FinTech Spotlight: How Betterment Can Help You Retire
(888) 370-6026

Learn More

FinTech Spotlight: How Betterment Can Help You Retire


If you’re looking for a way to set money aside for personal projects or even retirement savings, but you are unsure about setting up a monthly amount or you are unable to meet the minimum account balances for brokerage firms, new financial technology company Betterment can be a great option. Betterment is designed to let you invest in what is essentially a mutual fund-like portfolio, but without a minimum subscription fee. The product is geared toward 20 somethings just starting out as well as freelancers, or individuals who are self-employed and may have fluctuations in income month to month.

 FinTech Spotlight: How Betterment Can Help You Retire

Betterment is designed to get you to save at least $100 per month by putting that money into the Betterment investment portfolio and growing it through a combination of regular contributions and portfolio returns. However, if you can’t meet the $100 per month mark they’ll let you open an account with anything but will tack on a small $3/month for managing those smaller amounts. If you increase your contribution to $100 per month, that fee transitions into a small monthly percentage fee, based on your balance. These fees range from 0.35% to 0.15% of your balance.

Users who sign up will need to prove their identity in much the same way as they would when opening a bank account and also set up the wire transfer between their bank account and Betterment. After that, everything else is self directed in terms of the contribution amount and frequency. You can automate the contributions or manage them on your own.

Unlike traditional brokerage accounts you can also withdraw the entirety of your account at any time. The portfolio is essentially set up to let you track specific goals and/or just save money. So if you want to go to Europe next year, you can set up a Betterment account with that goal in mind, set a goal amount and contribute toward it. If you have multiple financial goals, you can segment your contributions against those multiple goals as well, and track how close you are to achieving them.

There are some points users will need to be aware of though. Specifically, Betterment is a financial portfolio investment, not a savings account. This means that your contributions are not guaranteed by the FDIC up to $250,000 like a savings account, and there is a very real possibility you could lose all of your contributions. Betterment is an investment in an actively managed financial portfolio, which could return 100% of the investment or 0% of that investment without any guarantee. According to the website, users can expect on average to see approximately a 3% return over the base contribution on a yearly basis.  You’ll need to be comfortable with that track record going in.

As a savings option, although there is no guarantee, the present return on the portfolio still far exceeds the abnormally low interest rates on current savings accounts. You will, however, have to deal with the potentiality of capital gains taxes if your investments and their subsequent return meet those range requirements. Betterment will send you the necessary documents to include that tax requirement on your personal income tax forms each year.

As an investment option for people just starting out, Betterment is a great way to sock away some money without having to get too deep into the details. However, if you’re looking for all of the bells and whistles of a normal investment account you won’t find those here. You can’t pick the equities included in the portfolio and you can’t opt to invest in other instruments on the platform. To go the more traditional investing route, you will need to get a traditional account. That said if you need a leg up (like a year building up to the minimum account requirement on those accounts) Betterment could be a great option.



Share us with your friends!


Leave a Reply

Your email address will not be published. Required fields are marked *

Sign Up for Blog Updates

Get invoices paid faster. Avoid collection agency fees. Automate the entire debt colection process with Funding Gates, the world's first CRM platform for all your receivables needs.