Rollovers

Featured articles
-
The Benefits of Rolling Over Your 401(k) or 403(b) into an IRA
Rolling over an old employer-sponsored retirement plan into an IRA can be highly beneficial. ...
The Benefits of Rolling Over Your 401(k) or 403(b) into an IRA Rolling over an old employer-sponsored retirement plan into an IRA can be highly beneficial. Here are three reasons to consider rolling over a 401(k) or 403(b). It might be easy to forget about 401(k)s from past employers, but you'll pay for it in the long run. Here are some reasons to consider rolling them over into one IRA. When you’ve switched jobs multiple times in your career, you may have participated in several employer-sponsored retirement plans, such as 401(k) and 403(b) plans. 401(k)s are generally provided by many for-profit employers, while 403(b) plans are most often used by the nonprofit sector. What many people don’t know is that when you leave a job, it’s important to consider carefully what you do next with your employer-sponsored plan. While working, one of the best ways to save for retirement is to fund an employer-offered plan because they often have important tax advantages and higher contribution limits than individual retirement accounts. But after you leave a job, there are several important reasons to consider rolling over funds from your 401(k) or 403(b). In this article, we’ll run through some of those reasons. 1. Accessing more investment options One of the main benefits of an IRA is that there are often more investment options than a 401(k) or 403(b) plan. If you contribute to your employer’s retirement plan, you might end up with only a few options chosen by the plan administrator. You might have to be heavily invested in company stock or you might have a limited number of high cost mutual funds to choose from. We don’t bring this up as a way of lambasting your administrator—they're simply trying to pick the options they believe should be made available to all employees—but many people don’t realize just how limiting these options can be. If you have an account with a previous employer, you may not have any worthwhile reasons to stay with the limited investment choices within the plan, and that’s one reason to consider rolling into an IRA. An IRA held at a brokerage or investment advisor, like Betterment, enables you to access a much broader universe of funds. For some investors, having the ability to pick and choose any variety of funds is important to them. At Betterment, our investment advice for an IRA (and any account type) is based on research-backed portfolio construction that pursues a high expected return for the risk you’re willing to take on, while maintaining global diversification and low costs. 2. Lowering Your Investment Fees The fees with an IRA can sometimes be lower than what is charged by your plan administrator. In many 401(k) and 403(b) plans, the expense ratios (i.e. fees) on mutual funds and ETFs can be much higher than those available within IRAs. Also, depending on your plan, by keeping funds within your 401(k) plan after leaving your employer, you may be subject to management fees. Moving to an IRA may involve taking on fees for investment advice and management or trading costs, but all-in, when you do the cost analysis, an IRA can often be less expensive than a 401(k) plan. When evaluating fees, do keep in mind, that if your current employer-sponsored plan is among the nation’s top plans, it could also be worth your while to hold your funds there. 3. Managing Your Portfolio in One Place For many investors, part of the value of rolling over to an IRA comes from the peace of mind of having all of their past retirement contributions (and other investments) in one place, rather than spread out across multiple old employer-sponsored plans and investment providers. When you understand the full picture of your retirement savings, you can often make better estimates of what your future retirement budget could look like. Furthermore, depending on your situation, if you move your retirement assets to one provider, you can also improve the tax-efficiency of your taxable investments using asset location. You can learn more about how Betterment’s Tax Coordination of IRAs and taxable accounts helps increase potential after-tax returns here. Roll over correctly, and you probably won’t need to worry about taxes. Even with the above benefits of rolling over, many people hesitate on the fear of causing themselves extra taxes. The good news is that when rolling over a 401(k)/403(b) or any other employer sponsored plan, we use the direct rollover method to prevent any withholding or negative tax consequences. There are two important things to remember in regards to taxes when rolling over: Be sure to designate a withdrawal from your current provider as a rollover. A rollover from a traditional 401(k) or 403(b) should enter a traditional IRA. A rollover from a Roth 401(k) or 403(b), should end up in a Roth IRA. If you withdraw from a traditional 401(k) or 403(b) as a non-rollover before age 59 ½, you will face a 10% penalty for an early withdrawal. If you rollover from a traditional plan into a Roth IRA, you will have to pay income taxes on the money. Both of these situations are unnecessary for most investors, except in certain circumstances. The key is that when deciding whether to rollover a retirement account, you should carefully consider your personal situation and preferences. In this article, we’ve provided three general reasons to consider rolling over to an IRA, but as an individual investor, your situation is unique. This article is not an individualized recommendation that you take any particular action—just useful information for you to think about. As suggested above, there are a variety of factors to consider when evaluating the choice to make a rollover. In addition to the points above, you might want to consider: The investment options you have access to The current and future fees and expenses you face The investment services you need (and could gain or lose) Any penalties you could face when withdrawing your money Protections from creditors and legal judgments Required minimum distributions associated with certain accounts The treatment of employer stock within your employer plan The world of retirement planning is complicated, no doubt about that. So, before deciding to roll over an employer-sponsored plan, you should research the details of your current account and consult tax professionals and other advisors with any questions about your specific personal situation. -
How To Roll Over A 401(k)—We Help Make It Easy
Have 401(k)s from old jobs lying around? Betterment makes rolling them over into a low-cost ...
