Have you ever wondered if you could secure greater returns with your employer-sponsored retirement account? Not sure where to go for help? Afraid professional assistance will be expensive — or shady? Feel stupid for not knowing a lot about investing?
Take a look at Blooom — a robo-advisor that focuses solely on work-sponsored retirement accounts like 401(k)s, 403(b)s, 401(a)s, 457s, and thrift savings plans.
Blooom manages these plans with a simple and straightforward strategy.
Once you agree to let Blooom oversee your 401(k) or another retirement plan, you’ll pay a flat fee of only $10 per month.
There are no account minimums either, meaning anyone can use this service.
Like other robo-advisors, blooom uses a combination of technology and human help to assess your retirement accounts and help them perform better.
While it’s easy to set your work-sponsored retirement account on cruise control and rely on hope to reach your retirement goals, Blooom can suggest savvy 401(k) moves that could help you retire sooner — or with more money.
Why sign up for Blooom?
One of the most intriguing aspects of this company is the fact it focuses solely on work-sponsored retirement plans.
This strategy will inevitably alienate some investors who have taxable accounts and IRAs and would need an outside advisor to manage them as a result.
But Blooom appears to have a single goal in mind — helping people manage their work-sponsored retirement accounts.
They’re not trying to be everything to every investor; they are focused on an underserved niche — everyday people who focus on saving their retirement funds via workplace accounts.
Blooom is for people who are unsure if they have selected the right accounts to invest in within their 401(k).
When you set up an account with Blooom and put them to work on your 401(k), you get the advantage of having a professional assess your account to see exactly what you’re invested in and whether it makes sense for your retirement horizon and goals.
Blooom also offers a free analysis you can use to see “where you’re at.”
If you let Blooom manage your 401(k) for $10 per month, you don’t have to get your employer or human resources department involved in the decision, either.
Blooom will take a holistic look at your 401(k) to find problem areas and make fixes on your behalf.
In the end, this could mean paying fewer fees and scoring higher returns.
What does Blooom do, exactly?
But, how will they fix and manage your 401(k) account?
At the end of the day, that really depends on the type of management your 401(k) account needs and the funds you’re invested in already.
The steps Blooom could take on your behalf include:
Reduces hidden fees
According to Blooom, the company saved their clients $600 million in hidden fees as of this writing. Fees they may help you reduce or eliminate include:
- Hidden investment management fees: Blooom will move you to the lowest cost funds available in your 401(k) while also ensuring you stay within your recommended allocation.
- Managed account services: Many 401(k) plans charge a percentage to manage your account, and this amount grows right along with your account balance. Blooom looks for ways to eliminate these fees so you can keep more of your returns for yourself.
- Help you choose better options: Blooom notes that Target Date Funds often charge higher fees that comparable investment options. Worse, they are often owned by the financial institution offering them to you, which is a huge conflict of interest. Blooom will check to see where your money is invested and find better options with lower fees.
Suspicious Activity Alerts
Blooom also helps to keep your 401(k) secure.
They monitor your account for large withdrawals and other suspicious activity, and they notify you any time something questionable takes place. This is especially handy if you're going through a divorce or separation.
You can even sign up for notifications via text message.
Also, keep in mind that Blooom itself is incredibly safe to use.
The app offers 256-Bit encryption, bank-level security, 24/7 hacker virus scans, third party verification, and plenty of other features to keep your data secure.
If you believe your 401(k) funds are automatically rebalancing themselves, you’re probably wrong.
In reality, you should be rebalancing every so often (six months to a year).
Blooom does the hard work for you, automatically rebalancing your 401(k) investments to ensure the best mix of stocks and bonds for your goals.
Blooom notes that many employer-sponsored 401(k) plans assign everyone the same appetite for risk and allocation without ever considering the individual.
They also look at your unique situation to assess your risk, then consistently rebalances your portfolio for you to keep you on track.
Blooom operates on the very correct premise that nobody can beat the market consistently over time. As a result, they focus on taking over your 401(k) and keeping you in long-term investments that will pay off regardless of the ups and downs.
By leaning on Blooom for professional market guidance and asset allocation, you can keep yourself from making hasty decisions with your money.
Help from real, human financial advisors
Blooom also makes it possible for their clients to speak with financial advisors on any number of important financial issues.
Blooom clients can get ahold of real-life financial advisors via email or live chat, then ask them questions about their 401(k)s or other retirement goals.
