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How socially responsible investing connects your holdings to your heart

How socially responsible investing connects your holdings to your heart Mar 31, 2025 7:00:00 AM Learn more about this increasingly-popular category of investing. Socially responsible investing (SRI), also known as environmental, social, and governance (ESG) investing, screens for companies that consider both their returns and their responsibility to the wider world. It’s a growing market for investors, with assets totaling $30 trillion as of 2022. We launched our first SRI portfolio back in 2017, and have since expanded to a lineup of three options: Broad Impact Social Impact Climate Impact All three are globally-diversified, low-cost, and built to help align your investing with your values. So let’s explore a few ways they do that, before tackling a common question about the SRI category in general: performance. How our Social Impact portfolio lifts up underserved groups Social Impact uses the Broad Impact portfolio’s foundation while adding a trio of funds focused on helping underserved groups get on equal footing. There’s $SHE and $JUST, which screen for U.S. companies demonstrating a commitment toward gender and social equality, respectively. Then there’s $VETZ, our latest addition to the portfolio. $VETZ is the first of its kind: a publicly-traded ETF that mainly invests in loans to active and retired U.S. service members, and the survivors of fallen veterans. These types of home and small-business loans have historically helped diversify portfolios, and they also help lower borrowing costs for veterans and their families. And unlike $SHE and $JUST, which are comprised of stocks, $VETZ is an all-bond fund. So even if you have a lower appetite for risk when investing, your SRI portfolio can maintain an exposure to socially responsible ETFs. How the $VOTE fund is shaking up shareholder activism Remember the “G” in ESG? It stands for governance, or how companies go about their business. Do they open up their books when necessary? Is their leadership diverse? Are they accountable to shareholders? On that last front, there’s the $VOTE ETF found in each one of our SRI portfolios. On the surface, it seems like a garden variety index fund tracking the S&P 500. Behind the scenes, however, it’s working to push companies toward positive environmental and social practices. It does this by way of “proxy” voting, or voting on behalf of the people who buy into the fund. Engine No. 1, the investment firm that manages $VOTE, puts these proxy votes to use during companies’ annual shareholder meetings, where individual shareholders, or the funds that represent them, vote on decisions like board members and corporate goals. In 2021, Engine No. 1 stunned the corporate world by persuading a majority of ExxonMobile shareholders to vote for three new board members in the name of lowering the company’s carbon footprint. And it did all this in spite of holding just .02% of the company’s shares itself. Not a bad return on investment, huh? Does SRI sacrifice gains in the name of good? We now stand eye-to-eye with the elephant in the room: performance. Worrying about returns is common regardless of your portfolio, so it’s only natural to question how socially responsible investing in general stacks up against the alternatives. Well, the evidence points to SRI comparing quite well. According to a survey of 1,141 peer-reviewed papers and other similar meta-reviews: The performance of SRI funds has “on average been indistinguishable from conventional investing.” And while the researchers note that it’s “likely that these propositions will evolve,” they also found evidence that SRI funds may offer “downside” protection in times of social or economic crisis such as pandemics. Your socially responsible investing, in other words, is anything but a charity case. Simplifying the socially responsible space Not long ago, SRI was barely a blip on the radar of everyday investors. If you were hip to it, you likely had just two options: DIY the research and purchase of individual SRI stocks Pay a premium to buy into one of the few funds out there at the time Those days are thankfully in the past, because our portfolios make it easy to express your values through your investing. And our team of investing experts regularly seeks out new funds like $VETZ and updated SRI standards that strive to deliver more impact while helping you reach your goals. Check out our full methodology if you’re hungry for more details. And if you’re ready to invest for a better world, we’ve got you covered.

