Planning

Debt doesn't have to keep you caged—here's how to save your way out Paying down debt and building your savings aren't mutually exclusive—here's a simple framework for juggling both at once. Key takeaways Getting your financial footing early in your career has never been easy, but today’s high-debt, low-hire job economy adds to the struggles. But you don't need to be debt-free before you start saving. They can run on parallel tracks. Some debt can sit on the backburner while you put your money to work elsewhere. It all hinges on how high of an interest rate a loan carries. Quick number crunching beats a high-maintenance budget. Size up your cash flow, then direct your discretionary spending with a few guiding principles. Between college, cars, and credit cards, debt is a simple fact of life for a lot of us, especially those early in their careers. But waiting until you’re debt-free to start saving means missing out on one of your biggest advantages as a saver: time. So let’s reset expectations. With a clearer picture of your cash flow, you can chip away at debt, find your financial footing, and start enjoying some meaningful financial freedoms all at the same time First: Figure out what you're working with Do you really need a budget? We’d say yes, but it doesn’t need to be a detailed spreadsheet or elaborate app. Crunch a few numbers, then get on with it. Because before you can decide where your money goes, you need to know how much you have to direct in the first place. Start with your take-home pay, what lands in your account after taxes. Then subtract bare necessities like: Housing — your total costs will vary depending on whether you rent or own Utilities — electricity, internet, phone, etc. Transportation — car payment, insurance, gas, or transit Groceries — actual at-home food spending, not delivery Health insurance — assuming you're not on a parent's plan What's left is your discretionary income. For a lot of people in their 20s, that number is smaller than they'd like. That's okay. Even a little is enough to get started. From there, split what's left into two buckets: Freedom fund — for saving, debt paydown, and building toward bigger goals (more on this below) Fun fund — for shame-free spending like going out, trips, whatever makes your life feel like your life If you have a decent chunk of discretionary spending to work with, a 50/50 split between these two buckets is a solid starting point. If things are tight, lean toward the freedom fund for now. This is your money's first real job—not just covering expenses, but starting to build something. Then: Build your freedom fund Financial freedom comes in many shapes and sizes, but the most impactful aren't always the most exciting. So when setting up your freedom fund, it’s often best to focus first on preventing backsliding. 1. Cover your minimum payments and capture any employer match Missing minimum debt payments can lead to late fees, credit score dings, and balances that quickly balloon—small problems that become expensive ones quickly. If your employer offers a 401(k) match, contribute enough to get it. That match is treated as part of your total compensation. Leaving it on the table is like giving yourself a pay cut. 2. Attack high-interest debt while building a starter emergency fund Not all debts are created equal. Those with higher interest rates—roughly 8% or higher based on the current rate environment and market forecasts—can snowball fast. So paying them down aggressively is often the higher-ROI move. Lower-interest debt, on the other hand, is less of an emergency. You don't need to pour every available dollar into paying it off. Steady, on-time payments can be enough while you work toward other goals. At the same time, consider building a small cash cushion as you go. Without one, a single surprise bill can send you right back to square one. Even $500 in a high-yield cash account makes a meaningful difference. Cash Reserve offered by Betterment LLC and requires a Betterment Securities brokerage account. Betterment is not a bank. FDIC insurance provided by Program Banks, subject to certain conditions. Learn more. 3. Start designing the life you want This is where the line between your freedom and fun funds starts to blur. You’ve laid the foundation with the previous two steps, now you can dream big with moves that make sense a few years out or beyond. Sometimes that’s a literal move—to your own place, or a new city—or stepping away from work for a while for your mental wellbeing. Eventually, it can mean working less for the money, and more for the meaning. Because as your nest egg grows, you may very well feel empowered to pass on jobs that don’t align with your values. Either way, these types of long-term goals are better-suited for low-cost, globally-diversified investing, and apps like Betterment make it easier than ever to get started. A good-enough system beats the perfect plan When you’re just starting out, you’re often working with less than you’d like. But you can still build momentum by starting small and staying consistent. You don't need to have it all figured out. You just need a clear enough picture of your cash flow and a few sensible priorities to work from. Cover your minimums. Build a small cushion. And put what's left to work. The rest will follow.

