Can I transfer out an account that's been Tax-Coordinated?

Yes, you can. Transferring an account out of a Tax-Coordinated goal can cause rebalancing within the Tax-Coordinated Portfolio (“TCP”) in order to ensure that your TCP has a fully diversified portfolio of holdings at the target stock/bond allocation that you set. If there is a funded taxable account in the TCP, the rebalancing may be a taxable event.

If your Tax-Coordinated retirement goal holds both an IRA and a taxable account, transferring out the IRA can cause the taxable account to rebalance to the overall target allocation of Tax Coordination, which could result in the sale of securities and realized gains or losses in the taxable account.

If you’re attempting to transfer out an IRA that's part of a Tax-Coordinated Retirement goal including a funded taxable account, you generally have the following options:

  1. Transfer out your taxable account first:
    • You can postpone your IRA transfer request and work with your custodian to request a complete transfer of your taxable account first. When you transfer out your taxable account first, any rebalancing in the Tax Coordinated Portfolio will occur in the tax-advantaged IRA account. Click here for instructions on transferring out or withdrawing your taxable assets.
  2. Disable Tax Coordination first:
    • You may request to have Tax Coordination disabled by selecting from the menu Retirement > Overview > Goal settings > Modify Tax Coordination > I no longer want Tax Coordination > Send request to Customer Support
      • We will reach out to you for further authorization before disabling Tax Coordination, as the process could result in realizing taxes due to rebalancing in your taxable account. At this point, you may request to disable Tax Coordination and turn off rebalancing in the taxable account to minimize taxable rebalancing in the process.
  3. Cancel your IRA transfer:
    • If you decide that you would prefer to keep your Tax-Coordinated accounts at Betterment, you can simply cancel your outbound IRA transfer request and keep the funds in your Betterment account.
  4. Proceed with the transfer, accepting any taxable rebalancing that might occur:
    • You can move forward with your outbound IRA transfer without disabling Tax Coordination and accept the risk of realizing gains or losses in your taxable account.

Betterment is not responsible for tax consequences, missed market opportunities, or other costs that may arise from transferring out an account within a Tax-Coordinated goal or dismantling one. If you have any questions regarding this process, please contact us for more information.