Category : investing

A Penny And 401k Fees Both Overpriced

Penny for Your Thoughts: You Pay More For 401k Than You Think

The U.S. Government has recently engaged in serious talks to abandon the production of the penny. Why? Because each penny costs 1.4 cents to produce, resulting in a cost of more than $100 million per year to taxpayers. If you’re a 401k investor, does this sound familiar? How so, you ask? The answer lies in knowing how much you’re paying in the hidden investment fees associated with your 401k account. Based on NerdWallet research, nearly 92% of people have no idea what they’re paying in 401k fees.


Why Paying 401k Fees Can Be a Big Deal

Fees unnecessarily sap the potential long-term results of your 401k. The average American will pay $138,336 in 401k fees. That’s 2.5 years of earnings for the average U.S. household.

Want to see the fees you could strike from your life? Check out our hidden fee calculator to get an estimate. Or, evaluate your actual account for a truer picture.

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Thanks 1 Billion Clients

Blooom Reaches $1 Billion in Assets Under Management

“Wall Street has made a habit of running in the opposite direction of investors with small accounts…maybe we should build something and run towards them.”

This was written in email from Kevin Conard, my co-founder to me late one night back in January 2013. Four-and-a-half years later that idea has evolved into a company – blooom – and we are proud to announce that we have grown faster than virtually any other robo-advisor. Blooom now manages more than $1 billion of retirement accounts for our clients.

Specifically, thousands of people from all across this country have trusted blooom with what is likely their most important and potentially most valuable financial asset – their employer-sponsored retirement account, or 401ks/403bs, as they are so strangely named.

If you’re a blooom client, I want to thank you for believing in us and starting this journey of bettering your retirement and financial situation together. The entire blooom team works hard every day to help you reach your financial goals.

Every time we receive a message of gratitude from one of our clients, we share it with the team and … everyone gets to work the next day with a sense of pride that they are truly helping people and striving to achieve greatness. Thanks to everyone once again. We will continue to provide our helpful service to all of you — in good times and bad.

Speaking of pride. We also take pride that this Kansas-based company reached the milestone faster than both Betterment or Weathfront – while doing so on a fraction of the capital. They’re peers not so much from a comparable service offering but in that they’re a benchmark for other robo-advisors. In other words, out of the gates, we have grown faster on fewer resources, as one should expect from someone managing their money.

Blooom was started in 2013 to help the traditionally un-helped.

We felt – and continue to feel — that it isn’t fair that the people who needed the help from the financial services industry the most were the least likely segment of the population get it.

You’ve done the hard part: You started saving for you retirement. Thanks for letting us do the rest.

If you haven’t already read blooom’s manifesto — here’s WHY this is all so important to us:

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When Market Tanks ... Do These 3 Things

3 Things You Should Do With Your 401k When The Market Tanks

Disclaimer:  I am not predicting the market tanks tomorrow, next week, next month or even next year. Contrary to what the media or “pundits” try to convince you — it is impossible to predict when the market will drop or what will ultimately cause it. That said, I am 100% convinced that the market will drop at some point.

In fact, at blooom – we guarantee that it will drop at some point in the future. In reality, it isn’t IF the market will drop. It is WHEN and how many times over your investing lifetime will it occur. We try to inform our clients about this as often as possible and set the expectation that market drops – although painful at the time – are perfectly normal.

The mistake average investors make most often is they take the assumption that something is wrong with the market or their portfolio and they bail out of their investments right in the midst of the market decline. They do this thinking that they are doing the “safe” thing but it is often the absolute worst thing you can do. It is a huge reason why average investors perform so horribly when left to their own devices.

So what can you do the next time the market tanks?  At blooom, we advocate that our clients do these 3 things.

1. Set Your Expectations Ahead of Time

Just knowing that it is perfectly normal for the market and the value of your account to decline from time to time is half the battle.

History has repeatedly shown that the right thing to do — regardless of the circumstances causing the market decline — is to not panic, sit tight and just get through it. You probably know that the average rate of return over the stock market over the past 30, 50 whatever years is something close to 10%. Guess what, the 10% rate of return was calculated by STAYING in the market 100% of the time. Even in the last 20 years (1997-2016), the average investor return – 2.29% — has paled to that of the S&P’s 7.68% 1.

Achieving the S&P historical numbers does NOT assume that an investor had a fully functioning crystal ball. They weren’t hopping out of the market before a decline and back into the market right before it turned upwards. That rate of return assumes you left your investment the heck alone!

Start prepping your mind today — when the waters are fairly calm — for the fact that your 401k will decline in value when the market drops. This does not mean anything is wrong with your 401k, the investments, or blooom!  I promise you — after 22 years of experience working with clients to help them save for retirement — if you can come to grips and expect the market and your portfolio to drop from time to time, you will put yourself in a much better position for investing success.

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Common Traits Hamilton And Blooom

5 Unexpected Reasons Why We Love Alexander Hamilton

Hamilton the Broadway musical has been the hit of the New York stage for several years now. Even before his hip-hop reinvention, we at blooom shared some sensibilities with our founding father. Here are the Top 5 Alexander Hamilton traits we live when providing 401k help:

Alexander Hamilton Was an Innovator

When there was recent talk of removing Hamilton from the $10 bill, it was no surprise that there were a number of supporters who reached out to the press to challenge the move. Hamilton is rooted in the origination of several of our country’s financial and business institutions.

In addition to serving as our first U.S. Treasury Secretary, Hamilton co-founded the Bank of New York, which still lives on today as BNY Mellon. The bank’s stock was among the first to be traded on the New York Stock Exchange. His strategies were also instrumental in the formation of interest-paying bonds, the chartering of a national bank and the first U.S. incubator.

Disruptive like Hamilton, blooom’s founders created a revolutionary online 401k app to fix the plans for EVERY American. The key distinction between blooom and other robo-advisors is that we are the only firm managing individuals’ employer-sponsored retirement accounts like 401ks and 403bs.

And, blooom clients also have access to unbiased professional financial advice beyond their 401k. Our goal is to provide access to help everyday Americans, not just millionaires who can typically afford financial advice. We do it for only $10 a month.

Alexander Hamilton Championed Transparency

In 1801, Hamilton started a daily federalist news sheet that eventually became the New York Post. At the time, Hamilton used the paper to voice his opinions publicly and attack conventional wisdom.

Transparency is no act for us, as blooom is a fiduciary. This basically means we are required to act in your best interest, not ours. We wish this was the case for all advisors in the good ol’ US of A, but it’s not.

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401k Management Requires Dissection

What Do an Appendectomy and 401k Management Have in Common?

Picture this. You start to feel a dull sense of pain around your belly button that shifts to your lower right abdomen. Within just a few hours the dull pain has escalated to a sharp pain that can no longer be ignored. When you move, the pain gets excruciating and if by chance you need to cough or sneeze – you’d better be gripping onto something!

At this point, you realize you need to get your butt to the ER. After what seems like a million bumps in the road on the way to the hospital, you check yourself into the ER. The ER doctor then begins the examination. After just a few moments of probing your lower abdomen — she is confident that you have appendicitis.

The doctor explains that if appendicitis is not treated quickly, the appendix can rupture. When that happens, it releases bacteria into the abdomen and potentially leads to other, life-threatening infections.

Because of this danger she explains, appendicitis is considered a medical emergency. It typically needs to be removed within 24 hours of the condition being diagnosed. Given the amount of pain you’re are in, surgery sounds like the least of your worries. So, you tell her, “Let’s do it! Get this thing out of me. Nobody even knows what the heck an appendix does anyway!”

Then comes a response that you were not at all expecting. Instead of starting the process to prep you for the appendectomy, she instead asks you just about the …

Strangest Question You Would Expect a Doctor to Ever Ask

“I would love to perform this appendectomy, but before we can proceed, I need to know how much you have saved for your retirement?”

You are thinking … WTF!  What in the world does my retirement saving have to do with this emergency surgery? But given how much pain you are in, you will answer just about any question if it means getting you closer to the pain meds.

“I have about $70,000 saved up in my 401k,” you answer proudly. Still, you hadn’t seen the 401k management questions in the admittance form. What’s this about?

Her reply leaves you totally dumbfounded. “That is great but, unfortunately, you don’t have enough saved for ME to perform the appendectomy you badly need.”

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