All traditional banks have instituted some sort of online banking component for their customers during the last decade. This includes making it possible to transfer money between accounts, open up CDs, or pay bills online. Banks have learned it makes sense to cater to tech-savvy consumers.

Still, there are some big differences between traditional brick-and-mortar banks that offer online banking options and banks that are entirely web-based. Here are a few things to consider before deciding whether or not an online bank is right for you.

Security

One of the biggest concerns for consumers who are considering web-based banking is security. For many, the act of physically handing money over to a cashier feels a lot safer than making the same transaction electronically. Furthermore, many people fear their information could be stolen and dispersed somewhere in the deep underbelly of the web. Although banks have improved their security immeasurably over the past few years, this is a valid concern.

When it comes to security, your best bet is to take precautions on your own. Both traditional and web-based banks store your information in databases that could potentially be vulnerable to cybercriminals, so either one could potentially be hacked at any time. Instead of worrying, be vigilant about your online banking relationship and do what you can to keep it safe on your own.

Related: What to Do If Your Bank Account Is Hacked

When logging into your accounts, use secure connections rather than shared or public WiFi. Furthermore, choose an online bank that is backed by the FDIC. If you do, you’ll have the same protections as customers who use traditional banks (up to $250,000 in coverage).

Convenience

In many ways, online banking is extremely convenient for customers. With online banking, you have access to your accounts 24/7 from anywhere in the world with an internet connection. This is one of the main reasons that online banking has become so popular, and it is one of the best features that traditional banks offer through their online banking components. Because of the nature of online banking, customers can instantly make transactions – including deposits, transfers, and bill pay – at any time they want, even on holidays.

While all online banking options offer round-the-clock access to your accounts, web-only banks may not be as convenient as they seem. While it’s true that you have constant access to your accounts, you may struggle to complete certain tasks if your bank doesn’t have a physical branch that you can visit. For example, customers of web-based banks may have difficulty depositing money. Although most online-only banks give you the option of either mailing in a check or sending it via a text message, doing so is a bit more inconvenient than simply handing the check over to a bank teller.

Furthermore, that check may take longer to clear than at a traditional bank, especially if you are mailing it in. Additionally, customers of web-based banks are not able to deposit cash at all. With that being said, if the majority of your money is directly deposited into your account via your paycheck, that may not pose a problem for you.

When it comes to actually accessing your money, traditional banks also have the upper hand. Most traditional banks, especially the larger banks, have ATMs located everywhere. While online banks aren’t able to saturate an area with their own ATMs, most of them have agreements with ATM services that allow you to make ATM withdrawals without incurring a fee. Still, like most traditional banks, you are only allowed to withdraw a certain amount of money per day (typically about $500).

However, if you need to withdraw more than your daily limit, accessing your money can get tricky. Customers of traditional banks can easily visit a branch and withdraw more money in person. Obviously, if you are an online banking customer, you do not have this option. There are some ways around it, like cash advances on your debit card, but you’ll need to determine what those ways are with your preferred online bank.

Interest Rates

If you are looking to get the best interest rates on your banking products, look no further than a web-based bank. Because web-only banks don’t need to meet the same type of overhead commitments as their brick and mortar counterparts, online banks are able to offer far higher interest rates on their banking products than traditional banks. A MoneyRates.com study shows that the average interest rate on savings and money market accounts at online banks is 5 to 6 times higher than it is at branch-based banks. Additionally, many larger banks don’t even offer interest-bearing accounts for customers with balances that dip below $10,000, whereas most online banks let you earn interest no matter the size of your account.

Fees

In addition to higher interest rates, online-only banks typically have lower minimum balance requirements and charge lower fees than traditional banks. Some web-based banks like Ally do not charge a monthly maintenance fee or require a minimum balance at all. Like many traditional banks, online banks almost always have free checking accounts available. The low fees and minimum balance requirements make it easy to see why web-based banks appeal to younger customers.

Which is the Best Type of Bank for You?

So, which type of bank would work best for your situation? It all depends on what you are looking for. If you are seeking higher interest rates and lower fees, web-based banks may be the way to go. Likewise, if you need fast access to lots of cash and the ability to make cash deposits, you may want to stick with your traditional bank.

Fortunately, you don’t really have to choose one or the other – especially at first. If you want to ease into online banking, you can try out some online banking features through your traditional bank’s online offerings. Furthermore, just because you open a web-only account doesn’t mean you have to close out your accounts at your local branch. If you cant commit quite yet, you can leave some money in both places.

Regardless, of what you decide, make sure to do your research before choosing your next bank. It is your money, and you need to decide the best way to make it work for you.

Related: Best Neobanks

The post Online vs. Traditional Banking: Which is Better? appeared first on Doughroller.

The truth is that everybody’s retirement number is different. The amount of money that you need to retire is based on a whole slew of different factors. There are a bazillion different retirement calculators out there, all trying to help you estimate how much you’ll need to retire. Each one is different, and they all allow for different levels of detail. You can make adjustments for inflation, pension payment, growth rates, social security, living expenses, and anything else you can think of. With so many options, you can practically make them say anything you want. So, how accurate can these calculators be?

Rather than get too far into the weeds, let’s try and simplify things. Here’s the deal: Most people get used to living a lifestyle that is largely based on their income. Some people can certainly live on less, but very few of us are going to want to decrease our lifestyle once we retire. In fact, the opposite may be true. Many of us want to do more. We want to do things we never had the chance to do during our working years, like enjoying more travel and leisure activities.

