The opinions in this Blooom review are our own and we do not let advertisers influence our content. To support our work, some of the links in this article might be from our sponsors.
Do you know if your 401(k) is properly invested? Does it have any hidden fees? When it comes to saving for retirement, most of us have to figure things out on our own. And unfortunately, studies have shown that our brains are hard-wired to make mistakes when it comes to investing1. Fear and greed cause many of us to make emotional decisions, such as avoiding volatility or buying funds with the highest short-term performance.
Most people invest in their 401(k) without proper guidance and often with little knowledge of the funds they are invested in. For example, many Millennials invest all their money in one or two index funds thinking it’s a good strategy. While it’s not the worst strategy, there are simple ways to improve it.
Unless you happen to enjoy reading about investing and retirement plans (and good for you if you do!), chances are that your 401(k) is not invested in an optimal way. Our Blooom review will cover the pros and cons of this service to help you determine if your 401(k) could benefit from professional management.
What is Blooom?
Blooom is an online SEC Registered Investment Adviser that manages retirement accounts such as a 401(k), 403b, 401a, 457 and TSP. The company was founded in 2013 and they currently manage over $3 billion dollars in employer-sponsored retirement plans.
Blooom offers a free, unbiased analysis of your retirement plan to ensure that your current asset allocation and diversification are appropriate for your age and retirement goals. It also analyzes all the fees charged by the funds in your account.
If Blooom’s algorithm determines that your 401(k) is properly diversified and is invested in funds with the lowest fees, congratulations! That means you’re in good shape and are doing a good job managing your 401(k). On the other hand, Blooom’s free analysis might discover issues with your 401(k), such as improper diversification or asset allocation.
Do you need help managing your retirement plan?
Managing a retirement plan takes work. Many people struggle with the following challenges:
- Understanding your investment options.
- Ensuring that you have the proper asset allocation.
- Keeping fees as low as possible.
- Rebalancing your portfolio on a regular basis.
- Keeping your emotions in check. (For example, many people invest in funds with the highest returns, which is a bad strategy.)
Your options are to:
- Manage your 401(k) on your own.
- Invest in a target date fund.
- Have a professional manage your portfolio for you.
Managing your own retirement plan takes work. At a minimum, you need to understand the funds you are invested in and all their associated fees, as well as decide what your asset allocation should be.
You then need to follow through on your plan without letting your emotions affect your decisions. Finally, you need to regularly rebalance your portfolio. Needless to say, most people lack the time, interest, or discipline to do this on a consistent basis.
Target-date funds offer convenience as you simply pick a fund that matches the year when you want to retire and the fund takes care of your asset allocation. The challenge with target-date funds is that they are not customizable and some charge high fees.
Two investors of the same age may have completely different spending/saving habits and risk tolerance. In addition, two target retirement funds with the same retirement year can have very different asset allocations so you would need to select the right one for your needs.
Finally, you could have a professional manage your money but that doesn’t come cheap. It will typically cost you 1% or more of your portfolio per year and many advisors require a minimum balance before they will work with you.
This is on top of the plan administration fees, as well as the fees charged by the individual funds themselves. Knowing that the average American will pay close to $140,000 in 401(k) fees over their lifetime, it is critical to select funds with low fees (although low fees is only good if you invest in good funds in the first place).
Blooom Review: Affordable Professional Management?
After signing up for their free analysis of your retirement plan, if you decide to sign up for their service, Blooom will come up with a personalized portfolio based on your age, risk tolerance, and desired retirement age. You will maintain full control of your retirement account at all times and will have the option to change the stock-to-bond ratio if you wish.
As part of their service, they will analyze the investment fees charged by your 401(k) and the funds available within it. Most importantly, Blooom will help you weather the market when things get scary.
They will typically rebalance your account 4 times a year in order to ensure that your portfolio stays as close as possible to your desired allocation.
Is Blooom Right for You?
If after reading this Blooom review, you are wondering whether Blooom is right for you, here are some questions to help you decide:
- Are you confident you’re invested in the right mix of funds to reach retirement in time?
- Do you feel confident you’ve selected the right investments in your account with the appropriate balance of stocks and bonds?
- What are you doing to avoid hidden fees?
- How often do you rebalance your 401k?
- Do you have professional help with your 401k?
- Do you have any financial questions (beyond 401ks) you’d like answered by a professional?
Is Blooom safe? Are they a fiduciary?
When it comes to your retirement account, the safety of your account is critical. Blooom utilizes bank-level security with 256-bit encryption of all your personal and financial data.
Unlike many brokers, Blooom is a fiduciary. This means that they are legally obligated to act in your best interest at all times. This is important, as you should only entrust your money to a fiduciary.
How much does Blooom cost?
Blooom’s analysis of your 401(k) is free and they only ask you for your credit card information if you choose to sign up for their 401(k) management. Their management service costs $10/month, with no contract or minimum balance.
To put this into perspective, if your 401(k) has $100,000 in it, Blooom’s service will only cost you 0.12% of your portfolio per year. This is a fraction of the cost charged by most professional money managers.
In addition, your Blooom membership comes with access to a (human) financial advisor at no extra cost! So if you have questions about student debt, home loans, or other financial matters you can contact them during business hours to get some answers.
Does Blooom lower the risk of investing?
Unfortunately, investing comes with risk. Blooom helps manage your investments but they have no control over the performance of the funds you are invested in. Stocks have historically gone up over the long run, but no service or money manager can guarantee that you will never lose money.
It would be great if we could invest all our money in a “safe” investment, like a CD, and have enough to retire from it. But these “safe” investments simply do not generate a high enough rate of return to allow the average person to retire from it.
Blooom Review: Conclusion
We believe that over the long run, stocks will continue to offer a superior rate of return than most other asset classes. But investing is not as simple as putting all your money into a low-fee index fund and hoping for the best. You need to select the right funds and asset allocation to increase your chances of reaching your retirement goal while at the same time keeping risk in check.
At a minimum, Blooom’s free analysis of your employer-sponsored retirement plan can serve as a second opinion. If you are unsure about the funds in your 401(k) or if you have not been regularly re-balancing your account, then Blooom can do that for you at a fraction of the cost of a professional money manager.
In addition, many people have financial questions and often don’t know whom to turn to. The fact that you can reach out to a fiduciary with your financial questions can make this a great investment (this feature is included if you sign up for Blooom’s service for $10/month).
We hope you have enjoyed this Blooom review! Click here if you are ready to start with their free checkup of your retirement plan.
Have you tried Blooom’s service? Let us know in the comments!