Do you think company retirement plans – like 401k’s – are confusing?

I’d wager there is a good chance you do.

I was a financial advisor, and I even think company retirement plans can be confusing.

Blooom is a company that can help manage that complicated retirement plan of yours, so you’re not left wondering if you’re losing money, or if your money is even invested correctly in your 401k or retirement plan.

And…guess what?

I had never heard of Blooom until last week, even though a couple of years ago I literally managed people’s retirement plans for a living.

I figure, if I’d never heard of Blooom before, you may have never heard of it… so I’m eager to be helping you understand the company.

Below is an extensive Bloom review that should answer all your questions about using Blooom to help you with your company retirement plan.

Blooom Review

Bloom Features

About the fees and features

• Fees – $10 monthly (10% discount if paid annually). This is a very simple straightforward fee for the service.  Many companies in this space use a fee structure that charges a percentage of the money managed.  Blooom is different because it charges an actual cash fee that you pay monthly.  Instead of a hidden fee that is sucked out of your retirement plan funds, you see the fee coming out of your bank account monthly.  This is great for transparency.
• Asset allocation – Blooom will take your current available fund options and allocate your money into funds based on your risk tolerance, age, etc…  The allocation of your account will depend on your available options through your company retirement plan.  Lower cost funds will be preferred over higher-cost funds.
• Investment options –investment options are limited to your company’s investment retirement plan options:
  • Stock index funds
  • Bond index funds
  • Stock mutual funds
  • Bond mutual funds
  • Real estate investment trusts
• Blooom retirement options – retirement accounts available including:
  • 401k
  • 403b
  • 457
  • 401a
• Minimum investment – $0. There is no account minimum; anyone with a 401k, 403b, 457, etc… can utilize Blooom.  While there is no minimum, it makes sense to take the fee into consideration.  More on the justification of fees can be found below.
• Promotional offers – Blooom provides the ability to try the first month of their service for free. This is a huge benefit since many investors like to try an investment service before they are obligated to pay fees for it.

Positives of Blooom

• Fees – the $10 fee is straightforward and there are no hidden fees.  With the easy to understand fixed fee, you can decide if you have enough money invested to make the service worth it.
• Account minimum – if you want to use Blooom even though you have a small account, you have the option to do so.  Some investors simply want the peace of mind that a company is looking out for their investments; you can have that without a huge account balance.
• Evaluation – before you even signup for Blooom, you can request to have them do an evaluation of your retirement plan.  This benefit, mixed with the first month free, really benefits you as a consumer to try the service before paying a dime.
• Access to an advisor –  even though Blooom is considered a type of robo-advisor, you have access to the opinions of a real life person through the company.  You can ask questions to a financial advisor that pertain to your company retirement plan, or other general questions falling outside your retirement plan.  You can speak about anything from taxable brokerage accounts to SEP IRAs.
• Simplicity –  Blooom focuses on simplicity in its platform.  It doesn’t go into deep details with complex charts and graphs.  Instead, the symbol of your retirement plan’s health is portrayed as a flower.  It can range from an image of a withering flower to a healthy colorful and vibrant flower.  The simplicity is the core of Blooom since it is really designed for the more novice investor.

Negatives of Blooom

• Fee if you have a small amount of money – if you have a small amount of money, paying $10 per month may not be worth it for you.  If you only have $1,000 invested in your 401k, you would end up paying $120 per year for the Blooom.  That $120 is 12% of your total retirement portfolio, which is way too much to pay for a service.  This is why a bit of a higher account balance is best when using Bloooom.
• Sophisticated and/or do-it-yourself investors –  if you are a sophisticated investor or a do-it-yourself investor who wants control over your retirement plan allocations, Blooom won’t be for you.  Since the company uses an algorithm to create an asset allocation, you will not have the ability to make your own allocations decisions.  Some investors like to research their portfolio options and try to allocate their money according to their research.  If you are one of those people Blooom won’t be for you.
• Account options – some of you will find it unfortunate that Blooom won’t be able to provide you with a robo-advisor service for your other accounts, such as IRAs and taxable brokerage accounts.
• Lack of phone support – Blooom is a startup and, like most startups, they cut costs in various areas.  Phone support is one of those areas.  I personally like the ability to call a human, but maybe I am just old-school.

How does Blooom work?

Before you sign-up with Blooom, you have the option to request a free analysis of your account.  This is a great feature offered by the company.  You can gain a feel for what they do and how sophisticated they are with their analysis before you use them.

After you go through a free analysis of your current retirement account/accounts, you can sign-up for a free month of Blooom.

When you link your accounts, you will go through a three step process.

Blooom will go through these three-steps when you sign-up.

• First, Blooom will find the funds options you have available which you should NOT be invested in.  It removes these options from potential funds to allocate your money.
• Second, you should know that as a robo-advisor, Blooom uses an algorithm to find the best investment allocation for you.  After answering some questions about your risk tolerance, age, etc., Blooom’s algorithm will select the best investment mix for you.  A human will likely check the results to make sure everything looks ok.
• Third, your account is kept up-to-date and analyzed to see if new options become available to you.  Every 90 days or so, Blooom will re-balance your investments so that you stay within the parameters it has set.

As a Blooom client, you will also have access to a certified financial planner to ask questions if they arise.

Is Blooom a good deal?

Below is a detailed breakdown of how to calculate if Blooom fees are worth it for you.  If you are not into the numbers, just know that the less money you have, the more Blooom will cost as a percentage of your assets.