How To Roll Over A 401(k)—We Help Make It Easy Have 401(k)s from old jobs lying around? Betterment makes rolling them over into a low-cost IRA account simple and easy. Let’s say you’ve got a 401(k) from an old employer and you’re interested in rolling it over to an IRA. You can roll over your old 401(k) to any IRA provider, so why choose Betterment? At Betterment, not only do we make the rollover process simple and easy, we also make sure that your funds are placed into a globally diversified investment portfolio that fits your personalized retirement needs—all at a low cost. You have a 401(k) from an old employer—now what? Once you no longer work for an employer, you have a few different options when it comes to what you can do with your old 401(k). The possibilities include: Keeping the 401(k) where it is and doing nothing. Rolling over the previous 401(k) to your current or future employer’s 401(k). Rolling over the 401(k) to an IRA. Taking a cash distribution to your personal checking account. It’s important to consider all of the different options you have. Although there are times where it can make sense to keep your 401(k) where it is, or move it to your new 401(k) plan, doing so may not be in your best interest due to high fees, confusing investment selections, and a lack of holistic financial planning options. Taking a cash distribution to yourself can be especially harmful because it’s a taxable event and you may be hit with early distribution fees by the IRS. Note that rolling a 401(k) into either an IRA or another 401(k) is not considered to be a taxable event. At Betterment, it’s different. Many larger, more traditional financial institutions and 401(k) providers require lots of paperwork, long waits, and misleading and clunky processes. Additionally, when you actually complete the rollover to an IRA, they likely will charge you lots of hidden fees, charge high fees, or put you in investments that don’t align with your actual retirement goals. Other 401(k) and IRA Providers May Have... Betterment Offers... Slow, confusing, misleading processes. Many larger, older, legacy 401(k) providers allow you to roll over to IRAs within their system. To do so may include lots of paperwork that’s typically confusing. It can take weeks to actually open up the IRA and complete the rollover. Simple, efficient, transparent, automated, individualized processes. In just a few clicks, you can open up a Betterment IRA with the appropriate investment strategy, and instantly receive a personalized set of rollover instructions via email. There is zero paperwork required from Betterment. Higher fees, extra fees, poor disclosure. Providers will often find ways to charge you for everything. They have fee schedules, which include fees to open accounts, close accounts, change your allocation, make trades, take withdrawals, etc. The list goes on. The investments themselves may carry high fees on top of the other fees you’re already paying. These providers typically love to bury their hidden fee information in lengthy disclosure documents. Low cost with transparency. At Betterment we have one fee—our management fee—which covers everything and is one of the lowest in the industry. We don’t have a fee schedule or hidden fees. We don’t charge you to open or close accounts, make withdrawals, change your allocation, etc. The low-cost investments (ETFs) we invest in are among the lowest in cost of funds available for investors. Little or no guidance. Many companies will give you paperwork to fill out to move your 401(k) into an IRA. Once it’s moved to the IRA, the guidance—if there ever was any—ends. Either you will have a self-directed IRA where you do everything yourself, or, you can be put in a managed account where they will charge you lots of fees with little to no transparency. Many times there is no holistic planning around the different financial goals you have. Advice and hands-on customer service. When you set up a Betterment IRA, the corresponding investment strategy aligns with your specific retirement plan. It can even work in coordination with the rest of your retirement funds. Not only does the website itself provide you with personalized financial advice, we also have a team of Certified Financial Planners™ and an easy-to-reach customer support team. We automate the rollover process as much as possible. With just a few clicks inside of your Betterment account, we will automatically open up either a Traditional IRA or Roth IRA, depending on what type of 401(k) you are rolling over. We do not need any paperwork from you. Then, we’ll email you a full set of personalized instructions for how to proceed with your rollover. The instructions will lay out the exact next steps to take and the information you need to complete your rollover. This includes your unique Betterment IRA account number, how your provider should make your rollover check payable, and where they can mail your rollover check. Some providers may require you to either fill out their rollover paperwork, or even ask