Our Socially Responsible Investing portfolios methodology

Four ways we help trim your tax bill

Four ways we help trim your tax bill Mar 24, 2025 12:07:45 PM And why these "invisible" wins matter more than you may think. When you choose an advisor to help guide your investing, you may focus only on what you can see. Things like their investment options, and the expected returns of those investments. Less obvious—but no less important—to your money’s future growth, however, is tax optimization. It sounds boring, but believe us, taxes can steadily eat away at your returns over the years. And the scary part is: you may never even notice. So any advisor worth their salt takes taxes seriously, and strives to minimize them as much as possible. These “invisible” wins are hard to spot in the moment, so let’s shine a light on them now. Here are four sophisticated ways we buy, sell, and hold your shares, all in the name of trimming your tax bill. Choosing which assets go where Rebalancing wisely Choosing which taxable shares to sell (or donate) Harvesting losses 1. Choosing which assets go where From a tax perspective, you have three main account types at your disposal when saving for retirement: Tax-deferred (traditional IRAs, 401(k)s, etc.), where taxes are paid later. Tax-exempt (Roth IRAs, 401(k)s, etc.), where taxes are paid now. Taxable, where taxes are paid both now and later. Because of their different tax treatments, certain types of investments are a better fit for certain accounts. Interest from bonds, for example, is typically taxed at a higher rate than stocks, so it often makes sense to keep them away from taxable accounts. This sorting of asset types based on tax treatments, rather than divvying them up equally across accounts, is known as asset location. And our fully-automated, mathematically-rigorous spin on it is called Tax Coordination. When Tax Coordination is turned on, the net effect is more of your portfolio's growth is shielded in a Roth account, the pot of money you crucially don't pay taxes on when withdrawing funds. To learn more about our Tax Coordination feature and whether it’s right for you, take a peek at its disclosure. 2. Rebalancing wisely When your portfolio drifts too far from its target allocation of assets, our technology automatically rebalances it. But there's more than one way to accomplish that goal. You can simply sell some of the assets that are overweight, and buy the ones that are underweight (aka "sell/buy" rebalancing), but that can realize capital gains and result in more taxes owed. So we first take advantage of any available cash flows coming into or out of your portfolio. When you make a withdrawal, for example, we intentionally liquidate overweight assets while striving to minimize your tax hit as much as possible (more on that below). And when you deposit money or receive dividends, we use those funds to beef up underweight assets. 3. Choosing which taxable shares to sell (or donate) Say there's no way around it: you need to sell an asset. Maybe cash flows aren't enough to keep your portfolio completely balanced. Or you’re withdrawing funds for a major purchase. The question then becomes: which specific assets should be sold? The IRS and many brokers follow the simple script of "first in, first out," meaning your oldest assets are sold first. This approach is easier for your broker, and it can avoid more highly-taxed short-term capital gains. But it often misses the opportunity of selling assets at a loss, and harvesting those losses for potential tax benefits. So our algorithms take a more nuanced approach to selecting shares, and we call this technology TaxMin. TaxMin is calibrated to avoid frequent small rebalance transactions and seek tax-efficient outcomes, things like avoiding wash sales and minimizing short-term capital gains. In the case of donating shares, we apply the same logic in reverse, or TaxMax as we call it. That's because when donating shares, it benefits you to choose the ones with the most gains, since any shares bought as a replacement will effectively have a reset tax bill. 4. Harvesting losses Life is full of ups and downs, and your investments are no exception. At times, their price may dip below what you paid for them. Tax loss harvesting takes advantage of these moments, selling taxable assets that fit this bill, then replacing them with similar ones. The result is you stay invested, and can then use those harvested losses to shift taxes you owe now into the future. The practice essentially sprinkles tax advantages on a portion of your taxable investing. And our fully-automated spin on it, Tax Loss Harvesting+, takes a tax strategy historically reserved for the wealthy and makes it available to the masses. Happy harvesting. In conclusion, we care about taxes Because it’s one of the most reliable ways to boost your returns. We can’t control the market, but tax laws? Those are set by the IRS and broadcast far and wide. And we can help you navigate them wisely. We wouldn’t be doing our job if we didn’t. So the next time you take a peek at your returns, ask yourself how much of that growth will still be there come tax time. If you’re a Betterment customer, you can rest assured we’re working tirelessly to minimize those tax drags. You may not realize it right away, and rightfully so. Live your life, and leave the tax toiling to us.

