Setting up a retirement account doesn’t have to be a complicated process reserved only for those with plenty of discretionary income.
Carlos Garcia, founder and CEO of the retirement savings app Finhabits, wants to do away with those misconceptions about saving for retirement.
He says Finhabits users can set up an IRA (Individual Retirement Account) in 10 minutes using a simple three-step process. And you can start saving with any amount — even if it’s only $10 a week.
Garcia developed Finhabits because he wanted to give clients a simple approach to saving for retirement.
Understanding the best ways to save and invest can be complex for the average consumer to grasp. Garcia said he spent the past decade trying to make financial services more customer friendly.
He realized a significant portion of the population — the self-employed, gig-economy workers and small business owners — tend to miss out on the retirement benefits others receive through their employers. He didn’t want those entrepreneurial workers, to whom he refers as “the potential high earners of the next decade,” to be left out.
Thus, Finhabits was born.
Individualized Approach to Investing
Garcia says Finhabits allows individuals to save for retirement however it works best for them.
“We can adapt to a user’s cashflow,” he says. “We know existing workers might have inflows and outflows. There might be months when they don’t have access to income. We let these workers save on their own terms and on their own schedules.”
If investors need to stop making contributions to their account for a couple months, they can. When more income is flowing in, investors can easily increase their level of contribution.
Garcia says there’s no minimum amount individuals have to contribute on a regular basis, which allows people of all income levels to start saving with what they have available.
Finhabits keeps its fees comparatively low. It charges $1 per month on accounts less than $2,500 or a 0.5% annual fee for accounts that have $2,500 or more. The app invests customers’ money in companies like Vanguard and BlackRock, which charge additional average fees of about 0.12% a year.
How Far Can Your Money Go?
One of the best pieces of advice Garcia said he has received is to start saving early.
“The earlier you start building [good financial] habits, the more likely your wealth will grow over time,” he says.
The Finhabits retirement calculator lets you see the impact your contributions will have by the time you retire.
Garcia says this feature is important because he wants to help people visualize how far a $20 weekly contribution when you’re 18 or 22 can go once retirement age hits.
“You will see that your contributions are actually not what makes the money grow, but the compound interest on your investment,” he says.
Saving for retirement is a long-term game. One misconception Garcia comes across often is the idea that you can become wealthy overnight. He said the recent Bitcoin obsession has made some people believe they can double their money in no time and without taking risks.
“If there’s something that can double, it’s probably also something you can lose,” he says.
Instead, he recommends long-term investing with a diversified portfolio that’s constructed to minimize the risk of loss.
Start Saving in 3 Steps
Want to start saving for retirement with Finhabits? It only takes three simple steps:
- Use the retirement calculator to estimate how much you can contribute and understand the impact of compound interest over time.
- Select a portfolio that fits your individual financial profile.
- Connect your bank account and start your on-demand contributions. Bonus: Finhabits will give Penny Hoarders an extra $20 after you contribute $500.
Then sit back and watch the good financial habits you start today develop into something your future self will thank you for.
Nicole Dow is a staff writer at Codetic.