Betterment Editors

Claiming Social Security: 7 questions every retiree should ask Jul 10, 2025 9:28:37 AM A short guide to understanding how Social Security works. If you’re like many Americans, Social Security is one of the most important pieces of your retirement planning. You’ve worked hard, paid into the system, and now it’s time to figure out how and when to claim the benefits you've earned. But with so many rules, options, and trade-offs, deciding when to start can feel overwhelming. Don’t worry — Betterment has you covered. This short guide breaks down seven questions to help you make sense of claiming Social Security benefits. Am I eligible for Social Security benefits? If you’ve worked and paid into Social Security for at least 10 years, you’re most likely eligible to receive benefits. The Social Security Administration tracks your work history using “credits.” You can earn up to 4 credits per year, and most people qualify for retirement benefits after earning 40 credits. You can start collecting benefits as early as age 62, but the longer you wait (up to age 70), the bigger your monthly checks will be. When can I claim Social Security? You have three main options when it comes to timing: Early retirement (age 62): You can start collecting in your early 60s, but your monthly benefit will be permanently reduced up to 30% less than if you wait until full retirement age. Full retirement age (FRA): This is between the ages of 66 and 67, depending on when you were born. You’ll get 100% of your benefit if you wait until your FRA. Delayed retirement (up to age 70): Social Security benefits increase by a certain percentage each month you delay receiving payments beyond full retirement age. These are called Delayed Retirement Credits. Quick Tip: Not sure when your FRA is? If you were born in 1960 or later, it’s age 67. Should I wait to claim Social Security? Timing your claim isn’t just about the numbers. It’s about what’s best for your life. Here are a few things to think about: Health: If you’re in poor health, it might make sense to claim early. Longevity: If you expect to live into your 80s or beyond, waiting could be a worthwhile strategy. Other income: Do you have a 401(k), pensions, IRAs, or rental income? You might not need Social Security right away, so waiting could make sense. Everyone’s situation is unique. It’s important to balance short-term needs with long-term security as you make your decision. How much will I get from Social Security? Monthly benefit amounts vary widely from person to person.. The Social Security Administration looks at multiple factors and plugs them into a formula to determine your payment. What you get depends on: Earnings history: What you earned during your 35 highest-earning years of work. Age at claiming: You can claim Social Security benefits as early as age 62, but benefits are permanently reduced if you start before your full retirement age. Delaying benefits: If you delay starting benefits beyond your full retirement age, your benefit will increase by a certain percentage each year until age 70. Other factors: Your marital status and whether you are claiming as a worker, spouse, or survivor also affect your benefit amount. Want a rough estimate? The Social Security Administration has a benefits estimator you can use to see what your checks might look like. How does Social Security work if I’m married, divorced, or widowed? If you're married, divorced, or widowed, there may be additional options to consider: Spousal benefits: If your spouse earned significantly more than you, you might be eligible for up to 50% of their benefit, even if you’ve never worked. If a spouse is also eligible for benefits based on their own work record, they will receive the higher of the two amounts. Divorced spouses: Divorced individuals can potentially receive Social Security benefits based on their ex-spouse's earnings record, even if they remarry, provided certain conditions are met. For instance, the marriage must have lasted at least 10 years and the divorced spouse must be at least 62 years old. Survivor benefits: If your spouse passes away, you may be eligible if you are age 60 or older (age 50–59 if you have a disability), were married for at least nine months before your spouse's death, and didn’t remarry before age 60 (age 50 if you have a disability). Learn more about Survivor Benefits. There are also strategies like one spouse claiming early while the other delays to boost long-term income. Will I owe taxes on my Social Security benefits? Maybe. Social Security benefits can be taxed, depending on your total income. This surprises many people, so it’s worth factoring into your retirement planning. The IRS looks at something called provisional income, which includes your adjusted gross income, nontaxable interest, and half of your Social Security benefits. Here’s a quick look at the thresholds: Percentage of Social Security income taxed? Single filers combined income thresholds Married couples filing jointly combined income thresholds 0% is taxed Less than $25,000 Less than $32,000 Up to 50% is taxed $25,000–$34,000 $32,000–$44,000 Up to 85% is taxed Greater than $34,000 Greater than $44,000 These calculations can be complex, so you may want to speak with a tax professional to better understand your specific situation. Can I work and claim Social Security? If you’re still working and claim your benefits before your full retirement age, there’s an earnings limit that, once reached, will reduce your payment. In 2025, that limit is $23,400. If you go over the limit, the SSA withholds $1 in benefits for every $2 you earn above the limit. In the year you reach full retirement age, the Social Security Administration deducts $1 in benefits for every $3 you earn above a different limit. Once you reach your full retirement age, that earnings limit goes away, and you’ll get any withheld benefits back over time. Takeaway: If you're planning to work part-time in your early retirement years, pay attention to how much you're making. Plan for a brighter retirement At Betterment, we know planning for Social Security and retirement can be challenging. But that’s why we’re here—to help you build the future you want. We provide financial resources every step of the way. Take advantage of our free educational resources to help you prepare for and navigate retirement.

