Why you should care

Because you want to know if early retirement is an actual possibility.

Check out OZY's series on being smart with your money. Want to save better or make your cash work harder? Check out OZY's original series on being smart with your money.

The marshmallow experiment is a famous lesson in delayed gratification. A Stanford University psychologist gave children a choice: one reward now, or two rewards if they waited about 15 minutes. Some children took the marshmallow. Others waited, but it wasn’t easy. Many would occupy themselves, cover their eyes or even “stroke the marshmallow as if it were a tiny stuffed animal,” the psychologist observed. 

Saving for retirement can be like the marshmallow experiment. Only harder. Because while the children know what reward is awaiting them, most adults don’t know how much their savings now will leave them with in the future. When the reward is amorphous, it’s even more difficult to sacrifice now to gain later. 

An extra $1,000 per month could spare you nearly two decades of working.

Which is where apps like Pretirement come in. Making some basic assumptions about stock market returns and inflation rates, the app tells you how much you will have later by spending or saving now. Wonder if you can afford that $300-per-month car loan? It could add up to three years to your working career (note: results vary based on what retirement goals you set). What happens if you’re good, though, and kick that $3-daily-latte habit? That one change could allow you to retire nearly 10 months earlier, according to the app. Ready for some serious saving? An extra $1,000 per month could spare you nearly two decades of working years, depending on your retirement goals. That is one hell of a marshmallow. 

Released in 2017 and available on Android and Apple, Pretirement joins a slew of trendy tools for the financially-inclined — at a time where experts fret that financial literacy in America is woefully inadequate. Money advice apps also benefit from being more intuitive to younger users, who are still learning the basics of personal finance. “The reality is that the next generation doesn’t operate on checks, on cash. Everything is digital on their phone,” says CJ MacDonald, founder of the youth-focused credit card company Step. Joining Pretirement are apps such as Personal Capital and Mint, which track your net worth and investment returns. Meanwhile, micro-investment apps — including Acorn, Robinhood and Stash — help you save for that big future. 

However, these apps don’t answer the basic question: If I do this, what will happen? Pretirement (which is also free) is fairly easy to use — so long as you can Google terms like “annual ROI” and “safe withdrawal rate” — and available in other currencies for those who aren’t based in the United States. 

 

Pretirement is especially salient amidst the rise of the FIRE (Financial Independence, Retire Early) movement — mostly young, high earners who live frugally to save as much as 40 to 60 percent of their income with the hopes of escaping the rat race and living off their stock market gains for good. What started as a seemingly absurd concept has started gaining steam, with the financial independence Reddit page claiming more than half a million subscribers and recent articles featuring FIRE in The New York Times and The Washington Post. It’s not so impossible: If a family making the median American household income of $63,000 can save half their income annually over 20 years, they could build a retirement fund of more than a million — which averages out to $40,000 per year in retirement.

Of course, users should exercise caution. An app like this is more guiding arrow than GPS. While its assumptions follow long-term U.S. market trends, the past doesn’t guarantee similar results in the future (you can make alterations if you’re feeling more risk-averse). And with increasing longevity, some people who retire in their early to late 60s are already having trouble making their retirement savings last, says Mark Miller, founder of the financial website Retirement Revised: “It gets more challenging to forecast retirement.” Now imagine making the math work while retiring in your 40s. “You’re talking about making it more challenging by adding decades,” he adds, a problem especially difficult because exiting the workforce early could cost you as much as 40 percent of your Social Security payout. 

But whether you are saving for early retirement or just trying to be more financially conscious, apps like Pretirement can help you plan better for the life you want to live. Plus, it’s always fun to find 85 cents under the couch and ask: If I invest this, how much sooner can I retire?

The answer was 45 minutes for me. Or you could just buy a marshmallow now instead …  

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