How to course correct when you simply can't stay the course De-risking during market volatility can be costly. Here’s how to do it without breaking the bank. The best course of action during market volatility is often inaction. That’s because selling riskier assets at a loss locks in those losses. It foregoes their potential for future growth, and it might also trigger capital gains taxes in the process. But if taking some sort of action feels necessary, then modestly reducing your overall risk exposure can be a reasonable alternative. Consider dialing down your existing stock allocation by a few percentage points, or lower the costs of recalibrating by using your future deposits instead. Either way, the solution may be the same: sprinkling in more bonds. Consider bonds to calm your investing nerves When people talk about diversification, equities like international stocks get most of the attention. But no less important in the role of managing risk are bonds. These are the loans given to governments and companies by investors, and while they're not completely risk-free (no asset is), the relatively-modest interest they tend to pay out can feel like a windfall when stock values are plunging. They won’t negate all of the volatility of stocks, but they can help smooth things out and preserve capital. This is why all of our recommended allocations include holding at least some bonds. You can easily dial the bond allocation up or down in our portfolios such as Core. And we also offer two portfolios comprised primarily of bonds, each one designed for a different use case: Target Income built with BlackRock, designed to help you limit market volatility, preserve wealth, and generate income. The Goldman Sachs Tax-Smart Bonds portfolio, designed for high-income individuals seeking a higher after-tax yield compared to a cash account. Don’t forget about the role of cash One of the best ways to mitigate your overall financial risk is by shoring up your emergency fund, which may include a high-yield cash account like our Cash Reserve. Imagine losing your income stream, and how much time you'd want to get back on your feet. A good place to start is 3-6 months' worth of your essential expenses, but your right amount is whatever helps you sleep more soundly at night. Cash Reserve offered by Betterment LLC and requires a Betterment Securities brokerage account. Betterment is not a bank. FDIC insurance provided by Program Banks, subject to certain conditions. Learn more. Steadying the ship during unsteady times As we mentioned up front, right-sizing your risk during downturns isn’t always cheap. But there are ways to minimize the costs. Lowering your risk profile incrementally is one of them, and stretching out your safety net is another. Either way, it’s okay to recalibrate your risk tolerance from time-to-time, and you can do it wisely with Betterment.

Free financial advice, for the busiest season of your life For households with $100k+ at Betterment, our advisory fee includes complimentary live chat with a licensed financial specialist. Key takeaways Mid-career comes with competing financial priorities, but you don't have to figure out the order alone. Households with $100k or more at Betterment unlock free access to live chat with a licensed financial specialist. Not AI, not a bot—a real person. Higher earners often leave money behind by staying in "default mode.” Use live chat to size up advanced strategies like asset location, backdoor Roth IRAs, and tax-loss harvesting. Transferring investments from outside Betterment can be a simple way to reach $100k and unlock live chat, while also bringing more of your financial life under one roof. If life is one long series of challenges, those in their 30s or 40s are somewhere in the messy middle of it all. Maybe you just bought a house, or you're trying to. Maybe there's a kid on the way, an expensive wedding behind you, and a college fund somewhere on the horizon. Your income is real now, your finances are getting complicated fast, and the old advice ("just max out your IRA") stopped covering it a while ago. The good news? You don't have to untangle everything by yourself. Households with $100k or more at Betterment now have free access to live chat with a licensed financial specialist—someone who can look at