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There are resources out there at every turn to help you plan, budget and prepare for your retirement. Including Retirement Apps.

We know right now you may have some questions.  Can you have an app on your cellphone which you can trust and rely on?

The answer is sure you can! Today, you can control many things from a simple touch on your cellphone. Obtaining an app that can help you stay on track of your retirement plan can be very beneficial. Technology is an excellent tool to help you prepare for your retirement. But, from our point of view, it cannot replace the savvy and expertise of a financial adviser.

Before confiding your financial future to technology, there are few key things you should look for in a retirement app.

Why A Retirement App?

Retirement planning is important, no matter which stage of your live you are currently in. In your retired years, income received from Social Security and retirement account probably won’t be enough. This is because most Americans don’t make retirement savings a priority until it’s too late.

The primary challenge? Balancing you current standard of living with the need to save more.

Enter: the retirement app. Each app provides free tools from big financial firms.  Their main purpose is to assist individuals achieve income sustainability, as well as making savings easier.

Think about it: we are all addicted to technology. If, at the touch of a button, you were able to move money around and save for your future while scrolling through Twitter wouldn’t that make saving a no-brainer?

While these apps make saving convenient, savers might run into a different set of issues.  We have made a list of a few key things you should look for in a retirement app.  

Retirement realism

Your retirement funds depend on several factors, both within your control and without your control. You want to look for an app that allows you to play with different investment outcomes and things like inflation adjustments (such as cost-of-living). Additionally, withdrawal strategies vary from account to account. So, you will also want an app that allows you to come up with alternative efficient withdrawal plans. 

Essentially, your app should reflect a realistic retirement strategy by allowing you to play out a few different scenarios. This is beneficial because it helps illustrate your financial adviser’s advice in an easier way to understand.

Market Projections

Ideally, the app that you use to help manage your retirement account will be able to project different market returns. Unfortunately, these returns are often beyond the control of both the user and the app. That doesn’t mean that apps can’t get there eventually. A future and innovative app could potentially link to a stock market app on your phone. This way trends can be predicted, but most retirement applications just haven’t gotten there yet.

Instead, what most apps do is require you to enter a constant for your expected rate of return on investments. There are a few out there that have the idea right. Instead of requiring you to enter in a constant rate of return, these apps employ a system that uses random sampling to produce a range of possible outcomes based on historical records of stock performance.

In terms of realistic retirement planning, the apps that don’t utilize this simulation are almost useless because they are unable to account for any potentially negative returns during your retired years. Therefore, relying solely on an app is not always the best policy. That is why we suggest an experienced financial adviser is better suited to help you predict varying outcomes depending on your rate of return.

If you already utilize an app and the market takes a turn for the worst in the future.  Remember, that your first step should always be to consult a financial adviser.

Remaining Balance vs Safe Withdrawal Data

In addition to being able to predict your return on investment, your app should also include information on the remaining balance of your retirement account.

Yes! We said remaining balance, rather than withdrawal amounts. This way, when combined with rate-of-return estimations, you will be able to see more accurately see how long your portfolio will last you at varying stages of the market.

Another reason why this is beneficial, is because it allows a more accurate expense projections. If your app focuses too much on that sweet spot of “safe withdrawal” rates, then you might end up spending too little. It may seem strange for a financial blog to say this, but you’ve earned your retirement. So, while you want your money to last. You should also be able to enjoy your retirement. If you have done a good job of preparing for your post-working years, then your app’s focus should be more based on your remaining balance. This way, you understand the risk of spending and understanding the sustainability of your retirement portfolio.