Make Investing Simple Whether you’re putting away your first $1,000 or have been saving for the future for years, you’re going to want to consider investing your funds at some point. Doing so will allow you to maximize returns and exponentially grow your savings. Unfortunately, the investment process can be pretty intimidating, especially if you are starting out on your own. It’s hard to know how to begin, where to invest, how to balance your portfolio and even what sort of fees you should expect to pay along the way. That’s where the convenience and ease of today’s best investment apps can come into play. [youmaylike] What are Investment Apps? Once upon a time, your only choice for investing was to pick up the phone and call your stock broker to initiate a trade. You were charged for the service, either based on commission or as a flat fee per transaction. While stock brokers are still an option, you can take investing into your own hands these days, without ever needing to talk to another human. And it’s all thanks to investment apps and platforms. Today’s apps offer a range of services and features. With them, users can: Research funds and individual stocks. View fees and expenses related to investment choices. Invest funds on the go, and even automate regular contributions. Automatically reinvest earnings on current investments. Adjust portfolio for personal risk tolerance. View performance projections. Choose funds or individual stocks that align with personal beliefs, through portfolios based on socially-responsible missions. The best part? Investing through trusted apps is usually cheaper and faster and you’ll have instant access to your portfolio/reports at any time of day. Not only that, but you’ll also be able to set your investment risk tolerance, rebalance your portfolio and even reinvest earnings automatically. Who are Investment Apps Designed For? Whether you’ve been playing the market for ages or are ready to invest your first $100, the right investment app is worth considering. For those new to the stock market, apps will simplify the process and put the power of investing at your fingertips… literally. From your phone or computer, you can easily see portfolio recommendations based on your own goals, savings plans and even risk tolerances. The right app will tell you upfront how much you can expect to spend in fees throughout the year, and can even allow you to automate many of the more confusing aspects, such as picking well-performing stocks or even rebalancing. While investment apps are ideal for beginners, newbies aren’t the only ones who will see the benefits. Even seasoned investors will find the process easy to use, and may even learn that these platforms can maximize returns (and save them money in fees) along the way. Not to mention, many investment apps offer additional insight into specific funds, so you can choose to invest in companies that align with your own passions and beliefs. Now that you know why you should consider using an investment app for your own savings, let’s take a look at some of the best ones available today. Best Investment Apps Great for Beginners: Acorns Fees and expenses: For investors with less than $1 million invested, fees are between $1-3 per month depending on the account option you choose. Acorns is also free for college students. Beginning investment requirement: At least $5 to start Types of investments available: ETFs (exchange-traded funds) Portfolio options: Conservative, Moderately Conservative, Moderate, Moderately Aggressive, Aggressive Automatic investing?: Yes Automatic reinvesting?: Yes Automatic rebalancing?: Yes If you want an easy, hands-off approach to investing that won’t leave your head spinning, Acorns is a great first choice. This app not only simplifies investing for beginners but allows investors to completely automate the process from start to finish. After connecting the app to your debit card, the app will “round up” each of your daily purchases, putting the savings into an investment holding account. Once you reach the minimum required, Acorns will invest this money on your behalf, based on your account preferences. The app will also reinvest your earnings, as well as rebalance your portfolio when necessary. Great for Truly Free Investing: Robinhood Fees and expenses: Robinhood is a free investment platform in every sense of the word, pledging to never charge company fees or commissions to customers. Beginning investment requirement: You’ll need $2,000 to get started. Types of investments available: ETFs, stocks, cryptocurrency and options. Portfolio options: Interest-based options such as Fashion ETF, Tech ETF and Energy ETF, as well as a standard S&P 500 ETF, all with personal risk tolerance settings. You’ll also find “collections,” which are individual stocks grouped according to specific interests — such as companies with female CEOs or that are in the social media sector. Automatic investing: No. Automatic reinvesting: No. Automatic rebalancing: Yes. A great option for beginners and experienced investors alike, Robinhood makes the process both easy and affordable. How affordable? Well, it’s entirely free. By offering a truly free experience, Robinhood saves investors some serious cash over time. Additionally, the platform makes it easy to choose individual stocks