your specific situation and help you figure out what to do next. So let's set the table for your first conversation. Too many goals, not enough dollars? You’ve got a lot going on, so much that your cash flow can’t cover everything. Free live chat can help you quickly prioritize and start knocking out money goals. Because the sooner you start, the sooner you can start enjoying the financial freedom that comes with stacking milestones. Here’s a sampling of the life goals we can help you sort through: Buying a home. Whether you're ready to make an offer or still saving for a down payment, a home purchase reshapes your whole financial picture. A $100k Betterment balance not only lets you size up your strategy with the help of a specialist, it can score you a discounted rate on a mortgage. Building (or rebuilding) an emergency fund. Life has a way of getting expensive at the worst moments. Three to six months of accessible cash is the foundation everything else sits on. At the same time, it’s also possible to overdo it. So size up exactly how much cash you need to sleep better at night, and what to do with the rest. Saving for your kid's college. This one isn’t a pass-fail proposition. Saving even a little, especially while your kids are little, can lighten their financial load when college or trade school come knocking. The question is where to save, and how this goal fits against everything else you're juggling. Charitable giving. The great thing about building the foundation for long-term wealth is it empowers you to give with an abundance mindset. And by donating and replacing appreciated shares instead of dollars, you can effectively reset the tax bill on a slice of your taxable investing as an added bonus. Move beyond the basics of investing Once your finances mature a little, you hit a different category of question. Not "Am I saving?" but "Am I set up the right way?" This is where a lot of investors quietly wonder if they're missing something. And often, they are—not because they've done anything wrong, but because default settings don't always age well. A few advanced settings worth exploring include: Asset location (aka Tax Coordination). It's not just what you invest in, it's where you hold it. You may now have a mix of account types (tax-deferred, tax-exempt, and/or taxable), and strategically dividing up your portfolio between them can meaningfully reduce the potential tax drag on your returns over time. Backdoor Roth contributions. Make more money, and the tax benefits of a traditional IRA will quickly phase out. Make a little more, and the same goes for Roth IRAs. But there’s a perfectly legit workaround that high earners use to get money into a Roth anyway. It takes a couple of steps, so live chatting with our team (and a tax advisor) is highly recommended. Tax-loss harvesting. When your taxable investments dip below their initial purchase price, you can jump on the opportunity to “harvest” the theoretical loss and potentially snag similar benefits as tax-deferred accounts. None of these are hacks. They're just what a well-kept portfolio and automated investing can look like once you've moved past the basics. Help has entered the chat If your household has more than $100k at Betterment, you've reached the point where some money questions are worth asking out loud—and you can do exactly that, for free, with a licensed financial specialist via live chat. Not a chatbot. Not an FAQ page. A real human who can act as a sounding board, take a look at how you're set up, and tell you honestly whether anything deserves a second look. Think of it as a gut-check from someone who's seen a lot of portfolios. The kind of conversation where you can ask: Is a backdoor Roth right for me? How can I grow my charitable giving right along with my wealth? Does my particular mix of assets and accounts make sense? If you're already at $100k, you're already in—simply open a new support chat and select “Talk to a financial specialist.” And if you're not quite there, transferring existing investments from external accounts can be a straightforward way to get there. It can mean bringing more of your financial life under one roof, with the fuller picture in view. So consider transferring your investments to Betterment, and get a second set of eyes for your nest egg.