5 tips to plan for healthcare costs in retirement Jul 7, 2025 11:01:26 AM Retirement should be a time to enjoy life—here are five tips to ease the stress of planning for healthcare. Healthcare is one of the biggest and most unpredictable costs retirees face. While Medicare provides a foundation, it doesn't cover everything. Planning ahead can help you stay financially prepared and reduce stress later. Here are five key tips to help you plan for healthcare expenses in retirement. Tip 1: Understand how Medicare works Many people assume Medicare covers all health expenses in retirement—but that’s not the case. There are different parts to Medicare, and understanding them can help you avoid unwanted expenses. Part A covers hospital stays and is usually premium-free. Part B covers outpatient care and doctor visits. In 2025, the standard premium is $185/month—but it could be higher depending on your income. Part C (Medicare Advantage) is an all-in-one alternative offered by private insurers. Part D covers prescription drugs. Part A and B together are referred to as “Original Medicare” Medigap plans are offered by private health insurance companies that can help cover out-of-pocket expenses not covered by Original Medicare (such as copayments and deductibles) You must enroll during your initial enrollment period (3 months before and after your 65th birthday month) to avoid late penalties. You can avoid penalties by enrolling in Original Medicare (Parts A and B) during your Initial or special enrollment period (if you qualify due to certain life events)—and potentially reduce out-of-pocket costs by adding Medicare Advantage (Part C) or pairing a Medigap plan with Part D drug coverage. Also, keep in mind that Medicare premiums are based on your Modified Adjusted Gross Income (MAGI) from two years prior. Higher earners may pay significantly more. Tip 2: Estimate how much you’ll need for medical expenses Healthcare costs in retirement are much broader than just your monthly Medicare premiums—they include a wide range of expenses that can add up significantly over time. The Milliman Retiree Health Cost Index estimated that a hypothetical couple retiring in 2024 will need $395,000 to cover healthcare if they have Original Medicare plus Medigap and Part D coverage. Where does all that money go? Monthly premiums for Medicare Parts B and D (or Medicare Advantage plans), which often increase with income. Deductibles, copayments, and coinsurance, which are your share of the cost each time you receive medical care. Services not covered by Medicare, such as routine dental visits, vision exams and eyeglasses, hearing aids, and custodial long-term care (like help with bathing, eating, and dressing). Everyday health-related expenses, including over-the-counter medications, supplements, medical devices like blood pressure monitors, or home safety equipment like shower chairs or walkers. Many of these costs are easy to overlook, especially if you're healthy now. But planning for them early can help you avoid financial surprises later. A realistic healthcare budget in retirement should factor in both predictable expenses (like premiums) and variable or unexpected ones (like dental work or mobility aids). Tip 3: Plan for long-term care expenses One of the most commonly underestimated healthcare costs in retirement is long-term care. Medicare does not cover extended stays in nursing homes or full-time, in-home care if it's custodial (help with bathing, dressing, etc.). According to the Genworth 2024 Cost of Care Survey, the median cost of a private room in a nursing home is nearly $10,646 per month, and the costs of an assisted living community is $5,900 per month. To prepare, consider: Long-term care insurance, ideally purchased in your 50s or early 60s. Self-funding, by setting aside a portion of your savings for future care. Medicaid planning, if you expect to need care but may not be able to cover the full cost on your own. Tip 4: Leverage a health saving account (HSA) If you contributed to a Health Savings Account (HSA) while working, you have a valuable tool for retirement. And under certain conditions, you can still contribute in retirement (more on that below). HSAs offer a triple tax benefit: Contributions are tax-deductible Growth is tax-free Withdrawals for qualified medical expenses are tax-free Even though you can’t contribute to an HSA once you enroll in Medicare, you can use the funds tax-free to pay for a wide range of costs in retirement—like Medicare premiums, long-term care, and dental or vision expenses. Tip 5: Plan for inflation in your healthcare budget Planning for inflation is easy to forget but it can pay off, especially if costs rise even more than expected. Historically, medical care prices have generally grown faster than overall consumer prices. According to the Peterson-KKF Health System tracker: Since 2000, the cost of medical care—including doctor visits, insurance, prescription drugs, and medical equipment—has risen by 121.3%. Over that same period, the overall cost of consumer goods and services increased by just 86.1%. From 2027-2032, per capita spending growth on healthcare will increase at an average annual rate of 5.0%. As you make your healthcare budget, planning for inflation can help ensure you’re not caught off guard by rising premiums, medical bills, or care costs down the road. Plan for a brighter retirement At Betterment, we’re here to help you build the future you want. We provide financial resources to help every step of the way. Take advantage of our free educational resources to help you prepare for and navigate retirement.

