Tax-Coordinated Portfolio

If you have long-term investments in multiple accounts, Betterment's Tax-Coordinated PortfolioTM can apply an asset location strategy to boost your after-tax returns. Our research estimates an additional benefit of 0.48% each year on average. Over 30 years, that's an extra 15% in your pocket.1

Tax Loss Harvesting+

We carefully assess your portfolio to realize losses, which can offset capital gains. In a typical scenario, Tax Loss Harvesting+TM could add an estimated +0.77% in after-tax returns annually, in your taxable account.

TaxMin Lot Selling

Choosing which lots of shares to sell can greatly impact the investment taxes you pay. Using our TaxMin cost basis accounting method, we go beyond the industry standard (FIFO). We intelligently liquidate each of your lots when you withdraw to minimize your capital gains.

TaxMin

$3,883 taxes saved vs. Industry Standard (FIFO) $0

taxes saved

Based on an actual customer withdrawal of \$100k in Apr 2014 with tax rate of 30% LT, 50% ST. About this data

Tax Impact Preview

Betterment is the only investing platform to offer real-time tax information. Tax Impact Preview shows an estimate of the taxes you may owe before you change your allocation or make a withdrawal. This encourages smart investor behavior, and can ultimately increase your after-tax returns.

• Tax-Efficient Securities

We only invest in exchange-traded funds (ETFs), which are generally more tax‑efficient compared to mutual funds. ETFs combine low-cost indexing and tax efficiency to offer a truly flexible, modern investment product.

• Asset Location

We tax-optimize your asset location at multiple levels. If you use a Tax-Coordinated Portfolio (TCP), we optimize across multiple accounts. Without TCP, we optimize at the account level by placing municipal bonds in your taxable accounts, where they will pay income exempt from federal tax, and by placing core bonds in your IRA accounts, where they can grow tax‑free.

Smart Rebalancing

We use every cash flow and dividend to rebalance your portfolio, which reduces the need to sell shares to rebalance. This can lower your capital gains tax over time, and maintains the risk and return of your portfolio without you lifting a finger. Plus, our sophisticated infrastructure will never cause short-term capital gains when rebalancing.

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1 The estimated additional annualized return of 0.48% assumes that the initial balance is equally distributed across three types of accounts: a taxable account, a tax-deferred account (such as a traditional IRA) and a tax-exempt account (such as a Roth IRA). They also assume a 70% allocation to stocks across the entire 30-year period, and a California resident in a 28% federal tax bracket both during the entire period, and at liquidation. The incremental return was calculated using the Monte Carlo projection method across more than 1,000 simulated market scenarios. It compared the total after-tax value of all three accounts when managed by TCP to the benchmark, which was the after-tax value of all the accounts under the same market scenarios, but uncoordinated (i.e. managed by Betterment separately, as standalone Betterment portfolios). As such, these projections make no claim about the value of Betterment's service as compared to any particular non-Betterment investing strategy. Instead, they estimate specifically the value of the TCP service, as applied to Betterment's baseline passive investing strategy. There are additional assumptions around these estimates, which are necessarily numerous and complex, due to the nature of this projection method. TCP may not be suitable for taxpayers subject to a Federal tax bracket of 15% or lower. You should not use TCP to coordinate accounts with materially different time horizons. TCP is not optimal for accounts which you rely on for liquidity in case of unforeseen circumstances. For much more on this research, including additional considerations on the suitability of TCP to your circumstances, please see our white paper and our full disclosures.