When it comes to Robo-advisors, Blooom is breaking the rules by offering advisory services on your 401(k). With Blooom, you can keep the perks of your 401(k) or other employee-sponsored retirement plans, like employer matches, while benefiting from the guidance of a Robo-advisor that’s working for you.
The reality for most Americans is that employee-sponsored retirement plans are the only way they save for retirement.
But here are the two main issues with most people’s 401(k) – the fees are high and your investments aren’t always well aligned with your real retirement needs.
That’s where Blooom comes in. They want to optimize your retirement account with the right asset allocation for your needs all while helping you save on fees.
M$M 2022 Blooom review
What is Blooom?
Blooom is a Robo-advisor that’s only goal is to help you manage your 401(k). And yes, there are three o’s in Blooom. It was founded by Kevin Conrad, Chris Costello, and Randy AufDerHeide back in 2013.
Costello, a financial advisor for high-net-worth individuals, says he got the idea to start Blooom after realizing his parents couldn’t afford 401(k) advice. And that’s the goal of Blooom – to help real people get the most out of their 401(k).
Clearly there was a need for this because Blooom became the fastest robo-advisor to hit $1 billion in assets under management, which they did in 38 months. They now manage over $3 billion for investors.
Blooom was built on these principles:
- It should help people regardless of account size.
- You shouldn’t need a Ph.D. to understand what’s in your 401(k) and how to manage it.
- Pricing should be simple, low, and transparent.
How did they do? Well, that’s exactly what this Blooom review is for…
How much does Blooom cost?
I want to start with pricing in my Blooom review, because if you’re being told “here’s this cool thing that can help you save more money for retirement,” you know it’s going to cost something.
Blooom costs $120/year or $10/month for managing and monitoring your 401(k).
Flat fees like this are obviously going to feel much lower when you have a larger balance, and let’s say you do have $100,000 in your 401(k). The cost of Blooom is an annualized fee of 0.12%.
Other Robo-advisors like Wealthfront and Betterment start at 0.40%, but they don’t manage employee sponsored retirement plans. You could roll your 401(k) over to them, but Blooom lets you keep your money where it is while offering low cost management fees.
It’s 100% free to have Blooom run an analysis for you, and they’ll do that for anyone.
M$M tip: Read more about the cost and features of Wealthfront and Betterment at Wealthfront Review 2022: How Does This Robo-Advisor Stack Up? and Betterment Review 2022: Should You Use the OG Robo-Advising Tool?
How does Blooom work?
Blooom starts by analyzing your 401(k). The process only takes a few minutes, and you will need to share some personal details and answer questions about your investing habits. Then, you will be asked to securely link your 401(k) information. Linking your 401(k) happens through Blooom’s secure site.
Blooom’s analysis looks at your diversification, fees, and allocation. They use a proprietary algorithm to go over 100,000 different data points to find the optimum allocation for your account. They also go through everything in your 401(k) and find where you’re hemorrhaging money… this is a big bummer for many retirement investors
If you think Blooom can give you a healthier-looking 401(k), they will start making trades and adjust your account within 30 days.
According to Blooom, they have found and saved clients over $1 billion by projected retirement age. The median amount they claim to save clients by retirement age is $32,100.
What is Blooom’s investment methodology?
Here’s the good stuff that explains how Blooom tries to help you save on fees and optimize your 401(k).
When you went through the analysis, you answered questions about your age, other investment accounts, and retirement goals. This information is used to determine what kind of asset allocation you need to meet your goals.
Blooom leans towards index funds because they are inherently diverse (tracking the market and not an individual stock) and cost-efficient because they aren’t actively managed funds. Blooom will try to fill as much of your account with index fees before relying on mutual funds if they still need to find something to fit your asset allocation.
Blooom continues to monitor and rebalance your assets. So, as young investors age and get closer to retiring, Blooom will start to move your account towards more conservative assets like bonds.
What type of accounts does Blooom support?
Blooom currently only supports employee sponsored retirement plans, including:
Now, I said currently because on Blooom’s website, there are a few mentions of “stay tuned” when it comes to the other types of accounts they offer. If it makes sense for them to offer their advice to other investors, it could be beneficial to have all of your accounts managed in one place.
M$M tip: See all of your retirement accounts in one place, keep track of your net worth, and build a plan for retirement with Personal Capital. It’s free to use and you can learn more about its robust investment and money tracking tools at my Personal Capital Review 2022: Free Investment and Net Worth Tracking Tool.
Pros and cons of using Blooom
It’s hard to find a Robo-advisor to manage your 401(k)
Employee sponsored plans are usually the go-to option for people with traditional employers, but it’s incredibly rare to find a low cost Robo-advisor to manage them. Blooom works for you to manage your 401(k) no matter where it’s from. Your employer isn’t involved at all.
Blooom is good for hands-off investors.
If you aren’t actively paying attention to what’s in your 401(k) and making adjustments to the best of your abilities, then you are probably losing money. If you are going the DIY route with your 401(k), it probably eats up a lot of your time, and your options might be limited.
Blooom takes your 401(k) and does the heavy lifting for you. They use an algorithm to find the best investments, double-check all of that, and will likely save you money in the process.
There are no account minimums
You could go with Blooom even if you had $1 in your 401(k) – according to Blooom, the smallest 401(k) balance they manage is less than $500.
The fees are low compared to other Robo-advisors
Once your account hits $50,000, Blooom becomes one of the most affordable Robo-advisors on the market. The $10/month fee is charged to a debit or credit card rather than being taken out of your retirement account.
Blooom includes access to financial advisors
With some robo-advisors like Wealthfront distancing themselves even more from human advisors, Blooom gives you access to their team of registered investment advisors. You can reach them via chat, email, or text support.
These advisors are available for guidance on topics outside of Blooom’s service, including paying of debt or other major life events.
Only for employee-sponsored retirement plans
Yep, right now Blooom is only offering portfolio management for 401(k)s or other employee-sponsored retirement plans.
Blooom review – The final word
Blooom is a robo-advisor and if you want to know which robo-advisor is best, I’d start by looking at how each can help you.
Knowing that Blooom is virtually the only Robo-advisor to manage employee-sponsored retirement plans, they are really the only option for anyone who is looking to reduce their fees and find a better asset allocation.
Again, you can DIY this, but it’s a lot of work. Blooom’s approach is to make investing for retirement even more passive, and being hands-off with your investments is about as passive as it gets.
Decide you don’t like Blooom or another option pops up on the market, there are no contracts and you can quit any time.
Yes, Blooom is a fiduciary, and it’s advisors will offer you guidance on personal finance issues that fall outside of 401(k) management.
Blooom uses 356-bit encryption, bank level security, and third party verification. This is the same level of security you will see with any other robo-advisor.
You’ll be notified by email any time they make a change. They say it’s not realistic for them to ask for your approval everytime they do.
Blooom will not manage company stock. They will work around it to keep your asset allocation as close to where you need to be as possible.