8 tips for retiring in a volatile market May 27, 2025 12:32:20 PM In this guide, we walk through what to do before and after retirement to help get the most of your retirement savings, especially in a down market. Planning for retirement during a volatile market can be overwhelming—and stressful. Working with a financial professional can ease the burden, but having a solid understanding of your own plan can empower you to have the retirement you want. In this article, we share eight ways to help you make smart retirement moves in a turbulent economic landscape. Before you retire As you near retirement, there are a few proactive steps you can take to get your financial life on solid ground. Tip 1: Reevaluate your asset allocation Market volatility is a good reminder that asset allocation matters. Too much invested in stocks, and your portfolio can be vulnerable to large losses during a downturn. Too much sitting in cash and you’ll be leaving long-term gains on the table. Portfolio allocation is about balancing your needs in retirement. Take some time to think through the following concepts: Time horizon: The length of time you expect to hold an investment before needing to access the money. When you retire, you’ll likely have immediate income needs to fund. With a shorter time horizon until you need to access your retirement portfolio, you have less time to recover from market losses. Income needs: The amount of money you require from your investments to cover living expenses and financial goals. This may or may not change once you retire, and your portfolio will likely be a main source of income. Risk tolerance: As you retire, your ability and willingness to endure fluctuations in the value of your investments may decrease. You can reduce stress by having a portfolio allocation that you are comfortable with during market ups and downs. As you near or enter retirement, it’s likely time to start reducing your stock-to-bond allocation. According to Nick Holeman, CFP®, Director of Financial Planning at Betterment, investors may want to consider lowering their ratio to about 56% stocks in early retirement.. Everyone’s situation is unique, making it wise to talk with a CERTIFIED FINANCIAL PLANNER® to find the right portfolio allocation for you as you near retirement. Tip 2: Build your emergency savings AARP reported that around 30% of Gen Xers (ages 44-59) and 16% of boomers (ages 60-78) have no emergency savings. If you’re in this age range, an emergency fund can be even more important than when you were younger, because you no longer have income from a paycheck. As you think about your emergency fund, here are some tips as you near retirement: Start (or replenish) your emergency fund: If you tap into your emergency fund, slowly rebuild it, even if you are already retired. Having at least three months of expenses can help you survive unexpected events. Already funded an emergency fund? Consider building a larger cash buffer: Planning to increase your cash position before transitioning into retirement can provide peace of mind in the case you retire during a volatile market environment. If able, you may want to consider planning to save up to 12 months' worth of expenses, sometimes more, depending on your situation. Use a liquid account: Using an account that allows easy cash withdrawals, like Betterment’s Cash Reserve, is crucial for your emergency funds. Next steps: See the three steps to creating your emergency fund. Tip 3: Plan your Social Security timing and make a budget Deciding when to start receiving Social Security is one of the most important retirement choices, as it impacts your monthly budget for years to come. For your budget, start by figuring out what your retirement lifestyle will realistically look like and what it will cost. It helps to draw up a budget that separates “must-have” expenses (needs) from “nice-to-have” expenses (wants). Once you have an idea of your expenses, working with a financial advisor can help you plan ahead to understand your sources of income, including: Social Security payments Dividends and/or interest payments The amount of withdrawals your retirement portfolio can support over your lifetime Other forms of income (part-time work, pension income, rental income, etc) You can claim Social Security as early as age 62, but your monthly benefit will be permanently reduced. If you wait until full retirement age (~66–67) or even up to age 70, your benefit will be significantly larger. Tip 4: Stress-test your retirement plan Finally, before you step into retirement, it’s wise to give your investing plan a “stress test” to see how it may perform. A simple exercise is to simulate a market downturn right before or after you retire. For example, let’s say your plan was to retire with $2 million and withdraw 4% each month, for a total of about $80,000 per year. Now, imagine the market declines, and your portfolio is down 10%, leaving you with $1.8 million. At a 4% withdrawal rate, you’d now only have about $72,000. Playing out different scenarios of market declines can help you determine how “safe” your retirement portfolio is from volatility, especially if you are relying on it for a certain level of income. Make scenario planning easier. The Betterment app does the math for you, letting you test potential outcomes of different financial situations. And if you need more hands-on advice, our CFPs® can be your guide. Tip 5: Consider delaying your retirement date or earning part-time income If you're concerned about meeting your long-term financial needs, delaying retirement by even 6–12 months can make a meaningful difference—especially in a down market. Extra time working means: More contributions to your retirement plan More time for your investments to grow and recover in a downturn Less time in retirement that you have to fund with your savings When possible, we are trying to avoid what’s called “sequence-of-returns risk”—the danger of experiencing poor market returns early in retirement, which can drastically affect your nest egg’s longevity. By delaying retirement in a downturn, you reduce this risk. After you retire You’ve made it: Retirement. Congrats! Now, here are three tips to help you get the most out of your savings. Tip 1: Stick to your plan and don’t panic-sell during volatility When stocks are tumbling, it’s natural to feel worried. But one of the worst things a recent retiree can do is panic-sell. All it will do is lock in your losses and rob you of any chance for your portfolio to rebound. Research shows that “doing nothing” is generally your best bet during a volatile market. Dating back to 1988, if you decided to invest on any given trading day, 65% of those days would have resulted in a positive investment return over the following month. The share of days with positive returns goes up as that trailing holding period extends. Historically, no matter when an investment was made between 1988 and 2009, the market was higher 100% of the time just 15. You likely have decades ahead of you in