Betterment IRA Review 2024: Features, Fees, and More

Bottom Line

Any Betterment review would be remiss if it failed to mention the company’s status as a forerunner in the world of robo-advising. And given its history and stature, Betterment gets a lot about automated investing right. Low fees, $0 minimum account balances, a focus on responsible portfolio options, and, perhaps best of all, a set-it-and-forget-it approach to investing that makes saving for retirement as easy as clicking a few buttons, Betterment is a solid choice for those who are comfortable with digitalized portfolio management.

You can work with a live advisor through Betterment Premium, though access to advisor services will require you to have a higher account minimum ($100,000). Still, with its host of technology-driven tax strategies, including tax-loss harvesting and automatic rebalancing, Betterment is well suited to new investors and veterans alike, no matter your minimum deposit.

Betterment Fees

Most automated accounts charge what’s known as an advisory fee or account 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: $4/month for balances under $20,000, and 0.25% annual fee for balances over $20,000 (e.g. $25 for a $10,000 account). At this level of the fee schedule, you’ll have access to an automated portfolio for your IRA.
• Premium plan: 0.40% per year (e.g. $400 on $100,000 account) which provides unlimited access to financial advisor guidance with a team of Certified Financial Planners. You’ll need at least $100,000 of investment funds under management with Betterment to get access to this plan.

What You Can Invest In

When you set up your account with Betterment, you will be asked a variety of questions regarding your financial situation, as well as your investment objectives, time horizons, and risk tolerance. These inputs help Betterment determine a recommended portfolio allocation (and risk level) for you to select or edit based on personal preferences. Betterment has a specific focus on responsible investing, with responsible portfolio options including Climate Impact and Social Impact that allow you to choose investments that both meet your financial goals and fit your values.

Regardless of which of its investment options you choose, Betterment will provide guidance on how your portfolio allocation correlates to your level of risk. Portfolios are comprised of exchange-traded funds (ETFs) with low expense ratios and can give you exposure to a variety of asset classes (domestic and international stocks and bonds). Betterment also offers crypto investing, though these options are pre-set; you can’t directly buy or trade specific stocks, bonds, or cryptocurrencies. (Betterment’s crypto investing options come with a slightly higher 1% annual management fee.)

Betterment Limitations

Betterment does not have physical locations like some legacy providers, but they do have knowledgeable and responsive customer service online. Access to human financial advisors is only available through their Premium plan or through the purchase of an advice package for the Digital plan.

Furthermore, although access to financial advisor guidance is limited to those with higher balances in their investment portfolios, Betterment does have a savvy tax strategy that it offers to all its customers. Betterment offers technology-driven tax loss harvesting that can offset the consequences of capital gains incurred by taxable accounts, potentially lowering your taxable income by thousands of dollars per year. It’s not the same as sitting down with a live, human advisor to take stock of your taxable investment account, but it’s a pretty good substitute.

For those who want more leeway to pick and choose their own investments, however, a different brokerage might beckon. Betterment offers only pre-arranged investment portfolios comprised of stock and bond ETFs, which doesn’t allow investors to pick and choose individual stocks or bonds, for example. Furthermore, none of its current offerings have a focus on real estate or include real estate investment options in their bundle of funds.

Betterment Account Minimums

One of the features that makes Betterment a popular robo-advisor on the market today is its low account minimums—so low, in fact, as to be non-existent. You can get started investing with Betterment for just $10, but after that initial deposit, you aren’t obligated to keep a certain threshold investment account balance in order to keep them open.

Betterment Customer Support

As mentioned, live advisory services are only available to Betterment clients with at least $100,000 under investment management. (Those with at least $20,000 invested with Betterment are eligible for a one-time setup support call with a live advisor.)

However, Betterment does have a robust Help Center and FAQs that can help most investors troubleshoot problems on their own. There is also an online chat function as well as a direct customer service line: (718) 400-6898, where representatives are available between 9 a.m. and 6 pm. Eastern Time.

Betterment Account Types

Betterment offers a wide range of retirement accounts (as well as other types of investment accounts, including 529 accounts for educational savings and individual taxable investment accounts). For this article, we’ll focus on Betterment’s retirement offerings.

Traditional IRA

A Betterment traditional IRA will allow you to contribute and grow tax-deferred funds in your retirement account. Traditional IRA contributions are tax-deductible in the year they’re made, but withdrawals in retirement are taxed as regular income.

Roth IRA

A Roth IRA will allow you to invest in Betterment’s digital assets with after-tax funds, which means you’ll owe taxes upfront, but enjoy tax-free income during your retirement. Unlike traditional IRAs, Roth IRAs aren’t subject to required minimum distributions, but they do have income eligibility requirements to be aware of.

SEP IRA

A Simplified Employee Pension (SEP) IRA allows self-employed people and small business owners to maximize retirement funds by contributing on both the employer and employee side. If you qualify for this kind of retirement fund, you can open one at Betterment.

Inherited IRA

If a loved one perishes and leaves behind their IRA to you as a gift, Betterment makes it easy to open the right kind of inherited IRA account you’ll need to roll the funds over and begin managing them.

Other Features

Along with the various retirement accounts it offers to help customers reach their long-term investment goals, Betterment also offers non-investing services, such as as a checking account. Betterment Checking was rolled out in 2019 and offers a no-fee bank account along with a Betterment Visa debit card. Betterment Checking funds are covered by FDIC insurance up to the typical $250,000-per-depositor max. Although the account doesn’t earn interest, it is automatically linked to a cash-back rewards program that works with many well-known brands.

Betterment also offers a high-yield cash management account, which it calls Betterment Cash Reserve. This cash account earns up to 4.75% variable APY and is covered by FDIC insurance up to $2 million, and boasts $0 fees and no minimum balance. You can also withdraw your cash as often as you like, though you won’t have the convenience of doing so with a debit card.

While Betterment doesn’t officially offer a savings account, either its checking account or its cash management account could be a good place to stash your emergency fund and daily spending money alongside your investment accounts.

Considering a Betterment IRA?

Betterment offers one of the best digitally managed IRAs in the market today at a low cost. Their commitment to doing right by the customer, helping clients reach specific goals, 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 and with their greater overall values in mind.

If you’re looking to fund your new Betterment IRA with a 401(k) rollover, Capitalize can help. We’ve made it our mission to make this process easier for everyone. We can handle the entire process for you. Most of the process can be done online and our rollover experts will guide you through any of the manual parts. Get started with your 401(k) to Betterment IRA rollover in just a few minutes.