Blooom Robo-Advisor Detailed Review for Managing Your 401k

Ever heard of Blooom Robo-Advisor? We might know that contributing to a retirement plan in the workplace may be the single best way over time to build wealth, but maintaining the retirement plan can be great pain. Blooom is an automated investment service that aims to make handling this key piece of your investment life easier.

The technology of Bloom is not rocket science. To keep you interested in your retirement goals, they use a simple asset allocation approach. These are generally in favor of lower costs and loosely focused index funds.

But you can outsource the 401(k) administration to a computer for $10 a month.  Plus, you can also ask them practically any financial question for that charge, and get a response. That is not a bad deal these days for financial advice.

And, with your IRA you can now have the support you too! That is a lot for a lot of people. Want some assistance in handling your401(k)? Here’s everything you need to know about Blooom.

What is Blooom?

Blooom is just your401(k) robo-advisor. You will review your investments for free but the value proposition is to do what Betterment and Wealthfront do for your401(k) for a taxable brokerage account. They will also do it for only ten dollars a month, instead of a percentage of your assets.

It was founded by Randy AufDerHeide, Chris Costello, Kevin Conard and. The Finance folks are Costello and Conard, AufDerHeide brings the tech.

Costello is a Certified Financial Planner, previously co-foundedwith $500 million in assets under management as an investment advisor, and has also collaborated with wealthy individual clients. Conard has over 15 years of working with clients at another firm.

What Blooom Does

For your401(k) (or other employer-sponsored retirement plans like403(b), TSP,401(a), and 457 accounts, and IRA accounts, see Blooom as a Robo-advisor. They will prescribe an allocation for your portfolio based on your age, and your target retirement date.

We advocate a 100 percent stock allocation for younger people, but they also provide stock diversification. They will select large, medium and small-cap domestic stock funds and various international stocks, and possibly even “alternative” funds, for instance.

If you don’t like the asset allocation, you can opt for a different stock-to-bond ratio. Blooom offers no diversification beyond stocks and bonds.

On top of that, Blooom’s asset class allocations are not customizable. That means that if that is your preference, you can’t opt for more developed international markets or more small-cap stocks.

If appropriate Blooom chooses a low-cost index fund to meet the requirements of your portfolio. Generally speaking, this means you’ll get low cost production that monitors the demand.

If you’re someone who picks all of the highest cost mutual funds inadvertently, that could earn you substantial savings. Blooom will rebalance your portfolio on the basis of their algorithm every 90 days (along with any changes you have made to your stock-to-bond ratio).

Once you choose you to accept Blooom’s recommendations, they will manage your portfolio in perpetuity (as long as you pay your monthly fee). Blooom also allows its users to ask financial questions – beyond just the 401k management – and get responses from real advisors.

Should you invest or pay off student loan debt? Ask? Planning to have a little one soon? Ask about it.

Pros & Cons

Pros

• A true set and forget 401(k) and IRA solution for hands-off investors
• Allowable accounts include 401(k)s, IRAs, 403(b)s, 457s, and TSPs
• The free analysis offers valuable insights regarding the health of your retirement portfolio
• Maintains a fiduciary standard with the SEC
• Get exclusive pricing ($99 first year)

Cons

• Blooom doesn’t factor in outside assets when choosing your asset allocation in an individual account.
• Only manages IRAs with Fidelity, Charles Schwab, and Vanguard
• While great for those with a larger balance in their 401(k), their one-size-fits-all annual fee eats into their returns of smaller investors

Blooom’s Important Features

Investment options

Retirement funds are confusing. That’s why people pay big buck to financial planners. Blooom doesn’t believe you should go broke managing your investments.

Blooom wants to actively manage your account to ensure that you’re investing wisely.

401k monitoring

For safety and to make sure you’re investing as best you can, Blooom is constantly monitoring your account. They also protect your confidentiality through encryption.

IRA monitoring

In the past, Blooom has focused solely on managing and optimizing 401k accounts. But they have now added IRA management as well! Just like with 401ks, Blooom is not an investment app, but rather a tool to help you manage and better your existing IRAs.

Rebalancing

After your first rebalance when you initially sign-up with Blooom, your account will be monitored in case your employer stops offering a certain fund, your retirement goals change, market movements put your portfolio out of balance and rebalanced as necessary.

Your money stays put

Unlike many investment advisors that can only make changes to non-401k accounts and may require you to move those accounts into their custody. Blooom connects with leading 401k providers to rebalance your account automatically online.

Although they can make account adjustments for you—they don’t require you to move your money. In fact, they cannot withdraw money from your 401k account—only you can.

Who Should Use Blooom?

Anyone with a 401k should head over to Blooom and take advantage of their free 401k analysis, at least. The beautiful thing about Blooom after the free analysis is that it costs just $120 per annum, which is far cheaper than hiring a fee-only financial planner at a cost of several thousand dollars.

Professional investment advisors cost even more — generally around 1% of your assets that are invested. And many will not work with you unless you have portfolios of 6 or 7-figure investments!

If you’re like millions of Americans, your 401k reflects both your first investment account and your largest. Blooom can help you ensure less than your gym membership is on track.

With a larger 401k balance, Blooom Robo-Advisor is really a no-brainer. And yet, even someone with a newish 401k between $5,000 and $25,000 can benefit from Blooom to ensure the money you’re putting in is allocated in the best way to compound over the next 20 or 30 years.

What Type of Accounts Does Blooom Support?

They currently support employer-sponsored retirement plans, including:

• 401(k)
• 457
• 403(b)
• 401(a)

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What Blooom is Missing

The biggest thing that I find is that Blooom Robo-Advisor doesn’t take into account the asset allocation of your entire portfolio. Retirement assets are just one piece and so it’s up to you to decide what you want to do with your401(k) if it’s outside the guidelines.

In other words, let’s say you keep most of your stock investment in a taxable brokerage account because you want the long-term capital gains that are favorable.

When you placed bonds within your401(k), as long-term capital gains are not covered by the bond dividends, otherwise they would assume you’re over-exposed. Fortunately, you can change your allocations so that’s not a big deal.

FAQ

1. Does Blooom Analyze IRAs too?

Yes! They have expanded their service beyond 401ks to include IRAs at the following institutions: Fidelity, Charles Schwab, and Vanguard.

2. Is there a cancellation fee?

Blooom accounts can be canceled at any time directly online after your account has been processed. You’ll receive a refund for time not used.

3. What if I have a 403(b)?

No problem. They offer 403(b) analyses! IRA, 401k, 401a, 403b, 457, or TSP analysis, monitoring, and management are available through Blooom!

4. What if I just started investing, and my 401(k) barely has anything in it?

Blooom helps all 401k participants, no matter the size of your 401k account.

5. At what point does it make sense to use Blooom?

The free Blooom account analysis is perfect for EVERYONE with an employer-sponsored retirement account. The paid account management service Blooom offers is perfect for the person who has a growing 401k and has absolutely no interest in managing it or doesn’t feel comfortable doing it.

Bottom Line

Blooom Robo-Advisor can help you manage your 401k investments when you don’t have the first clue where to start. Whether you just opened your 401k or you have had it for years, it’s a service that not many other companies offer.

If you are unsure about the right asset allocation or don’t have the time/knowledge to rebalance your allocation periodically, it may be worth the monthly fee to make sure you are on target to retire with the bank account you envision.