retirement. If you planned ahead and have a well-diversified investing portfolio, your best bet is to stay the course. Tip 2: Have a tax-optimized withdrawal strategy Tax planning doesn’t stop when paychecks stop—in fact, it can become even more important in retirement. One key tip to plan for is to withdraw from your account in a tax-efficient order. Generally, tax-efficient withdrawals follow this order: Taxable accounts (Brokerage) Tax-deferred account (Traditional 401k/IRA) Tax-free accounts (Roth) Why? Using taxable investment accounts first allows your tax-advantaged accounts to keep growing sheltered from taxes. Moreover, when you sell assets from a taxable brokerage account, any long-term capital gains are taxed at a lower tax rate (0%, 15%, or 20%) as opposed to IRA withdrawals, which are taxed as ordinary income. Also, things like stock dividends and bond interest in taxable brokerage accounts are being taxed annually anyway. If you spend that cash instead of reinvesting it, you’re not incurring additional tax—you’re simply using what would be taxed regardless. That said, you may experience years of lower taxable income, during which it could make sense to prioritize withdrawals from tax-deferred accounts or consider Roth conversions to fill up lower tax brackets.. When the market is down, converting during a dip means you pay taxes on a smaller balance, and any rebound growth afterward happens tax-free in the Roth account. To understand how a Roth conversion may impact your personal financial situation, we strongly recommend consulting a tax advisor and IRS Publication 590. Tip 3: Be prepared for required minimum distributions Required minimum distributions (RMDs) are the minimum amounts you must withdraw from your retirement accounts each year. According to the IRS, you generally must start taking withdrawals from your traditional IRA, SEP IRA, SIMPLE IRA, and retirement plan accounts when you reach age 73. (For more info, see the IRS’s Official RMD FAQs.) So, why are RMDs important to plan for? Simply put: RMDs can raise your taxable income. A sudden spike in income from mandatory RMDs can increase your taxable income, bumping you into a new tax bracket. Without careful planning, a higher tax bracket can potentially result in: Raising your Medicare premiums More taxes paid on Social Security and investment income Shrinking your savings faster than intended Thoughtful tax planning—such as managing withdrawals early, considering Roth conversions, and coordinating Social Security timing—helps spread out taxable income more evenly over retirement and preserves more of your wealth. Plan for a brighter retirement—with an expert At Betterment, we’re here to help you build the future you want. We provide resources and experts to help every step of the way. Education resources: See our library of articles on preparing for retirement. Talk to an expert: Partner with our team of experts for hands-on guidance backed by Betterment’s technology.

401(k) contribution strategies: Dip or dive in? May 1, 2025 12:36:08 PM Learn how front-loading and dollar-cost averaging work in a 401(k), and what factors to consider when planning your retirement contributions. Contributing to a 401(k) is one of the most effective ways to build long-term wealth, especially when you factor in tax advantages and the potential for employer matching. But how you contribute can make a meaningful difference. Some investors choose to front-load their 401(k)—contributing as much as possible early in the year to maximize time in the market. Others stick with the more common approach: dollar-cost averaging (DCA), spreading contributions evenly throughout the year. Which strategy is more effective? Understanding the tradeoffs can help you make the most of your 401(k). Let's take a closer look. What is front-loading? Front-loading involves making your 401(k) contributions as early in the calendar year as possible, ideally maxing out your contributions within the first few months. By front-loading, your money is invested sooner, giving it more time to potentially grow. The longer your contributions are in the market, the more opportunity they have to benefit from compound interest—where your earnings generate their own earnings over time. Even small differences in timing can add up significantly over the long run. What is dollar-cost averaging? Dollar-cost averaging is when you contribute the same amount to your 401(k) each paycheck throughout the year. This spreads your investments across different market conditions and can reduce the impact of short-term volatility. It's the default approach for most 401(k) participants since contributions are often tied to payroll deductions. Potential downsides of front-loading Timing your employer match: Some employers match contributions on a per-pay-period basis. If you front-load and stop contributing mid-year, you could forfeit part of the match. Check your employer’s match policy before committing to this strategy. Cash flow: Contributing heavily early in the year requires more liquidity. You’ll need to ensure you have the budget flexibility to absorb a smaller paycheck. Timing the market: Front-loading exposes your investments to the market conditions at the beginning of the year. If the market dips shortly after, you may see short-term losses. Additional considerations Alternative investment opportunities If you are able to save more each paycheck, you’ll need to work out whether front-loading your 401(k) is the best use of those funds. Depending on your personal financial circumstances, you may consider paying down high-interest debt, building up your emergency savings, or saving for another non-retirement goal. Payroll and plan restrictions Some 401(k) plans have rules that prevent you from contributing too much in a single period or may not allow large lump-sum contributions. Check with your HR department or plan administrator to understand the rules of your plan. Which strategy is right for you? It depends on your financial situation, risk tolerance, and employer plan structure: If you have the cash flow and your employer matches annually (or would offer to complete your match as if you had contributed throughout the year, known as a “true-up”), front-loading could give your money more time to grow. If you prefer a hands-off, lower-risk approach or want to ensure consistent employer matching, dollar-cost averaging may be the better choice. Some investors even opt for a hybrid approach—contributing more than the minimum early in the year, but not so much that they lose out on any employer match. Final thoughts Front-loading your 401(k) can be a powerful way to take advantage of compounding and time in the market, but it requires careful planning and consideration of your employer’s match policy. Meanwhile, dollar-cost averaging provides steady progress toward retirement with built-in risk management. Whichever strategy you choose, the most important thing is to contribute consistently and make the most of your 401(k)'s benefits.