you to give them a call to complete a rollover. If so, there’s no way around that. Using the personalized email that Betterment sends you, you can give your 401(k) provider a call and you’ll have all of the information they’ll ask you for right at your fingertips. Lastly, we will notify you via email as soon as your rollover funds are invested into your Betterment IRA. You can roll over more than just a 401(k). It’s important to note that this process does not just apply to 401(k)s. It applies to any employer-sponsored plan that you hold from past employment. This includes pensions, 401(a)s, 457(b)s, profit sharing plans, stock plans, and Thrift Savings Plans (TSPs). Ready to Roll? We designed the rollover process to be as smooth as possible. If you have any questions before or during your rollover process, we have a team of customer experience associates available via phone, email or mobile messaging to sort out any questions or concerns you may have. When deciding whether to roll over a 401(k) account or other retirement accounts, 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. -
Your Guide to Betterment Rollovers
Moving your money to a new financial institution can be tedious and complicated. At ...
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. We’ve talked before about why we believe Betterment is a better 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. Read about all the benefits. 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 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.
Considering a major transfer? Get one-on-one help with one of our experts. Explore our licensed concierge
All Rollovers articles
-
The Betterment Rollover: A Fast Track to a Better Financial Future
The Betterment Rollover: A Fast Track to a Better Financial Future Roll over a Traditional, Roth, or SEP IRA—and start yourself on the path to a better financial future. At Betterment, we’ll manage your account for you, without the hidden fees that you may be used to from other providers. We invest your money in a low-cost, globally diversified portfolio, and we offer personalized advice with your best interests in mind. Before us, there wasn’t an easy, automatic way for people to get advice and invest their money. We built our platform from the ground up to give customers an intuitive interface, designed to lead to better behavior and better expected returns. Take advantage of the benefits we offer by rolling over your old 401(k)s and other retirement accounts into an Individual Retirement Account (IRA) here at Betterment. Our Mission: Low-Cost Investing and Personalized Advice for Everyone We believe that everyone has the right to both low-cost investing as well as advice that is tailored to their situation. We offer services that we believe will help make everyone a smarter investor—and help them ultimately reach their goals. Personalized advice keeps you on track. Our retirement advice shows you how much to save for retirement based on your current age, your desired retirement age, where you plan to retire, and how much you’re saving across all of your retirement accounts—even those that are held somewhere other than Betterment. You can even include your spouse’s accounts in order to plan more accurately. Our globally-diversified portfolio balances risk and reward. Rollovers and deposits into IRAs at Betterment are instantly diversified across our global portfolio. We carefully select Exchange Traded Funds (ETFs) across 12 types of asset classes, which are invested in more than 36,000 stocks and bonds, which represent companies and governments in over 100 countries. Because no one can predict how each asset class, country, or company will perform in a given month or year, it’s often best to diversify across them all. This helps to balance out your returns over time. Tax-smart automation boosts your returns. While IRAs already offer many great tax benefits, our Tax Coordination feature helps take it a step further. TCP optimizes and automates a strategy called asset location. It starts by placing your assets that will be taxed highly in your IRAs, which have big tax breaks. Then, it places assets taxed at lower rates into your taxable retirement account. Save money with our low fees. Our fees are a fraction of the cost of other services because of our cutting-edge technology. We are vertically integrated, meaning we are the registered investment advisor (RIA) and the broker-dealer through our affiliated entity, Betterment Securities. That means we handle the investment process from beginning to end, which allows us to charge lower fees than other investment services, which have to work with and pay third-party custodians. Additionally, all of our fees are completely transparent—we have no hidden costs. Fast track your 401(k) rollover. Ready to get on the path to a better financial future? When deciding whether to roll over a 401(k) account or other retirement accounts, 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. -
What Should I Be Doing With My 401(k)?
