Betterment was launched on May 25th, 2010 on stage at TechCrunch Disrupt conference in New York City. Eventually, they became a “Battlefield Finalist” and were named as “NYC’s Best Startup” at that conference, but it was only the beginning.
In the intervening 1829 days, they’ve become the premier automated investing service.
They were the first to reach 50,000, and then 75,000 customers. They are now closing in on over 260,000 happy customers and $9 Billion in assets under management! They’ve continually improved their product offerings and during their 5 years, they’ve dropped the costs for using the service substantially.
This week I received an email from Betterment thanking me for being a customer for 1512 of their 1829 days. In other words, I’ve been a customer for just over 4 of their 5 years.
Why did I sign up for Betterment 1500+ days ago? I saw the potential that the site had for the average investor, for people who know they need to be in the markets but don’t want to spend a lot of time and resources to do it. By investing with Betterment you’re able to invest in a highly diversified portfolio of ETF index funds that should give you proven long-term returns, while at the same time having your account regularly rebalanced and having dividends reinvested to ensure your account runs as efficiently as possible.
When they first launched Betterment’s pricing was decent, but not great – with investors having to pay anywhere from .3%-.9%. in annual fees for the service. Just over 3 years ago the fees for the service were slashed across the board, all the way down to .15%-.35% in annual fees – a much more cost-effective number. In investing one of the keys is to keep your costs low, right?
After the annual fees were slashed I jumped in and started investing more with the service, maxing out my Roth IRA in 2012, and continually adding it to where I have over $10,000 invested with Betterment currently.
With all that said, I think it goes without saying that I am a Betterment believer.
Release Of The New Betterment RetireGuide™ Advice Engine
A couple of weeks ago Betterment released a new tool for investors to give them recommendations for their retirement accounts, called RetireGuide™. It will take you through planning scenarios to see what you might expect in any number of situations. You can look at scenarios where Social Security exists – is reduced or not available at all. It will show you what kind of income you can draw down in retirement depending on how much you contribute, and considering certain growth and inflation rates. Finally, it will give recommendations for how to proceed and allow you put those suggestions into action through your Betterment account if you so choose.
Getting Started With RetireGuide™
To get started with RetireGuide™ just log in to your Betterment account, and click on the “Advice” tab in your account. Once you arrive on the page you’ll see a blue box at the top that says “RetireGuide”. Click on the “See Plan” button to begin.
Once you click the button the RetireGuide™ will take you through a question and answer process to get some of your basic details down.
It will ask for marriage status, and if you’re married, for your spouse’s name and age.
Next, it will ask for:
- Your income.
- Your spouse’s income.
- Your retirement age.
- Your spouse’s retirement age.
- How much you already have saved (in Betterment and elsewhere).
- How much you contribute to your retirement accounts annually already.
- How much you plan to spend in retirement. You can enter your own number or it will give you a suggestion if you want. The recommendation is based on spending 75% of pre-retirement income, assuming average costs of someone in your zip code. It will then show you much that amount will be after inflation in the year of your retirement.
After you have entered all of your information RetireGuide™ will give you a full summary based on what you’ve entered.
First, it will show you a projection of how much you’ll have to spend in retirement, based on your current saving trends, amounts already saved and Social Security. It will give you a recommended and updated saving amount in order to reach your preferred annual spending amount in your retirement versus what you currently save.
For example, here’s a scenario I entered in my account based on some made-up numbers:
Since the account believes I’m only putting in $1320/year into retirement savings (the amount I’m currently doing only with Betterment), it shows me as being pretty far off track for reaching my retirement goal. By updating the projection to include outside retirement plan contributions and amounts saved it’ll give me a more accurate number.
Once you are shown the projection and how much you’ll need to save every year in order to reach your retirement goal, it will give you an idea of how you could save to reach that number.
How To Save
The “How To Save” tab will give you a rundown of Betterment’s recommendation for how to save for your retirement.
On my account, it recommended that we save $12,370/year. To do that it said we should save the maximum allowed amount in a Roth IRA for my wife and I ($5500 each – $11,000 total).
Then it recommended saving the additional amount, $1,370/year, in a taxable investment account.
In the last step of the RetireGuide™ it suggests taking action right away and setting up your existing accounts to fully fund the needed amount for retirement.
In my case, it gave me a button that I could click in order to change my funding and automatic contribution amounts for my Roth IRA and taxable Betterment accounts. It also instructed me to work on fully funding my wife’s Roth IRA.
RetireGuide™ Can Be Eye Opening
One thing that Betterment does well is making investing simple and efficient. With their new RetireGuide™ tool they’ve made it simple and efficient to see just how much you’re going to need to save for retirement.
While their goal is obviously to get you to invest more through their accounts (the more you invest, the more they collect via their annual fees, right?), the tool is helpful regardless of where you decide to invest. The whole process can be eye-opening. You might have thought you were saving enough, but invariably you’ll likely need to save more. The tool makes it easy to find out just where you are, and where you need to be in order to reach your goals.
So the question is this, are you on track or off track for retirement? Have you given the RetireGuide™ tool a test drive? If you don’t have an account, you can sign up for one through the link below – and then give it a test drive!