Start small: A 3-step roadmap to building your 401(k) savings Mar 25, 2025 12:38:48 PM Building your 401(k) savings is about putting yourself first. Here are the steps you can take to start today. For many people, saving for retirement feels hard. It’s easy to put off saving when there are more pressing financial needs or when retirement feels far away. That’s totally normal to feel. Here’s the thing: You don’t have to choose between financial stability today and retirement security tomorrow. You can do both with the right plan in place. The 3-step roadmap to start saving for retirement It all starts with putting yourself first. But that’s often not what happens. Instead, many of us put our money towards: Spending on monthly purchases (groceries, bills, entertainment, etc) Paying off some debt with anything left over Saving for retirement with what’s left after that The problem with that is clear: by the time one covers monthly expenses and pays off some debt, they might not have anything left to save. The easiest way to remedy the situation? Flip that list on its head. Here’s a 3-step roadmap to start actively building your 401(k) savings: Start with a 2% contribution to your 401(k) Prioritize your high-interest debt payments Build a budget around your 401(k) savings and debt payments You may be thinking, “What if I don’t have enough money left to pay for expenses?” That’s a fair question, and in some cases, that may be true. But if you start by putting yourself in a position to save, you can always make adjustments as life changes. Let’s walk through each step… Step 1: Start small and build up your 401(k) contributions It's a common misconception that you need a substantial income to begin investing. In reality, starting with small, consistent contributions can lead to significant growth over time. Try starting with just a 2% 401(k) contribution rate: If you earn $60,000 per year, contributing 2% means setting aside just $1,200 annually—or about $100 a month ($50 per pay period). At first glance, $100 a month may feel like a lot. But if you break it down, it might be the cost of a couple of takeout meals or a few streaming subscriptions each month. Small, manageable changes can help you build a strong financial future without overwhelming you today. Let’s assume Natalie and Nathan both make $60,000. Natalie starts contributing 2% to her 401(k) today. After 10 years of consistent saving, she needs to stop making contributions (because of a life event). She reduces her rate to $0/month. During the previous 10 years, she contributed $12,000 out of her paycheck, and with an 8% rate of return on her investments, her balance grew to $300,173 by the time she was ready to retire. . On the other hand, Nathan put off contributing to his 401(k) for 10 years. He then saved $100/month over the course of 35 years, or $42,000 out of his paychecks. When it was time to retire, his account balance was $230,524. It may seem unlikely that Natalie ends up with more money after only contributing for ten years, but that’s the power of time in the market. As your financial situation changes, you can always adjust your contribution rate. If 2% feels like too much, start with 1%. It’s important that it feels manageable now. You can always increase when you’re ready if you get a raise or a promotion or pay off a debt. Step 2: Prioritize your high-interest debt payments OK, after deciding how much to contribute to your 401(k), step 2 is all about being strategic with paying off debt while investing. It’s about finding the right balance between immediate financial needs and long-term security. You can follow these steps: Prioritize high-interest debt first: For example, if you have credit card debt with a higher interest rate, it makes sense to prioritize paying it down. Take a close look at any debt with an 8%-plus interest rate. Next, pay lower interest debt: Lower interest debt may be things like a mortgage, student loans, or potentially a car loan payment. Here are some additional important considerations when it comes to debt: Make at least the minimum debt payments. This will help pay off debt faster and avoid issues like penalty fees or going into collections. Take a close look at high-interest debt: In some cases, if you have too much high-interest debt, you may want to hold off on saving for retirement until it feels manageable to you. If that’s the case, once you’ve paid off enough high-interest debt, you can begin investing for the long term. But if you mainly have low-interest debt, your 401(k) investment returns can outpace your lower-interest debt. Bonus: If you’re making qualified student loan payments, your employer may be able to contribute to your 401(k) on your behalf, even if you’re not contributing directly. Login to your Betterment account to see if your employer offers a match on your student loan payments. Step 3: Build a budget around your 401(k) savings and debt payments Now that you have an idea of how much you want to contribute to your 401(k) and how much debt you need to pay off, let’s build a budget around that. Budgeting is very personal and looks different for everyone. But to help start, you can use a budget framework like the 50/30/20 rule: 50% of income goes to essentials (housing, food, bills, etc) 30% goes to discretionary spending 20% goes to financial goals (a mix of debt repayment and retirement savings) The exact percentages may look different for you, but the 50/30/20 rule serves as a solid guideline. Here’s how to create your budget: To build a monthly budget around your 401(k) savings and debt payments: Add up your monthly 401(k) contribution and debt payments Next, add up all of your monthly living essentials like housing, food, and bills Finally, estimate your monthly discretionary spending, like entertainment and going out to eat Once you have a total budget, compare