Betterment IRA Accounts
The online financial advisor Betterment uses software to automate tasks that other brokers charge fees for. Betterment is dedicated to long-term wealth management and retirement planning, and they have mastered these objectives with dramatically lower costs and superb execution. They offer the a range of IRA accounts, Traditional, Roth, rollover and SEP, and get high marks as a top provider. Companies like Betterement have been labelled robo-advisors in the financial services world.
Opening a Betterment Account
It's easy to open your online IRA account at Betterment, and set it up according to your retirement goals and needs. Deposits can be transferred from existing bank accounts. Selecting investments for your IRA is streamlined. Betterment walks you through a process to determine how much to invest in stock ETFs and how much in bond ETFs for your IRA. They keep fees low by investing in ETFs (exchange traded funds) that are diversified like mutual funds, but trade as shares like stocks. ETFs tend to have low expense ratios.
After you set your allocation of stocks vs. bonds, Betterment places your money in a variety of Vanguard and other ETFs. They automatically rebalance your selection of investments and reinvest your dividends. You are provided with charts tracking your portfolio performance.
There is no minimum deposit required to open your Betterment IRA. Fees are charged as a percentage of your account balance from 0.15% to 0.35%, with rates depending on the amount of the balance. For accounts with less than $10,000, the fee is .35% of the average balance, and requires a $100 per month automatic deposit. If you don't do the auto deposit, you incur an additional fee of $3.00 per month. A fee of 0.25% of average balance is charged for accounts with a minimum $10,000 balance. The fee is 0.15% of average balance for accounts with a minimum of $100,000. If you have more than one Betterement IRA, the balances are combined to determine your fee percentage.
The Betterment Retirement Guide
One of Betterement's signature services is their Retire Guide. The guide makes a big picture analysis of your income sources, retirement expenses, cost of living, and savings rate. All these factors are considered along with your savings and other assets to paint the complete picture of your financial situation in order to give you top quality retirement advice. Betterement delivers a detailed scenario of your present financial position and crafts personalized recommendations on steps to take towards your retirement goals. The advice includes planning retirement withdrawal amounts that are sustainable for the long term.
Betterment Technology Working for You
The philosophy behind Betterment's percentage fee structure is to keep overall client costs low, with the goal of encouraging long term growth for its clients. The proprietary software custom designs a low-cost, diversified plan for each client, and constantly adjusts the account.
The Betterment software automates two key areas that help you to earn more and hang onto more money, automatic portfolio rebalancing and tax loss harvesting. Their fee for the service is as low as $150 per $100,000 invested. While risk is always present in investing, you can likely expect gains that far outstrip the fee.
Rebalancing and Tax Loss Harvesting Defined
The in-house proprietary re-balancing program works to maintain your personal mix of stocks, bonds and securities in the optimum strategic proportion. If part of the mix gains value while another part loses value, the software adjusts the mix, selling off a bit of the winners and buying some discounted assets. The idea is buy low, sell high, and improve returns gradually over a period of years.
Over time, with rebalancing, Betterment will sell some of your index fund shares at a profit, triggering capital gains taxes. This is countered by selling other shares at a loss in the same calendar year, and using the money to pick up shares of other funds that own the same companies, a process known as loss harvesting.
Smart Dividend Reinvestment and Fractional Shares
As you receive dividends, Betterment distributes them to fit your portfolio allocation. For example, you receive a dividend from a stock fund. Instead of reinvesting it in the same fund, Betterment invests the money in an area of your portfolio that needs to be built up, such as bonds.
Another cool feature is Betterment's ability to invest every penny in your portfolio, as they are able to invest in fractions of shares. This keeps your money active at all times. This smart reinvestment feature is the hallmark of Betterment's ability to smartly invest all of your money in a constantly changing mix that maximizes your potential to stay on the beam towards your retirement goals.
Active traders who enjoy playing the market may want to consider using an online broker with a discount trading fee instead, as they want more personal control over the investments in their IRA.
Those who are uncomfortable with an automated investment system may want to consider using a traditional walking, talking financial advisor. It costs more but may be worth it for some, simply in terms of peace of mind.
Customer Support at Betterment
The Support Center at the site takes care of the most common inquiries with the FAQ menu, covering items such as How Do I Transfer my IRA to Betterment. There is also a link to the Betterment Retire Guide Methodology. You can reach them handily via phone, customer support email or live chat.
Verdict - Very Good
Betterment may be best for those with more than $10,000 in their IRA as the fees get lower as you invest more. If you can invest at that level, perhaps rolling over your existing IRA to Betterment, they are hard to beat, delivering great value. It's still a great IRA provider for those with under the $10,000 balance, as long as they can handle the $100 per month automatic deposit.
Financial novices can save time and get a lot of expertise and service for the low fee. Those who understand the value of long-term program investing will also appreciate Betterment. They are happy to patiently invest their money and grow it over time, and know that a diversified portfolio tends to be a safe, profitable long term bet.