Making sense of market volatility

Making sense of market volatility Mar 24, 2025 12:06:57 PM During times of market turbulence, it may be tempting to move your money to safer ground. But it’s important to consider the long-term impact of your decisions. As we've seen recently, the stock market can experience significant fluctuations, rising one day and declining the next. With market swings, tariff announcements, and policy changes flying about, you may be wondering what to do and whether now is the time to take action. You’ll hear from many financial advisors, including Betterment, that volatility is natural and often something you simply need to ride out. Which is true. While the temptation to move your money to safer ground is understandable, it’s important to consider the long-term impact of your decisions. You could miss out on growth opportunities or trigger a larger tax bill. Instead of taking immediate action, take a moment to think through your investing strategy, your financial needs, and potential next steps. Start with this question: When will I need my money? It’s impossible to time the market perfectly. But having a clear timeline for your financial goals allows you to prepare for volatile moments and even take advantage of them. A longer time horizon means you can afford to ride out downturns, while a shorter one may require different considerations. We’ll walk through four different scenarios based on time horizon and how you can align your volatility strategy with your financial goals. Staying invested at every stage in life If you’re not yet in the market: Waiting for the “perfect” time to invest often leads to missed opportunities. The best time to start is now, with a diversified portfolio that aligns with your goals. If you don’t need the money for decades: Whether we’re talking retirement, education savings, or just a healthy investing portfolio, if you’ve got decades to go, time is your greatest asset. Market volatility is normal, even if it feels chaotic. Staying invested and making consistent contributions over time will allow you to benefit from long-term growth and compounding. If you need the money in the next five to 10 years: Your investments still have time to recover from a downturn, but start thinking ahead. Make sure your portfolio reflects your risk tolerance while maintaining a focus on growth. As you get closer to your end goal, you may want to plan to shift toward a more conservative allocation of stocks to bonds, or even move money into a high-yield cash account. If you’re retired or nearly retired: In this retirement-specific case, you’re already drawing down on your investments (or will soon begin to). Remember that even though you’re “using” this money, you’ll be retired for a while, so you don’t want to miss out on growth entirely. “Have a plan that includes a mix of safe and growth-oriented investments. A cash or bond ‘bucket’ can cover short-term needs, while equities can support long-term growth,” says Betterment financial planner, Corbin Blackwell, CFP®. How Betterment can help you mitigate volatility While you can’t avoid market volatility altogether, you can take proactive steps to manage your money and financial needs during market downturns. Establishing a thoughtful investing strategy now will pay dividends in the future. Here are three things to consider as you determine your approach: Invest in a well-diversified portfolio: By investing in a diversified portfolio, your money isn’t riding the wave of any individual stock, asset type, or even a country’s performance. For example, the Betterment Core portfolio is globally diversified and has delivered 9.0% annual returns (after fees) since inception.1 Consider enabling tax loss harvesting: One silver lining strategy during market downturns is tax loss harvesting—a tax-saving tool that Betterment automates. TLH is the process of selling an asset at a loss (which can happen especially during market downturns) primarily to offset taxes owed on capital gains or income. Build and maintain an emergency fund: You should work to maintain 3-6 months of expenses. These funds should be stored in an account that’s relatively liquid but still provides some level of growth to help keep up with inflation. Depending on your preferences for risk, growth, and liquidity, we offer a few options: Emergency Fund, our investment allocation built specifically for this use case, with 30% stocks and 70% bonds BlackRock Target Income, our 100% bond portfolios Cash Reserve, our 100% high-yield cash account The big picture If you remember nothing else, remember this: The most important thing you can do is avoid making rash decisions based on short-term market movement. Betterment is here with you every step of the way, helping ensure you make the most of your money, whether the market’s up or down.

ETF selection methodology

ETF selection methodology Mar 20, 2025 8:00:00 AM When constructing a portfolio, Betterment focuses on exchange-traded funds (“ETFs”) with generally low costs and high liquidity. In the following piece, we detail Betterment’s investment selection methodology, including: Why ETFs Cost of Ownership (CO) Mitigating market impact Actively-managed investments Conclusion 1. Why ETFs? When constructing a portfolio, Betterment focuses on exchange-traded funds (“ETFs”) with generally low costs and high liquidity. An ETF is essentially a basket which contains underlying securities, such as stocks and bonds, and generally come in two different flavors: passive (or index tracking) and active. By design, passive index ETFs closely track their benchmarks—such as the S&P 500. On the other hand, active ETFs represent a group of hand-selected securities decided upon by a portfolio manager with the intention of beating a benchmark. Additionally, ETFs have certain structural advantages when compared to mutual funds. These include: A. Clear goals and mandates Betterment generally selects ETFs that have mandates to passively track broad-market benchmark indexes. A passive mandate explicitly restricts the fund administrator to the singular goal of replicating a benchmark rather than making active investment decisions in an effort to beat the fund’s underlying benchmark. We largely favor such transparency and lower idiosyncratic market risk, yet some asset classes may benefit from fundamental research-driven security selection, and in some instances, Betterment