Betterment vs. Wealthfront IRAs: The biggest differences
Betterment and Wealthfront are two popular robo-advisors (automated investing platforms) offering algorithm-powered portfolio management for hands-off investors. Both give you access to traditional IRAs, Roth IRAs, rollover IRAs, and SEP IRAs. But the platforms also differ in several ways.
Betterment is best for those looking to merge traditional ETF-focused portfolio management with the option of one-on-one human advisor support. Wealthfront, however, best suits investors who want access to a wider collection of investment types, including cryptocurrencies.
IRA eligibility requirements
Betterment and Wealthfront offer the same types of IRAs, but the robo-advisors differ when it comes to fees, investment types, and account perks. However, it’s nonetheless important to familiarize yourself with the rules of each IRA type before you begin:
- Traditional IRA: You can set up this account if you’re at least 18 years of age with taxable income. Traditional IRAs allow you to contribute up to $6,000 per year (or $7,000 if you’re over the age of 50) in pre-tax dollars. You’ll be responsible for taxes only when you start making withdrawals at age 591/2 .
- Roth IRA: The minimum age requirement is the same for Roth IRAs. However, unlike traditional IRAs, Roth IRAs are funded with after-tax contributions. Plus, you can only make contributions if you meet the income thresholds set by the IRS. Single filers can only contribute the full amount ($6,000 or $7,000) for the 2022 tax year if their modified adjusted gross income (MAGI) is less than $144,000 (the limit for married couples is $214,000).
- SEP IRAs: Both robo-advisors accept automated SEP IRAs. Strictly for self-employed individuals and small business owners, these accounts let you contribute up to $61,000 in 2022.
Are Betterment’s IRAs right for you?
You can set up a traditional IRA, Roth, or SEP IRA with either of Betterment’s two investing plans (digital and premium). Though you won’t need a minimum to use the digital plan, you’ll be responsible for a 0.25% annual fee. Betterment’s premium plan has a $100,000 minimum requirement and 0.40% annual fee.
The robo-advisor also applies tax-loss harvesting to maximize your returns, and its Roth conversion option makes it easy to move funds between multiple IRAs both through the web and mobile platforms. Plus, the premium plan gives you unlimited access to a certified financial planner (CFP). You’ll have to pay extra to access this service if you’ve got the digital plan.
In addition, Betterment lets you create retirement goals and monitor your progress as you invest more and more. The company’s mobile app is available on iOS and Android devices.
Are Wealthfront’s IRAs right for you?
PFI SmartAssetLike Betterment, Wealthfront also offers traditional, Roth, and SEP IRAs. You’ll need a minimum of $500 to set up an account, and Wealthfront also charges a 0.25% annual fee (not including fund fees). But the robo-advisor’s investment selection is better for those who want access to a wider range of investment types, including crypto.
Wealthfront not only offers ETFs, but it also lets you weave index funds and crypto trusts into your portfolio. It currently offers two crypto trusts: Grayscale Bitcoin Trust (GBTC) and Grayscale Ethereum Trust (ETHE). Plus, the robo-advisor offers tax-loss harvesting, stock-level tax-loss harvesting, and several other strategies.
Unlike Betterment, Wealthfront doesn’t offer ongoing human advisor consultations, but it does have a product specialist team of certified public accountants (CPAs), certified financial planners (CFPs), and chartered financial analysts (CFAs). You can contact them if you ever have any questions about the platform.
Wealthfront’s mobile app is available on iOS and Android devices.