What Should I Be Doing With My 401(k)? With the spread of COVID-19 and recent market volatility, it’s natural to wonder what you should do with your 401(k). With the spread of COVID-19 and recent market volatility, it’s natural to wonder what you should do with your 401(k). Betterment is here to help you navigate your financial life and work toward your retirement goals—whether the market is up or down. You can even join us for a live webinar on April 8. While everyone’s situation is different, we’ve put together some guidance based on common scenarios. Please consult a financial advisor, such as one of our CERTIFIED FINANCIAL PLANNERS™, to develop a specific course of action. What if I’m in a stable financial position? If you feel stable and have a fully funded emergency fund, we strongly recommend that you continue saving in your 401(k) plan. For most people, retirement is years, if not decades, away. And even if you’re approaching retirement, you’ll be spending down your savings for years. Make sure your retirement plan reflects your preferences and current situation. Consider increasing your contributions so that you have more time in the market. What if I don’t have an emergency fund? An emergency fund (or “safety net”) is a foundation of financial security built for times just like this. It’s better if you can save without altering your 401(k) contributions. If that’s not possible or will take too long, it’s okay to temporarily redirect some of your savings toward one. Create a Safety Net goal or Cash Reserve within your Betterment account. Save an amount equal to 3–6 months of expenses as quickly as you can. Once achieved, be sure to turn your 401(k) contributions back on. What if money is tight right now? We know times are hard for many people. First, we recommend looking for ways to cut back on non-essential spending. Little purchases can add up fast, and it’s better to give up a little now and continue the habit of saving. Additional steps: Check for temporary relief, including stimulus checks, student loan pauses, and mortgage breaks. If you expect a tax refund, file your taxes as soon as possible. If you have an emergency fund, consider using it. What if I need to use my retirement funds? If you have no emergency fund (or have used it all) and need money now, you may consider tapping into retirement accounts as a last resort. Fortunately, there’s a new Coronavirus-Related Distribution (CRD) that your plan may allow. This means you can: Access up to $100,000 from your account, with no withholding and no 10% early distribution penalty. Spread the income (and any income tax owed) over three years; but if you repay the distribution within 3 years, you won’t owe taxes. The CRD’s flexibility means it’s likely more beneficial than a 401(k) loan. That said, if your plan allows loans, you may be able to benefit from relaxed loan requirements, such as higher loan amounts and deferred repayments. Please contact your employer to determine if either of these options is available through your plan. What should I do if I’ve been furloughed or laid off? If you’ve been furloughed, you are technically still employed, so you can likely take steps outlined above. If you’ve been laid off, you have additional 401(k) considerations. Even if you can keep your 401(k) in your current employer’s plan, you may find that rolling over to an IRA provides you with additional flexibility. For example, you’re permitted to take a CRD from your IRA, just like the 401(k) CRD, which is a penalty-free withdrawal and can be repaid to avoid taxes altogether. Rolling over to a Betterment IRA means you can continue to take advantage of the same investment advice and platform features you had with your 401(k). -
The “Best” IRA Rollover Offers Are Not What They Appear
The “Best” IRA Rollover Offers Are Not What They Appear Before you bite on one of the “best” IRA rollover offers, it's important to read the fine print and ask yourself a few questions. Financial companies advertise all types of offers to incentivize you to roll over your old accounts. The “best” IRA rollover offers might include free trades, cash bonuses, or even "retirement matches." But before you bite on one of these offers, it's important to read the fine print and ask yourself a few questions. What are their fees—and are they hidden? Money managers don’t offer cash bonuses out of generosity. Often, managers that offer the largest cash bonuses can only afford to do so because it also charges the highest fees. Within a few months, a company will have recouped the entire bonus, but its fees stay sky high. Our recommendation? Do a little math on how much you’ll be paying per year to keep your money with a manager before you take them up on the cash bonus. You’ll likely find that the bonus is a drop in the bucket when compared to the fees you’ll be paying over the five, 10, or even 30 years until retirement. Additionally, the advertised fees are not always the only ones, and any hidden fees tend to be buried. It’s better to learn about them before you commit than to be surprised later. Account closure fees, in particular, are a mainstay in brokerage fine print. You might as well deduct the account closure fee from the cash bonus, as that portion of the bonus is really only a loan from the provider that you’ll have to repay if you decide to leave. 