that to your monthly take-home income. If your budget is more than your take-home income, look for areas in your discretionary spending to cut first. If you can’t cut enough discretionary income, then review your debt payments and 401(k) contribution amount to rework them into a manageable budget. The goal isn’t to stretch yourself too thin—it’s to take small steps forward in saving for retirement and paying off debt while still being able to enjoy life. Start small today With the uncertainty of Social Security and rising inflation, relying solely on traditional savings accounts may not be enough. Your 401(k) helps you take control of your financial future—so instead of seeing it as an expense, think of it as paying your future self—there’s a good chance it will be your main source of income in retirement. Betterment is here to help you As always, we’re here to help you confidently plan for retirement with the tools and resources you need to make smart decisions for your money. Ready to start saving? Claim your account at betterment.com/accountaccess.

Making sense of market volatility Mar 19, 2025 12:15:00 AM During times of market turbulence, it may be tempting to move your money to safer ground. But it’s important to consider the long-term impact of your decisions. As we've seen recently, the stock market can experience significant fluctuations, rising one day and declining the next. With market swings, tariff announcements, and policy changes flying about, you may be wondering what to do and whether now is the time to take action. You’ll hear from many financial advisors, including Betterment, that volatility is natural and often something you simply need to ride out. Which is true. While the temptation to move your money to safer ground is understandable, it’s important to consider the long-term impact of your decisions. You could miss out on growth opportunities or trigger a larger tax bill. Instead of taking immediate action, take a moment to think through your investing strategy, your financial needs, and potential next steps. Start with this question: When will I need my money? It’s impossible to time the market perfectly. But having a clear timeline for your financial goals allows you to prepare for volatile moments and even take advantage of them. A longer time horizon means you can afford to ride out downturns, while a shorter one may require different considerations. We’ll walk through four different scenarios based on time horizon and how you can align your volatility strategy with your financial goals. Staying invested at every stage in life If you’re not yet in the market: Waiting for the “perfect” time to invest often leads to missed opportunities. The best time to start is now, with a diversified portfolio that aligns with your goals. If you don’t need the money for decades: Whether we’re talking retirement, education savings, or just a healthy investing portfolio, if you’ve got decades to go, time is your greatest asset. Market volatility is normal, even if it feels chaotic. Staying invested and making consistent contributions over time will allow you to benefit from long-term growth and compounding. If you need the money in the next five to 10 years: Your investments still have time to recover from a downturn, but start thinking ahead. Make sure your portfolio reflects your risk tolerance while maintaining a focus on growth. As you get closer to your end goal, you may want to plan to shift toward a more conservative allocation of stocks to bonds, or even move money into a high-yield cash account. If you’re retired or nearly retired: In this retirement-specific case, you’re already drawing down on your investments (or will soon begin to). Remember that even though you’re “using” this money, you’ll be retired for a while, so you don’t want to miss out on growth entirely. “Have a plan that includes a mix of safe and growth-oriented investments. A cash or bond ‘bucket’ can cover short-term needs, while equities can support long-term growth,” says Betterment financial planner, Corbin Blackwell, CFP®. How Betterment can help you mitigate volatility While you can’t avoid market volatility altogether, you can take proactive steps to manage your money and financial needs during market downturns. Establishing a thoughtful investing strategy now will pay dividends in the future. Here are three things to consider as you determine your approach: Invest in a well-diversified portfolio: By investing in a diversified portfolio, your money isn’t riding the wave of any individual stock, asset type, or even a country’s performance. For example, the Betterment Core portfolio is globally diversified and has delivered 9.0% annual returns (after fees) since inception.1 Consider enabling tax loss harvesting: One silver lining strategy during market downturns is tax loss harvesting—a tax-saving tool that Betterment automates. TLH is the process of selling an asset at a loss (which can happen especially during market downturns) primarily to offset taxes owed on capital gains or income. Build and maintain an emergency fund: You should work to maintain 3-6 months of expenses. These funds should be stored in an account that’s relatively liquid but still provides some level of growth to help keep up with inflation. Depending on your preferences for risk, growth, and liquidity, we offer a few options: Emergency Fund, our investment allocation built specifically for this use case, with 30% stocks and 70% bonds BlackRock Target Income, our 100% bond portfolios Cash Reserve, our 100% high-yield cash account The big picture If you remember nothing else, remember this: The most important thing you can do is avoid making rash decisions based on short-term market movement. Betterment is here with you every step of the way, helping ensure you make the most of your money, whether the market’s up or down.

