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How to Withdraw, Transfer Out, or Close Account

We’ll walk you through how to withdraw from a taxable account or an IRA, how to transfer your account to another provider, and how to close your account.

Articles by Betterment Editors

By the Editorial Staff
Betterment Resource Center  |  Published: September 1, 2018


TABLE OF CONTENTS

How to Withdraw

Transferring Out to Another Provider

Closing Your Account

IRAs


How do I withdraw funds from my Betterment account?

You can withdraw your money from Betterment at any time, without additional fees.

We do not charge any trading fees or assess penalties for requested withdrawals or account closures. It’s your money, and is always accessible to you.

From a web browser, after logging in to your account, go to Transfer or Rollover > Withdraw.

Withdrawals generally take about 4-5 business days to process; funds will automatically be sold and sent to your linked bank account.

When you request a withdrawal, shares in your account are sold and this may have tax consequences. Betterment will always sell your shares in a way that minimizes taxes for you. We’ll sell shares that have lost value first (short-term losses, then long-term losses), and then we’ll sell shares that have gained value (long-term gains, then short-term gains).

Full withdrawal terms and conditions are listed on page 21, section 20 of the Betterment Client Agreement.

Note that the process for withdrawing from your Betterment For Business 401(k) is different. Click here for more information about withdrawing from your 401(k).

Why 4-5 business days?

When you withdraw from an investment account, the securities you hold must be sold before the cash can be sent to your bank. Betterment processes each request as quickly as possible, subject to market settlement and bank processing timelines. Between trade settlement and ACH processing, this typically means that most customers receive their requested funds in 4-5 business days.

Are there any withdrawal fees or penalties?

There are no transaction fees, account closure fees, or limits to withdraw. If you withdraw 100% of your money invested with Betterment before the end of a calendar quarter, we’ll only assess a prorated fee for the total days your money was managed by Betterment. We do not charge fees for accounts with a $0 balance.

Selling shares may have tax consequences. Betterment will always sell your shares in a way that minimizes taxes for you. We’ll sell shares that have lost value first (short-term losses, then long-term losses), and then we’ll sell shares that have gained value (long-term gains, then short-term gains).

Tax Impact Preview allows you to see an estimate of the taxes you may owe before you make a withdrawal.

Can I set up an automatic withdrawal?

Currently, you can only set up automatic withdrawals from Betterment goals that have corresponding retirement income advice. If you have a Retirement Income goal, you can set up and customize automatic withdrawals to your own schedule, including frequency and day of the month or week. You can make changes or stop and start the payments here. You can also continue to take withdrawals manually and your dynamic withdrawal advice will adjust accordingly.

Anyting else to be aware of?

  • Betterment does not support outbound wire transfers to your bank account nor do we issue checks made out to you personally.
  • Changing your linked bank account after requesting a withdrawal can delay a withdrawal.
  • The dollar value reflected in your withdrawal request may fluctuate due to market volatility until the trades are executed.

Are there limits or fees for transactions with Betterment?

There are no transaction fees with Betterment. That said, there are a few parameters regarding transactions to be aware of:

  • The minimum amount you can deposit is $10.
  • The maximum amount you can deposit is $300,000 every two business days.
  • You can always wire funds into Betterment of any amount, but your bank may charge wire fees.
  • You must wait 60 days to withdraw from an IRA Rollover deposit.
  • You can only make one allocation change per business day, as we are not a licensed day-trading platform.

How does Tax Impact Preview work?

Selling shares is a taxable event—those sales could be triggered by a withdrawal or an allocation change. Tax Impact Preview shows the estimated gains and losses the sale is expected to realize, as well as an estimate of the taxes that may result, in real-time, before the transaction is carried out.

When initiating a withdrawal amount on the Transfer tab or adjusting the allocation slider on the Advice tab, the estimated tax impact will appear, giving you access to a summary of the short- and long-term gains and losses expected to result from the sales.

Tax Impact Preview generates this estimate by “pre-playing” the transaction to simulate the trades that will take place across all of the ETFs that you hold.

To determine those trades, our algorithms first check whether each asset class is over or underweight by comparing your current allocation to your target allocation. The amount of bonds and stocks to sell is determined in a way that brings each asset class back to the portfolio’s target allocation.