2015 IRA Offer Case Study: Merrill Edge Let’s say you were considering a rollover for your $20,000 IRA and wanted to take Merrill Edge up on its 2015 (the company changes its offers periodically, but you can see their standard cash current offer page here): $100 cash bonus, plus 300 free trades. Merrill’s offer is a typical example of one from a big brokerage. Merrill’s Offer What You Actually Received $100 Bonus Your take-home bonus is actually only $50 after Merrill’s $50 account closing fee. 300 free trades You won’t use all of these trades, as you only have 90 days to use them, according to the fine print.1 (Most reasonable investors make less than 300 trades over three months.) $6.95 per trade after 90 days You could end up paying $312 in your first year alone. While the first three months are free, the next nine aren’t. We assume that in order to reinvest your returns as they come on, and keep your portfolio balanced, you make five trades per month.2 Even if you trade less, you can see how quickly the bonus evaporates. Net of your cash bonus and free trades, you’ll still pay Merrill more than $260, or about 1.3% of your balance, in your first year as a customer. It gets worse from there. In Year 2, without the benefit of the bonus and with commission on every trade, that fee would increase to roughly 2% of your original balance, depending on market changes. Compare that with a Betterment account, which would charge you almost 90% less—0.25% per year. Do I really want this company to manage my money? So, you’ve done the math and know exactly how much you’ll be paying in fees relative to the bonus they’re offering. Ultimately, however, the cost of the product is only one of several considerations when choosing a provider. You should ask yourself these questions before choosing a provider, even if the offer looks like it’s the best one out there. Does the provider offer an adequate level of guidance for your savings? Are you confident that your money is working as hard as it could be? How is the company’s customer service and website? Why Betterment Is Different Before any bonuses, Betterment costs you much less. We typically offer one to 12 months of our service as a free trial, depending on when you sign up, the offer you use, and how much you deposit. If you don’t like our service, you can always move it to another brokerage or wealth manager at the end of your trial, free of charge.3 But we think you’ll stay. Not only are our fees low, but we offer an excellent investment experience—starting with personalized allocation advice for your money, a diversified portfolio of ETFs, and automated portfolio management—all of which is included in our low fee. No extra fees or hidden costs. For a $20,000 account at Merrill, the trading you would need to keep your funds invested and balanced would cost you roughly 2% of your balance in the second year. At Betterment, on the other hand, you would pay only 0.25%, for a savings of $350 for the year. Even as your account grows, the annual savings would remain significant.4 1 From Merrill Edge's original 2015 disclosure: “$0 trades begin within 5 business days of account opening and must be used within 90 calendar days; up to 300 trades per account. $0 trades are only applicable in the new account and are limited to online equity and ETF trades. Standard commission rates apply to trades in excess of the 300-trade limit or after 90 days.” 2 This is a very conservative estimate of how many trades Betterment performs for a customer. If the customer makes ongoing contributions, in addition to needing dividends reinvested, the number is significantly higher. 3 Betterment has no fees for closing an account. If you move investments outside of a rollover you will be responsible for any resulting tax liabilities. 4 We've updated our pricing structure since this article was published. Learn more at betterment.com/pricing. When deciding whether to roll over a retirement account, you should carefully consider your personal situation and preferences. The information on this page is being provided for general informational purposes and is not intended to be an individualized recommendation that you take any particular action. Factors that you should consider in evaluating a potential rollover include: available investment options, fees and expenses, services, withdrawal penalties, protections from creditors and legal judgments, required minimum distributions, and treatment of employer stock. Before deciding to roll over, you should research the details of your current retirement account and consult tax and other advisors with any questions about your personal situation. -
How to Roll Over Your 403(b) to Betterment
