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Should you have an IRA even if you have a 401(k)? Sep 26, 2023 3:08:49 PM A 401(k) is a great place to start saving for retirement especially if your employer offers matching contributions. But an IRA can take you a step further as you plan for the future. The main idea: If you have a 401(k), consider an IRA as well. You may find that an IRA can provide additional investment choices and potentially lower fees than your 401(k) plan. Plus, having both gives you tax diversification in retirement. Know the essentials: Your 401(k) is most often offered as a benefit from your employer although if you’re self-employed you can have an individual 401(k). It’s common for employers to match your 401(k) contributions up to a percentage of your paycheck. An IRA is an account you open yourself. At Betterment, we can help you open an IRA that meets your goals with our guided process. There are two types of IRAs: Traditional and Roth. You contribute to a Traditional IRA using pre-tax income while a Roth IRA allows for contributions from post-tax income. The big benefits: An IRA in addition to your 401(k) offers 3 potential benefits: Additional investment choice: While Betterment offers the same diverse investment choices in our IRA accounts and 401(k) plans, IRAs typically have more investment options to choose from than an employer-sponsored 401(k). This can help diversify your portfolio using low-cost investments such as ETFs. Access to lower-fee investments: The fees for 401(k) investments are dictated by your employer’s plan. Since you can open an IRA on your own and invest in a range of assets, you have a larger selection of low-fee options available to you. Compare your 401(k) plan fees to IRAs to see if adding an IRA may be right for you. If you have questions about 401(k) fees, ask your HR or benefits contact at your employer. Tax diversification in retirement: Having a 401(k) and an IRA can provide tax diversification in retirement. You can contribute pre-tax dollars to your 401(k) and traditional IRA, paying tax on future withdrawals in retirement. Roth IRAs and Roth 401(k)s on the other hand allow you to contribute post-tax dollars—for example, money from your paycheck that you already paid taxes on. Your withdrawals, both on the earnings and the contributions, when you reach retirement age can be withdrawn tax-free. Bonus benefit: Having a 401(k) and an IRA allows you to put more away for retirement in tax-friendly accounts. In 2023, you can contribute up to $22,500 to a 401(k) with catch-up contributions up to an additional $7,500 if you’re 50 or older. For IRAs, you can contribute $6,500 ($7,500 if you're 50 or older), depending on your income level. Pro tips: Make sure you know how much your employer matches your 401(k) contributions. Contributions from your employer are essentially free money for your retirement savings. If you are considering an IRA in addition to your 401(k), look at all fees, including management fees and expense ratios, when selecting investments.

A simple way to invest in Bitcoin and Ethereum Sep 12, 2023 2:27:26 PM Since cryptocurrencies were first released in 2009, Bitcoin and Ethereum have established themselves as the largest digital assets. What to know: At Betterment, we’ve made it easy for you to invest directly in the most well-known and adopted digital assets through our Bitcoin/Ethereum portfolio. A simple, balanced approach to crypto: Our Bitcoin (BTC) and Ethereum (ETH) portfolio simplifies investing in the largest, most liquid digital assets. Together, BTC and ETH can make up about 60% to 70% of the crypto market capitalization depending on the market conditions. The portfolio has target weights of 70% BTC and 30% ETH relative to each coin's market capitalization. Once your account has reached the balance threshold, we automatically rebalance the portfolio for you to maintain as close as possible to the 70/30 split. Fast facts: The price of Bitcoin and Ethereum are considered indicators of the overall health of the crypto markets but there are key differences between the two assets. Bitcoin, launched in 2009, and Ethereum, launched in 2015, are both digital currencies and decentralized blockchains (a distributed peer-to-peer database). The Bitcoin blockchain records BTC transactions, with the original goal of BTC being a medium of exchange and a store of value outside the control of individuals, banks, or institutions. The Ethereum blockchain is used to record ETH transactions but its distinguishing feature is ‘smart contracts’ used across industries including finance, e-commerce, and real estate. Generally, there are two other ways to invest in BTC and ETH: Investors can manually select BTC and ETH on crypto exchanges but have to take care of monitoring the market and rebalancing their investments in a crypto wallet. Exchange-traded products including ETFs and trusts provide investors with easy exposure to BTC and ETH but the price of the investment doesn’t always track the price of the digital asset, plus these investments don’t provide true ownership of the underlying cryptocurrency. Both of these approaches are considerably different than ours. The Betterment Bitcoin/Ethereum portfolio is designed to give you ownership of both BTC and ETH while we rebalance the portfolio for you as the market changes.

