Playbook Review: My Experience With The Tax Optimization Software

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Playbook (also referred to as Hello Playbook) is an online financial planning platform that aims to help high-income individuals optimize their tax-advantaged retirement savings.

To write this Playbook review, I signed up for an account to see how it works, to learn about its pros and cons, and to identify the type of person who would benefit the most from using it.

3.9/5

Summary: Playbook's automation engine helps you determine the optimal accounts for saving your money in the most tax-efficient way possible. In addition, Playbook can help manage your retirement portfolio.

Playbook offers two membership plans: Playbook Essential for $19 per month or $180 per year, which provides the basic features to optimize your financial plan. Playbook Plus costs $59 per month or $348 per year, and includes advanced tax strategies like tax loss harvesting, asset location, and smart withdrawals to further optimize your savings.

We found the software's guidance helpful but limited in terms of who could benefit from using it — specifically, high-income salaried employees. That’s largely because Playbook’s planning engine isn't yet advanced enough to deal with more complicated situations, such as business owners with unstable incomes.

Pros:

• The free trial gives you full, unlimited access to the platform.
• Our testing found the software to provide useful and accurate advice.
• Flat fees lower the cost of asset management for those investing $300,000 or more.

Cons:

• No current support for HSAs.
• Portfolio recommendations are basic and could easily be constructed outside of Playbook.

Visit Playbook

Playbook at a Glance

While most people have heard of asset allocation, there’s also an important concept called asset location. Asset location refers to where you invest — e.g., within an IRA, 401(k), HSA or taxable account — rather than what you invest in.

Optimizing where you invest can save you hundreds of thousands on taxes over your lifetime.

Case in point: Investing $5,000 annually into a Roth IRA from 29 to 65 with average returns of 7% will grow your balance to $796,687. That money will be tax-free. There are also significant estate planning benefits to holding a Roth IRA versus a taxable account.

Investing that same amount into a taxable account will net you only $532,215 after taxes.

Keep in mind that this is your potential savings when investing $5,000 per year. A high-income earner who is optimizing every tax-advantaged opportunity available — and saving much more than $5,000 per year — will benefit more. 

Playbook estimates the additional growth of a typical 30-something who earns $150,000 per year is $1.3 million by retirement. 

After signing up, users answer questions about their income, financial situation and goals. Playbook then uses these answers to generate a proposed financial plan of action to maximize the user’s after-tax returns.

If needed, Playbook will also direct money to the proper accounts. 

For example, once you reach your max 401(k) contribution limit, Playbook will redirect your savings into a strategy known as a backdoor Roth IRA.

In addition to directing which accounts you invest in, Playbook can also manage your portfolio. 

For no additional cost beyond the subscription fee, Playbook will construct a portfolio of diversified, low-cost ETFs according to your goals and risks. 

The Essential plan is $9 per month and the Plus plan is $59 per month. 

The Plus plan includes advanced tax optimization strategies like tax-loss harvesting, asset location and smart withdrawals.

Currently, Playbook supports both IRAs and taxable accounts. At the time of publication, no support exists for HSAs.

Playbook Walkthrough

To walk you through exactly how Playbook works, I signed up for an account. There is a seven-day free trial for new users before the fee kicks in. 

I was first asked some very basic questions regarding my financial situation, such as income, expenses, current contributions to employer plans and IRA contributions.

I used a hypothetical $150,000, as shown in the screenshot below.

At this point, I linked some financial accounts to Playbook. Using the data gathered during the signup process — such as how much I’m currently saving and combining it with my actual accounts — Playbook then provided an estimated retirement age and net worth. 

From here, Playbook generated a personalized “tax game plan.” 

For accounts like a 401(k) — where the account is provided through an employer — Playbook tracks your returns over time. For IRAs and taxable accounts, Playbook acts similarly to a robo-advisor, managing the accounts on your behalf. 

There is no additional fee for this service. However, the low-cost ETFs used by Playbook have expense ratios of their own.

How Playbook Builds Your Optimized Tax Strategy 

The tax strategy is formulated using current contribution limits for various accounts.

Some employers typically also have a match provision in their 401(k) plan, and Playbook encourages its clients to take advantage of employer matches before funding any other account. 

Playbook’s proposed strategies are likely more complex than those that most people would create for themselves, which makes it a simple and easy option for investors with limited experience. It also does the heavy lifting of directing funds into the appropriate accounts and preventing overcontributions, which is a unique attribute of the software. 

The platform doesn’t currently offer a mobile app (although their site implies they’re working on it), so users have to log in via browser to see their dashboard.

How Playbook Executes Your Optimized Tax Strategy

Once the plan is created, Playbook encourages users to set up automation to fund accounts. It uses Plaid, an account aggregation platform, to help users link accounts and track the account balances over time while directing capital into different accounts in a predetermined order. 

Users can search for their existing brokerage accounts or bank accounts and log into those portals to connect the account balances. For existing accounts you own, such as a 401(k) with your employer, Playbook does not make investment recommendations or place trades.

The software generates a proposed sequence of contributions toward retirement accounts based on considerations like employer match, tax deferred status, importance of goal, and how quickly funds are needed. Users can manually direct which order they’d prefer to fund their accounts in, although the reordering doesn’t come with any advice around which might be more advantageous to fund first.

Over time, users can adjust their income and expense level, and Playbook will update its recommendations based on any changes to the current year’s tax law. The ease of revisiting and making updates to your financial plan encourages frequent review, which can help users stick to their plan and keep it top of mind.

Playbook Key Facts

Playbook Fees

Taking a deeper look at Playbook’s fees, you’re charged either $99 per month for the Essential plan or $59 per month for the Plus plan.

Included in this fee is the recommendation engine (what account to invest in), the ability to set up automatic transfers into the right account, and wealth management services (where you can open an account and invest with Playbook using their suggested asset allocations).

The investments themselves — specifically, the low-cost ETFs that Playbook uses to allocate your portfolio — have additional fees ranging from 0.03% to 0.08% annually.

For comparison’s sake, the robo-advisor Betterment charges fees of 0.25% annually if you invest at least $250 per month or have $20,000 across all your Betterment accounts.

That means a $100,000 portfolio would incur $250 in annual fees per year. ETF fees — which similarly range from 0.03% to 0.08% annually — are separate from their 0.25% asset management fee.

That said, Playbook’s portfolio allocations are quite vanilla. One can argue that robo-advisors like Betterment and Wealthfont offer a more optimized portfolio. Specifically, their suggested allocation offers a greater reward for less risk. 

Here are Betterment’s allocations based on their most aggressive portfolio setting.

The idea of having a portfolio optimized for the highest level of reward for a given level of risk is known as being on the “efficient frontier.” You can measure whether your existing portfolio lies on the efficient frontier by syncing your investment accounts with Empower. 

M1 charges zero asset management fees for their “expert pie” portfolios, which share similar characteristics as robo-advisors like Betterment and Wealthfront. As with Betterment and Wealthfront, the ETFs used to construct M1 portfolios have small fees of their own. 

Where Playbook Shines

• Playbook offers an easy-to-use tool for high earners and new investors. The platform is intuitive, doesn’t overcomplicate planning, and provides a nice way to prioritize goals.
• The integration of varying types of accounts is diverse and inclusionary of alternative assets. This is nice for investors who might have a larger position in something like crypto and want it to be part of their financial plan.
• Playbook encourages users to update and revisit their plans often, and ensures the recommendations it makes are in line with the current year’s tax code. This is an improvement on many robo advisor solutions that offer suggestions up-front, but don’t follow through in subsequent years. 

When Playbook Falls Short

• Playbook advertises how it can help investors optimize their tax situation. However, there are a few areas in the software that seem underdeveloped, like more specific tax-advantaged accounts for business owners, HSAs, or people looking to save for their children’s college education.
• The investment portfolio recommendations don’t account for the optimal tax-efficient investment to hold in each account. For example, the general advice is to keep assets that pay higher dividends, such as bonds and ETFs, inside a tax-sheltered account. Then, place investments like a stock index fund in a taxable account because it yields a much lower dividend rate. Over time, holding more tax-efficient investments is a strategy that can increase your after-tax returns. But Playbook silos each of your accounts, so you’re not taking advantage of this strategy.
• In the event that your investment accounts can’t link to the system, there’s no way to enter a manual balance. This can lead to discrepancies in the overall plan if an account isn’t included.
• The software removes the “human” component of financial planning. While an algorithm can do a good job of recognizing tax planning opportunities, it doesn’t perfectly factor in an investor’s desire to take on debt to execute a goal sooner, which can lead to unrealistic expectations about net worth in the future. 

Is Playbook Right For You

Playbook is a simple tax planning tool to help high-income earners create a plan that is optimized for long-term after-tax returns. 

The platform does a good job of making financial topics visually attractive and easy to understand, which can remove roadblocks for people who are intimidated by the complexity of saving and investing for retirement.

Where the platform is lacking as of now is in its ability to make adjustments for unique situations. For example, employer retirement plans can take many forms other than a 401(k), such as SIMPLE IRAs, Roth 401(k)s, solo 401(k)s or many others. 

Much like a traditional 401(k), these diverse account types are great options to save money in a tax-deferred investment vehicle. However, among other differences, the contribution limits are dependent on the type of account. For example, the 2022 SIMPLE IRA maximum contribution is $14,000, while the maximum 401(k) contribution is $20,500. 

Additionally, there are some missed opportunities that the software hasn’t built in. For example, when users add goals to their plans, the goals are automatically assumed to be saved for in taxable accounts. However, let’s use the goal of saving for a child’s education as an example. Yes, this could be saved for in an individual account, but a 529 account could be a good option for someone who wanted to take advantage of the account’s tax deferral benefits. 

Playbook does a decent job of bringing structure to people with straightforward situations or who need help organizing where they are and where they’d like to go. It’s a great fit for someone who has lost interest in managing their investments themselves but still has a good grasp on what tax-deferred accounts are and why it’s important to fund them early. 

The marketing of the platform puts a lot of emphasis on the power of time and investing at a young age to give funds a chance to grow. While there may not be a lot of technical complexity behind the planning and the investment portfolios, the fundamental concepts are sound, and Playbook has great potential to make a difference for investors.

R.J. Weiss

R.J. Weiss, founder of The Ways To Wealth, has been a CERTIFIED FINANCIAL PLANNER™ since 2010. Holding a B.A. in finance and having completed the CFP® certification curriculum at The American College, R.J. combines formal education with a deep commitment to providing unbiased financial insights. Recognized as a trusted authority in the financial realm, his expertise is highlighted in major publications like Business Insider, New York Times, and Forbes.