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5 Hacks to Get More from Your IRA

You already know that contributing to an IRA is a smart move for building retirement savings. Take it a step further by using these five hacks to make the most of your money.

Articles by Eric Bronnenkant
By Eric Bronnenkant Head of Tax, Betterment Published May. 16, 2019 | Updated Aug. 13, 2020
Published May. 16, 2019 | Updated Aug. 13, 2020
4 min read

Whether you’re opening a new IRA or rolling over an old 401(k) into an IRA, here are five hacks to make the most of the hard earned money you are putting towards your future.

Remember, for both 2019 and 2020, you can contribute up to $6,000 into your IRA. If you’re over 50, you can contribute up to $7,000.

1. Max out—and do it as early as possible.

There is truly no time like the present.

Our analysis shows that funding an IRA at the start of the year—rather than at the end—can increase returns simply because your money is in the market for a longer period of time.

If you max out in January of every year instead of December, you could end up with an estimated $8,800 more to spend in retirement.

2. Costs matter—especially in the long run.

Minimizing your costs by choosing low-cost investments is one of the smartest ways to increase your retirement savings. For example, the difference between paying an all-in cost of 0.31% and paying 1% for a mutual fund is enough to buy a small house. Those fees can add up to $162,000 over 30 years.

“In investing, you get what you don’t pay for. Costs matter.”

John Bogle

We’ll help you avoid paying for that house you’ll never get to live in. Sync your external accounts to your Betterment account and we’ll show you which of your other investment accounts may be charging fees that are too high.

3. Use the ACATS process to transfer funds—quickly.

ACATS is the fastest way to move your investments from an old IRA account into a new one at Betterment. Once you initiate a transfer into a Betterment IRA, the assets generally arrive within five business days.

A small percentage of accounts are not ACAT eligible through our website. In these cases, you may want to consider an indirect rollover, where you withdraw and then deposit the funds within 60 days. The IRS permits only one indirect rollover every 12 months.

4. Consolidate accounts–less really is more.

We know that some customers have their retirement accounts spread out among various providers, for example, you might have an IRA worth $50,000 with Company A and an IRA worth $50,000 with Company B. But, did you know that having two accounts worth $50,000 each—rather than one account worth $100,000—could actually cost you more?

Having two accounts rather than one typically carries additional costs. This is because many providers offer economy of scale benefits, which means that your fee schedule, trading costs, advisor rates, etc., might be lower if you hold a higher balance in your account.

There is another cost associated with having multiple accounts in multiple places: time. It takes time to check on, manage, and rebalance accounts in multiple places.

Consolidate your accounts with us to help save time and money. Our retirement recommendations could help you earn an estimated 1.48% extra per year compared to the approach taken by the typical investor. That may not sound like a lot, but over 30 years, that could lead to an estimated 38.8% more to spend in retirement.

5. Say goodbye to target-date funds—it was never meant to be.

Target-date funds are a popular but simplified option for retirement investing. They are easy to set up and they keep you on an investing path with an asset allocation that adjusts over time.

The problem with these funds is that they set your allocation based solely on your target retirement date, rather than how much money you have already saved.

We offer a similar all-in-one concept, but with personalized advice based on your existing savings, how much time you have left, and your future contributions.

Bonus Hack

If you have a Roth and a Traditional IRA, or, if you save for retirement in both an IRA and a taxable account, you can take advantage of asset location to help earn even more. We’ll manage your assets as a single portfolio across all included legal accounts, using every dividend and deposit to optimize the location of the assets. We’ll also rebalance in order to improve your asset location when we see opportunities to do so—without causing taxes.

Setting up asset location could increase your portfolio value by an estimated 15% over 30 years.

Invest with Betterment!

Ready to make the most of your money?

Get started by opening an IRA within minutes on our website. There is no paperwork required. If you’re unsure whether to use a Traditional or a Roth IRA, we’ll help you decide.

Please note that Betterment is not a tax advisor—please consult a tax professional for further guidance.

When deciding whether to roll over a retirement account, you should carefully consider your personal situation and preferences. The information on this page is being provided for general informational purposes and is not intended to be an individualized recommendation that you take any particular action.

Factors that you should consider in evaluating a potential rollover include: available investment options, fees and expenses, services, withdrawal penalties, protections from creditors and legal judgments, required minimum distributions, and treatment of employer stock. Before deciding to roll over, you should research the details of your current retirement account and consult tax and other advisors with any questions about your personal situation.

Contributing authors

Katie Marie
Content Manager, Betterment
This article is part of
Original content by Betterment

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