5 Best Automated Retirement Programs for New Investors
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The best automated retirement programs do one thing – allow you to start saving for retirement by going on autopilot. Too many times in my stockbroker career I saw individuals put off saving for retirement because they didn’t know where to start or have little money to invest.
Automated retirement programs, also known as robo-advisors, help you start investing for retirement with confidence – even when you have little money to invest in the stock market or have little to no investing knowledge.
Kill the Overwhelming Feeling
We all know it. Investing in the stock market can be overwhelming. You may have little money to invest in the stock market or you simply may not know how or where to invest. This is not to mention the fact that you may think retirement is decades away and that you can put off saving for a few years.
I understand all those feelings as I’ve had them myself. Don’t let them hold you back from starting. You do need to start to invest sooner rather than later so your money has time to grow. The other overwhelming parts are what some of the best automated retirement plans specifically address. They help you begin to grow a good foundation by following solid investing principles.
Benefits of the Best Automated Retirement Programs
There are many benefits to investing with a robo-advisor. Automated retirement programs are different from investing through a traditional online broker in that they manage everything for you.
In essence, they provide a virtual financial advisor to manage your investing. Traditionally, this was something only available to people with substantial money and added high fees. It’s my opinion that just because you may be new to investing or have limited funds you shouldn’t be held back from getting access to some of the tools to which those with means can access. There are other benefits to using a robo-advisor besides saving for retirement; those are:
- They allow you to start investing even if you know absolutely nothing about the stock market
- You can start with very little money
- They generally are very low-cost
- Automated retirement programs usually abide by solid investing strategy – focusing on your allocation and not a specific stock
- They can manage everything for you
There are other benefits to using a robo-advisor though the above are simply highlights. I will also note that they do not release you from the responsibility to learn how to invest, but they provide a great way to start. You still need to educate yourself so you can make confident investing decisions in the future.
With that in mind, you may wonder what the top automated retirement programs are or what to look for with a robo-advisor. Below is a list of the best automated retirement programs for beginners and what to look for with each.
Betterment is likely the best automated retirement program for beginners. The reason is quite simple – they have no minimum balance requirement to open an account. If you can only start with $100, or even less, you can open an account with Betterment. You can’t beat that.
Betterment is one of the top robo-advisors in the space. They listen to you, your needs and your goals and make a portfolio based on what they hear. Betterment chooses from among 13 different low-cost Exchange Traded Funds (ETFs) to start you out. They don’t stop there, Betterment also regularly rebalances your portfolio and reinvests dividends to ensure you’re where you should be.
Some of the other features of Betterment are:
- They have a straightforward fee structure – charging just .25 percent annually, based on your account balance. If you want more personalized service, they offer Betterment Plus and Betterment Premium for those with balances over $100,000 and $250,000, with .40 and .50 percent charged, respectively.
- SmartDeposit allows you to deposit money into your account each month once your bank account hits a certain threshold.
- They offer numerous account types: Rollover IRA, Roth IRA, SEP IRA, Traditional IRA, Trusts and other non-retirement accounts.
- Tax Loss Harvesting for non-retirement accounts.
If you’d like to read a more in-depth analysis of Betterment, read my Betterment review.
If Betterment is the best automated retirement program for beginners, Wealthfront is a very close second. Wealthfront operates much the same as Betterment. They listen to your needs and specific situation and make a customized portfolio for you.
There are some slight but significant differences with Wealthfront. While you can open an account with Betterment with nothing, Wealthfront requires an opening balance of $500. Wealthfront also offers you access to a variety of ETFs from 6-7 asset classes to take advantage of Tax-Loss Harvesting opportunities, while Betterment offers 13 specific ETFs. The ETFs used at Wealthfront provide better diversification opportunities when compared to Betterment.
Some of the features of Wealthfront are:
- Wealthfront has a much simpler fee structure. You play a flat fee of 0.25% of funds under management. Wealthfront also manages the first $15,000 for free. This is a big win for Wealthfront.
- Wealthfront does a bit of a better job of reinvesting dividends than Betterment. They reinvest into asset classes that are underperforming so you can stay relatively close to your allocation needs.
- They have some of the best minds on their investment committee – led by Burton Malkiel, famed author of Random Walk Down Wall Street.
- Wealthfront offers the same account types as does Betterment, but they also offer a 529 Plan for those wanting to save for college needs.