So, instead of trying to accurately predict every last variable, why not try to determine if we are doing a good job of saving based on our age and income? Once we do, you’ll have a very simple way of checking whether or not you’re on track. Let’s get started!

The Methodology

In part, I have borrowed this methodology from my friend Sam at Financial Samurai. In his model, he errs (I think rightly) on the conservative side. In my model, I’ve made a few tweaks and even went a little more conservative – shortening the number of years worked and extending the years in retirement. In any case, I’d rather have more than I need than run out too soon.

Of course, to make our calculations, we have to make a number of assumptions. Here are a few:

• Age Range/Number of Years Worked: These figures assume that your working life will last 40 years. We’re going to give you a pass for the first few years of your 20s and assume that you either start working or saving at age 25. We also assume that you work 40 years and retire no later than 65.
• Number of Years of Retirement: We’ve assumed that we want our money to last for 30 years of retirement, which is a very conservative estimate. Thus, if you retire at age 65, your money will last until age95. If you want to retire at 50, your money will last until 80 – but the total dollar figure that you need stays the same as if you worked to 65. So, if you need $1.5 million for 30 years of retirement after age 65, you still need $1.5 million to retire at age 50 in order to enjoy those same 30 years. To get there, you need to save more aggressively, get better returns, or both. If you want your money to last for a shorter time period, adjust the multiple accordingly.
• Rate of Savings: If you want to live comfortably in retirement, you need to save aggressively now. We are going to assume that you’re going to continue living at or below the level of your income prior to retirement. These numbers can be looked at as liquid savings or total net worth. Our numbers are based on saving a minimum of 20% of your annual income. We aren’t really focused on the rate of return, but rather on the total dollar amount you should have saved in order to pay for 30 years of retirement. (Just for your reference, we assume a modest 6.25% rate of return over 40 years at the 20% savings rate to assist with the multiples.)
• Rate of Withdrawal: The best-case scenario is that your returns during retirement will outpace inflation and the amount you need to withdraw to live. Thus, you’ll never touch the principle and your money can keep growing indefinitely. We are going to assume that your investments simply mirror inflation and that you withdraw 3% of your principle annually (3.33% to be more specific). Again, these numbers assume you continue living at or below the level of your income prior to retirement.
• No Additional Sources of Income: These figures do not include any additional sources of income such as social security, pension plans, inheritance, money from rental properties or other investments, etc. If you plan to receive additional income during retirement, adjust the numbers accordingly.

Saving in Your 20s

We can all agree that somebody who makes $100K should be able to save more total dollars than a person who makes $50K, correct? Thus, the only good way to calculate whether or not you are on track with your savings is to use a multiple of your income based on your age. In that way, we are able to compare apples to apples.

Just to be clear, since we assume you’re going to live at approximately the same lifestyle level you did prior to retirement for 30 years, your ultimate retirement number is equal to 30x your annual average salary. So, if you make $100K (or live like your making $100K), our conservative estimate is that your net worth should be equal to $3 million in order to enjoy a very comfortable 30-year retirement. If you only want to prepare for 25 years of retirement, then your total net worth at retirement should equal $2.5 million. Let’s take a look at some benchmarks to see how you can get there.

As I mentioned earlier, these figures give you a pass for the first few years of your 20s. Feel free to wander the globe, live in your parent’s basement, or go to work and simply not save. However, the earlier you buckle down and start saving, the earlier you’ll reach your goal. So, if you plan to retire at 65, you should have about 1.13 times your average income saved by the time you reach 30 (or after 5 years of work). Not too bad. Remember, this is saving at no less than 20% per year.

Let’s talk quickly about the “average income” number. Obviously, for most people, their income will fluctuate over the course of their careers. If you want a little more accuracy, consider this number as the weighted average of your income. Thus, if you make 50K for 10 years and 75K for another 5, your average weighted income is $58,333. Here’s the calculation:

($50,000 x 10 years) + ($75,000 x 5 years)/15 years = $58,333

Obviously, the math doesn’t usually work out quite so cleanly, but you get a general idea. Again, we aren’t trying to be exact here. We’re just trying to get a good estimate.

Saving in Your 30s

Now is the time when your career is probably starting to take off. It’s also the time when you really need to be pumping money into your savings, especially if you want to retire early. Try and resist the temptation to increase your lifestyle. Instead, save as much as you can. The more money you can sock away now, the better.

Saving in Your 40s & 50s

Here is the meat of your money-making years. You’ll be well into your career, which generally makes you more valuable. As a result, you’re probably going to be earning more.

Notice how much you should have saved. If you look carefully, you’ll notice that those savings goals are more than just a flat 20% of your income. That means that in order to get to this point, you must be getting a return on your money. Hopefully, you started making these types of investments way back in your 20s. If you did, the magic of compounding is really going to start working for you. Also note that, if you make $100K but live like you make $50K, you can have over 30 years of retirements savings piled up by age 55!

Saving in Your 60s

Retirement is here. How did you do?

Study those last few years before retirement. If you make $100K, we expect you to add $650K to your net worth in just 5 years. There is absolutely no way to do that unless you invested early and often.

Here is the entire table for your reference:

Wrapping Up

Again, these are very conservative estimates, and they are only meant as guidelines to help you hit your retirement numbers. Of course, your actual number will vary depending on your particular circumstances, lifestyle, and retirement goals. However, by using the multiples provided, you should be able to use your age and income to gauge whether or not your savings and net worth are on track to meet your retirement savings goals.

What do you think? How does your net worth/savings compare to these numbers?

The post How Much Should You Have Saved Based on Your Age and Income? appeared first on Doughroller.