401(k) participants

Details for participants in employer 401(k) plans managed by Betterment


What does ‘vesting’ mean and how does it apply to my account?

With respect to retirement plans, “vesting” simply means ownership. In other words, you will vest, or own, a portion or all of your account in the plan based on the plan’s vesting schedule. All 401(k) contributions that you make to the plan, including pre-tax and/or Roth contributions made through payroll deduction, are immediately 100% vested. Those contributions were money you earned as compensation, and so you own them immediately and completely. Employer contributions made to the plan, ...

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Is there a limit to how much I can contribute to my 401(k) account?

For 2022, you can contribute up to $20,500 if you are under 50. If you are age 50 or older, you can contribute up to $27,000. Limits are subject to change each year, so check for the latest IRS guidelines.

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How do I change the amount of my paycheck, or deferral, that I contribute to my 401(k)?

To change the amount that you contribute to your 401(k), simply log in to your Betterment 401(k) account, click Transfers, choose Pending Transfers, and then select “Edit contribution rate”. You can either choose a $ (fixed dollar) deferral amount or a % (percentage) of your paycheck. It takes one to two payroll cycles for your new rate to be effective. As you may know, many plans allow you to make two types of contributions to your 401(k) – Traditional and Roth. Although Betterment takes both ...

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What is the difference between Traditional 401(k) contributions and Roth 401(k) contributions?

In the most basic sense, the difference is that Roth 401(k)s are comprised of after-tax dollars while Traditional 401(k)s are comprised of before-tax dollars. Traditional 401(k) contributions are withheld tax-free, whereas Roth contributions will be counted as taxable income for the year during which the money is deferred. The benefit of Roth contributions comes into play when the 401(k) contributions and income are liquidated. Roth 401(k) contributions and earnings are exempt from federal ...

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How do I know what my employer has contributed to my account?

Employer contributions come in several flavors, whether a match (based on how much you’ve elected to save in the plan) or a non-elective / profit sharing contribution (typically based on a percentage of your income for the year, regardless of how much you saved). When your employer makes these kinds of contributions, you’ll see the breakdown in your contribution confirmation email.

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Getting started

What is automatic enrollment in a 401(k)?

If your plan has automatic enrollment, your employer is setting your default savings rate in case you don’t take action to defer a portion of your paycheck to your 401(k). Your contributions to your 401(k) will be invested in an age-appropriate portfolio based on your expected timeframe to retirement. You can log in to your account to change both your savings rate—including choosing not to contribute at all—and investment selections at any time. In general, employees at companies whose 401(k) ...

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Does Betterment provide 401(k) participant support?

Yes. Betterment offers a dedicated Customer Success team. See our contact page. Customer Success hours are: Monday – Friday: 9:00 AM – 6:00 PM ET

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What do I do if my employer announced a switch to Betterment 401(k)?

Congratulations and welcome! Your 401(k) just got a whole lot better! When your employer switches to a Betterment 401(k), participants go through a conversion process. During this process, the funds that you held at your previous 401(k) will be sold and transferred to cash in order to move them over to Betterment and into your new investment portfolio. A conversion triggers a “blackout” period, during which you will not have access to your funds. You cannot change investment elections, ...

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How is Betterment's 401(k) different from other 401(k) plans?

With other 401(k)s, generally participants are asked to choose between a selection of funds—often with minimal insight or advice regarding their fees, track record, or how to allocate across funds. In contrast, Betterment for Business provides a 401(k) that includes personalized investment advice. This advice is designed to help you meet your retirement goals by accounting for your overall financial picture, including current and expected income, cost of living, net worth, and external accounts ...

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Why does Betterment use ETFs instead of mutual funds like most 401(k) plans?

The 401(k) market is largely dominated by insurance and investment companies who are incentivized to offer certain mutual funds. Often, they are compensated in some way by the mutual fund company, which usually comes in the form of revenue-sharing arrangements. ETFs, on the other hand, generally cannot have the same revenue-sharing relationships that many mutual funds do. That means the 401(k) providers who use ETFs aren’t being compensated behind closed doors, so they have to charge explicit ...

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What is a 401(k) plan?

A 401(k) plan is an employer-sponsored retirement savings plan that allows you to save on a tax-advantaged basis. There are two types of 401(k) contributions: Traditional and Roth. Traditional contributions allow you to save pre-tax income from your paycheck, meaning income taxes are not withheld on these amounts today but will be taken when you withdraw the funds in the future. Roth contributions are a way to save after paying income taxes (no deduction today), but your withdrawal upon ...

