New retirement savings tool unveiled

Give a computer access to your bank account – then let it invest your money before you spend it.
That’s the financially savvy premise behind a new retirement savings tool unveiled Tuesday by Betterment, the New York City tech company that has automated many investing functions.  
Betterment says SmartDeposit, which links to a person’s bank account, monitors the balance and automatically shifts money into an investment account. Each user manually sets both the threshold when the system is permitted to withdraw and how much. The computer ultimately makes the transfer on its own – and, ideally, repeatedly.
"With SmartDeposit, we enable customers to reach their financial goals without worrying or thinking about their finances,” said Dan Egan, Director of Behavioral Finance and Investing at Betterment.
The money winds up in investment funds comprised of mainstream stock and bond holdings – giving idle cash an opportunity to grow.
Betterment has made waves – and a business – automating the process of helping everyday investors pick the right stocks and bonds for their nest egg. The firm has built Wall Street grade algorithms in the background, yet given Main Street a simple website that drives their investments based on their profile. Betterment has also undercut the fees that traditional brokers charge and attracted 98,000 customers, according to the company.
SmartDeposit represents an expressway to get idle cash to the markets. But might it be too fast?
We wondered about the possibility of overdrafts and bounced checks when a computer is in charge. Egan said the robots aren’t actually in charge – users are.
He reassured us the system is designed to prevent overdrafts, beginning with the user’s customization. In addition those thresholds, Egan explained that SmartDeposit sends an alert 36 hours <i>before</i> a scheduled withdrawal takes place. Egan said one click will cancel a pending transfer – a function that can even be performed on a smartphone app.
“It is extremely easy for you to decide exactly how, where, and why you want to use SmartDeposit,” Egan said. “You can go directly in on your phone and say, ‘I’m going to take a vacation from SmartDeposit. I know I’m going to have a big [spending] couple of weeks; I’m on vacation – don't take it out,’” he explained.
Egan said most consumers are apathetic in talking about and taking action on the growing need to save money for retirement. SmartDeposit isn’t designed to remedy that frustrating interest gap; it’s intended to outsource the obligation.
“This is going to help a lot of people basically get very comfortable with investing on a regular basis without having to set up a budget and that exact issue is the key thing,” he said. “I think people would rather go to the dentist than set up their own budget, and here’s a way of saving regularly without even having to do that.”