How to Roll Over Your 403(b) to Betterment Betterment makes rolling over your 403(b) simple and efficient. There is a lot of talk in the finance space about 401(k)s. While corporate employees are typically the beneficiaries of these plans, those who work for non profit organizations, hospitals, or educational institutions may be more familiar with a similar retirement savings plan, the 403(b). Just as a 401(k) does, a 403(b) provides you with a tax-advantaged way to save for retirement. You benefit from tax-free growth over time and depending on the options your employer offers, you’ll also get a tax break on either current contributions (traditional) or future withdrawals (Roth). When Switching or Leaving Jobs, Don’t Forget Your 403(b) When you leave a job where you have a 403(b), you have a few options for what to do with your retirement savings: Leave it in your old employer’s account. Roll over your 403(b) into your new employer’s 403(b) or 401(k) plan. Roll over your 403(b) into an Individual Retirement Account (IRA). Rolling over your 403(b) into an IRA can be a good choice because it gives you more control over your investment options, tends to have lower fees, and can ultimately hold funds from all of your previous work retirement accounts. At Betterment, your IRA is invested in our diversified, globally diversified portfolio of 12 asset classes. The portfolio is made up of index-tracking exchange-traded funds (ETFs), and you can personalize your own level of risk. How to Roll Over a 403(b) to Betterment Rolling over your old 403(b) is free. The first step is to create a Betterment account. Then, you can start your rollover online by clicking “Transfer or Rollover” at the top right-hand side of your home page. Complete Your Rollover Online It’s easy to start your rollover online. After clicking “Transfer or Rollover” at the top right-hand side of your home screen, answer simple questions about your 403(b) provider, the type of funds held in your account and their estimated values. Betterment will then send you an email with details on how to complete the transfer. You’ll want to contact your 403(b) provider and let them know that you’re rolling over your funds to Betterment. Your provider will release your 403(b) funds by issuing a check—either directly to us, or sent to you, which you can then forward to us. The same fund transfer process applies for any other employer-sponsored plan. Apples to Apples Remember that a traditional, tax-deferred 403(b) should be rolled over to a traditional IRA (otherwise your rollover funds may be subject to taxes). Though rarer, funds from a Roth 403(b), can be rolled over to a Roth IRA. If you’re not sure what type of retirement account you have, and which rollover account to set up, our guide makes it really easy and will help you find out your account type. Knowing your account type is important. For example, if you try to roll over a 403(b) to a Roth IRA, it’s considered a Roth conversion and you’ll likely owe taxes on that transfer of funds. Note that Betterment is not a tax advisor, and nothing in this article constitutes tax advice. If you have tax questions, you’ll want to consult a tax professional. (If you’re wondering about how to roll over an existing IRA to Betterment, you can do that with Betterment, as well.) Ask About Fees While it’s free to initiate a Betterment IRA rollover, your 403(b) provider may charge you for closing your account. As you’re starting a partial rollover of your 403(b) funds, ask your current plan provider whether you will incur any fees. Once your Betterment rollover account is setup, you’ll begin to benefit from some of the lowest investing fees in the industry. Whatever you do, don’t procrastinate or let your investments sit idly by with your company’s 403(b) provider. Roll your 403(b) over to Betterment now. Disclaimer: When deciding whether to rollover a 403(b) account or other retirement account, you should carefully consider your personal situation and preferences. Relevant factors may include that: (i) 403(b) 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 403(b) accounts may also allow for loans or distributions in a broader set of circumstances than IRAs. (iv) Some 403(b) plans may also offer specific educational and advisory services to participants that are unavailable to some IRAs. (v) Some 403(b) plans may have lower fees and expenses than some IRAs. (vi) Some IRAs may offer a broader range of investment options than some 401(k) plans. (vii) Special tax rules may apply to the rollover of employer securities. You should research the details of your 403(b) and speak to a tax and other advisors about whether the features of your 403(b) 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 your rollover request, Betterment will be acting at your direction.
Looking for a specific topic?
- Account protection
- Behavioral finance
- Buying Real Estate
- Career Planning
- Charitable Giving
- Connecting accounts
- DIY Investing
- Debt
- Diversification
- ESG Investing
- Earning Rewards
- Education Savings
- Estate Planning
- Fiduciary Advice
- Filing Taxes
- Financial Advisors
- Financial Goals
- Funds and Investments
- Health Savings
- Inheritances
- Insurance
- Investing Philosophy
- Investing Risk
- Investment Accounts
- Investment Portfolios
- Market volatility
- Markets
- Performance
- Product news
- Public statements
- Reducing Spending
- Research
- Retirement Income
- Retirement Planning
- Robo-Advisors
- Rollovers
- Salaries and Benefits
- Saving Money
- Savings Accounts
- Security
- Shared Finances
- Tax Optimization
- Tax Planning
- Transfers
- Using IRAs
- Using a 401(k)
No results found