Top Roth IRA Investment Strategies with Betterment

Betterment’s Core portfolio serves as an excellent foundation for Roth IRA investors seeking balanced growth and risk management.

Betterment is a leading fintech company revolutionizing investment management by offering an automated robo-advisory platform that simplifies retirement and portfolio management. Its intelligent algorithms build diversified, low-cost ETF portfolios customized to each user's financial objectives.

Since its inception in 2008 and platform launch in 2010, Betterment has grown to serve over 900,000 clients and manages assets exceeding $50 billion.

With a focus on affordability, Betterment provides investment management services that recommend portfolios aligned with users’ goals. These portfolios are globally diversified, constructed from low-cost stock and bond ETFs spanning nine asset classes, and tailored to individual risk tolerance and investment horizons.

Investors desiring greater control can personalize their portfolio allocations, adjusting stock and bond ratios or emphasizing specific segments like large-cap versus small-cap stocks to match their unique strategies.

In the U.S., tax-advantaged savings options include 401(k)s, traditional IRAs, and Roth IRAs. Roth IRAs differ by using after-tax contributions, enabling tax-free withdrawals in retirement, unlike traditional IRAs where withdrawals are taxed.

Key Highlights

• Founded in 2008, Betterment offers a robo-advisory platform that creates portfolios tailored to individual risk profiles and timelines.
• Clients receive globally diversified portfolios composed of stock and bond ETFs, with flexibility to customize asset allocations.
• The Core portfolio, typically featuring a 60/40 stock-to-bond split, is a recommended starting point for most investors.
• All Betterment portfolios can be self-assembled through other brokers without incurring Betterment’s management fees.

Betterment Core Portfolio: 70/30 Stock-to-Bond Allocation

• 23.4% Vanguard Total Stock Market ETF (VTI): Broad U.S. Equity Exposure
• 19.3% Vanguard FTSE Developed Markets ETF (VEA): Developed International Stocks
• 11.6% Vanguard FTSE Emerging Markets ETF (VWO): Emerging Market Equities
• 6.2% Vanguard Value ETF (VTV): Large-Cap Value Stocks
• 5.1% Vanguard Mid-Cap Value ETF (VOE): Mid-Cap Value Stocks
• 4.3% Vanguard Small-Cap Value ETF (VBR): Small-Cap Value Stocks
• 10.9% Vanguard Total International Bond ETF (BNDX): Global Bonds
• 9.8% iShares Core U.S. Aggregate Bond ETF (AGG): U.S. Aggregate Bonds
• 5.5% iShares J.P. Morgan USD Emerging Markets Bond ETF (EMB): Emerging Market Bonds
• 3.8% Vanguard Short-Term Inflation-Protected Securities ETF (VTIP): Inflation-Protected Bonds

The 70/30 stock-to-bond allocation in Betterment’s Core portfolio balances growth potential with risk mitigation, making it a solid default choice. While some advisors recommend adjusting stock exposure based on age (e.g., “100 minus your age” rule), personal risk tolerance and investment horizon should guide asset allocation decisions.

Betterment charges a 0.25% annual management fee plus the underlying ETF fees. Since these fees exceed the base ETF expenses, investors can reduce costs by replicating similar portfolios independently through brokers offering no-fee accounts, though this requires self-managing periodic rebalancing.

Frequently Asked Questions (FAQs)

Does Betterment Offer Roth IRAs?

Yes, Betterment provides both Roth and traditional IRA accounts to suit different retirement planning needs.

Can You Withdraw Funds From a Betterment Roth IRA?

Withdrawals from a Betterment Roth IRA are permitted at any time without extra fees; however, early withdrawals may have tax consequences depending on timing.

Is It Possible to Have Multiple Roth IRAs?

Investors can hold multiple Roth IRA accounts, but the annual contribution limit applies collectively across all accounts.

Conclusion

A Roth IRA offers significant tax advantages by allowing after-tax contributions and tax-free withdrawals, enabling investments to grow without tax burden. Selecting suitable investments depends on individual risk tolerance and research commitment. Betterment’s platform streamlines this process by recommending portfolios aligned with personal risk profiles and retirement timelines, making it easier to build a tailored Roth IRA portfolio.

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