Ready to Invest? Check Out This Comprehensive Betterment Review

betterment review

One of the best ways to build wealth over time is to invest.

Many folks, though, feel like they don’t have enough money to start investing. Dollar-cost averaging is a strategy that can help you overcome that hurdle.

With dollar-cost averaging, you invest a manageable amount each month. Over time, the consistency allows you to build your portfolio and grow your long-term wealth.

Betterment’s entire service is based on the concept of dollar-cost averaging, and the idea that you shouldn’t touch your money until you need it later. If you have $100 a month you can spare for investing, this comprehensive Betterment review can help you put it to work for the long-term.

Betterment review

Betterment is a robo-advisor that uses an algorithm to invest your money in low-cost index ETFs. You can open an IRA (Roth, SEP, or Traditional), a taxable investment account, or a trust using Betterment. It’s also possible to open joint investment accounts.

On top of providing these accounts, Betterment manages them using an asset allocation strategy. Once you put the money in, they take care of your account by investing for you, using stock and bond ETFs.

The makeup of your portfolio is determined by your risk profile and goals. It’s possible to adjust your ratio of stocks and bonds after Betterment makes its recommendation, but you don’t get to choose which ETFs are in your portfolio.

Other features

Betterment also offers tools like RetireGuide, which can help you figure out how much to set aside each year. Using information about your goals, including how much you expect to spend in retirement and your current age, you receive recommendations for how much to set aside each month.

You can use these suggestions to direct Betterment to adjust your asset allocation to meet your future needs. At the very least, the suggestion can encourage you to set more money aside each month. Chances are, the required $100 a month won’t be enough to help you retire comfortably.

Another nice feature? Betterment reviews your IRA contribution and automatically adjusts it so that you max out during the year. If the IRS increases the contribution limit, your contribution automatically increases so you keep pace.

Betterment also offers a service that minimizes your taxes as much as possible. The tax feature tries to sell older investments first so you have a favorable rate on long-term assets. This services doesn’t cost extra, and is available to all of those with an account.

It’s possible to set up different accounts for various goals. For example, I have two different goals in my Betterment portfolio:

  • Roth IRA (tax-advantaged)
  • Travel fund (taxable)

You can easily track your performance, make adjustments to your asset allocation, and change how much you invest each month. Betterment reviews and automatically rebalances your account on a regular basis so your asset allocation remains within certain parameters.

Finally, there is a handy feature that allows you to sync your external accounts with Betterment. This lets you to see everything in one place, even if some of your accounts aren’t with Betterment.

Get Started with Betterment

Using the Betterment online platform

It wouldn’t be a complete Betterment review without talking about their online platform.

The only requirement to open an account is that you commit to invest $100 per month, or put in a lump sum of $10,000. I find the online platform easy to use — it’s intuitive, allowing you to quickly and easily navigate.

You open an account by answering a series of questions designed to help the algorithm put together a plan that makes sense for you. Enter your age, income, and retirement status.

Next, you figure out your goals. Betterment helps you prioritize your targets and move forward. It’s a nice feature for those who aren’t sure of where to begin. Many of the targets are set based on your age and income, using common rules of thumb.

Betterment uses Modern Portfolio Theory to set your asset allocation. This is a method that prescribes a certain percentage of stocks and bonds, based on your age, time from goal, and a couple other factors. The idea is that as you get closer to using your money, your portfolio shifts from being heavier on stocks to focusing more on bonds.

Once you’re done with those questions, you’ll be asked to create an account. Setting up your account is simple, and only takes a few minutes. You need to connect your Betterment account to a bank account to transfer money.

Betterment takes care of the rest, allocating your investment in a way that is likely to help you reach your goals.

One of the drawbacks to Betterment is that you don’t have the ability to direct your specific investments unless you reach a certain account balance. Instead, you just have to accept the ETFs that Betterment chooses on your behalf.

This is a great feature for newer investors, but if you want to be more actively involved with choosing your investments, you might need to go elsewhere.

Rolling over a retirement account can be a little bit of a hassle, however. Betterment doesn’t handle the transaction itself. Instead, you will need to take the money out of your retirement account and move it into Betterment.

Before you make this move, talk to your current custodian to make sure that your move is classified as a rollover and not an early withdrawal. An early withdrawal will come with penalties. When adding the money to Betterment in the account you opened, be sure to click the rollover box.

If you want to withdraw from your Betterment account, it’s fairly simple. It takes three to four business days to complete the transfer to your bank account.

Betterment fees and interest rates

There is no minimum requirement to open an account. However, you do have to start by committing $100 a month if you don’t have $10,000 to put in.

You can stop that investment later, or skip a contribution. However, if you stop the investment, you are still charged a fee.

Betterment charges an annual fee of 0.35 percent of your average account balance when your balance is between $1 and $9,999. An account balance of between $10,000 and $99,999 has a fee of 0.25 percent. Once your account balance reaches $100,000, your fee drops to 0.15 percent.

These fees include all costs associated with your account. The expense ratios for the ETFs are accounted for, so you don’t have to worry about additional costs eroding your real returns.

When compared to other money managers, Betterment investing holds up pretty well. Many company retirement plans come with annual management fees of between one and two percent, and that doesn’t include the expense ratios for the funds chosen.

Betterment eligibility requirements

As long as you are eligible to open an investment account in the United States, you are eligible for a Betterment account. You will need a US address, a social security number, and a current US checking account.

Betterment is best for people who are interested in meeting savings and retirement goals through investing, but are hands-off. The relatively low barrier to entry ($100 per month) makes it easy to get started.

If you want more control over the investments in your portfolio, Betterment isn’t for you. This is a tool best used for those who want to “set it and forget it,” growing wealth over time without fiddling much with asset allocation on their own.

Betterment customer service

Betterment investing offers customer service via phone, email, and live chat. Betterment is responsive, with customer service hours for the phone Monday-Friday, 9 a.m. to 8 p.m., and weekends, 11 a.m. to 6 p.m.

More about Betterment

Betterment was started by Jon Stein, a former financial industry insider. He and his co-founder set out create a platform to make it easier for regular folks to invest. The idea behind Betterment is that you can invest a set amount each month and grow your wealth over time.

Betterment has assembled a team of financial and investment professionals who understand the markets and behavioral economics. Today, Betterment has more than $5 billion in assets under management.

The company is headquartered in New York City.

Betterment contact

61 W 23rd Street, 4th Floor
New York, NY 10010
Email: support@betterment.com
Phone: 855-381-5956

Get Started with Betterment

Want to get started investing?

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