Acorns Later is a retirement account from Acorns. The managed account encourages you to invest on a regular basis while Acorns takes care of the heavy lifting of figuring out how exactly to invest your funds.
Getting started requires a brief survey asking about your investment goals and a $5 minimum deposit. From there, Acorns will choose the best type of IRA for your needs and build you a low-cost portfolio based on your answers.
If that sounds interesting to you, read more to find out how it works and if it may be a good fit for your retirement investing needs.
How Acorns Later works
Acorns Later helps you open and maintain an Individual Retirement Account (IRA) to save and invest for your future. Joining Acorns Later requires you to also have a standard Acorns account. More on the pricing of these accounts in a later section.
If you already have a standard Acorns Invest account, adding an IRA is very quick and easy. If you don’t, signing up takes less than five minutes in my experience.
In the signup process for Acorns Later, you will answer a series of questions about your age, target retirement age, investing experience, risk tolerance, and other details about your money and retirement goals.
You will create a traditional IRA, Roth IRA, or SEP IRA at the end of the signup process. Acorns will help you pick the right one based on your situation.
You can start with as little as $5 in Acorns Later. As you add funds to your account, Acorns will allocate that money to an ideal portfolio based on your goals and needs.
This is similar to what you get from most popular robo-adviser or managed portfolio products, but with Acorns Later it’s all handled in the Acorns app. This makes Acorns particularly popular with millennials and people who are tech-savvy and see their phone as the main place to manage their money.
Acorns uses low-cost funds to create fairly conservative portfolios for Acorns Later users. That means your portfolio will probably grow less than the market during good times but fall less than the market during bad times.
I personally found Acorns Later to be too conservative for my taste, but it’s a good arrangement for people who get that icky roller coaster feeling in their stomach if their portfolio takes a big drop.
Acorns makes it fun to contribute and invest
Acorns and Acorns Later use innovative contribution methods to help you fund and grow your account. With a regular Acorns Invest account, you can round-up spare change and shop through partners for “found money” to fund your account.
With Acorns Later, your contributions are limited to the more traditional one-time and recurring contributions. You can make a one-time contribution at any time. Recurring contributions allow daily, weekly, and monthly schedules.
Remember that traditional and Roth IRA accounts limit you to investing a certain amount each year. For 2020, the limit is $6,000 for most people ($7,000 if you are 50 or older). Some other limits may apply based on your annual income. SEP IRAs, which are for self-employed workers, have higher limits.
What Acorns Later costs
Like other robo-advisers and managed portfolios, Acorns Later charges a fee to manage your money. Acorns has three plans, two of which include Acorns Later.
The lowest cost you’ll get with Acorns Later is $2 per month, which also includes the basic Acorns account.
While $2 per month doesn’t sound like a lot, it is a huge amount on smaller portfolios. Most investment platforms charge based on a percentage of your total portfolio size, if they charge at all. For small accounts, $2 per month is a lot.
For example, if you have a $100 balance, your fees of $24 per year would wipe out almost a quarter of your account value (between both Acorns and Acorns Later fees). If you are adding $5 per month, 20% of your contributions are going to fees.
So while it’s “just” $2 per month for Acorns and Acorns Later, that can be a big percentage of your investments. While $24 per year isn’t a huge cost for professional investment management, it is a huge cost for people just starting out or with a lower balance. Prices change if you have at least $1 million invested, but that’s not most people.
Is Acorns Later right for you?
I didn’t find it to be ideal for my own needs, as I’m comfortable picking my own investments and didn’t find $2 per month worth it. But for someone who doesn’t feel ready to pick their own investment funds, it could be a good choice.
If you are not investing at all for retirement and Acorns Later sounds like a fun way to get started, it could be a great fit.
Sign up for Acorns today and add an Acorns Later retirement account »