Betterment Slashes Fees and Now Offers IRAs

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If you want simple, diversified, hands off investing that just plain works, I continue to highly recommend Betterment. (I wrote a full Betterment Review awhile back so be sure to check that out too.)

Betterment fees lowered

Lowered isn’t the word, slashed is more like it. Originally their fees started at .9% for beginning investors – now that fee is only .35%!

Here’s the entire fee structure:

Betterment Fees

Fees are prorated across the entire year and charged at the end of each calendar quarter, meaning every 3 months Betterment charges 0.0375% to 0.0875% (.15 divided by 4 and .35 divided by 4 respectively) based on your average balance for the period. If you close your account and withdraw all your money before the end of a quarter you will be charged a prorated fee for only the days your money was in the account.

As an example, if you invested $10,000 today and earned a flat 10% all year you will pay just $27.50 in fees and have a final fund balance of $10,972.50 a year later.  Would you consider the $27.50 annual expense a worthwhile cost for a fully managed, diversified, and secure 9.75% return on your money?  Only you can answer that question.

If you cannot afford to invest $10,000 and do not automatically fund your account with at least $100 each month the 0.35% annual fee is replaced by a $3 monthly fee. To easily avoid that simply set up an automatic deposit of at least $100 each month. The automatic deposit is a no-brainer since you’re committed to growing your investments anyway, and there’s no point to investing if you don’t fund and grow the investments.

If this sounds like an investment solution you’d be happy with you can read more about Betterment and open an account if it suits you.

Did I mention they give you a $25 bonus for opening an account with at least $250! The bonus just about nullifies that annual fee used in the above example.

It’s a great deal for hands off investing.

Betterment now offers Traditional and Roth IRAs

An IRA is a savings vehicle for retirement that offers significant tax benefits. The Betterment IRA has all the benefits of a regular Betterment account – diversification, re-balancing, automatic deposit, and simplicity – plus the tax advantages that come with an IRA.

They offer both a Traditional and a Roth IRA option and make rolling over your 401k effortless.

More international diversification

In addition to lowering fees and offering tax-sheltered IRAs, Betterment also increased their international fund offerings.

This is their updated stock market fund basket (new international ETF funds bolded):

  • 25% VTI: Vanguard Total Stock Market
  • 25% IVE: iShares S&P 500 Value Index
  • 25% VEA: Vanguard Europe Pacific
  • 10% VWO: Vanguard Emerging Markets
  • 8% IWS: iShares Russell Midcap Value Index
  • 7% IWN: iShares Russell 2000 Value Index

And here is their bond fund basket:

  • 50% TIP: iShares Barclays TIPS Bond Fund
  • 50% SHY: iShares Barclays 1-3 Year Treasury Bond Fund

If you want, you can read more about their investment diversification on their website.

In closing

Betterment now offers lower fees, a more diversified portfolio, and tax-sheltered IRA accounts – what’s not to love?

If you’re looking for diversified, low-cost, hands off investing that works then Betterment may be perfect for you – especially now that their fees are so low and they offer tax-advantaged IRA options. It’s the perfect one-stop-shop for a hands of investor.

For more info you can read my full Betterment Review or visit the Betterment site to find out more and open an account if it suits you.

(Don’t forget about the $25 bonus for new accounts.)

Betterment fees

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Betterment is one of my two favorite ways to earn interest on my savings! They have an awesome program for the Average Joe to save and invest simply and effectively. There are no minimum balance requirements and no transaction fees. Read my Betterment Review or open an account to get started earning now.

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