Earn Rewards: Sign up now and earn a special reward after your first deposit. See offer details



Save, invest, retire

GET — On the App Store


Introducing Custom Model Portfolios. Learn more


Is Betterment Worth It? Estimating the Added Value of a Robo-Advisor

Based on our estimation, using Betterment’s retirement recommendations could earn you 38.8% more after-tax money in retirement compared to investing on your own.

Articles by Sebastian Rollén
By Sebastian Rollén Quantitative Investing Associate, Betterment Published Apr. 25, 2019
Published Apr. 25, 2019
4 min read
  • Compared to the approach a typical investor might take, Betterment can certainly add value. If you’re investing for retirement, we estimate our recommendations could lead to 38.8% extra after-tax money in retirement.

  • Simulated over the long-term, our retirement recommendations could lead to an estimated 1.48% greater return annually compared to the approach taken by a typical investor.

Anyone asking themselves “Is Betterment worth it?” is asking the right questions about their financial relationships. You should take any potential advisor relationship seriously, and consider the options available to you. Looking for an answer, you’re bound to find many possible suggestions online. But the truth is, having a number (or set of numbers) to help you assess how much added value you might get from Betterment can be highly beneficial.

A number can help you draw several comparisons that may or may not be important to you:

  • You can consider our additional value estimate compared to Betterment’s management fee.
  • You can compare our estimated value add (which includes our fee) against those of other comparable advisors, reviewing the assumptions for apples-to-apples comparisons, then assessing the potential value differences.
  • You can read our assumptions and see if there are aspects of Betterment’s investment advice you may have previously been missing out on.

So, what do the numbers say about whether getting our advice is worth it? Let’s dig in.

An Estimated 38.8% More After-Tax Money in Retirement with Betterment.

That’s how much more our simulations show a Betterment investor could attain, when investing for 30 years following our retirement recommendations, compared to a typical investor. This estimate is based on investing specifically for retirement and following our recommendations. For a full list of assumptions and additional information about Betterment’s added value estimates, please read our disclosure.

Annually, Betterment could increase returns by an estimated 1.48%.

If you think in annual terms instead of final retirement income, then you can think of Betterment’s value this way:

A Betterment customer saving for retirement could increase their returns by an estimated 1.48% per year compared to the typical investor. If they’re already using low-cost ETFs, then Betterment’s estimated value is still an estimated 0.90% per year.

You can dig deeper into these estimates, but you should remember that they’re based on using Betterment’s full set of advice for retirement, and we’ve annualized the value for an assumed 30-year period of saving for retirement. These numbers can help you set your expectations for the long-term, but, of course, you shouldn’t consider it a prediction of value each and every year, especially since many of Betterment’s features contribute value only through the compounding effects of long-term investing.

Start investing today

Know which Betterment features contribute to our value add.

To draw the kinds of comparisons you might want to make—versus Betterment’s fee and versus other advisors’ added value—you should know which Betterment features play a role in the projected added value. There are quantitative nuances behind each element, so be sure to read more in our methodology. Here are the features that we include in simulating our value as a retirement advisor.

  1. Our recommended portfolio strategy: A quantitatively optimized mix of stock and bond asset classes, based on Nobel Prize-winning research methods. We compare our recommended portfolio to that of a typical investor—one stock fund and one bond fund.
  2. Our systematic low-cost fund selection. We compare our average fund fees to those paid by a typical investor.
  3. Our asset allocation that automatically adjusts over time before retirement. We assume that a typical investor adjusts their portfolio the same way. In actuality, a typical investor may or may not actually adjust as efficiently as Betterment does.
  4. Our tax-efficient rebalancing that maintains the target allocation within a set threshold of how far your portfolio can drift. We compare that approach to annual rebalancing.
  5. Our recommended use of retirement accounts with Tax Coordination (i.e. asset location) that can shelter assets based on their different tax rates. We compare that situation to using retirement accounts without any specific asset location.
  6. Tax loss harvesting implemented algorithmically as funds change in value. We compare this feature to a typical investor who doesn’t harvest losses.
  7. Our 0.25% management fee assessed annually—we include it in our projection, while we compare it to not having management fees at all (i.e. investing yourself with a self-directed brokerage service). While our management fee isn’t a feature, it’s helpful to know that it’s already in the picture for when you’re thinking about what an estimated 1.48% increased returns means to you.

There are a few other important assumptions about what kind of initial balance, deposit pattern, taxes, and liquidation method we use to simulate the value Betterment could bring to investors. Find them in our full methodology.

What you can see in the above is that Betterment’s retirement recommendations start at the portfolio and funds we invest in, and include our tax-smart allocation changes, our account recommendations, and our tax strategies. Together, these pieces cannot simply be added together to return higher value; rather they work together to influence your expected returns over many scenarios.

As you think about the value you seek from Betterment, we encourage you to carefully review the numbers and your own situation. You can also consider elements of our offering that aren’t quantified here: The ease of investing for the short and medium-term. Goal-based planning. Helping to keep natural human jitters about money at bay. The value you gain from financial advice is personal, and we encourage you to tell us about the things we’re doing well and the challenges you continue to face.

Contributing authors

Jamie Cartwright
Senior Product Manager, Betterment
This article is part of
Original content by Betterment

How would you like to get started?

Manage spending with Checking

Checking with a Visa® debit card for your daily spending.

Save cash and earn interest

Grow your cash savings for general use for upcoming expenses.

Invest for a long-term goal

Build wealth or plan for your next big purchase.

Invest for retirement

Set up traditional, Roth, or SEP IRAs to save for the golden years.