If you’d like to read a more in-depth analysis of Wealthfront, read my Wealthfront review. You can also read my detailed analysis of Betterment vs Wealthfront if you can’t decide between the two options.
Betterment and Wealthfront are more traditional robo-advisors. FutureAdvisor doesn’t manage your investments directly in house – they manage your investments at other online brokerages. Currently, FutureAdvisor works with both the Fidelity and TD Ameritrade platforms.
In essence, FutureAdvisor acts on your behalf with the above brokerages. Both brokerages will still charge you trading fees though FutureAdvisor manages everything for you. After linking up your investment accounts FutureAdvisor will analyze your investments and provide recommendations for a proper allocation. FutureAdvisor focuses on the same low-cost ETF approach as do both Betterment and Wealthfront.
Some of the features of FutureAdvisor are:
- FutureAdvisor charges 0.50% to manage your investing – which is on top of any trading fees you’d incur.
- FutureAdvisor requires a minimum account value of $10,000, which is higher among the top automated retirement programs.
- They will take your 401(k) plan into consideration so investments are made in light of what you have in that plan.
- FutureAdvisor will look at all of your accounts, retirement and non-retirement, if you wish.
- You get to review all trades before they’re placed.
- FutureAdvisor will rebalance your portfolio 2-4 times per year.
- FutureAdvisor also offers support for 529 plans, which is a bit unique among automated retirement plans.
- You can use them for free if you choose to make trades outside of their platform.
TradeKing brought a new service to the robo-advisor world in 2014 with their introduction of TradeKing Advisors. While TradeKing is known for their low prices and bent towards active traders, they saw the need for automated retirement programs to help investors save for retirement.
Perhaps my favorite feature of the TradeKing Advisors program is that they partner with Ibottson (a subsidiary of Morningstar) to construct the portfolios. Morningstar is the leader of mutual fund and ETF information and education. Whereas Betterment and Wealthfront construct a portfolio from 13 and 10 ETFs, respectively, TradeKing uses 23 which provides for some nice diversification opportunities.
Like other automated retirement programs, TradeKing Advisors asks you a handful of simple questions in the beginning and makes your portfolio from there.
Some of the features of TradeKing Advisors are:
- They offer two portfolio types: Core and Momentum. Core requires a minimum balance of $500 and charges 0.25% for balances over $5,000 (though $1 per month if under). Momentum requires a minimum balance of $5,000 and charges 0.50% of your funds under management. TradeKing does offer the first year fee free.
- TradeKing does not charge trading fees for changes they make in your portfolio.
- TradeKing offers automatic rebalancing of your portfolio and a more hands off approach, like Betterment and Wealthfront.
- They support all account types, even business accounts.
- TradeKing Advisors does not offer Tax Loss Harvesting like some of the other top automated retirement programs.
If you’d like to read a more in-depth analysis of TradeKing, read my TradeKing review.
Personal Capital doesn’t offer a true automated retirement program, but they’re that good that they belong on my list. Think of Personal Capital as Mint with a lot of investing features included. We use Personal Capital in our home and love what they offer.
Personal Capital offers a full suite of financial management products to manage your finances. You link your accounts – from anything like your bank accounts to credit cards to mortgage and investment accounts so you can get a complete picture of your financial health. We use it to monitor our spending, plus a few other things, but it’s the investment piece where they stand out.
Personal Capital targets those with investable assets of $250,000 or more though you can work with one of their advisors with as little as $25,000. The advisor will manage your investments for you, again focusing on low-cost ETFs. It is not a requirement to work with a financial advisor from Personal Capital to use their platform. We’ve used the platform for three years and never worked with one as we’re self-directed investors.
Some of the features of Personal Capital are:
- Personal Capital is free to use. You don’t spend a dime, but you get access to their full suite of tools.
- Personal Capital analyzes your portfolio to see if there’s lower cost funds available.
- The platform will compare your investments against their benchmarks to make sure they’re performing as they should.
- You can use Personal Capital to set payment reminders to help better manage your bills.
- You will likely be contacted by an advisor when you open an account though you don’t have to work with them and can politely decline.
If you’d like to read a more in-depth analysis of Personal Capital, read my Personal Capital review.
Saving for retirement, and investing in general, can be overwhelming. Don’t let that hold you back from investing. If you don’t know where or how to start, take a look at some of the best automated retirement programs and get started investing today.
Do you use a robo-advisor to manage your investing? Would you ever trust a virtual financial advisor to manage your retirement planning? When did you start investing in the stock market?
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