Traditional vs. Roth: Should you take your tax break now, or later? Picking up where the standard guidance leaves off There can be endless decisions to make when investing. Chief among them: Whether to save for retirement through a traditional IRA and/or 401(k), or the Roth variety. With traditional accounts, you typically invest with pre-tax money, then pay taxes on withdrawals later in retirement. This lowers your taxes today and frees up more money to invest. With Roth accounts, you contribute money that's already been taxed, then enjoy tax-free withdrawals once you turn 59½, with no required minimum distributions. When it comes to which is better, here’s the advice you’ll often hear: Traditionals make more sense if your current tax bracket is higher than where you expect it to be in retirement. And vice versa with Roths. It's a start, but not always helpful in practice. Tax brackets can be confusing, for one, and nobody knows what they'll look like decades from now. People's incomes also ebb and flow with age, as do their tax brackets. Luckily, data from the U.S. Bureau of Labor Statistics can help us eyeball these shifts and plot out when each account type tends to shine brightest. The upward and downward slopes of spending When we look at American's average spending by age, we see it often peaks in middle age and declines as we approach our traditional retirement years. Connecting the dots, this means that traditional contributions often make more sense during the middle portion of workers’ careers. They’re likely earning and paying more in taxes than they will in retirement, so it makes sense to shift some of that tax obligation to a lower bracket down the road. For those with lower incomes, pairing those tax-deductible deposits with the standard deduction can also help squeeze more of their taxable income into the 12% tax bracket. The next bracket takes a big step up to 22%. As one’s income rises, however, another wrinkle may come into play. The IRA income limit exception If your income grows to a certain point (see the table below), you’ll face one of those so-called “champagne problems”: the tax deductions of a traditional IRA will begin to phase out, meaning it’s Roth or nothing if you want at least a partial tax break. Earn even more, and your Roth access will eventually dry up too, although there’s a handy “backdoor” option that’s worth checking out. A 401(k), as a side note, has no income restrictions for either contribution type. 2026 IRA income limits Traditional IRA* Modified Adjusted Gross Income (MAGI) Roth IRA Modified Adjusted Gross Income (MAGI) Full tax deduction $0-$81,000 (single filers) Full contribution $0-$153,000 (single filers) $0-$129,000 (married filing jointly) $0-$241,999 (married filing jointly) Partial tax deduction $81,001-$90,999 (single filers) Partial contribution $153,001-$167,999 (single filers) $129,001-$148,999 (married filing jointly) $242,000-$251,999 (married filing jointly) No tax deduction** $91,000 and up (single filers) No contribution $168,000 and up (single filers) $149,000 and up (married filing jointly) $252,000 and up (married filing jointly) *If covered by a retirement plan at work **Anyone is eligible to make non-deductible contributions to a traditional IRA See the income limits for more tax filing statuses Source: IRS This is why blanket statements like “Roths are better” don’t hold much water. The decision boils down to your personal income situation, and that’s subject to change. With Betterment, however, our Forecaster tool does much of the work for you. Simply scroll down to its “How to save” section, and we’ll use your self-reported financial information to suggest not only the optimal order of retirement account types, but whether traditional or Roth contributions make more sense based on your projected future tax bracket. Just be sure to update your info as needed (raises, marital status, etc.) for the most accurate estimates. Now or later? Now that’s one less call to make The traditional vs Roth debate will likely rage on for years. But between content like this, and tools like Forecaster, we do our best to help you quickly clear this common investing hurdle. If your income is trending anything like the averages above, traditional deposits may make more sense, but the advantage will be slight, and it never hurts to hedge. Having both Roth and traditional funds gives you more flexibility when managing your income in retirement. Plus, you can spend less time stressing over the two, and more time building momentum toward your goal. Cash Reserve offered by Betterment LLC and requires a Betterment Securities brokerage account. Betterment is not a bank. FDIC insurance provided by Program Banks, subject to certain conditions. Learn more.