Taxes made simple: Getting the most out of your retirement accounts Mar 18, 2025 10:59:42 AM Practical tips to help you optimize your taxes when it comes to retirement planning. When it comes to taxes and your retirement account, a little planning and knowledge can go a long way. This guide covers key planning areas to help optimize your taxes through retirement accounts. In this guide, we cover: Reporting and filing taxes: Traditional and Roth accounts Contribution limits for traditional and Roth accounts Tax benefits of traditional and Roth contributions Reducing your tax bill with the Saver’s Credit Managing withdrawals and Required Minimum Distributions (RMDs) Reporting and filing taxes Taxes aren’t always fun, but here are a few tips to make them easier. How to report traditional and Roth contributions on your taxes When you contribute to a retirement account, whether it’s a 401(k) or an IRA, the way you report it on your tax return depends on the type of account: Traditional accounts: These contributions are generally tax deductible because they're made with pre-tax dollars, so you’ll report them on your tax return. This means that when you contribute to your traditional 401(k) or IRA, your taxable income is reduced by the amount of your contribution, which can lower your tax bill for the year. However, you’ll pay taxes on withdrawals later in retirement. Roth accounts: If you're contributing to a Roth 401(k) or an IRA, those contributions are made with after-tax dollars, so they don't lower your current taxable income. You won’t report these contributions on your tax return. Wondering if an IRA is right for you? Read our blog to see the potential benefits of an IRA in addition to your 401(k). Three practical tax filing tips When you’re ready to file, keep these tips in mind to help everything go smoothly. 1) Use tax preparation software or consult a professional Filing your taxes accurately is essential to capture all your retirement-related benefits. Whether you opt for user-friendly tax software or choose to work with a tax professional, the goal is to ensure you’re making the most of every deduction and credit available. 2) Keep detailed financial records year-round Staying organized is key! Keep a detailed record of all your contributions, receipts, and financial statements throughout the year. This practice not only simplifies tax filing but also ensures you don’t miss any valuable deductions or credits. Plus, some tax preparers will charge an extra fee for disorganized files and paperwork. 3) Use electronic filing for faster refunds If you’re looking to streamline the process even further, consider filing electronically. E-filing is fast and secure, and typically leads to quicker refunds, allowing you to reinvest your money sooner. Contribution rules and limits for 401(k)s and IRAs Each year, the IRS sets limits on how much you can contribute to your 401(k) and IRA. Staying within these limits not only helps you avoid penalties but also ensures you’re making the most of any tax advantages that are available to you. If you’re 50 or older, you’re allowed to make “catch-up contributions.” These extra contributions can boost your retirement savings and offer additional tax advantages—whether you’re in a traditional or Roth account. It’s a smart way to ensure you’re on track as retirement draws nearer. For the 2024 tax year, contribution limits are: 401(k) contributions: Under age 50: You can contribute up to $23,000. Age 50 and older (Catch-up contribution): You can add an extra $7,500, bringing your total to $30,500. IRA contributions: Under age 50: The contribution limit is $7,000. Age 50 and older (Catch-up contribution): The limit increases to $8,000. Tax benefits & savings of retirement accounts At Betterment, we help you automate much of your retirement savings. But even with automation, it’s still good to know the details about the tax benefits so you can select the account type that’s right for your goals. Tax benefits of traditional and Roth contributions There are three potential tax benefits that come from retirement plan contributions: Immediate tax savings (Traditional accounts): Because traditional 401(k) or IRA contributions are made with pre-tax dollars, they lower your taxable income for the year. If you are maxing out your contributions, you could see a significant reduction in your current tax bill, which could even move you to a lower tax bracket, depending on your income level. Tax-deferred growth (Traditional accounts): The money in your traditional 401(k) or IRA grows tax-deferred until you withdraw it in retirement. This allows your investments to compound without being eroded by annual taxes, potentially leading to a larger nest egg. Tax-free withdrawals (Roth accounts): Because Roth 401(k) and IRA contributions are made with after-tax money, qualified withdrawals in retirement are completely tax-free. This can be especially beneficial if you expect to be in a higher tax bracket later on. Reducing your tax bill with the Saver’s Credit For those with low- to moderate-income, the Saver’s Credit is a real game-changer. This credit rewards you for putting money into your retirement accounts by reducing your tax bill directly. It’s like getting a bonus just for saving for the future. You're eligible for the credit if you meet the following: Age 18 or older Not claimed as a dependent on another person’s return Not a student The amount of this credit — 10%, 20%, or 50% of contributions, based on filing status and adjusted gross income — directly reduces the amount of tax owed. Triple tax savings from Health Savings Accounts (HSAs) HSAs are often overlooked