Blooom: How This Robo-Advisor Automates Your 401(k)

Blooom is a robo-advisor that answers the question, “Am I getting the best results from my retirement account?” Blooom.com, founded in 2013, offers a patent-pending solution for 401(k), 403b and TSP account management. Blooom targets two types of retirement plan participants: those with smaller accounts without access to a financial advisor and individuals who don’t have the time or inclination to manage their own account.

Read on for more about the service—and if it seems like an option for your retirement planning toolbox.

The Blooom approach is considered a do-it-for-you investment management solution for employees. The approach is fourfold. First, the firm examines your 401(k) fund choices and eliminates the ones that aren’t appropriate. Second, Blooom finds the best funds for you—usually, although not always, these will be index funds. Third, on your behalf, Blooom buys and sells funds to approximate your target allocation—here’s where the Blooom proprietary algorithm comes into play. Finally, a flesh-and-blood Blooom financial advisor reviews the results and double checks the recommended 401(k) allocation.

Blooom determines your investment asset allocation according to a secret algorithm. The company factors in your age and your desired retirement age to come up with the percentages allocated to bond vs. stock funds. The asset allocation will shift as you get closer to retirement to a more conservative mix with greater bond investments and a smaller percentage designated towards riskier stock funds.

Four times per year, Blooom reviews your current investments and compares the fund account balances with your desired asset allocation. If the fund values diverge too far from the preferred allocation, Blooom rebalances the funds. This means the platform will sell the over-weighted assets and buy more of the under-weighted funds on your behalf. As you approach retirement, Blooom reallocates your investments to a more conservative portfolio with a smaller allocation to the more volatile stock funds.

For investors worried about becoming locked in, the Blooom platform is flexible. If you want to adjust your asset allocation, Blooom offers an easy method to inform them of your new preferred asset allocation. It’s easy to adjust your retirement date as well. And if you want to speak with an advisor about your 401(k), there are several ways to contact the company. 

Blooom is different from many other robo-advisors—the service doesn’t require you to open a new account or transfer assets to the company. It manages your assets regardless of where the funds are located. The firm works with your existing retirement account provider and the plan’s current funds. Anyone with a 401(k) or another retirement-supported account can use Blooom.

The Blooom app will analyze your retirement account for free to assess whether you’re properly allocated to receive the best returns for your desired risk level. Blooom's fees:

• For an account valued at less than $20,000: $5 per month
• For accounts valued at $20,000 up to $499,999: $19 per month
• For accounts valued at $500,000 and above: $99 per month

Fees can be paid by credit or debit card. Blooom is a fiduciary advisor, which means that it is required by law to act in your best interest.

Blooom is a targeted management tool for workplace retirement accounts. The firm doesn’t dabble in traditional or Roth IRAs but focuses on one broad category—workplace retirement 401k, 403b and TSP accounts. As of June 2016, Blooom had analyzed more than $1 billion of retirement account balances.