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Investment Accounts

Your Guide to Betterment Rollovers

Moving your money to a new financial institution can be tedious and complicated. At Betterment, our goal is to make it easy and automatic. Here, we break down each rollover method and explain which might be right for you.

Articles by Chrissy Celaya, CFP®

By Chrissy Celaya, CFP®
Financial Planning Professional, Betterment
Published: February 9, 2017 | Updated: July 27, 2018

At Betterment, we believe rolling over into a low-cost, globally diversified, and tax-smart IRA should be easy.

We’ve enhanced our rollover flow to make it faster, cheaper, and easier to get invested properly.

Not all rollovers are created equal. Learn the important differences between electronic transfers, direct check transfers, and indirect rollovers.

We’ve talked before about why we believe Betterment is the best place to put your money if you’re investing for the long term: our globally diversified portfolio, low fees, personalized advice, and tax-efficient services that can increase your after-tax returns by an estimated 15% over 30 years. (You can read about all the benefits here.)

Once you’ve made the decision to move your money to Betterment, there are a few different ways you can do so. Based on your account type and provider, we will automatically select an appropriate transfer method for you.

If you’re ready to get started now, click the “Transfer” button from the Summary tab of your account. From the Transfer tab, click “Roll over an IRA or 401(k)” to begin moving your money to Betterment.

Or, if you’d first like to learn more about each method, read our guide below.

A Guide to Moving Your Money to Betterment: 2 Transfer Methods

Direct IRA Transfer or Direct 401(k) Rollover via Check

Moving money through ACATS is usually ideal because it’s a more efficient process, but in some cases, it’s not an option. To start, both firms must support ACATS transfers. Second, you must move funds between matching account types (i.e., IRA to IRA). Therefore, moving retirement money from an employer-sponsored account, such as a 401(k) or 403(b), into an IRA is generally not an option via ACATS.

It’s also worth noting that if you own a mutual fund IRA account and not a brokerage IRA account, you cannot use the ACATS system. There may be other reasons why ACATS is not available for your specific account. In that case, we will automatically provide you everything you need to do a direct transfer or rollover via check.

While there are a few more steps required, this method maintains many of the advantages that are tied to direct transfers. Not only can you complete as many direct transfers or rollovers via check as you would like in any given year, it’s considered to be a direct exchange between providers, meaning there are no tax penalties involved and generally no withholding.

Read about how to roll over a 401(k) to Betterment.

Indirect Rollover

As a last resort, completing an indirect rollover is another way to move retirement funds between institutions. However, the many IRS rules and restrictions attached typically make it a last-resort choice.
Not only are you limited to one indirect rollover per 365 days, but you must also distribute all or part of your account, take possession of the funds, and then redeposit the cash proceeds into a new IRA within 60 days. What’s more, it’s potentially reportable on your federal tax return.

In addition, generally, the original firm withholds on the distribution, meaning you must make up the difference from your own funds, or else it may count as a taxable distribution. This can leave a lot of room for error, not to mention it requires a lot of manual work for you.

If you have any questions about moving your retirement money to Betterment, we have experts on hand seven days a week to assist. Ready to make the move to Betterment? Get started today.

Betterment is not a tax advisor, nor should any information contained in this article be considered tax advice. Please consult a tax professional.

When deciding whether to roll over a 401(k) account or another retirement account, you should carefully consider your personal situation and preferences. Relevant factors may include that: (i) 401(k) accounts may offer greater protection from creditors than IRAs. (ii) In some cases, the ability to take penalty-free distributions at an earlier age or to defer minimum required distributions. (iii) Some 401(k) accounts may also allow for loans or distributions in a broader set of circumstances than IRAs. (iv) Some 401(k) plans may also offer specific educational and advisory services to participants that are unavailable to some IRAs. (v) Some 401(k) plans may have lower fees and expenses than some IRAs. (vi) Some IRAs may offer a broader range of investment options that some 401(k) plans. (vii) Special tax rules may apply to the rollover of employer securities.

You should research the details of your 401(k) and speak to a tax and other advisors about whether the features of your 401(k) are relevant to your personal situation. The rollover process is currently automated for rollovers from select providers. If you have a provider that is not part of our automated process, you will receive an email with a checklist for completing your rollover to Betterment. In processing you rollover request, Betterment will be acting at your direction.

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