An update on my Betterment retirement account
If you have checked out my site you know I switched my managed Simple IRA to a “robo-advisor” company called Betterment and I wanted to update everyone on my results.
A little background, I had a Simple IRA from a former employer from years ago and I have rolled it over to various traditional advisor based firms over the years and honestly have been slacking on investing much more into a formal “retirement plan” up until the last few years. I was using my capital to invest in short-term projects like real estate flips and businesses. Lately I have started to get more serious about diversifying my retirement investments and have been doing pretty well the last 3 years.
The account was rather small and again not a high priority for me so I let several financial advisors take on the account and found each one had a great sales presentation but really no follow through. In fairness, they make a rather small percentage on their managed accounts and mine was just too small to focus on. I found they placed my fund in a rather safe diversified portfolio and forgot about it. Quite frankly after inflation and their fees I don’t think I saw any real gains in the 10+ years I had the account. This led me to roll the IRA into a Betterment Tradition IRA and have been monitoring it very closely. I have focused on my Roth IRA for the last 3 years which is in a self-directed IRA and invested in Lending Club (more on that in another article).
As for my Traditional IRA, I have seen very low fees from Betterment ($1-$9999= .35% per year, $10k-99k= .25%, $100k+=.15%) which compared to the 1-5% fund managers charge this is a bargain. The only drawback is you have to do a lot of the research yourself since the website is the licensed broker they do not have financial advisors to assist you, but with a little work to do your initial setup this shouldn’t be a problem for most.
As I mentioned I have not contributed to my Traditional IRA so all of my returns are from market gains and dividends. As of this writing 01/17/17, I have seen a 9.3% return since 03/31/16 not quite a year but far better than I have seen in the past.
I am currently invested in their moderate risk plan since I am younger and have more time to recover. This plan includes 90% stocks 10% bonds. As I get closer to retirement I will adjust those percentages to get a safer return.
Now I want to be clear I am not bashing financial advisors as a whole, I know there are very knowledgeable people in the industry that can beat this return, however, I don’t have the size account to hire those managers and will not get the attention I need to make up the fee difference. Betterment’s use of fund allocation with market fluctuations called their Drift program moves your funds as your positions move more that 3% away from their targets.
To find out more I highly recommend checking out their site as it is very helpful and informative, they also have a great customer service department which I have contacted on several occasions. In closing, I do want to say although I no longer contribute to my Traditional IRA I have opened a SEP IRA with Betterment since I am self-employed and it too is starting to make some nice gains for me.
Lastly, I am testing their “Safety Net” account which allows you to parked idle cash in a liquid account that should receive higher that savings account returns, however, it is still subject to market movement which is why I am testing a small balance at first.
That concludes my personal review on my Betterment retirement account and my experience so far, again I am not a financial advisor and if managing your own retirement account seems too scary to you I urge you to consult a professional. By signing up with one of the links on this blog post you will receive 6 months free! Click Here For Your Free 6 Months!