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Retirement Planning Advice That Matches How You Save

Betterment is constantly working to align our investment advice with what it’s really like to pursue your financial goals. Learn about how our retirement planning advice continues to improve.

Articles by Chrissy Celaya, CFP®
By Chrissy Celaya, CFP® Customer Growth Manager, Betterment Published Mar. 21, 2018
Published Mar. 21, 2018
4 min read
  • Betterment is introducing an improved way of offering retirement advice by integrating multiple investment accounts (including external accounts) toward a Retirement Goal.

  • Most people's retirement savings are likely to be achieved using multiple accounts, not just one.

  • Betterment will analyze the overall risk of all accounts included in a Retirement Goal as well as advice on how to save.

You’re not alone if you’ve been saving for retirement for years but still find it to be a looming, uncertain part of your financial future. At Betterment, retirement planning is as close as we get to seeing a universal concern among Betterment customers for their financial plans.

Not everyone will be a homeowner. Only some people will have children to support through college. But nearly all investors end up putting money away for their retirement years.  Most Americans would like to retire one day, and over time, the government has encouraged retirement savings, offering a myriad of tax-advantaged account types: IRAs, 401(k)s, 403(b)s, SEP IRAs, SIMPLE IRAs, HSAs, and more.

We all probably have at least one of these obnoxiously named acronym-accounts hanging around. Maybe it’s well-funded, maybe it’s not. Maybe it’s invested, maybe it’s not. The point is, just having a retirement account labeled with three or four characters doesn’t really make the problem of saving for retirement feel any easier to solve.

Make your retirement an investment goal. We’ll help you reach it.

To really understand what you need to do to reach retirement, we at Betterment recommend thinking of retirement as one big, long-term goal. You need to be able to cover your expenses each year of your retirement, and growing a lump sum that allows you to do that is your Retirement Goal.

The idea here comes from the concept of goal-based investing, which suggests that you’re more likely to invest successfully if you set clear, well-defined goals for how you want to use your money in the future. So, why not get more specific about what achieving a Retirement Goal looks like? At Betterment, we’ve been working on helping you do that.

Retirement Goals are achieved using multiple accounts.

While Betterment has long helped you project how much you’ll likely need to save for retirement, the feedback we’ve heard is that it can be challenging to plan and work toward having one lump sum of money, when you inevitably have multiple accounts you’re using to save for retirement. After all, the ever-growing list of tax-advantaged acronyms we mentioned before leads you toward this reality. For example, IRAs offer investors a great deal of choice for tax-advantaged retirement investing, but at an annual limit of just $5,500 (if under age 50). You can bet many IRA holders won’t reach their Retirement Goal if that’s the only account type they use. So, they turn to their employer-sponsored plan or even taxable accounts.

It’s perfectly legitimate and realistic to have multiple retirement accounts, and that’s why we decided to introduce Retirement Goals driven by multiple investment accounts—with advice on how to prioritize and invest in your different account options to help reach your retirement savings goal. Let’s take a look at how our advice for Retirement Goals looks today:

retirement goal

Introducing Retirement Goals with Multiple Investment Accounts

Within your Betterment account, the goals you set—which you can find on the Summary, Portfolio, and Advice tabs—should reflect the specific reasons why you’re investing, so that you can see those reasons any time you log into Betterment. As an advisor, our approach is to help you make sure you are maximizing your savings by using the best vehicles available to achieve your goals.

For your Retirement Goal specifically, the vehicles you use include accounts you might have at Betterment as well as accounts outside of Betterment that you’ve synced. Common external accounts include any employer-sponsored retirement plans, like 401(k)s or 403(b)s, as well as any IRAs you’ve yet to transfer. Together, any accounts earmarked for your retirement can be put toward your Retirement Goal at Betterment. We have worked to align the reality of your different investment accounts with the aspirational future state of a successful retirement.

Getting Advice for Your Retirement Goal

You can think of your Retirement Goal as the big “X” marking retirement on a map, and, with the right accounts aligned within your goal, Betterment is helping you figure out how to best get there. Most people need some advice on how to make the path to retirement as efficient and advantageous as they can, and that’s where Betterment’s advice on how to save comes in. You can think of it like a GPS. We analyze the possible routes and choose the one which we believe makes the most sense for you, based on the information we know about you.

save for retirement

One of the most important parts of our retirement planning methodology is our retirement savings advice, which gives you up-to-date yearly advice taking into account your retirement income needs and the circumstances we know about you. You can navigate to your account’s Advice tab to review our specific advice, but, in general, we make recommendations on:

  • The total you should save this year to reach your expected spending needs
  • Which accounts to invest in first based on your employer plan benefits and taxes
  • How much to save in each account based on IRS regulations and limitations

Analysis for Your Retirement Goal Portfolio

Besides saving, the other important way to pursue your goal is by having the appropriate portfolio in place. Because your Retirement Goal can include external accounts as well as the parts of your portfolio held at Betterment, we help you stay on track toward your goal by providing you with an overall risk assessment—essentially rating the risk of your external accounts and Betterment-held accounts together.

If your overall risk assessment is outside our recommendation, then it may be appropriate to adjust your investments. Your goal should be to try and create an overall allocation that matches Betterment’s recommendation for you as closely as possible.

The future of retirement is uncertain. Gain confidence in yours.

Whether you feel confident about your retirement savings or you’re overwhelmed by it, our goal is to create a clear, step-by-step guide to improving your ultimate retirement outcome. It’s about baby steps: becoming aware of your retirement spending needs, taking advantage of company matches, using tax-advantaged accounts, and eventually prioritizing retirement in the context of your other financial goals.

At Betterment, we’re working to help you take action on your retirement with the clarity and confidence to improve your savings over time. Learn more by visiting your Advice tab—we’ll guide you from there.

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