How to leverage your taxable investments into lending Examining the pros and cons of the Securities-Backed Line of Credit (SBLOC) Securities-Backed Lines of Credit (SBLOCs) are offered by The Bancorp Bank, N.A., Member FDIC, to Betterment clients. Betterment is not a bank. See more in disclosures. Sometimes in life, despite your best-laid plans, you need quick access to cash. Say you bought a new home and need to bridge the gap until you sell your old one. Or a smart business opportunity presents itself. If you have a sizable amount of investments in taxable accounts, you can leverage them into a Securities-Backed Line of Credit (SBLOC), a little-known but increasingly-available form of short-term lending. Unlike many conventional loans, SBLOCs typically provide access to the line quickly after approval. And crucially, they keep your assets invested and avoid triggering capital gains taxes. If the market drops, that means you avoid locking in those losses. And if the market goes up, that growth can help offset some of your lending costs. Plenty more details exist for this type of borrowing, so keep reading to learn more. The basics of SBLOC borrowing SBLOCs are revolving lines of credit you can use over and over again, as opposed to the one-time nature of many loans. Many lenders require at least six-figures’ worth of taxable investments to qualify for one, with credit limits often falling somewhere between 50% and 95% of the investments’ value depending on how risky they are. Betterment SBLOC powered by The Bancorp Minimum assets needed Approx. $150k in taxable assets or less, depending on their risk profile Maximum credit/loan available Approx. 50-95% of taxable assets, depending on their risk profile Interest rate Variable rate3 based on assets committed Repayment options Flexible As mentioned above, one of the key benefits of SBLOCs is that your taxable assets stay invested, giving them the chance to grow. SBLOCs are also more multi-purpose than many loans, with one notable exception being that you can’t use them to buy more securities or to fund margin loans. In addition to versatility, they tend to offer competitive interest rates lower than that of a personal loan or credit card. Our SBLOC offering, which is powered by our banking partner The Bancorp, has a variable interest rate that’s tied to The Wall Street Journal prime rate and discounted based on the amount of taxable assets committed4. Short-term lending does come with risks, however, and speaking with an advisor can help you weigh those risks relative to your specific situation. That’s in large part why at Betterment, an SBLOC is offered through our Premium tier, which gives you unlimited access to our team of advisors. When (and how) the bill comes due SBLOCs offer relatively flexible payback terms, with many only requiring monthly interest payments and some (like The Bancorp’s) with an option to add the interest to the loan balance instead of paying it right away. This is known as “capitalizing” the interest. Bear in mind that if the value of your investments drops enough, your lender may make what’s called a “maintenance call” and require you to reallocate your portfolio to obtain a higher borrowing power, provide additional collateral or sell some of your assets and pay any applicable capital gains tax1. The bottom line of borrowing this way If you’re looking for quick access to capital without disrupting your investment strategy, then an SBLOC may be right for you. And if you do come to that conclusion, then we and our trusted banking partner, The Bancorp, are here to help. They were the first bank to offer SBLOCs to independent advisors in 2004, broadening access to this type of borrowing. And their simple application process can generally provide a quick turnaround, helping fund today’s plans without touching tomorrow’s dreams.

How to plan for retirement It depends on the lifestyle you want, the investment accounts available, and the income you expect to receive. Most people want to retire some day. But retirement planning looks a little different for everyone. There’s more than one way to get there. And some people want to live more extravagantly—or frugally—than others. Your retirement plan should be based on the life you want to live and the financial options you have available. And the sooner you sort out the details, the better. Even if retirement seems far away, working out the details now will set you up to retire when and how you want to. In this guide, we’ll cover: How much you should save for retirement Choosing retirement accounts Supplemental income to consider Self-employed retirement options How much should you save for retirement? How much you need to save ultimately depends on what you want retirement to look like. Some people see themselves traveling the world when they retire. Or living closer to their families. Maybe there’s a hobby you’ve wished you could spend more time and money on. Perhaps for you, retirement looks like the life you have now—just without the job. For many people, that’s a good place to start. Take the amount you spend right now and ask yourself: do you want to spend more or less than that each year of retirement? How long do you want your money to last? Answering these questions will give you a target amount you’ll need to reach and help you think about managing your income in retirement. Don’t forget to think about where you’ll want to live, too. Cost of living varies widely, and it has a big effect on how long your money will last. Move somewhere with a lower cost of living, and you need less to retire. Want to live it up in New York City, Seattle, or