Why I moved $85,000 of retirement savings to a 'robo-adviser' (2024)

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Earlier this year, I began writing a series chronicling my decision to roll over my old 401(k) into a new IRAwith an automated investment adviser such asPersonal Capital,Betterment, orWealthfront.

Since my old account was worth more than $85,000 at the time, this decision wasn't one I took lightly. In fact, I spent a great deal of time researching and exploring my options.

Why automated investment advisers? A recap

Inmy first poston this subject, I explainedwhyI think the financial service model is broken. Fees and incentives for financial advisers are not aligned with the needs of average Main Street investors.

I also believe, from my time spent as a day trader, that it is incredibly difficult to beat the market unless you are devoted to it full-time. Since most of us already have full-time jobs to worry about, we should minimize how much wetinker with our investments and opt for a long-term, passive strategy with low fees.

Automated investment advisers help you do all of this, keeping fees low and using sophisticated software to cheaply perform many of the tasks that high-priced financial advisers charge big fees for.

The top automated investment advisers

The more you pay in fees, the smaller your return tends to be over time. And while theretirement fees charged by online personal financial firms are on average quite low compared to those found at traditional brokerages, they still vary greatly. Meanwhile, advisers like Personal Capital,Wealthfront, andBettermentall offer different perks that appeal to different types of investors.

For my own needs, it was pretty easy to eliminatePersonal Capitalearly on. Although they offer some serious perks–including a personal financial adviser assigned to youraccount—their fees ended up being a lot higher than those charged by Betterment orWealthfront.

That left the two remaining online financial advisory firms to duke it out in terms of both costand value. While I weighed the pros and cons of going with Wealthfront or Betterment, I wrotea side-by-side comparisonof the two well. When it came down to it, each of these firms offered many of the same options.

• Related:Betterment vs. Wealthfront

Ultimately, several ofBetterment's features helped push it over the edge for me—and with that, Betterment won my retirement account. Here are a few of the main features that convinced me to choose Betterment for my 401(k) rollover:

Low fees

Ongoing fees are obviously of utmost importance when choosing any type of financial adviser, including an online firm. Simply put,fees can gobble up your returnsyear after year.

Betterment charges a fee of 0.35% per year for accounts under $10,000 (plus a $3 monthly fee if you don't use direct deposit). That drops to 0.25% on accounts bigger than $10,000, and to just0.15% on accounts over $100,000.

Compare that to Wealthfront, which charges 0.25% on all accounts after managing the first $10,000 for free. Since my $85,000 401(k) will surpass the $100,000 threshold before too long, choosing Betterment will allow me to pay only 0.15% from that point on.

Included services and perks

Bettermentoffers a ton of perks as part of itspackage, including automatic portfolio rebalancing and automated deposits. Their stance on fractional share investingwillalso help me maximize gains, since a smaller percentage of my portfolio will be sitting idle at any given time.

As someone who stays busy with work and family, I liked the idea of havingBettermenttake care of some of those tasks for me. Meanwhile, Betterment offers a refer-a-friend program that awards you with one year of free account management for every three friends you refer.

An investment selection methodology I can believe in

With the goal of maximizing your take-home returns,Bettermentfocuses onlow-cost, index-tracking ETFsthat they monitor on an ongoing basis.

Meanwhile, Betterment also uses open-ended ETFs, which carry no restrictions around issuing or redeeming shares. Since they have structural advantages when compared to mutual funds, this allows Betterment to maximize returns even further.

Tax loss harvesting+

Betterment's new "Tax Loss Harvesting+" program works to offset taxes on both gains and income. Atno additional cost, this improved program runs throughout the day and can reduce your tax burden more than other automated tax loss harvesting tools.According to Betterment, taking advantage of this perk can save the average investor as much as $3,000 per year.

Why I'm looking forward to using Betterment

Customer service:In addition to the perks I've mentioned, something else gaveBettermentan edge: When I was exploring my options and looking for answers to my most pressing questions, Betterment provided me with excellent customer service.

Not only did they answer my questions honestly, but they also got back to me in lightning speed. As someone who values a personal experience, I felt relieved knowing that Betterment would be there for me if something went wrong.

Goal setting:Another reason I'm looking forward to my experience with Betterment? Goal setting. The fact that I have a family to support means that it's crucial for me to create long-term goals and plans – and actually reach them.

Betterment's goal planning optionhelps people like me customize their accounts to reach four primary types of investing goals: retirement, safety net, wealth building, and major purchase. As someone with goals that fall into each of those buckets, I see plenty of ways I could benefit.

RetireGuide:Another huge perk Betterment offers is their RetireGuide, a series of online surveys that help you determine whether you'll be able to achieve your long-term financial goals.

The screenshot below shows my odds of enteringretirement at age 68 with my desired balance (based on my desired retirement spending of$120,000 a year). TheRetireGuide saysI need to save $14,591 a year to get there, and the graph shows my likelihood of achievinga higher or lower balance:

Using the RetireGuide, I was able to get a better sense of "where I'm at" in terms of retirement savings – and where I need to be. This knowledge has proved helpful as I continue to formulate a comprehensive financial plan that will allow me to retire comfortably, help my kids with college, and have some fun along the way.

Betterment's online interface

Now that I've signed up, I'm finding that I really like the way theBettermentwebsite functions. On my account homepage, I can see a snapshot of my current holdings and investment strategy, the average performance of my portfolio, detailed analysis of retirement goals and targets, and more:

On my "Portfolio" page, I can see greater details in terms of my investment allocations, earnings, and overall strategy. I can also adjust my target allocation here, and take advantage of planning tools that keep my investing goals on track.

Although Betterment actively manages my accounts for me, I'm still someone who likes to have some input. And with their selection of account tools, I do.

Another bonus: The Betterment app for iPhone and Android makes it possible for me to set and manage automatic deposits directly from my mobile phone. Since I work remotely and travel often for work, this perk will allow me to stay in touch with my investments no matter where I am.

Summary

Now that I've transferred my old 401(k) toBettermentand started taking advantage of all they have to offer, I'm very pleased with my decision. Not only do their ongoing fees align well with my current account balance and investment strategy, I also feel confident in their competence as a firm – and their customer service.

And although I was dreading the process, I was actually quite surprised at how easy it was toroll over my old 401(k)into a traditional IRA.

I thought I would have to fight with a rep at Wells Fargo who would try to convince me to keep the assets with them. As it turned out, there were no questions asked. All I had to do was present the required information and paperwork, follow up with my old 401(k) provider, and follow through. The process was easy and seamless, and I would highly recommend it to anyone trying to figure out what to do with an old 401(k).

For me,Bettermentwas the best option to roll overmy old 401(k), and I'm looking forward to funding this account for years to come and setting up additional accounts for my children.