Once the specific ETFs and amounts to sell have been determined, Betterment’s algorithms use the TaxMin accounting method to select the specific lots that will be sold. For each ETF, TaxMin selects losses first and short-term capital gains last in order to minimize the tax impacts.

Tax Impact Preview sums up all the losses and gains that are expected to be realized across the different ETFs and tax lots. If your losses outweigh your gains, Tax Impact Preview will estimate your realized losses. If your gains outweigh your losses, estimated taxes owed will be displayed.

The estimated tax is an upper bound, meaning it assumes the highest applicable tax rates of combined federal, state, and medicare surtax. Actual taxes are likely to be different depending on specific circumstances, including, but not limited to, the marginal tax rate applicable to you, any subsequent trading activity, the presence of other capital gains or losses for the year, and securities prices at the moment your execute the trades.

Tax Impact Preview is just an estimate, since it depends on the current prices of each ETF, which won’t necessarily be the price at the time you trade.  However, it will give you a good idea of the impact of the transaction. Tax Impact Preview is not tax advice.

Transferring your Betterment IRA to an IRA at another provider

You will first need to reach out to your receiving institution and request to have your assets transferred out of Betterment to the new provider. They will need to know your Betterment account number, which can be found in “Settings.” There are never any fees to transfer out or close your account.

For IRA to IRA transfers, we’ll use the direct transfer process and send a check, to avoid any tax consequence for you.

What we need:

  • Transfer paperwork (from the receiving institution) that also includes a copy of the first page of your most recent Betterment statement, which you can find in Documents.
  • If you are transferring out more than $250,000, the transfer paperwork will need to be medallion signature guaranteed.
  • If you are transferring out less than $250,000, please simply send your completed original transfer paperwork.

All outgoing transfer paperwork must be mailed to:

Standard Mail

Betterment Transfers

PO Box 207691

Dallas TX 75320-7691

Overnight Mail

Betterment Transfers

2975 Regent Blvd

Lockbox Services 207691

Irving TX 75063

Transferring your Betterment IRA to a 401(k) or another employer-sponsored plan at another provider

Note that Roth IRAs cannot be transferred into 401(k)s, even if it’s a Roth 401(k), due to IRS rules.

Here’s what we need to transfer your Traditional IRA to your Traditional 401(k):

  • An acceptance letter from your new provider.
  • A copy of a Betterment account statement, which you can find in Documents.
  • A signed letter from you authorizing the rollover. This should reference the words, “I authorize the transfer of assets from my Betterment Traditional IRA (or SEP IRA) account into my 401(k)/employer sponsored plan.”
    • If you are transferring out more than $250,000, the signed authorization letter will need to be medallion signature guaranteed.

All outgoing transfer paperwork must be mailed to:

Standard Mail

Betterment Transfers

PO Box 207691

Dallas TX 75320-7691

Overnight Mail

Betterment Transfers

2975 Regent Blvd

Lockbox Services 207691

Irving TX 75063

Transferring your Betterment taxable account (non-IRA) to a taxable account (non-IRA) at another provider

You will first need to reach out to your receiving institution and request to have your assets transferred out of Betterment to the new provider. They will need to know your Betterment account number, which can be found in “Settings.” There are never any fees to transfer out or close your account.

For non-IRA transfers, we will transfer only full shares directly to another institution: we cannot transfer partial shares.

What we need:

  • Transfer paperwork (from the receiving institution) that also includes a copy of the first page of your most recent Betterment statement, which you can find on your Activity page.
  • If you are transferring out more than $250,000, the transfer paperwork will need to be medallion signature guaranteed.
  • For non-IRA transfers of less than $250,000, please have your signature notarized or medallion signature guaranteed

All outgoing transfer paperwork must be mailed to:

Standard Mail

Betterment Transfers

PO Box 207691

Dallas TX 75320-7691

Overnight Mail

Betterment Transfers

2975 Regent Blvd

Lockbox Services 207691

Irving TX 75063

What is a medallion signature guarantee?

A medallion signature guarantee is an extra level of security to prevent the unauthorized transfer of your assets. You can obtain a one at a local financial institution with which you have an account.  You will need to bring a statement from your current IRA provider to obtain a medallion signature guarantee.