Blooom says that its median 401k balance is $48,106.

If this is the case, Blooom will cost the median account 0.25% of assets ($120 Annual Bloom Fee / $48,106 account balance).

Don’t forget that your funds still charge fees (more on that below).

Bloom fee example

Bloom is a good deal if you have enough money.  If you only have $5,000 in your 401k, Blooom will cost 2.4% of your assets ($120 / $5,000) and this doesn’t even include the fees on your funds.

Examples of Blooom fee with different dollar amounts:

$5,000 Blooom fee = 2.4%

$10,000 Blooom fee = 1.2%

$25,000 Blooom fee = 0.48%

$50,000 Bloooom fee = 0.24%

$100,000 Blooom fee = 0.12%

$500,000 Blooom fee = 0.024%

$1,000,000 Blooom fee = 0.012%

Don’t forget to calculate your total fees

I believe many of the Blooom reviews are missing an important part of Blooom when it comes to their fee structure.

Blooom charges $10 monthly for their service ($120 for the year).  Many websites are comparing Blooom’s fee structure as if it was the ONLY fee you will be paying for your 401k.

But….you know what?

This is not the case.

You will pay the fee for Blooom AND the management fees of your underlying funds.

It will look like this example:

Blooom Annual Fee: $120

American funds fee: 1% of assets

Many websites are not taking into consideration the fees of your current retirement plan funds.

These sites are basically saying, “Blooom charges $120 so if you have $50,000, Bloom only costs $120 / $50,000 = 0.24%.”

This is technically correct, but, in reality, the TOTAL fee you will pay on your account is what is most important.

If you pay a 1% fee and Blooom doesn’t save you any money in fees, your total fees in the above example would cost 1.24% (1% of assets + 0.24% cost of Blooom).

1.24% is higher than the original 1% you were paying, so this would not be saving you money.

The real way to find out if Blooom pays for itself is by calculating how much it will save you after factoring in its fee.

Is Blooom worth it?

If we take the example above, you will break even with Blooom  if the following occurs:

Original 401k Investment without Blooom

• $50,000 invested in American Funds Mutual Fund paying 1%
• Annual fee for American Funds Mutual Fund = $50,000 x .01 = $500 / year

Breakeven with Blooom

• Blooom will find  lower fee funds within your 401k
  • Example: $50,000 invested in American Funds Mutual Fund paying 1% ($500 / year) is reduced by using a Fidelity index fund paying .76% ($380 / year)
  • Blooom fee = $120
  • New Fidelity Index Fund fee + New Blooom fee = $380 + $120 = $500

In the above scenario, Bloom breaks even if it reduces your fee from $500 per year (1% of $50,000) to $380 (0.76% x $50,000).

In the above scenario, you would pay no additional cost for Bloom.  With no additional cost, you will receive the help of Bloooms algorithm to allocate your money and automatic re-balancing quarterly with the service.

Since you get automatic re-balancing and allocation, even breaking even with Blooom can be of benefit to you.

Bloom can pay for itself if it lowers your fees more than the extra amount you pay for the service

If we take the breakeven example from above, Blooom pays for itself if you have $50,000 invested and it lowers your fee from 1% to .76%.

If Blooom were to lower your fee to less than 0.76%, you would pay less money AND receive the help of a robo-advisor for your 401k.

Here is an example of how much you would save if you have $50,000 in your 401k and Blooom reduced your fee from 1% to 0.50%

• Blooom finds  lower fee funds within your 401k
  • Fee before Blooom reallocates to lower cost funds =  $50,000 x .01 = $500 / year
  • Fees after Blooom reduces your fee from 1% to 0.50% =  $50,000 x 0.50% = $250 + $120 Blooom fee = $370 / year
  • Savings = $500 – $370 = $130 per year

As you can see, if Blooom reduces your fees, it has the potential to pay for itself.

Whether Blooom pays for itself will depend on what account options you have available, and what you are currently invested in.

Either way, you can have a robo-advisory service that will automate your 401k by allocating money into an asset allocation and rebalancing, all with a potential to save money doing so.

Bloom review conclusion – Is Blooom worth it?

When I was an advisor, I spent time focusing on the 403 b market.  I worked at one of the largest universities in the United States, and I met with everyone from the staff to the faculty to the administration.

One thing I can tell you for sure is that many employees don’t understand, or don’t care to understand, their retirement plan.

There is nothing wrong with this.

I had over 1,000 clients and prospects in my territory and I couldn’t possibly meet with all of them each year.

When I did meet with clients and prospects, I saw all sorts of problems with their 403b plans.

Maybe they were in the highest cost funds, or maybe they only invested in a money market.

These situations are very common, and I am really excited I came across Blooom because I feel it can help solve these issues.

This is a major reason I started my website…I have witnessed more and more people going to the internet to find solutions to their finances.

Blooom is one way this is the case.

In conclusion, do I think Blooom is worth it?

For those with a large enough account balance who are not passionate and interested in their investments…yes, Blooom is resoundingly worth it.

Have you used Blooom?  Let me know your experience below!

Disclaimer: These are the ideas and opinions of the author.  The author is not responsible for the actions of those who read the posts on this blog.  Each individual reader has a unique situation and unique needs.  This blog is not intended to solve those unique situations of the readers.  This blog is not liable for decisions made by the readers of this blog.

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