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What are the fees associated with my Betterment 401(k) account?

Any administrative or investment management fees charged to your account are described in your annual fee disclosure (available in your account statements), and are transparently reported on your statements. The ETFs that we use in our core portfolios have expense ratios that on average range between 0.06% to 0.17% for your total portfolio, depending on your allocation. One of the reasons that we are able to keep costs low is because we choose the same, low-cost, passive ETFs to use in all of ...

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Managing my account

Can I have a Betterment account in addition to my 401(k) account?

Great question! Betterment makes it easy to manage all of your assets holistically, and we provide advice accordingly. When you’re logged into your Betterment 401(k) account, click "Add New” on the left of your Profile. You’ll be able to add a taxable, IRA, joint or trust account. You can also sync external accounts so that your personalized advice is based on an even more holistic financial picture.

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Moving money out

What happens to my 401(k) if I leave my employer?

If you leave your current employer, you have several options for your Betterment 401(k) account. You may be able to leave your account with your former employer’s plan until you reach retirement age. If you have a lower account balance, you may need to decide sooner where you want benefits sent. You also have the opportunity to roll over your benefit to a new employer’s retirement plan or to your own IRA account. You can also opt to cash out all or a portion of your account but should review ...

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What is a hardship 401(k) withdrawal?

Amounts you contributed from your compensation to a 401(k) plan are typically not accessible until you terminate employment, reach age 59 ½, or become disabled. However, many employers allow for a special type of distribution while you are employed, which is for a severe and immediate need (typically falling within a very specific list of situations). If taken, these distributions may still be subject to early withdrawal penalties, are not eligible for rollover, and cannot be repaid to the ...

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What is an in-service distribution?

Some 401(k) plans allow you to take a withdrawal from your contributions to your 401(k) while employed for any reason, often beginning at (but not before) age 59 ½. You may also be able to withdraw your funds that have been rolled in from an outside retirement account before age 59 ½. This in-service distribution can be rolled over to an IRA or another qualified plan, or cashed out. Participants may opt to use this distribution type to cover a current need, or diversify the tax and investment ...

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What is a 401(k) plan required minimum distribution?

Generally speaking, there is a required minimum distribution (RMD) that the IRS requires participants take from Traditional retirement plans beginning for the year in which they retire or turn a certain age. In the event that you don’t take your required minimum distribution, you may be subject to a 50% excise tax on the amount of the distribution that you failed to take on time. To determine your deadline for taking a required minimum distribution, please refer to IRS guidelines or speak to a ...

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What’s a QDRO and what does it mean for my 401(k)?

QDRO stands for Qualified Domestic Relations Order. According to the Department of Labor, a QDRO recognizes a spouse’s, former spouse’s, child’s or dependent’s right to receive benefits from a participant’s retirement plan. A domestic relations order is a document typically approved by a court judge stating how an account must be split or reassigned, and is required to begin the QDRO process. Please contact your employer to find out more about the process of reassigning part or all of your ...

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Can I take out a loan on my 401(k)?

Some 401(k) plans allow you to borrow against your 401(k) to meet your financial needs, in exchange for a promise to repay the borrowed amount (often through payroll deductions) to your account. If you apply for a loan, it must meet the terms set out in your plan’s loan policy. Typical terms include a maximum loan of up to 50% of your vested account balance (capped at $50,000 and further restricted by loans you had in the last 12 months), and repayment within 5 years. The interest rate set for ...

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How and when can I withdraw from my 401(k) account?

As a general rule, 401(k) savings are not eligible for withdrawal before the participant turns 59 ½, leaves employment, becomes disabled, or passes away. When funds are available to a participant before age 59 ½, it often comes with a 10% early withdrawal penalty for accessing the funds prior to retirement. Your Summary Plan Description (SPD) can provide more information on what types of withdrawals your plan allows, and you can see more information about distributions you may be eligible for ...

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How to roll over retirement accounts into my 401(k) plan?

No matter what type of retirement account you want to roll over, we’ll try to help make it as easy as possible. Learn more with our roll over FAQs. Where do I mail my rollover check? If you receive a check for a rollover or transfer made out to “Betterment”, you can mail the check to one of the addresses below. These instructions only apply if you’d like to transfer funds into an existing Betterment 401(k) plan through your employer. 401(k) lockbox addresses: If regular mail: Betterment 401(k) ...

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