As economies continue to grow, investors face new financial challenges every day, from managing complex taxes to compounding rates, requiring smarter strategies. Evolving compliance requirements and supporting larger investments amid shifting market conditions can exhaust small investors very quickly. Given this conundrum, tasks like portfolio management, tax calculations, and financial management can often exceed the limitations of an individual. Modern financial solutions address these challenges by offering tools that automate and simplify investment and financial holding.
Among them, Acorns and Betterment are two prominent platforms designed to streamline and centralize key financial features, but which solution offers the best fit for your needs? Find the answer in our comprehensive Acorns vs Betterment guide, which examines how each supports investors in achieving their long-term financial goals.
Acorns Vs Betterment: At A Glance
Feature
Acorns
Betterment
Automated Investment
Smart account automatically invests a portion of every income
Automated investing powered by human expertise
Retirement Planning
‘Acorns Later’ automatically invests for retirement and tax benefits
Automated retirement investing with a bird’s-eye view
Accounts Management
Integrated account management with automated investing in banking, custodial, and retirement accounts
Unified account management, with automated Investing, high-yield cash, and crypto
Tax Benefits
Potential Tax benefits through ‘Acorns Later’ accounts
Special tax breaks via IRA, to grow and compound money faster
What is Acorns?
Acorns is a leading financial wellness platform that helps individuals automatically save and invest through its integrated array of financial products. The platform simplifies micro-investing by automatically rounding up everyday purchases to the nearest dollar and investing the spare change into diversified Exchange Traded Fund (ETF) portfolios.
The solution also comes with a complete financial system, including Acorns checking accounts issued by Lincoln Savings or nbkc bank for smart spending. It also offers ‘Acorns Later’ for automated retirement planning, and ‘Acorns Earn’ for bonus investments when shopping with partner brands.
Unique Features Of Acorn
Round-Ups Investments: This is a signature feature that automatically invests in spare change from everyday spending and budgeting. By linking your debit and credit cards, the platform rounds up your purchases to the nearest dollar and automatically invests the difference into your diversified ‘Acorns Invest’ portfolio.
Acorns Later: It is a dedicated retirement savings tool that helps you easily open and contribute to an Individual Retirement Account (IRA). The platform recommends the right type of IRA (traditional, Roth, or SEP) based on your financial goals and allows you to set up automatic recurring contributions to consistently save for the future.
Acorns Earn: This feature allows users to receive bonus investments when they shop. By making purchases with thousands of top partner brands through the Acorns app or browser extension, the brand automatically contributes a percentage of your purchase back into your Acorns Invest account.
Pros And Cons Of Acorn
Pros:
User-friendly app simplifies investing and savings.
The withdrawal process is easy, simple, and efficient.
The promotional bonus aspect offers better opportunities to increase the initial investment.
Cons:
Emergency fund opening can have a complicated verification process.
Changes to banking account information can lead to challenges in verification.
What Is Betterment?
Betterment is an investment management platform that deals with long-term investing through financial automation and offers personalized spending advice. Its main features involve creating and managing expert-built, globally diversified portfolios with a wide range of ETFs, tailored to an individual's specific financial goals and ability to tolerate risk.
The solution also provides a complete suite of financial tools, including high-yield cash accounts, automated retirement planning with various IRA options, and access to certified financial experts.
Unique Features Of Betterment
Goal-Based Investing: The platform offers users the ability to invest in specific life goals. These goals can be individual retirement plans, a down payment on a house, or a child's education. For each goal, Betterment provides a personalized investment plan that comes with automated deposits and clear projections to show users where they stand.
Portfolio Rebalancing: This is a core automation feature that helps keep your investments on track without manual effort. When market fluctuations cause your portfolio's asset allocation to drift from its target, Betterment automatically buys or sells investments to return it to the desired balance, a key discipline for long-term investing.
High-Yield Cash Reserve: Betterment has a high-yield cash account feature designed to earn a competitive variable interest rate on money set aside for short-term goals or as an emergency fund. The account has no fees on your balance, is separate from your investment portfolios, and offers insurance up to $2 million through their partner banks.
Pros And Cons Of Betterment
Pros:
Gives users the ability to link their bank account to the app to ascertain their net worth.
Offers a wide range of investment options with higher yields.
Simplifies the setup process of auto-payments in the account.
Cons:
Lacks the feature to generate custom investments.
Transferring money from an investment class into investment accounts can be complicated.
Acorn Vs Betterment: Key Features Comparison
Automated Investment
Acorns offers an automated investing solution through its aforementioned ‘Round-Ups’ feature. As the name implies, it automatically rounds up spare change from everyday expenses and invests the difference once the change balance reaches at least $5.
The platform allows recurring investments based on a daily, weekly, or monthly basis. Users can also make one-time deposits to grow their investment portfolios.
Acorns automatically balances investments and reinvests dividends to maintain long-term performance without requiring any manual effort. With assistance from Acorns’ financial experts, users can make custom portfolios that are based on their risk profiles and needs, ensuring a guided system suitable for new investors.
On the other hand, Betterment offers an automated investing platform that is focused on getting higher returns while reducing taxes. It automatically rebalances portfolios, reinvests dividends, and uses advanced features like tax-loss harvesting and tax-coordinated investing strategies to give users the best after-tax performance.
