In the investment world, fees can be a significant obstacle to getting the most out of your investments. While not all fees are avoidable, understanding how to reduce fees or even eliminate them altogether can help your investments perform more effectively and take you closer to your financial goals. This guide will cover everything you need to know about the fees associated with Betterment, the various strategies you can use to minimize them, and how you can avoid them altogether.
What Are Betterment Fees?
Betterment is an automated investment service that combines the expertise of both humans and technology to invest and manage your money on your behalf. It provides you with the tools, insights, and guidance needed to achieve your personal financial goals. As with many professional services, Betterment charges a fee for its services, and understanding how it works is the first step to avoiding it.
Betterment fees are calculated as a percentage of your total investment. For accounts with balances under $2,000, Betterment charges 0.25% annually. As your account balance increases, the annual fee charges small decreases. Accounts with balances between $2,000 and $100,000 are charged 0.15%, while those over $100,000 are charged 0.05%. In addition to the annual fee, there’s also an additional 0.25% annual fee for tax-loss harvesting.
Ways to Minimize Betterment Fees
While it may sound like 0.25%, or even 0.05%, is a small amount, when it comes to investing, even the smallest percentage can make a significant difference when compounded over time. Therefore, one of the best ways to reduce Betterment fees is to invest more money. Increasing your investments, even by small amounts, will lower your overall fee percentage by increasing your account balance.
Another way to minimize Betterment fees is to take advantage of their SmartDeposit feature. This feature will automatically deposit money from your checking account into your Betterment portfolio when your balance falls below the amount you’ve set. This will help lower your overall fee percentage, because it reduces the number of periods when your portfolio balance is below the amount where the fee rate is higher.
Finally, one strategy you can use to minimize Betterment fee is to take advantage of the cash flow feature. This feature will allow you to automate deposits of a fixed amount of your paycheck directly into your Betterment portfolio. It’s a great way to consistently add funds to your portfolio without having to think about it. Not only is it a great way to save money and grow your wealth, but it’s also a great way to minimize your fees.
How To Avoid Betterment Fees Entirely
If you’re looking for ways to entirely avoid Betterment fees, the best way is to invest more money. If your account balance is over $2,000, then you’re already eligible for the lowest fee rate of 0.15%. If you increase your account balance to over $100,000, then you’ll qualify for the even lower rate of 0.05%.
Another strategy for avoiding Betterment fees is to take advantage of their promotions. Betterment often offers limited-time promotions, offering cash bonuses when you open a new account or add money to an existing account. These bonuses can be a great way to reduce, or even eliminate, the fees associated with your account.
Finally, if you’re looking to eliminate your Betterment fee entirely, another option is to open a Free Class Account. This is a no-fee Betterment account designed to help you learn the basics of investing without any fees. Although the account is limited in its features, it can be a great way to get acquainted with the investment process without having to worry about fees.
While fees can be a major obstacle to achieving the most out of your investments, understanding how to reduce or even eliminate them is the key to being successful. Betterment fees will vary based on your account balance, but by increasing your investments, taking advantage of the SmartDeposit feature, and cash flow automation, or taking advantage of promotions, you can easily minimize the fees associated with your Betterment account. Even better, if your account balance is over $100,000, you can even avoid the fees altogether.
