Katherine Boehret

Taking the Guesswork Out of Retirement Saving

How often do you tinker with your retirement savings? Many people think about this when starting a job or opening a 401(k), but sometimes not again until they are ready to retire. According to financial advisers, that’s too late.

This week, I forced myself to look at accounts I rarely monitor as I tested FutureAdvisor.com, a website founded by two former Microsoft engineers who are also a registered investment adviser and chartered financial analyst, respectively. They wanted to create an easy way for people to manage their retirement savings, primarily using index funds, and they based the site’s suggestions on what they consider to be the best practices in the industry and in academia.

FutureAdvisor, which has no ads, bills itself as a free alternative to paying a lot for financial advice from professionals, who often charge a 1% annual fee or work on commission. Many big investment firms offer retirement-savings services, but these generally don’t offer step-by-step advice for an investor’s complete portfolio. FutureAdvisor expects to make money when it introduces later this year an optional premium service, which will charge an annual fee of less than 0.25% of your assets to rebalance and maintain your portfolio, automatically. It says suggestions offered on the site are made solely on merit, with no kickbacks or commissions to FutureAdvisor.

The site differs from budgeting sites like Mint.com that don’t specialize in retirement savings. Instead, Mint makes money through recommendations for users, like which credit cards carry lower fees.


FutureAdvisor accesses data from your existing retirement savings and shows recommended options according to conservative, moderate or aggressive plans. An overall analysis, pictured, illustrates how you’re progressing on the goal to retirement.

I’m not a financial expert; rather, I looked at FutureAdvisor through the lens of an average person who might want to use the site. Its investment philosophy may not be right for everybody.

FutureAdvisor is easy to use and walks users through a set of simple steps. There’s no asset minimum to use the site, though people who are already in retirement can’t use it. Pop-up explanations and options to submit questions to the site’s CEO and co-founder, a registered investment adviser, are available as you go.

For security purposes, FutureAdvisor uses bank-level, 128-bit SSL (Secure Socket Layer) encryption for all communications. It can’t move money or make transactions; instead, people do this by clicking on links that send them to their financial institutions where they may pay a fee for certain transactions. Login information is never stored on the website; rather, it’s handled by partner company Yodlee.

To get started with FutureAdvisor, I entered my email and a password to create an account and then answered questions about myself. These included birthday, current annual income, desired retirement age, desired retirement income, age when I started consistently saving for retirement, approximate value of my retirement investments and marital status. Thankfully, messages that say, “What is this?” appear beside each question, explaining why it’s asked.

Next, you enter the names of brokerage firms that handle your accounts, like Fidelity for a 401(k) or T. Rowe Price for a Roth IRA. If you don’t already have online accounts with each of these firms, you must set up accounts on their websites so you can return to FutureAdvisor, enter your username and password and access your data.

FutureAdvisor recognized a lot of different brokerage firms that I searched for, and this week it added Thrift Savings Plans, or TSPs, which are used by government employees, including military personnel. If a brokerage firm isn’t on the site, you can suggest it in a feedback box. I did this, and my requested firm was added within hours.

When personal questions are answered and brokerage-firm information is retrieved, FutureAdvisor asks you to choose a conservative, moderate or aggressive approach with explanations of each. I chose an aggressive option because of my relatively young age. Various charts filled the screen showing recommendations for my stock/bond split, equity style, diversification split and glide style. Terms like this may lose average users, but brief explanations beside them helped, and I read a References and Citations pop-up menu filled with sources from which the advice was generated.

The most helpful section of the site showed recommendations for my portfolio.

A checklist showed where my money was or wasn’t allocated, and how my portfolio stacked up to what FutureAdvisor recommended. Items included “Have the right exposure to U.S. domestic stock” and “Have the right exposure to REITs (real-estate investment trusts).”

In some cases, the recommendation was to not change anything. I could click on “Go to brokerage” to follow FutureAdvisor’s suggested steps on a brokerage firm’s website. FutureAdvisor says it uses a mathematical optimization algorithm to apply modern portfolio theory principles to each person’s portfolio.

If nothing else, FutureAdvisor provides options, so your retirement savings doesn’t seem untouchable. You may need to brush up on terms like REITs and domestic small cap, but the site is filled with study materials.

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