Betterment Review – The Smart Money Manager

Betterment, a smart money manager and robo-advisor, is a brokerage that offers retirement, investment, and cash accounts. Like Mint, NerdWallet, Wealthfront, and Personal Capital, Betterment allows you to link your external accounts (Banking, Mortgage, Loans, Credit, Home Value, Other Retirement Accounts and Brokerages) so that it can offer better advice and help you track your net worth and goals. If you are interested in growing your wealth with Betterment after reading this post, join through my referral link https://financethrottle.com/go/Betterment and get $5000 managed free for a year.

Betterment IRA’s

Betterment offers three retirement investment products which include the Traditional IRA, Roth IRA, and SEP IRA. The Traditional IRA is a retirement investment account that allows you to contribute pre-tax income with tax-deferred growth. Roth IRA’s are retirement investment accounts that allow you to contribute after-tax income, in which your retirement distributions will be tax free on both your contributions and earnings/growth. Both Traditional and Roth IRA’s have $6000 contribution limits ($7000 if over 50). The SEP IRA is a Simplified Employee Pension, specifically for the Self-Employed and small business owners. SEP IRA’s have higher contribution limits of 25% of your income up to a maximum of $58,000.

Back in March of 2015, I joined Betterment and opened my first Roth IRA account with a very low 0.25% APY management fee and 0.06% Portfolio fee. The 0.06% fee was very normal for portfolios with ETF’s. The 0.25% APY fee is what scares most people away. That is only $25 for every $10,000 invested! I believe the 0.25% APY management fee is very cheap for a company that advises you and automatically rebalances your portfolio to help you reach your retirement goals. I contributed $300 per month and left my automatic contributions alone for the past 6 years. Now we are in 2021 and I have made over $8000 while spending only $173 in fees. That is a profit of $7827! If you don’t have a retirement account, or you have a 401k, consider opening a Roth IRA with Betterment. You won’t be disappointed.

Betterment Cash Reserve & Cash Savings Goals

Betterment currently offers a Cash Reserve account offering 0.4% APY at the time of this post. While 0.4% is very competitive, it is down from the 2.69% APY they offered just over a year ago. Due to COVID, most banks and brokerages significantly dropped their rates. I would expect rates to go back late 2021 as the market recovers.

Cash Reserve not a savings account, but it can be used as a savings account. This account has no routing number and cannot be used for direct deposit for paying bills directly. To move money into your Cash Reserve account, you need to link your bank account with Cash Reserve. This will allow you to transfer money or set recurring transfers into your Cash Reserve. You can also set recurring transfers to go from your Cash Reserve account to your Betterment IRA or Safety Net accounts. I use my Cash Reserve account to hold my emergency savings.

One of the best benefits of Betterment’s Cash Reserve are the Cash Savings Goals. You can organize your Cash Reserve into separate goals or buckets and set auto-deposit for each goal. For example, let’s say you have $15,000 in your Cash Reserve and your cash reserve is organized into 4 buckets, or goals. You can set recurring deposits of $100 to split into whatever bucket you want within your Cash Reserve account. Another great feature of Cash Reserve is that there are no withdrawal limits. Savings accounts have withdrawal limits of 6 times per month, but like I said, Cash Reserve isn’t exactly a savings account.

Betterment Checking

Betterment Checking is an FDIC insured, no fee, no minimum balance checking account with a free VISA debit card. You can get reimbursed at over 75,000 ATM’s and get as high as 5% cash-back on some of your favorite brands or store such as Target, Adidas, Sam’s Club, Dunkin’, Wal-Mart, Staples, and more. You can one-touch pay using Apple Pay or Google Pay and you can even open a joint-account with your spouse.

Betterment Safety Net & Investment Accounts

Betterment makes it difficult to understand their Safety Net Accounts. There is very little information on their website, so I gave them a call. The Safety Net Account is actually a low risk conservative brokerage account. It is a product that is meant to help you save for emergency expenses, hence the name Safety Net. Your conservative growth target is meant to beat inflation, but it is not guaranteed. You can say it compares to a bank’s Money Market savings account where your money is invested so that you can earn interest. Besides the Safety Net account, you can open other investment accounts geared towards life in retirement, education, trusts, and saving for a major purchase like a house or wedding.

One competitive advantage that Betterment offers is Tax-Loss Harvesting. They will automatically rebalance your portfolio to minimize taxes. This feature is included under the 0.25% management fee.

Betterment Health Savings Account

Have a Health Savings Account? Use Optum Bank? Betterment has partnered with Optum Bank to help manage your Health Saving Investment Account. HSA’s, as they are known, are triple-tax advantaged accounts that allow you to invest money tax free if you use that money for qualified medical expenses. Betterment charges a 0.5% management fee to help grow and manage your health savings account.

Conclusion

In my opinion, Betterment is one of the Best Smart Money Manager’s available. I periodically sign in to my Betterment App to check up on my Roth IRA and Cash Reserve accounts, my net worth, my Fidelity 401k, my cash accounts, and my M1 Finance Roth IRA. If you open more than one type of investment account with Betterment, they can automatically evaluate and move your securities around your tax advantaged accounts to minimize the amount of taxes you will owe in the future. They claim that this can save customers 0.45% APY. If you are interested in opening an account with Betterment, join through my referral link to get $5000 managed free for a year. Subscribe to be to notified when I post reviews and comparisons of Wealthfront (Betterment’s direct competitor) and M1 Finance.

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