Keep in mind that Blooom is a fiduciary, meaning they are legally obligated to give you sound, helpful financial advice instead of trying to sell you on a solution.
You pay Blooom a flat fee every month, but they don’t make money on investing options they choose on your behalf.
Benefits of using Blooom
If you know your 401(k) needs help but you aren’t sure where to turn, Blooom can keep an eagle eye on your account for just $10 per month.
The benefits of this approach include:
- Low account management fees on big balances: Since Blooom charges only $10 per month regardless of how much you have in your account, you can score incredibly low account management fees if you have a big balance in your retirement account. If you have $100,000 saved, for example, the fee as a percentage of your assets each year works out to .12%.
- Blooom charges your fees to a credit or debit card: Blooom doesn’t take their $10 monthly fee out of your retirement account. Instead, they charge it to a debit or credit card every month. Ultimately, this leaves more money in your 401(k) working for you.
- Get help without asking your employer. Your employer does not need to be notified or involved if you hire Blooom to oversee your 401(k) account.
- Save money and score higher returns. Since Blooom will help you eliminate unnecessary fees in your 401(k) account, it can easily pay for itself.
- No account minimum. You can start using Blooom right away, and that’s true even if your 401(k) balance is very small. Starting early can actually be very beneficial since Blooom can make sure your asset allocation and fees are on point from the beginning.
Why shouldn’t you use Blooom?
While Blooom’s account management services could be life-changing for a certain type of retirement saver, it’s certainly not for everyone.
There are several reasons you might want to consider another robo-advisor or real-life financial planner instead.
Those reasons include:
- High account management fees on small accounts: If you have a boatload of cash in your 401(k) account, paying $10 per month is a steal. But, if your account is still very small, $10 per month can make up a much larger percentage of your portfolio.
- They don’t support every type of account: Blooom makes no secret of the fact they focus on retirement accounts offered through employers. However, this detail means they may not work for everyone. If you have an IRA or taxable investment accounts in addition to a 401(k), you may need to seek out a different robo-advisor for comprehensive help.
- They assume your goal is retirement: Blooom’s goal is helping people reach retirement by their ideal retirement age. However, they aren’t really set up to help people plan out additional financial goals like paying for a wedding or college. If you need help planning out your financial life in its entirety, you may want to sit down with a real-life financial planner instead.
The bottom line
Blooom’s innovative ideas could very well change the way the average investor thinks of their 401(k).
Instead of “setting it and forgetting it,” people who use Blooom will realize that they do have some power when it comes to growing their retirement funds over time.
The fact that Blooom charges only $10 per month also makes it a realistic option for people with nearly any 401(k) balance.
After all, $10 per month is the cost of a fast food meal these days. Surely someone can give up one meal per month to have better results in retirement, right?
Still, Blooom will work best for people who save for retirement through their employer and not on their own.
The app’s focus on employer-sponsored retirement accounts makes it limited but also helps the company focus on one, singular goal.
In the end, it seems like that’s what Blooom wanted all along.
GUEST WRITER HOLLY
Holly Johnson (no relation to Emma) is a financial expert, award-winning writer, and mother of two who is obsessed with frugality, budgeting and travel. In addition to serving as contributing editor for The Simple Dollar, Johnson owns Club Thrifty and is the co-author of “Zero Down Your Debt: Reclaim Your Income and Build a Life You’ll Love.”
Some of the links in this and other posts generate a commission. I never recommend products that I don’t truly believe in. Seriously – I get asked to write about stuff all the time and turn down hard cash if I’m not feeling it.
Emma Johnson is a veteran money journalist, noted blogger, bestselling author and an host of the award-winning podcast, Like a Mother with Emma Johnson. A former Associated Press Financial Wire reporter and MSN Money columnist, Emma has written for the New York Times, Wall Street Journal, Forbes, Glamour, Oprah.com, U.S. News, Parenting, USA Today and others. Her #1 bestseller, The Kickass Single Mom (Penguin), was named to the New York Post's ‘Must Read” list.
Emma regularly comments on issues of modern families, gender equality, divorce, sex and motherhood for outlets like CNN, Headline News, New York Times, Wall Street Journal, Fox & Friends, CNBC, NPR, TIME, MONEY, O, The Oprah Magazine and The Doctors. She was named Parents magazine’s “Best of the Web,” “Top 15 Personal Finance Podcasts” by U.S. News, and a “Most Eligible New Yorker” by New York Observer.
A popular speaker, Emma presented at the United Nations Summit for Gender Equality. Read more about Emma here.