employs the use of active ETFs managed by experienced external portfolio management teams (more on that below). B. Intraday availability ETFs are transactable during all open market hours just like any other stock. As such, they are heavily traded by the full spectrum of equity market participants including market makers, short-term traders, buy-and-hold investors, and fund administrators themselves creating and redeeming units as needed (or increasing or decreasing the supply of ETFs based on market demand). This diverse trading activity leads to most ETFs carrying low liquidity premiums (or lower costs to transact due to competition from readily available market participants pushing prices downward) and equity-like transaction times irrespective of the underlying holdings of each fund. This generally makes ETFs fairly liquid, which makes them cheaper and easier to trade on-demand for activities like creating a new portfolio or rebalancing an existing one. C. Low-fee structures Because most benchmarks update constituents (i.e., the specific stocks and related weights that make up a broad-market index) fairly infrequently, passive index-tracking ETFs also register lower annual turnover (or the rate a fund tends to transact its holdings) and thus fewer associated costs are passed through to investors. In addition, ETFs are generally managed by their administrators as a single share class that holds all assets as a single entity. This structure naturally lends itself as a defense against administrators practicing fee discrimination across the spectrum of available investors. With only one share class, ETFs are investor-type agnostic. The result is that ETF administrators provide the same exposures and low fees to the entire spectrum of potential buyers. Where actively-managed ETFs are utilized in Betterment portfolios, fees and expenses remain a critical aspect of our decision making.Our selection process will favor active over passive when we strongly believe the value added by an active manager outweighs its likely higher expense ratio.. D. Tax efficiency In the case when a fund (irrespective of its specific structure) sells holdings that have experienced capital appreciation, the capital gains generated from those sales must, by law, be accrued and distributed to shareholders by year-end in the form of distributions. These distributions increase tax liabilities for all of the fund’s shareholders. With respect to these distributions, ETFs offer a significant tax advantage for shareholders over mutual funds. Because mutual funds are not exchange traded, the only available counterparty available for a buyer or seller is the fund administrator. When a shareholder in a mutual fund wishes to liquidate their holdings in the fund, the fund’s administrator must sell securities in order to generate the cash required to satisfy the redemption request. These redemption-driven sales generate capital gains that lead to distributions for not just the redeeming investor, but all shareholders in the fund. Mutual funds thus effectively socialize the fund’s tax liability to all shareholders, leading to passive, long-term investors having to help pay a tax bill for all intermediate (and potentially short-term) shareholder transactions. Because ETFs are exchange-traded, the entire market serves as potential counterparties to a buyer or seller. When a shareholder in an ETF wishes to liquidate their holdings in the fund, they simply sell their shares to another investor just like that of a single company’s equity shares. The resulting transaction would only generate a capital gain or loss for the seller and not all investors in the fund. In addition, ETFs enjoy a slight advantage when it comes to taxation on dividends paid out to investors. After the passing of the Jobs and Growth Tax Relief Reconciliation Act of 2003, certain qualified dividend payments from corporations to investors are only subject to the lower long-term capital gains tax rather than standard income tax (which is still in force for ordinary, non-qualified dividends). Qualified dividends have to be paid by a domestic corporation (or foreign corporation listed on a domestic stock exchange) and must be held by both the investor and the fund for 61 of the 120 days surrounding the dividend payout date. As a result of active mutual funds’ higher turnover, a higher percentage of dividends paid out to their investors violate the holding period requirement and increase investor tax profiles. E. Investment flexibility The maturation and growth of the global ETF market over the past few decades has led to the development of an immense spectrum of products covering different asset classes, markets, styles, and geographies. The result is a robust market of potential portfolio components which are versatile, extremely liquid, and easily substitutable. Despite all the advantages of ETFs, it is still important to note that not all ETFs are exactly alike or equally beneficial to an investor. Betterment’s investment selection process seeks to select ETFs that provide exposure to the desired asset classes. For certain asset classes where markets are more efficient, we seek to achieve these asset class exposures through passively managed ETFs due to its cost-effectiveness. Alternatively, where Betterment utilizes active management, we conduct rigorous analysis and due diligence to best understand the trade-off of benchmark deviation for potential performance benefit. The cornerstone of Betterment’s approach to investment selection is our “Cost of Ownership” or CO, allowing us to effectively rank and select ETFs based upon their fees to hold and cost to trade. 