as a retirement planning tool. These accounts offer a triple tax advantage: Tax-deductible contributions: These contributions lower your taxable income, reducing the amount of income on which you pay taxes for that year. Tax-free growth: Your investments can increase in value without being taxed annually, allowing your earnings to compound more effectively over time. Tax-free withdrawals for qualified medical expenses: You can withdraw funds to cover eligible healthcare costs without incurring taxes on those amounts. This makes HSAs a powerful way to cover healthcare costs in retirement while also benefiting from significant tax savings. Withdrawals and required distributions Saving for retirement is just the start. As you get into your 50s, it's wise to start planning for how and when to take distributions. Tax implications of early withdrawals Taking money out of your retirement accounts before age 59½ can come with a hefty tax penalty. Not only will you owe regular income tax on the amount, but you might also face an extra 10% penalty. It pays to plan ahead and avoid tapping into your funds prematurely. If you’re in your 50s, check out these four practical tips to help plan for retirement. Understanding Required Minimum Distributions (RMDs) For those aged 73 and older, the IRS requires you to start taking a minimum amount from your retirement accounts each year—known as Required Minimum Distributions (RMDs). Missing an RMD can lead to significant penalties, so it’s important to calculate and plan for them. To learn more about the details of RMDs, read our blog, What is a required minimum distribution?

How auto-enrollment in a 401(k) plan works: Benefits & what it means for your retirement savings Feb 6, 2025 2:36:18 AM The best time to start saving for retirement is…now. Features like auto-enrollment and auto-escalation make it easy to save for your golden years with little effort on your part. If you’re unfamiliar with these features, keep reading to see how they can help you start saving today for tomorrow. While auto-enrollment and auto-escalation have been around for years, some employers are now required to turn on these features due to SECURE 2.0, legislation aimed at helping employees save for retirement. These features are designed to automatically enroll employees into their company’s 401(k) plan and increase contributions over time. So, how does auto-enrollment work, and what does it mean for your retirement savings plan? Scroll down to learn more about: What is auto-enrollment Benefits of auto-enrollment How to check if you've been auto-enrolled in your company’s 401(k) Changing your contribution rate How Betterment at Work can help you optimize your saving strategy What is auto-enrollment in a 401(k)? There are plenty of reasons why people hesitate to set money aside for retirement—daily expenses, not knowing how much to save, not knowing how to sign up, to name a few— but auto-enrollment can make it easy to get started. Companies will auto–enroll new hires at a default rate—typically 3-8%—which you can adjust at any time. Once your money is in the market, you’ll benefit from a little thing called compound interest: The interest your money earns also accrues interest over time. Let’s explore other ways auto-enrollment makes saving for retirement easy… Benefits of auto-enrollment in a 401(k): Automatically save for retirement: Starting a new job can be overwhelming with so many new benefits to consider (healthcare, life insurance, etc), but with auto-enrollment, you can start saving for retirement immediately without having to take any action. Employer match contributions: If your employer offers a match, auto-enrollment ensures you won’t miss collecting this sweet financial boost. Tax advantages: Good news! Since 401(k) contributions are made pre-tax, this lowers your taxable income —which can help you hold onto more of your hard-earned cash. Early and consistent long-term saving: You can stay on track with minimal effort, thanks to auto-escalation. If you’re auto-enrolled, your default rate will increase 1% each year, to a maximum set by your employer (no greater than 15%), unless you adjust the contribution rate yourself. Whenever you log in and adjust your contribution rate, auto-escalation is turned off. By incrementally upping your contribution rate, auto-escalation ensures you’re saving more over time—and simplifies the decision-making process. How to check if you’ve been auto-enrolled in your company’s 401(k): If you’ve never logged in before, you’ll first have to activate your account. Visit betterment.com/accountaccess to get started. Once you’re in, you can see the status of your account by selecting the “Retirement” goal from the left-hand side of the screen. Click on “Activity” to review your past contributions. It’s a good idea to monitor your contribution rate, and increase it when you can. Many experts recommend contributing 10–15% of your paycheck towards retirement so you have enough to live on. 10-15% may sound like a lot, so start with anything you’re comfortable with. Many auto-enrollment plans enroll employees at a low contribution rate, like 3% – but it’s important to keep in mind that that’s just a starting point. The point of auto-escalation is to keep it moving into that sweet spot of 10-15% over time. As always, Betterment is here to help you confidently plan for retirement, with the tools and resources you need to make smart decisions for your money. Remember, small, consistent contributions can really add up. With auto-enrollment and auto-escalation, you can put your savings on auto-pilot, so you can focus on the rest of your life.