IRAs Betterment Vs. Wealthfront: The Biggest Differences
Betterment and Wealthfront are two popular robotic advisors (automated investment platforms) that offer algorithm-based 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 various ways.
Betterment is best for those looking to merge traditional ETF-focused portfolio management with the option of one-on-one human advisor support. However, Wealthfront is better suited to investors who want access to a broader collection of investment types, including cryptocurrencies.
IRA eligibility requirements
Betterment and Wealthfront offer the same types of IRAs, but auto advisors differ when it comes to fees, investment types, and account benefits. However, it is important to familiarize yourself with the rules for each type of IRA before you begin:
- Traditional IRA: You can set up this account if you are at least 18 years old with taxable income. Traditional IRAs allow you to contribute up to $6,000 per year (or $7,000 if you’re over 50) in pre-tax dollars. You will be responsible for taxes only when you start making withdrawals at age 59.1/2 .
- Roth IRA: The minimum age requirement is the same for Roth IRAs. However, unlike traditional IRAs, Roth IRAs are funded by after-tax contributions. Also, 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 tax year 2022 if their modified adjusted gross income (MAGI) is less than $144,000 (limit for married couples is $214,000).
- SEP IRA: Both automated advisors accept automated SEP IRA accounts. Strictly for self-employed individuals and small business owners, these accounts allow you to contribute up to $61,000 in 2022.
Are Betterment IRAs Right for You?
You can set up a traditional, Roth, or SEP IRA with either of Betterment’s two investment plans (digital and premium). Although you will not need a minimum to use the digital plan, you will be responsible for an annual fee of 0.25%. Betterment’s premium plan has a minimum requirement of $100,000 and an annual fee of 0.40%.
it also applies tax-loss collection to maximize your returns, and its Roth conversion option makes it easy to move funds between multiple IRA accounts via both web and mobile platforms. Plus, the premium plan gives you unlimited access to a Certified Financial Planner (CFP). You will have to pay extra to access this service if you have the digital plan.
Plus, Betterment lets you create retirement goals and track your progress as you invest more and more. The company’s mobile app is available on iOS and Android devices.
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Are Wealthfront IRAs Right for You?
PFI SmartAsset Like 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 robotic advisor’s investment selection is best for those who want access to a broader range of investment types, including crypto.
Wealthfront not only offers ETFs, but also allows you to weave index funds and crypto trusts into your portfolio. It currently offers two crypto trusts: Grayscale Bitcoin Trust (GBTC) and Grayscale Ethereum Trust (ETHE). In addition, the robotic advisor offers tax loss harvesting, equity-level tax loss harvesting, and various other strategies.
Unlike Betterment, Wealthfront does not offer ongoing consultations with human advisors, but does have a team of product specialists from Certified Public Accountants (CPAs), Certified Financial Planners (CFPs) and Certified Financial Analysts (CFAs). You can contact them if you ever have any questions about the platform.
The Wealthfront mobile app is available on iOS and Android devices.
Read our Wealthfront review »