or ETFs based on personal interests. If you want to invest in cryptocurrency or options, you can also do so through Robinhood. One of the biggest limitations of the platform, though, is its automation. While you can set up automatic deposits into your account, you will need to manually invest those funds and then reinvest (or withdraw) your dividends. Stash Fees and expenses: $1 per month fee for those with less than $5,000 invested, or $2 per month for retirement accounts with less than $5,000. For users under 25, fees on retirement accounts are waived. If you have more than $5,000 invested, your fee will be 0.25% annually. Beginning investment requirement: You’ll need at least $5 to begin investing (fractional shares are available) Types of investments available: ETFs (exchange-traded funds) and fractional stock shares Portfolio options: Too many to name, ranging from things you Want (portfolios that are conservative to aggressive mixes), things you Believe (such as groups of companies that believe in clean energy, LGBT rights, etc.), and things you Like (tech, retail and social media companies). Automatic investing: Yes. Automatic reinvesting: No. Automatic rebalancing: No. The closest competitor to Acorns, Stash seeks to make investing easy for everyone, regardless of your goals and passions. They have three account options to choose from, allowing you to manage your investment and retirement accounts, or even a child’s education savings through custodial accounts. With Auto-Stash, you can set any number of automatic investment options and transfers. However, Stash will not rebalance your portfolio for you, nor will they reinvest dividends on your behalf. Wealthfront Fees and expenses: 0.25% annually. Beginning investment requirement: $500 minimum initial investment. Types of investments available: ETFs (exchange-traded funds), individual stocks, retirement accounts (401k, IRA), 529 savings plans and trusts. Portfolio options: 11 asset classes to choose from, including natural resources and real estate. Automatic investing: Yes. Automatic reinvesting: Yes. Automatic rebalancing: Yes. Wealthfront’s investment platform is designed to be friendly for users of all experience levels. If you’re a seasoned investor, you’ll enjoy all of the options available to you, including the ability to manage your retirement accounts, education savings and even non-profits or trusts. If you’re a newbie, their free financial expertise center is the perfect place to learn all about investing and your future. TD Ameritrade Fees and expenses: The managed, automatic portfolio investment option (called Essential Portfolios) is available with a 0.30% advisory fee. Beginning investment requirement: $5,000 minimum for managed portfolios (no minimum requirement for traditional trading). Types of investments available: Stocks, ETFs, options, mutual funds, futures, bonds/CDs, Forex and cryptocurrency. Portfolio options: Essential Portfolios (EP) offer investors a range of options from Conservative to Aggressive, based on your passions, preferences and tolerances. Automatic investing: Yes, with EP. Automatic reinvesting: Yes. Automatic rebalancing: Yes. A more traditional brokerage app, TD Ameritrade is one of the most recognizable names in the industry. You can easily educate yourself on all things financial, thanks to their free videos and posts. If you want a traditional experience, you can choose your trades and pay per transaction. Prefer a more streamlined, automated approach? Opt for their Essential Portfolios, a hands-off investment option (robo-advisor) that charges a flat monthly fee and requires little-to-no oversight from you. Plus, their app makes the investing process easier than ever with a user-friendly interface, price alerts and no minimum to get started. If you prefer a desktop experience, this is also available to you through TD Ameritrade. Bottom Line Getting started with investing can be intimidating. With all of the terminology and account options out there, it’s easy to want to run and hide. Thanks to some of today’s best investment apps, though, you can not only get started with your first portfolio but also watch your money quickly grow… no matter how much of a beginner you may be! It’s important to choose an app that offers you the portfolio options and features you want most, with fees and deposit minimums that match your financial needs. The five apps above are our favorites for beginners, making that first foray into investing easier than ever before. The hardest part will be choosing the one you love most!
Setting Yourself up for Retirement
Whether you’re 21 or 60, it’s important to know whether you are saving enough for your retirement. There is no time like the present to ensure you are allocating enough funds for your retirement account. With folks routinely living into their 80s and 90s, it’s more important than ever to ensure your money lasts your lifetime.
Millennials have the advantage of having time on their side. They can benefit from compounding and the long-term trends that can make a real difference over the course of several decades. But it’s never too late to improve your savings plan and your retirement prospects.
In this article we’ll answer the question, “How much money do I need to retire?” and more.
When Do People Retire?
