Partnership Disclosure We might be compensated by one of our IRA partners for an account you open through our platform. This helps us keep the service free, but it never impacts the fees you’ll pay on your new account. We only win if you do, and our job is to help you simplify your retirement accounts. We also help people who already have an IRA account even though we receive no compensation in these situations—because it’s just the right thing to do!
Betterment IRA Review
• Easy-to-use, low-fee IRA managed for you.
• Access to a human advisor for an extra fee.
• Offers other financial products like a debit card.
• Limited ability to influence the portfolio they create for you.
• No physical branches for those who like that.
|Best if you want||An automated, low-fee portfolio from the largest independent provider of digital accounts. Betterment was a pioneer in providing “set-it-and-forget-it” portfolios for a low-fee.|
|What you can invest in||All digital advisors create a diversified portfolio of ETFs (Exchange-traded funds) based on your risk tolerance and preferences.|
|Limitations||Not much ability to influence the portfolio they create for you.|
|Ease of Use||stars|
Betterment was one of the first companies to provide automatically managed portfolios for a low-fee, launching its extremely popular service in 2008. It’s commonly referred to as a “roboadvisor”, and it pioneered the category along with several other players like Wealthfront. Betterment has grown rapidly over the years and now manages almost $30 billion of investment assets.
Despite its growth and a broadening range of services, Betterment has retained its customer-first philosophy. At its core, Betterment offers an easy-to-use service that manages your money for you. This is often referred to as a “set-it-and-forget-it” portfolio and it’s best for those who don’t want to be actively picking investments in their retirement account.
Most automated accounts charge what’s known as an “advisory” or “management fee” to manage your portfolio for you. This fee is usually expressed as a percentage of your assets that’s paid each year (e.g. 0.50% per annum).
Betterment is no different, and has two pricing models:
- Digital plan: 0.25% per year (e.g. $25 for a $10,000 account): access to an automated portfolio for your IRA.
- Premium plan: 0.40% per year (e.g. $40 for a $10,000 account): a digital plan plus unlimited calls with Betterment’s licensed financial experts. Unfortunately, you’ll need a minimum balance of $100,000 to get access to the Premium plan.
When you set up your account with Betterment, they’ll ask you a series of questions about your financial situation and preferences. This is known as a “risk-tolerance questionnaire” and is a common starting point when a portfolio is created for you.
Based on your answers and how much risk you’re willing to take, Betterment will create a portfolio for you. They’ll invest your money in a combination of “asset classes” like equities (stocks), fixed income (bonds), and international investments. Like other roboadvisors, they tend to invest your money in exchange-traded funds (ETFs) that allow you to efficiently get access to these asset classes. ETFs are often provided by large financial institutions like Vanguard and Blackrock.
Betterment is broadening its product offering from just investment accounts to other financial services. They now offer a Cash Reserve savings account that offers a higher yield than most banks, and they recently launched a Checking account (with a debit card).
In addition, if you opt for the Premium plan and have more than $100,000 to manage, you’ll get access to licensed human financial advisors who can answer questions on a range of financial topics.
Like other digital advisors, Betterment doesn’t allow you to really modify the portfolio they create for you. This makes it an ideal choice for people who want to completely outsource their investment management, but not as suitable for those who want to actively shape their portfolio.
Betterment offers one of the best digitally managed IRAs in the market today. Their commitment to doing right by the customer and providing simple-to-use products make it a very good choice for people looking to have their retirement account handled for a low-fee.
Ready to take control of your assets?
Capitalize helps you consolidate your old 401(k)s by rolling them into an IRA of your choosing. Use an existing IRA if you have one, or we’ll help you open one if you don’t.