Acorns lets you invest spare change. Can Acorns Later help you retire?



Myles Ma

Myles Ma

Senior Managing Editor

Myles Ma is a health care expert & personal finance writer for Policygenius. He edits the Easy Money newsletter.

Published February 6, 2018|3 min read

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Updated May 2, 2019: Retirement is no longer a given for everyone. Some people don't plan to do it because they love their work so much, they can't imagine stopping. On the other hand, some people don't think they'll ever save enough.

That's why the investment product from Acorns isn't called "Acorns Retirement." It's called Acorns Later. Whether they retire or not, said Acorns CEO Noah Kerner, "everyone wants to have a better life later."

What is Acorns Later?

Launched in April 2018, users of Acorns Later can open tax-advantaged retirement accounts, including traditional, Roth and Simplified Employee Pension individual retirement accounts, and set up automatic contributions to them.

Users with up to $1 million in assets pay $2 a month for Acorns Later and other Acorns tools, including Round-Ups, divident reinvestment, automatic rebalancing, Found Money and Grow, the Acorns education platform.

The new accounts are a core part of Acorns, a spare change investment company. Users can set aside small amounts — as little as $5 to start their accounts.

"Our pitch is you should be contributing even small amounts to Later," Kerner said.

Acorns Later has three types of individual retirement accounts: Roth, traditional and simplified employee pension (SEP). There are a number of differences between the three, but the simplest are:

  • Your contributions to Roth IRAs are taxable, but distributions are tax-free.

  • Your contributions to traditional IRAs are tax-free, but distributions are taxed.

  • SEP IRAs are for employers, mainly of small businesses, to set aside money for themselves and their employees, with higher contribution limits than the other IRA types.

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How much does Acorns Later cost?

Users can get Acorns core spare change app, plus Acorns Later for $2 a month until they've invested $1 million with the company. After that, a subscription costs $100 per million each month. Acorns automatically deducts payments from your investments.

Wait, what's Acorns again?

Acorns is an small-dollar investment app founded in 2014 with the aim of democratizing investing. Since then, it has added over 4.5 million users and Acorns Later has amassed over 350,000 investors since launching in April 2018.

Aside from automatically investing spare change from transactions, Acorns has also partnered with 150 companies for its "Found Money" program. When you shop with these companies, they invest a small amount into your Acorns account. For example, every time an Acorns user rides with Uber, the ride-hailing company deposits 50 cents into the user's Acorns account.

Typical Acorns users make less than $100,000 a year and range from as young as 18 to as old as 98, Kerner said.

"Part of what we're trying to do is uplift our customers and help them believe anyone can grow wealth in America," Kerner said.

Kerner said the financial industry tends to serve customers with money better than those without. Acorns, he said, is aiming to handle the finances of those who think they're in the latter group.

"I think we'll be the place where everyday Americans get all their money needs met," he said.

Trying to bank more money in 2018? Here's how to invest in five minutes or less.

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Image: aldomurillo