2. Cost of Ownership (CO) The Cost of Ownership (“CO”) is Betterment’s fund scoring method, used to rate funds for inclusion in the Betterment portfolio. CO takes into account an ETF’s transactional costs as well as costs associated with holding funds. In addition to CO, Betterment also considers certain other qualitative factors of ETFs, particularly when Betterment considers the use of actively-managed funds. Qualitative factors may include, but are not limited to whether the ETF fulfills a desired portfolio mandate and/or exposure and due diligence interviews with portfolio management teams. CO is determined by two components, a fund’s cost-to-trade and cost-to-hold. The first, cost-to-trade, represents the cost associated with trading in and out of funds during the course of regular investing activities, such as rebalancing, cash inflows or withdrawals, and tax loss harvesting. Betterment defines the the cost-to-trade as the bid-ask spread, or the difference between the price at which you can buy a security and the price at which you can sell the same security at any given time. The second component, cost-to-hold, is represented by the ETF’s expense ratio, or the fund expenses imposed by an ETF administrator. Let’s review the specific inputs to each component in more detail: Cost-to-Trade: Bid-Ask spread Bid-Ask spread: Generally market transactions are associated with two prices: the price at which people are willing to sell a security, and the price others are willing to pay to buy it. The difference between these two numbers is known as the bid-ask spread, and can be expressed in currency or percentage terms. For example, a trader may be happy to sell a share at $100.02, but only wishes to buy it at $99.98. The bid-ask currency spread here is $.04, which coincidentally also represents a bid-ask percentage of 0.04%. In this example, if you were to buy a share, and immediately sell it, you’d end up with 0.04% less due to the spread. This is how traders and market makers make money—by providing liquid access to markets for small margins. Generally, heavily-traded securities with more competitive counterparties willing to transact will carry lower bid-ask spreads. Unlike the expense ratio, the degree to which you care about bid-ask spread likely depends on how actively you trade. Buy-and-hold investors typically care about it less compared to active traders, because they will accrue significantly fewer transactions over their intended investment horizons. Minimizing these costs is beneficial to building an efficient portfolio which is why Betterment attempts to select ETFs with narrower bid-ask spreads. Cost-to-Hold: Expense ratio Expense ratio: An expense ratio is the set percentage of the price of a single share paid by shareholders to the fund administrators every year. ETFs often collect these fees from the dividends passed through from the underlying assets to holders of the security, which result in lower total returns to shareholders. Finding cost of ownership We calculate CO as the sum of the above components: CO = "Cost-to-Trade" + "Cost-to-Hold" Where Cost-to-trade = 0.5 * bid-ask spread As mentioned above, cost-to-trade estimates the costs associated with buying and selling funds in the open market. This amount is weighted to appropriately represent the aggregate investing activities of the average Betterment client in terms of cash flows, rebalances, and tax loss harvests. Additionally, we utilize ½ of the bid-ask spread in our calculations as this mid-point is generally what customers realize in terms of trade costs. The cost-to-hold represents our expectations of the annual costs an investor will incur from owning a fund as defined by the fund’s expense ratio In many cases, cost-to-hold, which includes an ETF’s expense ratio, will be the dominant factor in the total cost calculations. Of course, one can’t hold a security without first purchasing it, so we must also account for transaction costs, which we accomplish with our cost-to-trade component. 3. Minimizing market impact Market impact, or the change in price caused by an investor buying or selling a fund, is incorporated into Betterment’s total cost number through the cost-to-trade component. This is specifically through the interaction of bid-ask spreads. However, we do review and monitor other trading-related metrics not represented specifically in the CO calculation when evaluating our universe of investable funds. Additional metrics include whether the ETF has relatively high levels of existing assets under management and average daily traded volumes. This helps to ensure that Betterment’s trading activity and holdings will not dominate the security’s natural market efficiency, which could either drive the price of the ETF up or down when trading. ETFs without an appropriate level of assets or daily trade volume might lead to a situation where Betterment’s activity on behalf of clients moves the existing market for the security. In an attempt to avoid potentially negative effects upon our investors, we generally do not consider ETFs with smaller asset bases and limited trading activity unless some other extenuating factor is present. 4. Actively-managed investments Compared to passive investments which track a broad-market index, actively-managed ones seek to outperform their benchmark index by selecting and weighting securities based on a fundamental company research or market outlook. Betterment believes that certain markets may favor active management, and therefore, are less efficient than others, resulting in an opportunity where value may be added through actively-managed investments Given this, Betterment believes that a rigorous due diligence process can help identify favorable active managers who have developed a time-tested research-driven investment process. Additionally, while active management may have the potential to add return potential, Betterment continues to hold true to its Core portfolio construction philosophy, prioritizing cost-efficiency. This results in the continued evaluation of any actively-managed investment strategies we utilize with their ability to beat the benchmark vs. their, typically, higher expense ratio. Conclusion As with any investment, ETFs are subject to market risk, including the possible loss of principal. The value of any portfolio will fluctuate with the value of the underlying securities. ETFs may trade for less than their net asset value (NAV). There is always a risk that an ETF will not meet its stated objective on any given trading day. Betterment reviews its investment selection analysis on a periodic basis to assess: the validity of existing selections, potential changes by fund administrators (raising or lowering expense ratios), and changes in specific ETF market factors,including tighter bid-ask spreads). Additionally, Betterment undertakes qualitative due diligence to enhance our selection process for actively-managed investments. Finally, at the core of our portfolio construction process, we are constantly considering the tax implications of portfolio selection changes and estimates the net benefit of transitioning between investment vehicles for our clients.

