Editorial Note: The content of this article is based on the author’s opinions and recommendations alone and is not intended to be a source of investment advice. It may not have not been reviewed, commissioned or otherwise endorsed by any of our network partners or the Investment company.
Updated on Friday, October 18, 2019
Managing a 401(k) plan wasn’t in your job description, so you may not be giving your employer-sponsored retirement account the attention it needs. That’s where Blooom comes in. It works a bit differently than most other robo-advisors: Blooom’s only purpose is to manage your 401(k).
With Blooom, there’s no need for 401(k) rollovers or transfers of funds into a new account. You give this robo-advisor permission to access your existing retirement account, and Blooom ensures that you’re maximizing your account’s earning potential. Blooom tailors your investments to factors such as your age, how close you are to retirement and your risk appetite.
Who should consider Blooom?
Blooom is a great option for novice investors who aren’t sure how to maximize employer-sponsored retirement accounts. If your employer offers you a 401(k), 403(b), 401(a), or a 457 retirement account, Blooom can manage it in a way that most benefits you.
Note that individual retirement accounts (IRAs), healthcare savings accounts (HSAs), and 529 college savings plans are not eligible for management by Blooom.
Blooom scans your account to find any excessive or hidden fees that you’re paying now, and moves your money into investments with the lowest fees possible. Any time an investment isn’t performing as well as it should, Blooom may rebalance your portfolio to keep you on track for your retirement goals.
As a robo-advisor, automation is a big part of the process. This algorithm-driven app oversees and maintains your retirement account. However, you can also chat with a live financial advisor if you have questions or concerns.
Blooom fees and features
|Amount minimum to open account|
|Account fees (annual, transfer, inactivity)|
|Customer support||Chat, Email|
Blooom has one flat fee: $120 per year or $30 per quarter. That sounds enticing, since most robo-advisors are based on a percentage, rather than a flat rate. Wealthfront and Betterment, for example, charge annual fees of 0.25% of your total balance. But on a percentage of balance basis, $120 a year can look quite different depending on how much money you have in your account.
Fees mentioned in this article are accurate as of the date of publishing.
|Account balance||Blooom fee as a percentage of assets|
While it’s good to be able to start investing with a little bit of cash, the flat fee doesn’t work in your favor. With $1,000 invested, you’re paying 12% a year in fees. But if your investments are around $50,000, you’ll be on par with competing robo-advisors. And the more you invest, the lower that fee is, percentage-wise.
How does Blooom analyze your 401(k)?
A Blooom analysis of your existing company-sponsored retirement account: 401(k), 403(b), 401(a), or a 457 account is completely free. When you sign up for Blooom, you’ll answer a few questions about your investing habits to help them recommend the best strategy for you.
Then you are asked to link your existing account to Bloom. To repeat, you’re not moving your funds or your investment account; you’re just giving Blooom access to an existing account.
Blooom will show you what your current investment setup looks like compared to your ideal investment strategy. You’ll compare diversification, allocation and fees. If you’d like to move forward with Blooom, they’ll move the trades in your account to ones with the lowest flat fee.
It takes about seven business days for your account to get adjusted, depending on your company’s account setup. While machines are doing some of the work, Blooom says registered advisors and account coordinators are carefully managing the accuracy and quality assurance of all accounts.
Keep in mind that the type of investment account you have can inhibit your Blooom investment strategy. For instance, if you have a portion of your investment account in a self-directed brokerage, Blooom will leave it alone.
Investment selection and management
When trying to figure out what works best for your ideal plan, Blooom looks to:
- Ensure you have the right stock-to-bond ratio for your retirement time frame.
- Diversify your asset classes to as many as your retirement fund allows.
- Pick the lowest funds for each asset class.
While you can’t approve transactions before Blooom makes them, you’ll get an email every time a change is made to your investments.
Rebalancing is done on a per-fund basis. Blooom says that if your funds have transaction restrictions, they may not be included in your asset rebalance.
Blooom doesn’t change your contributions or withdrawals; those are still handled directly through your account custodian.
Strengths of Blooom
- Live analyst assistance: One downside to some robo-advisors is that they lack the option to discuss strategy or investment choices with human representatives. With Blooom, you can live chat with financial advisors on any pressing money questions you have. Investing isn’t one-size-fits-all, and you may need to discuss your options occasionally.
- Blooom is a fiduciary: Fiduciaries are legally required to act in your best financial interest, but not all financial advisors are fiduciaries. Your custodian may not be a fiduciary, which means you might not be getting the attention your portfolio needs to earn the best return. You can rest assured Blooom will make recommendations based on what’s right for you.
- No account minimum: Many investment accounts request a minimum to start investing. Because Blooom is only helping you manage your employer-sponsored retirement account, they don’t need you to have a minimum to invest. That means you can start using Blooom as soon as you have access to your work 401(k).
Drawbacks of Blooom
- Limited to work-sponsored accounts: If you don’t have an employer-sponsored plan or you work for yourself, Blooom isn’t going to work for you. They only offer support for 401(k), 403(b), 401(a) and 457 accounts. HSAs, 529s and IRAs aren’t accepted.
- Smaller balances pay more in fees: Blooom flat fee pricing structure is very simple, and easy to understand. The downside is that clients with smaller balances are paying much more in fees, percentage-wise, than may be available with other robo-advisors.
- Skews toward more aggressive investments: Blooom believes that the younger you are, the more you should invest in stocks. The older you get, the more you move towards less-risky bonds. That means if you’re more than 20 years away from retirement, Blooom assumes you can handle the ups and downs of the market. If you’re not comfortable with more aggressive investing choices, you may not always agree with how Blooom manages your money.
Is Blooom safe?
All investments carry risk, and your 401(k) is no different. If you feel your investments are too aggressive to your liking, you can always talk to Blooom about adjusting your portfolio.
Blooom discusses their security measures in a way many other robo-advisors don’t. They talk about encryption levels, secure servers, and the multi-level verifications in place to confirm it’s really you requesting changes to your account.
Because Blooom is a fiduciary, they are required to act in your best interest. They don’t hide fees and are upfront about their monthly fee. You can speak with experts any time you wish, like when the market fluctuates. Blooom alerts you any time there’s suspicious activity on your account. They’re also registered with the Securities and Exchange Commission (SEC).
Is Blooom right for you?
If you have the opportunity to save for retirement through an employer-sponsored plan, using Blooom could help make sure you’re getting every penny you should be. Not all employer plans have advisors that act in your best interest, which is where Blooom comes in. If you don’t like it, you can cancel any time without any fees.
However, if you don’t have a plan offered through your employer, you’ll likely use an IRA to save for retirement. Blooom doesn’t help with those, so there’s no use in signing up unless you have a work-sponsored account.
If you meet the requirements, Blooom may help you max out your earning potential, giving you the most money when you retire. If you don’t, there are plenty of other robo-advisors available to help you manage an IRA or other investment accounts.