to open, so in effect any broker that offers IRAs also offers spousal IRAs.

» Here’s how to decide between a Roth IRA vs. a traditional IRA.

SoFi IRA fees

While it’s positively wonderful that SoFi offers free access to financial planners, free stock, ETF and mutual fund trades, and a free robo advisor, some of its other IRA fees don’t look great next to the sea of $0s you’ll see at other brokers. For example, SoFi charges a $25 inactivity fee, a $20 account closure fee, and a $100 fee for a partial or full transfer of money out of SoFi. That’s no small beans.

Inactivity fee: If you’re looking for a set-it-and-forget-it IRA account, watch out for SoFi’s $25 inactivity fee. You must log into your account at least once every six months to avoid this super annoying fee. (No need to trade; simply log in on the website or app.)

Transfer in vs. transfer out fees: If you move $5,000 or more from another broker to SoFi, then SoFi will reimburse any outgoing transfer fee charged by the other broker, up to $75. That’s pretty cool. On the other hand, if you transfer money out of your SoFi account to a different broker, you’ll pay a $100 fee. So there’s that.

Paper statements: There’s a $5-per-paper-statement fee and a $2-per-paper-confirmation fee so make sure your email address is in good working order. You’ll be defaulted into e-delivery of documents, but if your email bounces those messages back, SoFi will mail you these documents on your dime(s).

Self-directed investment options

This is the area where, in digging into SoFi, I got a little squirmy. The good news: SoFi offers stocks, ETFs and mutual funds, all with no trading costs, and, if you want to try something different, they also have alternative investments, such as private credit, private real estate and pre-IPO offers.

The less-good news: SoFi in general doesn’t offer the highly diversified, ultra-low-cost ETFs and mutual funds you’re going to find at other brokers, such as Fidelity, Charles Schwab or Vanguard.

A brief word on fees: As investors, we can’t control which direction the stock market goes on any given day. What can we control? Fees. The price of the fees we pay is absolutely up to us, and that’s a wonderful thing when so much of the “saving for retirement” goal can feel uncertain and vague (see: I’m supposed to guess when I’m going to die to figure out how much to save?!).

As just one example, SoFi’s lineup of mutual funds includes the BlackRock Health Sciences Opportunities (SHSAX) fund, which has a front-end load of 5.25% (a fee you pay when buying into the fund), a back-end load of 1% (a fee you pay when you exit the fund) and an expense ratio of 1.09%! Outrageous. You don’t need this fund to diversify your IRA holdings.

» More on expense ratios: Read about what it costs to open an IRA.

For comparison’s sake: Vanguard offers a total stock market index fund with no front- or back-end load and an expense ratio of 0.04%. Even ignoring the front- and back-end loads of the BlackRock fund, the ongoing expense is $109 per $10,000, vs. $4 for the Vanguard fund. Obviously, these two funds have very different investing goals, so it’s not fair to compare them directly. My bad. It’s up to you to decide which is better for your retirement savings.

SoFi does offer some decent funds, such as Charles Schwab’s U.S. large-cap growth fund (SWLGX), which has no front- or back-end loads and charges a 0.35% net expense ratio. I’d still argue you don’t need to pay $35 per $10,000 when you can find so many funds elsewhere that are much cheaper.

SoFi also offers its own proprietary ETFs (which a good portion of your money will be invested in if you sign up for SoFi’s automated investing tool; more on that below). The thing is, you don’t need to pay 0.19% for SoFi’s Select 500 ETF when you can buy a Vanguard S&P 500 ETF for 0.03%.

I know that both of those fees sound vanishingly small, but they are not the same. On a $25,000 investment, that’s $47.50 vs. $7.50 every single year. The only reason to buy that SoFi ETF instead of the Vanguard one is if you believe that SoFi’s slightly different weighting methodology will outperform Vanguard’s index approach. I, for one, don’t know. Fees are in our control; performance, not so much.

And some of SoFi’s ETFs have expense ratios of 0.59%. Shaking my head over here. (Note: Some of SoFi’s ETFs have fee waivers in place, but those have expiration dates.)

