Retirement plans. The thing we must all have, yet is simultaneously the least enticing notion in existence. Who, besides those in commercials, sits eagerly around the dinner table discussing their 401k last quarter earnings. “Oh honey, it looks like the market is up today, I think that’ll really boost my retirement per year!” said no one ever. It is, however, something that deserves genuine thought. Even so, how we will survive financially past our 60s is something that receives less thought than how many drivers pulled out in front of us recently. Or how much we hate the busy work that’s shoveled onto us every day by that incompetent and undeserving rat bastard of a boss.
That’s because retirement is an intangible. It’s just a concept: something far off in the future that doesn’t really have a whole lot to do with today. So that’s where the idea of taking money out of your paycheck before you really have a chance to notice it comes in. No sane individual is going to willingly choose to fork over $100 of their hard-earned money per period just so you can be better off down the road, right? We just aren’t wired that way. I speak for everyone, it’s okay.
What if I were to say there’s another option; something that’s less abstract and more…sexy? A way of saving that is both as potent as your 401k or 403b but also as real as seeing your saving’s account next to your checking each day. There’s an app called Acorns. It downloads like all those other apps, installs, lets you sign up and processes your information. It’s rudimentary, Bob! Sure, sure, but what does it do?
How Does Acorns Let Me Save For The Future?
Little by little, like digging out your cell wall with a spoon. I joke, I joke. Retirement isn’t anything like prison, I swear! Acorns does a nifty (but also rather common) thing of connecting to your bank account. Being the introspective detective that I am, I was concerned about handing out that information. I checked the Better Business Bureau (fat lot of good they ever do, but hey, worth a try), reader reviews and also any whiff or hint of a scam from editorials online. All things considered, Reddit has proven to be a lie detector in many ways. People may lie or be polite about controversy in-person but on-line is certain a difference maker.
After my rigorous review of Acorns’ credibility, I felt confident that handing over my digits wouldn’t be a mistake. Acorns makes the promise that whenever you, being the credit card hero that you are, pull out your shiny magic rectangle to pay for things, each transaction will effectively be rounded up to the nearest dollar. The extra expenditure will then be pooled into Acorns to be invested into a modestly aggressive stock market portfolio.
If you spent $23.67 on groceries at your local supermarket, Acorns will then snag that excess $0.33 with the intent that you’ll never feel the hurt by missing $0.33. The truth of the matter is that it doesn’t quite work as smoothly as all that. You won’t see a grocery bill of $24.00 if that’s what you were hoping. I like those clean, round, sexy number too, but that’s not how Acorns likes to play ball. The app waits until you hit a $5.00 threshold before transferring anything out of your account. While I would prefer to see those round numbers instead of a $5.00 app withdrawal, I’ll deal with it. Might be that one day they’re able to make that dreamy number of $24.00 a reality. A man can dream.
Does Acorns Earn Money Faster Than My 401k?
That depends, bucko. Acorns works by rounding up your purchases, so if you only purchase one item per week, no, your totals won’t come anywhere close to what your 401k is producing. If you’re like me and swipe your card anywhere between one and five times per day, then you might see some decent returns. Let’s do some math. Grab your ruler and compass, please.
Let’s say I use my debit card five times per day, for an average rounding-up of $0.33. That’s a decent average because how many items do you know sit at $19.25 versus $19.97? You can tell your wife it was basically $15.00 regardless, and retailers know that. So yeah, $0.33 x 5 = $1.65. $1.65 per day for a year equals $602.25. Say you threw in a couple one-time payments and then did the $5.00 a month auto-transfer. Three one-time payments of $25.00 plus another $60.00 from the auto-transfers brings us to a grand total of $737.25.
What Kind of Returns Can I Expect With Acorns?
*Brings back out my ledger* Yes, yes, I see, I see. $737.25 scheduled against a modest one percent return is $7.37. That’s about the bare minimum that you can expect on a cautious total. Markets aren’t all run by stable geniuses (genii?), so things fluctuate a bit. The more you put in, the more you’ll get out. I do both 401k, automatic emergency fund withdrawal, and Acorns, so it’s nice to be able to see them side-by-side. 401ks can work before-tax or after-tax but the only real difference is if you’ll be paying the taxes now or later. It’s taxes like income, whereas Acorns is just you putting your money into a savings account after you’ve paid your run-of-the-mill-horrorfest of income tax.
Yeah, it’s essentially a savings account that can earn you decent cash. It sneakily saves money right under your nose and it startlingly easy to keep tabs on. There’s a flipping widget you can put on your your iPhone or Android mobile phone. The widget shows you the ups and downs of the daily stock market and also how much money you’ve made today.
Will I Still Have Access to My Money?
Absofruitly! As it functions as something akin to Paypal in terms of balances, you can send money to and fro with wild abandon. Retirement plans usually require an early-withdrawal fee or also slap you with a loan for trying to take any of your earned money. With Acorns, it’s your money. Use it when you’d like. Best thing is to let the balance grow, though. Can’t earn mad returns with a small balance, that’s what I always say.
What Features Does Acorns Have Versus Other Apps?
Acorns has a few other nifty features that are worth mentioning:
- Real-time analysis of future potential of account based upon someone’s algorithm
- Found Money aka extra investments made by Acorns for spending money at certain retailers (Between 1% and 25% of money spent, typically)
- Calculation of dividends-received for year-end tax purposes
- Grow aka their free information services about retirement topics
That All Sounds Too Good To Be True. What Does Acorns Really Do With My Money?
Alright, you paranoid bastard, they do charge a fee for this service. One, whole, Dollar for a month. One dollar. Uno dolore. That’s it. If you think about it, though, most Acorns accounts don’t make it past the $100 mark very quickly. That means that at a 1% return-on-investment, you’d just be breaking even. I don’t see it that way, however. This is a service. It saves my money into an account that simply isn’t my checking account, a little at a time. It invests it, and pays me dividends for my investment. That’s worth a dollar, bro. Go get you a retirement.