Blooom is an online registered investment advisor that uses a proprietary, patent pending algorithm to analyze the health of your 401(k), which can lead to greater potential long-term returns and greater peace of mind. In a nutshell, the process works over four steps, which will take five minutes or less:
- First, Blooom will collect a few key pieces of information, such as your age and estimated retirement date.
- Choose where your 401(k) is currently held and enter your login and password for your current 401(k) institution. Afterward, Blooom will analyze your holdings across 25,000 different funds.
- Based on the results, the health of your 401(k) will be represented by a flower (there aren’t any confusing charts or graphs to worry about).
- Finally, Blooom will show you how to improve your 401(k) with an easy-to-understand comparison. Here, you’ll also be able to weigh in on the stock and bond combination you’re comfortable with.
Did you know that according to some sources, as little as 31% of American workers participate in a 401(k) program? And among these, most would probably admit that they’re not where they need to be from a retirement perspective.
If you’re one of these individuals, can Blooom help get back on track? Are their services worth the time and money? We’ll explore all of this here. First though, let’s find out what a 401(k) is and what it’s used for.
What Is a 401(k)? How Does It Work?
Although you might think of 401(k)’s as something that have always been around, they didn’t come into existence until the early 1980s as more of an accident than anything else. In essence, they were intended to supplement an employer’s pension, which for the most part, went away long ago. Today however, 401(k)’s represent the primary method workers use to save money for retirement.
Basically, what happens is that workers are able to take out a portion of each paycheck before it’s taxed, which is then invested in a variety of “mutual funds composed of stocks, bonds, and money market investments.” While younger employees often target high-risk (but potentially higher paying) funds, older workers tend to focus on more conservative investments.
Most 401(k) accounts are overseen by an administrator (such as Fidelity Investments), who can help you keep track of performance and make changes at your request. The problem is that most of these administrators don’t help you make the best choices based on your account balance, age, and more; they just do whatever you tell them.
This is precisely why companies like Blooom exist. Let’s take a closer look at exactly how they help maximize your 401(k).
How Blooom Analyzes Your 401(k)
Regardless of where you work, where your 401(k) is held, or the size of your account (more about this shortly), Blooom can provide you with an analysis. You won’t need to open a new account or move your existing account—all you’ll need is a 401(k) and login credentials for online access.
Then, after answering the questions above, Blooom’s algorithm will take a look at the options in your 401(k), eliminating the “funds that don’t make sense for you to own,” based on your current balance and retirement goals. According to the company, in order to create a well-balanced portfolio, they traditionally lean towards cost effective index funds, but may use actively managed funds when needed.
Here’s where Blooom’s proprietary algorithm comes in. After your funds are selected, this technology will “select the ideal investments based on expense and manager experience.” According to the company, this algorithm does most of the heavy lifting, although a Blooom advisor will double check everything, cross reference it with your recommended 401(k) allocation, and make sure everything’s up to par.
After this initial process, Blooom will typically have your 401(k) adjusted within 30 days, and they’ll re-review it (known as rebalancing) once every 90 days and make adjustments if necessary. If adjustments are made at this point, Blooom will notify you via email.
However, keep in mind that Blooom will never change the amount being withheld from your paycheck to fund your 401(k), and you’ll maintain full control of your account at all times. Just as you normally would, if you’d like to make changes to your 401(k), you’ll have to contact your custodian.
How much will these services cost you?
Is Blooom Reasonably Priced?
Blooom’s initial analysis is completely free of charge, and there is no minimum account size. However, how much you’ll pay is directly related to the size of your 401(k):
- $5 per month for accounts less than $20K
- $19 per month for accounts between $20K and $500K
- $99 per month for accounts greater than $500K
Outside of this, Blooom doesn’t charge any hidden fees, and as long as you cancel 48 hours before the end of the billing cycle, you won’t be charged for the next month.
Given this ultra-low price (as least compared to hiring a dedicated professional to accomplish much of the same thing), what’s everyone saying about Blooom?
Does Blooom Have a Blossoming Online Reputation?
NerdWallet and InvestorJunkie gave Blooom a 4-star rating, both of which appreciated the super-simple signup, straightforward pricing, no account minimums, the company’s investment expense audit, and account assistance. However, both noted that Blooom’s automatic fund allocation might be too aggressive for a lot of users (although this can be changed manually), and that not much personal information is used during the process. Here’s how NerdWallet put it:
“The questions that determine how the company allocates your assets don’t delve any deeper than your birthday and target retirement age, and no mention is made of risk tolerance or investment goals.”
In fact, regardless of where you look, it seems like much of these same pros and cons were expressed for Blooom. After all, the company’s received a ton of media attention recently, primarily because it’s one of the only players in the game. Let’s talk more about this next.
Are There Other 401(k) Management Companies Besides Blooom?
While there are dozens of companies out there that can help you trade, budget, and build wealth (even robo-advisors like WealthFront, Schwab Intelligent Portfolios, and Betterment), there really isn’t anything quite like Blooom.
Well, that’s not exactly true. Among other things, a company called Financial Engines can help optimize and manage your 401(k), although their fees are quite a bit higher than Blooom’s.
Given the fact that Blooom seems to have cornered the market as far as 401(k) assistance, along with their ultra-low price, should you sign up for an account?
Is Blooom the Best Option for You?
The reality is that the “best” of anything is highly dependent on your current situation, your needs, your goals, personal preferences, and much more, and it’s no different with investing or wealth management platforms.
With this said, Blooom might be ideal for individuals whose 401(k) isn’t already managed by another company or service, and who has a higher tolerance for risk (often younger investors with more time until retirement). Alternately, if you’re looking for the lowest-priced option, Blooom wins from this aspect, too.
Our advice? If you’re curious about Blooom, the company’s initial analysis is completely free, so you can spend less than 5 minutes answering a few questions and setting up your account to get a better idea how the process works. And even if you decide you sign up for a paid account, it can be canceled at any time with minimal cash outlay on your part.
Have you used Blooom to manage your 401(k)? If so, tell us what you think by writing a review below!