When I was single with no kids, no mortgage and just a ~$35k student loan at under 4%… it wasn't too hard to plow a ton of money into a 401(k) out of college.
That flexibility hides a lot of mistakes.
With a decade, some wild swings in the stock market, and zero fingerprints, the account now sits comfortably in a Vanguard account where I only look at it once a month to record it in my net worth.
Until the rollover, I never thought about my 401(k). I picked some funds when I started working at 23, ignorant to asset allocation, and for five years the contributions went towards whatever my naive little 23-year-old mind decided was “good.”
I should have been thinking more about the allocation, rebalancing, and more about the fees. The only thing I did was rebalance annually.
Here's the thing:
Many corporate 401(k) plans are filled with terrible options.
They're not set up like Vanguard funds or Fidelity, with low fees and a transparency we've come to expect. They hide what they're investing in, what you pay in fees, and other details within documents. One of my plan options was an actively managed fund that charged over 1.5% each year! I only knew because I logged in, downloaded the prospectus, and searched through the stupid thing to find the fees.
For many folks, your 401(k) is the bulk of your retirement savings. This is a thing that will grow for 40+ years until you retire. You need to be reviewing your 401(k) regularly because small changes can mean big results.
401(k) reviews by a financial planner are expensive. It's because an experienced human being needs time to conduct a review. My friend Jeff Rose is a brilliant financial planner and he charges $350 for a 401(k) review (worth every penny I bet). $350 is not a lot to review a five or six-figure retirement account but maybe you're not ready to do that yet.
If that sounds like you, there's a startup that will review your 401(k) for free. (it's not as comprehensive as what Jeff would do, but it also costs nothing)
Get a free 401(k) analysis by blooom
(it's completely online)
What is Blooom?
First, some information on the company.
Blooom is a robo-advisor just for your 401(k). They will analyze your portfolio for free but the value proposition is that they will do for your 401(k) what Betterment and Wealthfront do for a taxable brokerage account. They'll also do it for just ten dollars a month, rather than a percentage of your assets.
Blooom was founded by Chris Costello, Kevin Conard, and Randy AufDerHeide. Costello and Conard are the finance folks, AufDerHeide brings the tech. Costello is a Certified Financial Planner, previously co-founded an investment advisor firm with $500 million in assets under management, and has also worked with wealthy individual clients. Conard has 15 years of working with clients at another firm. blooom raised a $9.15 million Series B investment in February of 2017.
Here's a two-minute explainer video (followed by screenshots when I went through it):
Free 401(k) 5-Minute Analysis
The analysis is really fast – enter in your birthday (to determine your age) and then the age you wish to retire.
The data in these screenshots is for demonstration purposes only, it's not my data. The analysis is real though (using my age and retirement age target of 65).
You're then asked a series of risk-related questions (what would you do if the stock market tanked, describe your perfect job, etc.) to establish risk.
After you create Blooom account, you can link up your 401(k) account:
After a bit of analysis, it'll show you how your asset allocation is compared to what it should be for someone of your age and looking to retire when you do:
As you hit next, you walk through each piece of the analysis to see what could be improved.
For example, under fees, it appears that I am overpaying. My current fees of 0.30% are higher than the optimal fee structure of just 0.17%.
After looking at the warning lights (risk and diversification), you're shown the check-up summary:
There's a lot of information here that you can use to adjust things yourself but Blooom does offer a paid service that costs as low as $10 a month.
It isn't until you after the check-up summary that you get to billing. So you get the analysis before they ever ask for a credit card.
Blooom's Ongoing Service
What do you get for your monthly fee?
They will rebalance your portfolio every 90 days to match your asset allocation. You can change the target allocation whenever you want and Blooom will adjust to that on the next rebalancing date.
They will also adjust your portfolio so that it matches your glide path, which is how your allocation changes as you age and near retirement. They will lower your allocation in stocks, increasing it in bonds.
Lastly, there is personalized support with licensed and certified financial advisors. You can ask them anything (I haven't tested this myself).
What Blooom is Missing
The biggest thing I notice is that Blooom doesn't take into consideration your entire portfolio's asset allocation. Retirement assets are just one piece (and even then, Blooom doesn't do IRAs) and so it's on you to remember what you want your 401(k) to do if it's outside the standard.
In other words, let's say you keep most of your stock investments in a taxable brokerage account because you want the favorable long term capital gains. If you put bonds inside your 401(k), since the bond dividends don't qualify for long term capital gains, then Blooom will think you're over-exposed.
Fortunately, you can adjust your allocations so it's not a big deal.
Is Blooom worth it?
The free analysis is worth it. It can tell you things you didn't even think about, like how some of your funds might have excessive fees, or if your allocation is out of alignment.
As for whether the ongoing management is worth it, that'll depend on you and your 401(k). If you are the type of person to re-balances your 401(k) every quarter, reviews fees, and check to see that the allocation is in line with your taxable investments… you probably don't need it (unless you want to pay $120 and automate it…).
(FWIW, I'm a fan of buying time)
Give it a shot and let me know what you think: