When deciding whether to switch from another provider, it’s smart to consider the benefits alongside any potential tax implications.
IRA Accounts: Since we use the direct trustee-to-trustee transfer process, to move IRA accounts electronically to Betterment, there are generally no taxes or penalties to make the switch. Once we receive your IRA transfer(s), we will sell any investments moved in-kind and then use your cash proceeds to buy new shares of the ETFs that make up your target Betterment IRA portfolio.
Taxable Accounts: As stated in the “How ACATS Transfers Work at Betterment” section above, while any investments moved via ACATS will continue to be invested throughout the transfer process, once your assets have been transferred, our rebalancing system takes over in an effort to move you as close to your target Betterment portfolio strategy as possible. Given the nature of taxable accounts, we attempt to do this thoughtfully.
If you're moving in ETFs, which overlap with the ones used in your target Betterment portfolio, we will keep the shares and incorporate them, only selling if holding onto the excess would mean your portfolio is not properly weighted. For any mutual funds or ETFs, that do not overlap with the ones we use in your target Betterment portfolio, our rebalancing system will take over and trade out of all of your "foreign" shares. This is so that the cash proceeds can be used to buy new shares of the ETFs that make up your target portfolio.
Note: We will not sell any shares trading at a short-term gain. Only shares trading at a long-term gain or loss will be sold. Over time, our system will continue analyzing your short-term holdings and if any begin trading at a loss or ultimately become long-term, our system will further rebalance.
Finally, any single stocks transferred to Betterment are immediately sold, regardless of underlying details.
As always, our transfer team is available to assist as needed. Please do not hesitate to reach out to firstname.lastname@example.org for dedicated support.
To learn more information, please see ACATS terms and conditions.
Please note that Betterment is not a registered tax advisor and information presented is meant to be educational only. Please consult a qualified tax advisor.