You can read more about medallion signature guarantees here.

How do I close my Betterment account?

You can close any investment account you have in your Betterment account once you’ve removed the funds. You can easily re-open investment accounts if you want to in the future.

To close investment accounts you hold at Betterment, the process is simple. Log in from a web browser and select “Settings” and then “Accounts”, or click here.

Once there, click the three dots to the right of the specific investment account(s) you wish to close. Before you can close an account, you must fully remove any funds from the account. If this is something you need to do, you’ll be prompted to click “Withdraw” from the close account flow.

Once the withdrawal is complete, you will then be able to close the account by repeating the above steps or by clicking here.

Please note that we are required to retain your sensitive information due to FINRA, SEC and US Patriot Act regulations. Your Betterment account will be accessible in the future, as some customers need to view tax forms in future years.

How do I close my joint account?

Closing a joint accounts works the same way. Either joint account holder can delete a shared joint account directly from “Accounts”.

If you wish to close a joint account but transfer the funds to an existing individual investment account at Betterment, contact customer service at support@betterment.com before proceeding.

Please note that we are required to retain your sensitive information due to FINRA, SEC and US Patriot Act regulations. Your Betterment account will be accessible in the future, as some customers need to view tax forms in future years.

Are there fees for closing an account?

There are no trading fees or penalties for closing/deleting accounts. If you simply need access to your funds, note that there are no fees for accounts with a $0 balance. Feel free to withdraw—keeping your investment goals set up and your accounts in place—until you are ready to invest with us again.

What are the different IRA distributions I can initiate on the Transfer page?

IRA distributions are withdrawals of funds from your account. There are four main distribution options on the Transfer page, which correspond to specific distribution codes on the tax form 1099-R.

  • Early Distribution. If you are under age 59 ½, you will see the option for an “early distribution,” which may mean that you will pay a 10% tax penalty along with any taxes owed on the withdrawal.
  • Normal Distribution. If you are over 59 ½, you will see the option for a “Normal Distribution,” which is generally not penalized, but may still be taxed.
  • Removal of excess contributions. This is a corrective distribution that is generally used if you have contributed too much to the account for the given tax year. While Betterment does not allow you to make annual contributions beyond $5,500 (or $6,500 if you are over age 50), you can still exceed the annual limit by contributing elsewhere, by making an indirect rollover deposit larger than the distribution made from your previous retirement account, or by exceeding the income limits for a Roth IRA. When removing excess contributions, you are generally required to remove both the excess contributions and the gains accrued on those contributions, which we can calculate for you. If the contribution was made at Betterment, our website will automatically calculate the gains for you in most cases, if you select this distribution type.
  • Beneficiary distribution due to death. This distribution is generally used in the event of a death or when making distributions from an inherited IRA.
  • Disability distribution. This distribution is described by an excerpt from IRS Publication 590B: “If you become disabled before you reach age 59 ½, any distributions from your traditional IRA because of your disability are not subject to the 10% additional tax. You are considered disabled if you can furnish proof that you cannot do any substantial gainful activity because of your physical or mental condition. A physician must determine that your condition can be expected to result in death or to be of long, continued, and indefinite duration.” There may be other conditions that are required in order to avoid the 10% penalty on your distribution.

For more on IRA distributions, please review IRS Publication 590B.

If you live in Michigan and want to withdraw from or convert your IRA…

As a Michigan resident, if you want to convert or withdraw from your IRA, the State of Michigan requires you to fill out Form MI W4P with your tax withholding instructions and return it to us.

Why do you have to do this? Well, since Betterment does not withhold state taxes for you (it reduces the amount of money that can grow tax-free in your Roth IRA), you must check Box 1 to state that you opt out of state tax withholding.

Please sign the form and return to us at support@betterment.com. If you download the free Adobe Reader, you can fill it out and sign it electronically (and easily).

I had a special exception apply to my IRA distribution and my form seems to be coded differently. Why is this?

The Form 1099-R is the tax form which reports all distributions from an IRA. Brokerages such as Betterment are not required to make distinctions on special exceptions, which are the responsibility of the taxpayer to self-report.

As Betterment is not a tax advisor, we recommend consulting a tax professional or referring to IRS resources for reporting information and requirements.

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