Betterment Makes Smart, Goal-Based Investing Accessible to Everyone

 

 

 

 

Unfortunately the statistics show that women & investing do not go hand in hand. Statistics compiled by the Stockton Women’s Networkshow 38% of women 30-55 years old are worried they will live at or near the poverty level because they cannot adequately save for retirement. If that’s not scary enough, how about this: Among women who live alone, spending peaks in the 25-54 age group. There are about 15 million women who live alone, 48% are over 65.  54% of women have little to no money left to save for retirement once they pay their bills.

These numbers are heartbreaking! I hate seeing numbers like this and statistics like this are one reason why I started this blog. I not only want to help educate women on getting out of debt but also on the importance of building wealth! I want to help change those statistics so women are educated and motivated to save for retirement.

You may remember last year that I started educating myself on investing and decide to test out the waters with my own investment account. While it worked out fine and was a great learning experience, I’ve kind of been stuck at this “now what?” roadblock. I don’t have thousands of dollars to throw at that account monthly but I still want to  focus on becoming more educated on building wealth through my retirement strategies.

I initially heard about Betterment on Twitter. I had seen several tweets about people attending Betterment’s webinars so I was generally curious. I watched the demo, read about the company and why it was founded and thought why not give it a try? I haven’t done any more investing on my own since my original post mainly because I didn’t really know where to go next! Plus with the expenses involved in trading, I had to have larger sums of money to invest to make the trade worth it & I’m just not to that level yet. Enter Betterment.

What is Betterment?

It’s smart investing made easy. Betterment puts a personal investment account in your hands by blending the simplicity of an online bank account with the higher long-term returns associated with investing in stocks and bonds. The best part? You don’t have to spend nights and weekends researching—that’s our job.

That sounds good to me. Investing can be so intimidating and overwhelming. Where do I start? What if I make a mistake? Will I wipe everything out? I like the simplicity Betterment has to offer for a beginning investor.

One of the questions I had about Betterment was around the type account I was setting up. (See, I’m new to this too!) Was I setting up an investment account, an IRA, a Roth IRA? What exactly was I doing?! I contacted their customer support and got a very quick response. Here was the answer:

Hi Jenny,

Thank you so much for setting up a Betterment account. The short answer is that it can be both. When you set up a Betterment account by default you have a taxable investment account. We are the broker dealer and funds you deposit are automatically invested into a set portfolio, while the allocation between stocks and bonds is chosen by you.
Once you have an account, you are able to then open up an IRA account as well. To do this, you can sign into your Betterment account and at the very bottom you can choose to open up a new goal (sub-account) or you can open an IRA account. You are then given the option to open a ROTH or Traditional IRA, and you can also choose to roll over IRA’s or even a 401k into an IRA.

That answer helped clarify things for me. I already have a couple of IRA’s & a Roth IRA so right now, I’m looking for an investment account but I like having the IRA options as well. I had another question around withdrawing the funds & here was their answer:

Regarding withdrawals, there are no fees and no penalties for withdrawing funds from your taxable investment account. With Betterment you only have but the one advisory fee and nothing else. This allows you to make consistent contributions to your investment and IRA account without having to worry about stacking up trade fees because you have 8 securities you are diversified across. In fact, at even $7/trade that would mean you would pay $56 each time you deposited money into your account. With Betterment, there is no charge for any of the trades made when you deposit, withdraw or change asset allocation.

Another nice thing about our only having a fee on the balance of your account is that there is no charge when you have no balance. We know that people need access to their money, and if you need to withdraw funds from your account there is no charge. Also there is no charge to have your taxable investment account and only have money in the IRA portion. While we do currently require that people set up a full Betterment account to take advantage of the IRAs, we will only charge a fee on the services you actually use, and only when you’re using them.

I’m glad they brought up the point about the cost per trade because that was one problem I had when I was toying around with investing on my own. I couldn’t very well just buy $25 in stocks because the fees would make that type of trade pointless! Since Betterment has no fees to deposit, withdrawl or change asset allocation, it’s a better option for me.

I still had a follow up question after this response so here is what I asked: You said ” While we do currently require that people set up a full Betterment account to take advantage of the IRA’s…” do you mean that I am required to set up an IRA (Roth or Traditional) or can I just keep the taxable account?  I’m new to investing on my own outside of the 401k so I just wanted to make sure I understand this.

My second question was answered just as timely as the first and here was the response:

Hi Jenny,

You do not have to set up an IRA to have a Betterment investing account, but you do have to set up a Betterment investing account to set up an IRA. It’s a bit chicken before the egg, but by default everyone who sets up a Betterment account automatically is setting up a taxable investment account, and then you elect to set up an IRA. I hope that helps clarify.

So what that means is when you set up a Betterment account, you are setting up a taxable investing account which you can withdraw from as needed. Any withdraws are subject to capital gains tax on the amount you made which is sent to you in the form of a 1099-Misc form for your taxes.

If you wish, you also have the option to set up a Traditional or Roth IRA (Individual Retirement Account) to save for your retirement. With this type of account, you can deposit to it but you would not want to withdraw from it until you retire otherwise you will face a taxable penalty.

Betterment Benefits

Betterment provides benefits for any investor who values time, accessibility, and market returns. Here’s a list of just a few:

  • A straightforward pricing model without hidden fees.
  • No minimum balance.
  • Automatic deposits to minimize your average investment cost.
  • Focus on the two investments that matter the most – a great stock basket and a conservative bond portfolio.
  • An incredibly simple user experience that makes it easy to understand your money and control your exposure to risk.
  • Automatic, seamless diversification (which means higher returns with lower risk).
  • Automatic rebalancing every quarter.
  • Automatic dividend re-investment to save you time and energy.
  • The ability to see how others like you invest.
  • Transactions in exact dollar amounts, instead of whole shares.
  • Goal-based advice and accounting.
  • Access to your account, whether at home or on the go.
  • Dedicated customer service, so in addition to receiving advice online, you can chat with real people when you need them

My Thoughts & Feedback

I set up my Betterment account & it was just as easy as they said. I linked my Betterment account to my PerkStreet Checking account & funded my account with $25. My next step is to confirm the two small deposits Betterment has put into my PerkStreet Checking account (which I am still waiting for). Then my accounts will be linked & I’ll be ready to go!

I think the thing I like about Betterment the most is its so easy to use. Investing is intimidating and seems complicated but the platform Betterment uses eliminates that for you. Betterment makes it easy to avoid becoming one of the women & inveseting statistics. I get asked by A LOT of you how to start investing and after reviewing the process & what they have to offer,  I think Betterment is the place to do that.

Next Steps:

Betterment is offering a free webinar on How to Build Your Perfect Investment on January 5, 2012. If you are interested in learning more about what Betterment has to offer, follow these steps:

Don’t forget to check out Betterment’s Blogging for a Better New Year throughout January for great advice to help you finally meet your financial goals in 2012. I’ll be featured as one of the bloggers at the end of January, so you won’t want to miss out!

Read the Original Article

This article originally published January 2nd, 2012 on The Jenny Pincher.