San Francisco? Plan to save significantly more. And finally: when do you want to retire? This will give you a target date to save it by (in investing, that’s called a time horizon). It’ll also inform how much you need to retire. Retiring early reduces your time horizon, and increases the number of expected years you need to save for. Choosing retirement accounts Once you know how much you need to save, it’s time to think about where that money will go. Earning interest and taking advantage of tax benefits can help you reach your goal faster, and that’s why choosing the right investment accounts is a key part of retirement planning. While there are many kinds of investment accounts in general, people usually use five main types to save for retirement: Traditional 401(k) Roth 401(k) Traditional IRA (Individual Retirement Account) Roth IRA (Individual Retirement Account) Health Savings Account (HSA) Traditional 401(k) A Traditional 401(k) is an employer-sponsored retirement plan. These have two valuable advantages: Your employer may match a percentage of your contributions Your contributions are tax deductible You can only invest in a 401(k) if your employer offers one. If they do, and they match a percentage of your contributions, this is almost always an account you’ll want to take advantage of. The contribution match is free money. You don’t want to leave that on the table. And since your contributions are tax deductible, you’ll pay less income tax while you’re saving for retirement. Roth 401(k) A Roth 401(k) works just like a Traditional one, but with one key difference: the tax advantages come later. You make contributions, your employer (sometimes) matches a percentage of them, and you pay taxes like normal. But when you withdraw your funds during retirement, you don’t pay taxes. This means any interest you earned on your account is tax-free. With both Roth and Traditional 401(k)s, you can contribute a maximum of $24,500 in 2026, or $32,500 if you’re age 50 or over. Traditional IRA (Individual Retirement Account) As with a 401(k), an IRA gives you tax advantages. Depending on your income, contributions may lower your pre-tax income, so you pay less income tax leading up to retirement. The biggest difference? Your employer doesn’t match your contributions. The annual contribution limits are also significantly lower: just $7,500 for 2026, or $8,600 if you’re age 50 or over. Roth IRA (Individual Retirement Account) A Roth IRA works similarly, but as with a Roth 401(k), the tax benefits come when you retire. Your contributions still count toward your taxable income right now, but when you withdraw in retirement, all your interest is tax-free. So, should you use a Roth or Traditional account? One option is to use both Traditional and Roth accounts for tax diversification during retirement. Another strategy is to compare your current tax bracket to your expected tax bracket during retirement, and try to optimize around that. Also keep in mind that your income may fluctuate throughout your career. So you may choose to do Roth now, but after a significant promotion you might switch to Traditional. Health Savings Account (HSA) An HSA is another solid choice. Contributions to an HSA are tax deductible, and if you use the funds on medical expenses, your distributions are tax-free. After age 65, you can withdraw your funds just like a traditional 401(k) or IRA, even for non-medical expenses. You can only contribute to a Health Savings Accounts if you’re enrolled in a high-deductible health plan (HDHP). In 2026, you can contribute up to $4,400 to an HSA if your HDHP covers only you, and up to $8,750 if your HDHP covers your family. What other income can you expect? Put enough into a retirement account, and your distributions will likely cover your expenses during retirement. But if you can count on other sources of income, you may not need to save as much. For many people, a common source of income during retirement is social security. As long as you or your spouse have made enough social security contributions throughout your career, you should receive social security benefits. Retire a little early, and you’ll still get some benefits (but it may be less). This can amount to thousands of dollars per month. You can estimate the benefits you’ll receive using the Social Security Administration’s Retirement Estimator. Retirement accounts for the self-employed Self-employed people have a few additional options to consider. One Participant 401(k) Plan or Solo 401(k) A Solo 401(k) is similar to a regular 401(k). However, with a Solo 401(k), you’re both the employer and the employee. You can combine the employee contribution limit and the employer contribution limit. As long as you don’t have any employees and you’re your own company, this is a pretty solid option. However, a Solo 401(k) typically requires more advance planning and ongoing paperwork than other account types. If your circumstances change, you may be able to roll over your Solo 401(k) plan or consolidate your IRAs into a more appropriate retirement savings account. Simplified Employee Pension (SEP IRA) With a SEP IRA, the business sets up an IRA for each employee. Only the employer can contribute, and the contribution rate must be the same for each qualifying employee. Savings Incentive Match Plan for Employees (SIMPLE IRA) A SIMPLE IRA is ideal for small business owners who have 100 employees or less. Both the employer and the employee can contribute. You can also contribute to a Traditional IRA or Roth IRA—although how much you can contribute depends on how much you’ve put into other retirement accounts.