According to Gallup, the percentage of Americans who expect to retire at age 66 or older has risen dramatically, from 21% in 2002 to 41% in 2018. People expect to live and work longer than ever, so it’s never been more important to know when to stop working and how to carefully plan for the big event.
For persons born in 1960 or later, the Social Security full retirement age is 67. You will receive 70% of your monthly benefit if you retire at age 62, and 86.7% at age 65. However, you’ll get the maximum monthly benefit if you wait until age 70. These milestones might be an important consideration if your Social Security benefit will be a sizable portion of your retirement income.
How Much Do You Need to Retire?
Experts often say your target annual income after retirement should be about 80% of your pre-retirement figure. That is, if you were making $100,000 a year at retirement, you’d want annual income of $80,000 in retirement. Naturally, Social Security might not get you there, which means you must supplement your resources with a retirement savings plan. The sooner you start saving for retirement, the easier it will be to attain your target.
For example, if you require $80,000 a year and think Social Security will provide about half, your retirement plan will need to supply the remaining $40,000 (assuming you don’t work during retirement). If you expect to live for 25 years following retirement, you would need $1 million in savings if you didn’t earn any return on your savings. Luckily, you can expect a return that reduces your savings target. However, you must also contend with inflation, which will eat into the value of your savings.
If you earn 4.5% on your retirement savings and inflation is 2.5%, you’ll earn a real return of 2% each year. In our example, an annuity calculator puts your retirement savings goal at $796,557. Using a future value calculator, you can figure how much to sock away each year to hit your goal. For example, if you start investing $6,000 a year for 30 years and earn a 9% annual return (the long-term return on stocks since 1926 is 10%), you will have $817,845 at retirement, more than enough to meet the example target. You can use the calculator to figure out your annual savings goal based on your age and expected annual return.
If all that seems too complicated, try using the 4% rule. Simply divide your required annual payment by 4% to get your target savings amount. In this example, a required annual income of $40,000 divided by 4% gives you a target of $1 million. That’s a little higher than the calculator amount, which means you have more breathing room if you earn less than the expected average annual return.
Which Retirement Plan Is Best?
Generally, the best retirement plan is one in which your employer can make contributions, such as a 401(k) or 403(b). With these, you can contribute up to the annual limit and your employer can provide either matching funds or a non-matching amount. Your contributions are tax-deductible and not included in your taxable income — you pay taxes when you withdraw your money later.
In 2019, you can contribute up to $19,000 to your 401(k) ($25,000 if you are 50 or older). Your employer’s contributions are limited by the total contribution cap of $56,000 (or $62,000 if you are 50 or older). You must begin taking required minimum distributions (RMDs) by age 70, unless you are still employed. If so, you can continue to contribute and postpone RMDs until you retire. RMDs are based upon the account balance and your life expectancy, as estimated by the Internal Revenue Service.
If you are a business owner or self-employed, you can open a Solo 401(k) with similar limits. With these, you can’t postpone RMDs beyond age 70, even if you continue to work.
Another good alternative is an Individual Retirement Account (IRA). In 2019, you can contribute up to $6,000 a year ($7,000 if you are 50 or older). IRAs have tax-deduction and RMD rules similar to 401(k)s. You are allowed to have a 401(k) and an IRA at the same time, but the deductibility of your IRA contributions will begin to phase out if your modified adjust gross income (MAGI) exceeds a set amount. For 2019, the phase-out begins at $64,000 for single filers and $103,000 for joint filers.
Roth versions of IRAs and 401(k)s are available. These do not provide a tax deduction for contributions, but if you follow the rules, your withdrawals are tax-free. Roth accounts have no RMDs. Traditional and Roth accounts penalize withdrawals 10% before age 65 (for Roth, the penalty applies to withdrawn earnings, not contributions). They also offer some exemptions from the early-withdrawal penalty if you use the money for certain purposes.
Conclusion
Your retirement finances are not set in stone. You have options at any age. The important point is to understand how much you will need to live on and adjust your lifestyle accordingly. Naturally, the earlier you start saving for your retirement, the better off you’ll be. You can use online calculators to figure how much you’ll need to sock away to make your retirement comfortable.
Using a tax-sheltered retirement account makes saving easy, because you postpone taxes until you retire. Make a commitment to your retirement plan now and reap the rewards in your golden years.