IPO investing: With SoFi’s IPO investing offering, you can get access to a company’s shares before they’re traded publicly, with no account minimum required. But if you’re thinking this is your opportunity to buy shares pre-IPO and then quickly dump them immediately after the IPO? First, I salute you, because that would be a great way to make some money before the shares tank, as they often do after the initial IPO boost. But if you sell your IPO shares within 30 days, SoFi will bar you from future IPO purchases for 180 days. Do it again, they’ll bar you for a year. Third time’s a charm: You’re no longer allowed to buy IPOs through SoFi.

Oh, also this: The website says that “SoFi may charge a fee for the sales of securities obtained through the IPO process if the sales take place prior to the 120th day of trading.” So, yes, you might be able to get a company’s shares nice and cheap pre-IPO, but your plan should be to hold those shares for at least a few months.

Managed investment options

SoFi’s robo advisor — SoFi automated investing — has its pros and cons. The biggest advantage is that it’s free. The management fee is $0. That’s hard to beat. Plus, you can get started with as little as $1, and you can invest a lump sum or set up regular payments into the account.

However, the investment choices left a slightly bitter taste in my mouth. In addition to ETFs from other firms, SoFi will invest you in their proprietary ETFs. While many of those currently have a fee waiver in place, the waivers are set to end. At which point, you’d be a lot better off invested in lower-cost ETFs, especially if you plan to leave your money sitting for a long time (we’re talking IRAs so that’s the general idea, right?).

Another red flag: When I opened a SoFi robo advisor account, the risk tolerance quiz was nerve-wrackingly brief. It asked for my primary goal (e.g., retirement), my time horizon, and then to choose between these two options: “maximizing gains with higher chances of loss” or “minimizing losses with lower potential gains.” That’s it. That’s the risk tolerance quiz.

I answered “saving for retirement,” “10+ years” and “maximizing gains,” and SoFi suggested a 100% stock portfolio for me. That works OK for me, but for sure there are people who would provide the same responses as I did, and then be horrified to watch their account value get absolutely decimated in the next market downturn.

Next, the website offered up a link to an “IRA calculator” to figure out which IRA account type would be best for me. Only problem is, that calculator link actually goes to an article with the headline “Important Retirement Contribution Limits.” At this point in the process, I’m not really interested in reading a story. I’d like a calculator that helps me decide the best account type for me.

Retirement planning tools

SoFi is no Fidelity or Schwab, both of which offer a slew of retirement planning tools. SoFi has plenty of easy-to-digest “learn” content on a variety of personal finance topics, but I couldn’t find one calculator or even worksheet. It’s all about the reading.

Retirement calculator: There isn’t one. There is a link that says “retirement calculator,” but it goes to an article, not to a calculator. Not a great experience, SoFi.

Link accounts to get the big picture. If you like to see all your info in one place, and who doesn’t?, SoFi lets you link other investment and financial accounts from other companies so you can monitor your total savings and investments. If you own a home, you can plug in the address so its value is included in your overall holdings. You can even enter your car’s make and model and the SoFi app will tell you its trade-in and private-sale values. Of course, SoFi wants to sell you things, including insurance, personal loans and more, so they like seeing your complete picture, too.

Free financial planners. To my mind, the most valuable tool SoFi offers is free access to financial planners (specifically, certified financial planners), who are fiduciaries and aren’t on commission. Keep in mind that this is a somewhat limited service. SoFi’s regulatory disclosure says: “...the client may engage with a financial planner in periodic sessions (by phone and email and video call) for up to 90 days. The objective of the session is to create a limited and targeted financial plan for a specific defined topic, such as managing the general household budget, insurance planning, debt management, retirement saving, college saving, home buying, or asset allocation & investment planning.”

Doing an IRA rollover with SoFi

Doing a rollover at SoFi is positively relaxing. They partner with another company, Capitalize, which promises to handle everything for you. That’s a nice perk, and it’s free. Capitalize even contacts the old plan on your behalf, which is arguably the hardest part of the process. And they promise to find any old workplace plans you may have forgotten about. The one small downside is you have to create a separate account with Capitalize, which is slightly annoying.

Bottom line

There’s a lot to love about SoFi, but if you’re looking for a simple, low-cost solution to save for retirement, I’d stick with one of the bigger brokers, e.g., Fidelity, Schwab or Vanguard. You’ll avoid the risk of investing in one of SoFi’s pricey investments, and you’ll have access to many more retirement planning tools and calculators.

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