3 ways to get the most out of your Cash Reserve account Sep 12, 2023 11:03:28 AM Let's take your cash game to the next level. Here are three tips to help manage your Cash Reserve account for long-term success. You're smart. You already have a Cash Reserve account (or you want one!). And you know the value of a high-yield account with FDIC insurance up to $2 million through our program banks†. Let's take your cash game to the next level. Why it matters: A Cash Reserve account is a place to grow your savings and secure your money during volatile times. But we also give you tools and tips to make the most of your cash, whether that’s saving for a goal or using cash to eventually invest in stocks and bonds. Here are three simple ways to level up your cash skills: #1 Have multiple goals and use the goal forecaster: You can have more than one Cash Reserve account to track your savings for different purchases or needs. To set up a new Cash Reserve account: Select “New cash goal” when you are opening a Cash Reserve account. You’ll be able to name your goal and set a target amount and target date to track your progress. To use the goal forecaster: On a desktop device, navigate to your cash goal account and click the “Open goal forecaster” button. You can enter different scenarios for a recurring deposit, a one-time deposit, and a target date. Our projection graph will show you the estimated chance of reaching your goal for each scenario you enter. #2 Pay yourself first with a consistent recurring deposit from your external account: The easiest way to pay yourself first is to automate it, saving you time while increasing your savings. Why use a recurring deposit to save? Think of the amount you save monthly just like a mandatory expense, no different than a phone bill or a mortgage payment. Each month, you can automatically send money from your external checking or savings account to your Cash Reserve account getting you one step closer to reaching your goal. How do you do it? In your Betterment account, click the Deposit button, select your “to” and “from” accounts, and adjust the frequency to meet your needs. #3 Balance short-term liquidity and long-term growth: Your Cash Reserve account is liquid, meaning it’s easy to access your cash. But it’s important to strike the right balance between cash for short-term needs and investments for long-term growth. Do you have an emergency fund? If you have already saved three to six months of living expenses then you should take a look at your extra cash. If you don’t have other short-term savings goals, investing in stocks and bonds may help to grow your money over time. Are your goals short-term or long-term? A Cash Reserve account may help you achieve short-term goals since you need the money soon and don’t want to lose it if stocks fall. But for goals longer than 12 months, consider stock and bond investing. While investing involves more risk, historically, stocks have had greater long-term gains than cash. Similar to a Cash Reserve goal, you can select an investing goal and we’ll recommend a portfolio to match your target date.

Is the S&P 500 the best investing benchmark? Sep 7, 2023 3:27:31 PM For many investors, the S&P 500 might not be the most accurate benchmark for their portfolio. Let’s find out why. The S&P 500 is an index commonly used by analysts and investors to track the health of the stock market and the general economy. But should you compare your portfolio’s performance to the S&P 500? Here are a few reasons why it may not be the best benchmark. What to remember: The S&P 500 index only includes the leading companies in the United States. If you have a diversified portfolio across global markets and industries, the S&P 500 is not an apples-to-apples comparison. Fast facts: Here are a few things to know about the S&P 500 and the global stock market when considering using an index as a benchmark. The S&P 500 index was launched in 1957 by the credit rating agency Standard and Poor's. The SEC lists six major stock market indexes on their website and there are dozens of indexes used across the world. The S&P 500 index includes 500 leading U.S. companies, representing only about 80% of the U.S. stock market and only about 42% of the global stock market. Additionally, the index is weighted by float-adjusted market capitalization which means that larger companies end up being a larger portion of the index, making it less of an apples-to-apples comparison for the global market. Economists at Goldman Sachs predict that emerging markets will grow at a faster rate than U.S. equities, making the S&P 500 even less of a global index than it is today. What’s the best index to use as a benchmark? It depends. To know which index to compare your portfolio to, you need to ask, “Which markets am I invested in?” Many Betterment portfolios are globally-diversified, making the MSCI All Country World Index (ACWI) a better benchmark than the S&P 500. The ACWI covers 47 global markets in both developed and emerging economies, representing 99% of the investable global equity market. It’s about your goals: It’s also important to remember that benchmark indexes are not designed with your goals in mind. Your personal portfolio at Betterment is meant to meet your goals, not track a general benchmark. As you invest with us, your asset allocation may change to protect your wealth and keep your investments in line with your risk appetite. Next time you see a news article reporting on recent movements of the S&P 500 you can relax knowing that your portfolio is designed for your goals, not the index’s.

