Retirement might seem like a long way off, but it’s something that requires planning before it actually happens to you. What do you want your golden years to look like? What kind of lifestyle will you want to live? More importantly, what kind of lifestyle will you be able to afford?
Retirement savings are a big problem in the United States. Bloomberg reported this year that only a third of working Americans are saving money in a tax-deferred retirement account. Making the situation worse, only 14% of employers in the U.S. offer retirement plans. That means most Americans don’t have access to that type of retirement account.
Not saving for retirement sooner is the number one money regret of Americans. So why don’t more of us start saving money earlier?
Once upon a time, when you retired, you received a gold watch and your first meaty pension check. But now the responsibility of saving for retirement has shifted almost entirely onto the individual’s shoulders. If you want money when you stop working, it’s on you to save it. That’s why robo advisor Betterment offers some handy retirement tools.
Betterment’s Retirement Calculator
Betterment has a retirement calculator that’s a good place to start to get an idea of where you are in your retirement savings.
The calculator asks if you’re married or single, where you live, your pre-tax income, how much you currently have saved for retirement, how much you save annually for retirement, your age, and your retirement goal age.
Next, it shows you projections for how much money you’ll want to have annually in retirement and how much you’re on track to have.
Once you’ve seen the results, it’s time to move on to what we consider the jewel in Betterment’s crown: the RetireGuide.
At the bottom of Betterment’s homepage, you’ll see this:
This starts your retirement planning with Betterment. After entering this information you’re taken through a few steps.
The first step is to decide which goal you want. Betterment suggests three different ones: safety net, retirement and general investing. Whichever goal you select, you will be prompted to sign up for Betterment in order to get really rolling.
To sign up, register with an email address, a password and some basic information (name, phone number, address, how you heard about Betterment). Then you’ll be asked for your Social Security number, birthday and gender.
Once you’re all signed up, Betterment creates a dashboard for your information. Betterment allows you to choose from a few retirement accounts, including a Roth IRA, traditional IRA and 401(k) plan. On your RetireGuide homepage, you can select from a box on the upper left-hand side which account you want to view.
Your homepage will show your balance, your retirement goal age and how your assets are allocated (e.g., what percent is in stocks or bonds). Your risk level is also shown. Your investments are displayed on a graph that’s front and center. This shows projections to your retirement age.
This page also has options for you to set up a monthly auto-deposit or a one-time deposit.
Why You’ll Want to Use This Feature
The RetireGuide feature does a great job of painting you a realistic picture of what your retirement timeline looks like. By plugging in your current numbers, you get a really accurate sense of whether it’s enough to take you to your ideal retirement. And if it’s not, the guide offers ideas for how you can get there.
The guide allows you to look at your retirement in a number of different ways. For example, you can account for Social Security contributions to your retirement and even adjust the amount of your retirement budget it makes up. This paints a realistic picture of your retirement, instead of your just having to make wild guesses.
The retirement guide also takes into account inflation and potential growth rates of your money. It calculates a number that you can withdraw in retirement depending on what you contribute in your working years. (The withdrawal recommendation is based on an assumption that you’ll be able to live off 75% of your pre-retirement earnings.)
The guide seeks to answer questions about what will actually be happening with your money in the future. Betterment wants you to input the data you have now so that you can envision what will happen in the future. The “How to Save” tab helps guide you through different amounts and accounts you can use to save the right amount for retirement.
Betterment is the best robo advisor platform for beginning investors, with no minimum deposit and low fees... in-depth retirement tools and effective asset allocation... plus, it's possible to receive assistance from human advisors.
- Simple Asset Allocation
- Low Management Fees
- Perfect for Young Investors
- Tax-Coordinated Portfolio
- RetireGuide Calculator
- Flexible Portfolios
- Not the Best for Higher-Net-Worth Individuals
- Cannot Asset-Allocate With External Accounts
- No REITs or Commodities
The guide makes it pretty simple to see how much you’re saving for retirement and how much you’ll need when retirement comes. For newbies or those who are scared to start investing, the RetireGuide can be a helpful and motivating tool.
If you’re already investing with Betterment, this is just icing on the cake. If you’re not investing with Betterment or investing for retirement at all, this feature could be a big draw. Since most Americans are unprepared for retirement, focusing on it as soon as you can is always going to be a good thing.
The earlier you start investing, the more money you’ll have in retirement. Getting new investors to start saving for retirement when they start using Betterment could be a game changer for both the product and its users.