Betterment automation also has a goal-based investing function, which lets users set certain goals. These goals can be retirement, future purchases, or general wealth-building. The system manages their investment according to said goals.
Winner: Betterment is the winner in this category because it provides a larger range of automated investment solutions and adds rebalancing features that reduce errors that might come with manual work.
Retirement Planning
Acorns gives users a simple yet effective approach to retirement investing through Acorns Later, its built-in retirement product. The platform recommends the most suitable type of IRA, Traditional, Roth, or SEP, based on the users' financial profiles.
Through Acorns, users can make repeated contributions to their IRA accounts and take advantage of tax-deferred or tax-free growth based on the type of account they have. Acorns also offers ‘Acorns Early’, a money app and debit card for kids (aged 6-18) that teaches financial habits. It focuses on a simple and accessible system, with simpler retirement options.
Betterment offers more detailed retirement planning solutions, including IRAs, which can be traditional, Roth IRAs, or SEP IRAs, and 401K planning. It also comes with dynamic goal-based investment plans that can be tailored to retirement. The platform also offers tools that simulate retirement income, forecast portfolio growth, and allow users to plan safe withdrawal strategies designed to fit their age and lifestyle.
Betterment adjusts investment recommendations as users approach retirement, maintaining a balance between growth and spending. It also lowers taxes by placing assets strategically across taxable and tax-advantaged accounts to minimize the probability of taxes.
Winner: Betterment takes the lead in the retirement planning round, with its advanced goal-setting tools, income projections, and tax-smart optimization features.
Accounts Management
Acorns offers a comprehensive financial setup that brings together features like banking, saving, and investing in a single app. With the ‘Acorns Checking’ accounts, users receive a debit card connected to their checking account and can invest with every swipe.
As we know by now, the platform invests leftovers from purchases and gives users the chance to direct a portion of each paycheck into their investment accounts. There are no hidden fees or overdraft charges. The ability to link everyday spending with automated investing helps users build wealth passively through daily financial activity.
Betterment, on the other hand, provides high-yield cash accounts that are insured by the Federal Deposit Insurance Corporation (FDIC). These accounts come with lower interest rates, an auto-deposit feature, and integration with Betterment investment portfolios.
While it isn’t a traditional checking account, Betterment’s cash reserve account lets users move funds instantly into investments, giving them better liquidity without disturbing their investment goals. It also offers a ‘Betterment Checking’ account, complete with a debit card, no account fees, and global ATM reimbursements, expanding its cash management offerings for more flexibility.
Winner: Acorns wins this round with its unified “spend and invest” experience. Its integration between banking and investing makes financial management easier and guides users towards consistent saving behavior.
Tax Benefits
Acorns gives its users a streamlined approach to investment taxes, with portfolios built around inherently tax-efficient low-cost ETFs. The platform also automatically reinvests dividends into its user portfolio and provides users with annual tax documents, such as 1099 forms, on its dashboard for easy reporting.
Acorns does not, however, offer more advanced tax strategies like tax-loss harvesting or asset location optimization. Its simplicity makes it a more beginner-friendly option, but it may not be ideal for investors looking to minimize their taxes on a larger scale.
Betterment, alternatively, has developed extensive tax management tools that automatically implement tax-loss harvesting, as mentioned before. It also uses tax-coordinated portfolios that spread assets across different account types (taxable, traditional IRA, Roth IRA) for maximum efficiency.
The solution also provides detailed performance and tax reports, offering full transparency into realized gains, losses, and dividend income. These built-in tools help users keep more of their returns while maintaining compliance with tax laws.
Winner: Betterment clearly wins in the tax category with its advanced set of automated tax-loss harvesting, tax coordination, and in-depth reporting features.
Acorn Vs Betterment: Which Solution Offers the Best Pricing Options?
As financial software, both Acorn and Betterment offer pricing in variable modules. Acorn offers a more simplified pricing structure, with the following plans:
Acorns Bronze at $3/month
Acorns Silver at $6/month
Acorns Gold at $12/month
On the other hand, Betterment offers an amount-based payment structure charging $4/month for a balance of $0-$20,000 and a 0.25% annual fee for a balance of $20,000-$1,000,000. There is also a premium benefits option for a 0.65% advisory fee.
Disclaimer: The pricing is subject to change
Closing Thoughts: Which Solution Is A Better Option?
Investment and capital management always carry a great deal of risk. Both Betterment and Acorn stand out as considerable options for a financial platform, excelling in ways that cater to different kinds of financial needs. Betterment, the apparent winner of our comparison, excels in its advanced and dedicated high-yield cash reserve capabilities as well as powerful investment automations that ensure accuracy across financial transactions. The solution also supports advanced retirement planning by streamlining 401K and IRA features.
On the other hand, Acorns stands out for its ‘Round-Ups’ feature, a simple and easier-to-learn approach to investments, and easy-to-understand retirement plans that help users meet their financial needs with a less feature-heavy system.
Rather than a one-size-fits-all approach, both platforms offer different ways to automate investments and build wealth. Choosing between them depends on your specific financial needs, workflows, and goals to align with your future expectations.