Diversification: 2 truths and a lie Sep 7, 2023 3:22:03 PM Diversification means spreading your investments across multiple assets, asset classes, or markets. We’re big diversification fans here at Betterment. An example of a diversified investing strategy: Diversification takes many forms, but an example could include combined investments in stocks from various industries and countries along with a mix of bonds and even a high-yield cash account. Two truths and a lie: Which of the following isn’t necessarily true about diversification? Diversification requires you to do more work Diversification can help reduce risk Diversification can help provide more consistent performance If you guessed A, you’re correct! Diversification does require more work but it doesn’t have to be you that does the work. That’s where we come in. We do the heavy lifting for you. We monitor your investments and rebalance your portfolio when it reaches the minimum balance threshold to help reduce risk. Rebalancing is the process of selling and buying the necessary securities as the market fluctuates. This maintains diversification by bringing your portfolio back into line as it deviates from its target asset allocation. Plus, we offer automated tools, like recurring deposits and tax loss harvesting, to help you grow a diversified portfolio. With recurring deposits, you can grow your investment over time and the regular deposits can help us rebalance your portfolio more tax-efficiently. Tax loss harvesting is the practice of selling a security that has experienced a loss that can offset gains. Tax Loss Harvesting+ (TLH+) is not suitable for all investors. Consider your personal circumstances before deciding whether to utilize this feature. It’s true that diversification can help reduce risk. Distributing your investments across assets distributes your risk. If 100% of your money is in one stock and it collapses, you could lose nearly everything. But if only 3% of your money is in that one stock, the rest of your portfolio survives. A typical example in a Betterment portfolio could be a distribution of global and domestic stocks across industries and company sizes. That way your portfolio is less likely to experience extreme changes in value due to a single industry or geographical region. It’s also true that diversification can help provide more consistent performance. One of the goals of diversification is to invest in unrelated assets, meaning stocks and bonds that have different factors driving their value. This way, not all of your assets gain or lose value at the same time. The big picture: Diversification is all about playing the long game, tapping into the potential growth of the global markets to help manage risk over time. At Betterment, our expert-built portfolios are a recipe for diversification. You can choose from: Stock and bond portfolios, including socially responsible investing and innovative technology Cryptocurrency portfolios High-yield Cash Reserve account

A smarter way to stash your cash Sep 5, 2023 3:54:07 PM Our objectives are aligned with yours: we want to grow your money, so we created Cash Reserve for you. The takeaway: Cash Reserve is our high-yield cash account offering FDIC insurance. It’s different from the savings accounts that you might find at traditional banks. We’re not tied to one specific bank. We use our size and scale to access a network of program banks. By spreading customer deposits across multiple program banks, it allows us to provide you with attractive rates and higher FDIC insurance than the average savings account.* Our high-yield Cash Reserve account offers a competitive APY rate, allowing you to secure and grow your money during volatile times. Here’s how variable rates work: The rate is variable, meaning it will change with the prevailing interest rate environment. The amount banks are willing to pay on deposits is heavily influenced by the Federal Reserve, which sets the rate at which banks can loan money to each other. This is known as the Federal Funds Rate. If the Federal Reserve increases or lowers its target range, the interest rate on Cash Reserve will generally change by a similar amount. You can expect this to impact rates at other banks as well. You can feel confident that Betterment is always working to offer you competitive interest rates, no matter what the current rate environment may be. Our Cash Reserve account offers FDIC insurance up to $2 million ($4 million for joint accounts) with our program banks. That’s 8X the standard FDIC insurance.* Here’s how FDIC insurance works: By spreading customer deposits across multiple program banks (as opposed to keeping everyone’s money at one institution), we’re able to stack the standard $250,000 of FDIC insurance per institution. We originally used this approach to offer up to $1M ($2M in joint accounts) in FDIC insurance for money saved in Cash Reserve. But after the news about Silicon Valley Bank, we set to work to double the coverage amount of FDIC insurance through our program banks. Plus, we don’t charge fees on your Cash Reserve account: Betterment LLC only receives compensation from our program banks. Betterment LLC and Betterment Securities do not charge fees on your Cash Reserve balance. Why it matters: Similar to how our approach to investing is grounded in diversifying assets, Cash Reserve diversifies savings across multiple institutions. In addition to a competitive variable rate and above-average* FDIC insurance, this approach could help mitigate loss and risk in the unlikely scenario that one of our program banks fails. You can’t eliminate risk, but you can help reduce it by using technology and creative thinking.