Sizing up your options for saving while self-employed

Sizing up your options for saving while self-employed Mar 10, 2025 9:50:21 AM Both solo 401(k)s and SEP IRAs offer high contribution limits, but which one is right for you? Self-employed workers wear many hats. Accounting, admin, you name it. And that doesn't even include saving for retirement. Depending on your income, you may still have access to the tax benefits of an IRA, but some folks quickly run up against its $7,000 contribution limit. They may want (or need) to save more. So what's a gig worker, small-business owner, or solo practitioner to do? Luckily, two accounts offer up to 10x the capacity for tax-advantaged investing: the solo 401(k), and the SEP IRA. In general, SEPs tend to be better for business owners planning to hire employees in the future. Solos, meanwhile, often make sense for self-employed individuals without employees other than a spouse. But the best fit for you will depend on your business model, income level, and financial goals. So to help you make a pick, let’s compare these accounts across three categories: High contribution limits Easy admin Flexibility (Roth access and small-business growth) High contribution limits You can contribute roughly the same (upwards of $70,000) to each account type annually, but solos have a slight edge in two cases: Case #1: You're over the age of 50 and playing catch-up. In this case, a solo 401(k) offers additional catch-up contributions of $7,500 each year, or $11,250 for those between the ages of 60 and 63. Case #2: Say you're a super saver, someone whose saving rate is well above the standard advice of 10-15%, but you earn less than $280,000. You'll be able to save more in a solo in this scenario, because not only can you contribute up to 25% of your income as an employer (the same as a SEP), solo 401(k)s allow you to contribute up to $23,500 as an employee as well. Advantage: solo 401(k) Easy admin Simply put, a solo 401(k) takes more work to set up, and unlike a SEP IRA, it requires annual reporting once its balance exceeds $250,000. But there's a big caveat here. If you have a trusted advisor—and a truly modern solo 401(k) offering like our own—they can handle the heavy lifting of setting one up and keeping it compliant year-in and year-out. That's in large part why we offer solo 401(k)s as an exclusive Betterment Premium offering. Premium puts a team of advisors in your corner, experts who can not only assist with all things solos, but help you make the decision of whether to open one in the first place. If you decide a Betterment solo 401(k) is right for you, a paperless and pleasant experience awaits. Advantage: Tie Flexibility Both SEPs and solos offer flexibility, but in different ways. A solo 401(k), for example, allows for Roth (aka after-tax) and/or traditional contributions. But depending on your business goals, the ability to scale your business and keep saving may be the most important type of flexibility for you. In general, SEPs allow you to quickly shift from a solo practitioner to an employer who contributes to employees’ SEP IRAs on their behalf. The only catch is you must contribute the same amount to their SEPs as you do yours. With Betterment’s solo 401(k), however, our advisors can transition the plan to a group 401(k) should you hire employees beyond your spouse. A group 401(k) requires more work to administer, but offers more flexibility than a SEP in how you structure contributions for you and your employees. Advantage: Tie So which account is right for you? The good news is both SEP IRAs and solo 401(k)s offer excellent tax advantages that can help you reach retirement quicker. We offer both at Betterment, and make it easy to open either one. Because when you’re self-employed, you’re busy running your business. Optimizing your retirement savings? Consider that one less hat for your wardrobe.