• How do I transfer my IRA to Betterment?

    Last Updated: May 05, 2017 11:20AM EDT

    Betterment uses a direct transfer process to transfer existing IRAs into Betterment IRA accounts.  These transfers are non-reportable transactions, which avoids any tax consequences for the user.  In a direct transfer your current IRA provider generally sends Betterment a check or wire for the value of your account. 


    To get started, go to the Transfer page of your account and click "Rollover". You'll answer a few questions and receive full instructions to complete your IRA transfer, based on your provider's requirements. You'll need to sign transfer paperwork that Betterment provides you to initiate the transfer.

    Additionally, if you have a special retirement plan like an inherited IRA, then please contact us at rollovers@betterment.com and we can guide you the process.

    These instructions only apply if you'd like to roll your funds into a Betterment IRA. If you'd like to transfer funds into an existing Betterment 401(k) plan through your employer, please contact us at support@betterment.com for separate instructions. 

     
  • How can I rollover my 401(k), 403(b) or similar plan into Betterment?

    Last Updated: February 16, 2017 2:40PM EST
    There are many benefits to rolling over a retirement plan into Betterment. We'll use the "direct rollover" method to prevent any withholding or negative tax consequences for you. This entails your current provider sending us a check of your funds directly, for your benefit. 

    To get started, go to the Transfer page of your account and click "Rollover".

    You'll answer a couple questions, and receive an email with the full, personalized instructions (how the check should be made out and where it should be sent) to complete your rollover.

    Please note that Traditional funds must be rolled over into a Traditional IRA and Roth funds must be rolled over into a Roth IRA. If you aren't sure which type(s) of funds you have, contact your current provider or HR representative. You can always convert a Traditional IRA into a Roth IRA after the rollover.

    To see if your retirement plan is eligible to be rolled over into a Roth or Traditional IRA, please check the IRS Rollover Chart. You can also check out our guide to retirement plans

    These instructions only apply if you'd like to roll your funds into a Betterment IRA. If you'd like to transfer funds into an existing Betterment 401(k) plan through your employer, please contact us at support@betterment.com for separate instructions. 
     
  • What is a Roth Conversion and how will it affect my taxes?

    Last Updated: April 24, 2017 2:44PM EDT
    A Roth conversion is a way to transfer all or part of your Traditional IRA into a Roth IRA. Since Betterment cannot provide tax advice on how this will affect your specific tax situation, we recommend you consult a tax advisor and IRS Publication 590
     
    Benefits of a Roth Conversion:
    • You generally won’t have to pay taxes when you withdraw money at retirement, as long as you have had the account for more than five years and are over 59½ or disabled. If you think your tax rate will be the same or higher than your current rate when you withdraw your money, paying taxes now could be beneficial.
    • There are no required minimum distributions after you retire.
    • There are no income limits to converting to a Roth IRA. Find out more by clicking here.

    ​Disadvantages of a Roth Conversion:
    • You may have to pay income taxes now on conversion amounts that were previously deducted from your income. Betterment will not withhold these funds for you.
    • The converted amount will be added to your adjusted gross income for the year, and could potentially increase your tax bracket overall. 
    • Taxpayers with incomes or an adjustable gross income (AGI) over $200,000 who file individually or $250,000 for married couples filing jointly could be subject to a 3.8 percent tax on income from interest, dividends, annuities, royalties and rents which are not derived in the ordinary course of trade or business.  Exceptions apply. You can read more about the tax by clicking here.​​
    Please note that if you live in Michigan, there are special requirements for completing your conversion.
  • How do I convert my Betterment Traditional IRA to a Roth IRA?

    Last Updated: April 24, 2017 2:46PM EDT
    Anyone, regardless of income, is eligible to convert his or her Traditional IRA into a Roth IRA. To do so, log into your account and click on your name at the top right hand corner of your Summary page and then "Settings". Select the "Accounts" sub-header. To the far right of your Traditional IRA account, click the ellipsis button (...) and select "Convert IRA to Roth" and follow the prompts..
     
    Note that you will not see the option to do this until your Traditional IRA has been funded. The wizard will guide you through the steps (you can decide exactly how much to convert). If you don't yet have a Roth IRA account, this process will create one for you. 
     
    Important things to note:
    • If you would like to complete a conversion for the 2017 tax year, the IRS requires that the conversion completes by December 31, 2017. Please note, if the last day of the year falls on a weekend, the conversion needs to be completed during market hours on the last business day of the year.
    • Betterment does not withhold taxes for you, because it reduces the amount of money that can grow tax-free in your Roth IRA.
    • Generally, any funds you convert from Traditional to Roth which were previously deducted will be subject to income tax. Since Betterment cannot provide specific tax advice, we recommend you consult a tax advisor and the IRS Publication 590.
    Please note that if you live in Michigan, there are special requirements for completing your conversion.
  • Can I transfer my spouse’s IRA account into my own?

    Last Updated: April 24, 2017 2:48PM EDT
    You cannot roll over a spouse's IRA into your Betterment account, as the IRS does not allow for joint ownership of IRAs. Your spouse will need to create their own Betterment account to roll their IRA into.

    If you and your spouse want to sign up for individual accounts, we can "household" the two accounts which will combine your balances for the purposes of meeting minimum balance requirements at our various pricing plans. Please email us with both of your email addresses if you would like to “household” your accounts, and we will make the necessary changes on our end.

    Additionally, we do allow you to add account beneficiaries. This would give the indicated beneficiary immediate ownership and transfer rights should anything happen to you. You can edit this at any time by clicking "Settings" on the top right hand side of the page, then "Accounts" from the sub-header. Once on this page, you will enter the beneficiaries information for the individual accounts.
  • What is a medallion signature guarantee?

    Last Updated: June 16, 2016 10:34AM EDT
    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.
  • Can I undo a Roth IRA conversion?

    Last Updated: April 24, 2017 2:49PM EDT
    If you change your mind prior to paying your annual taxes and decide you do not want to convert your IRA, you have the option to do a recharacterization.  This is a process which allows you to redefine all or part of your Roth IRA conversion as a contribution to a Traditional IRA.  The typical deadline for a recharacterization is the due date of your tax return (normally April 15 of the year following the conversion, or October 15 if you file an extension).  You should consult with a tax professional and the IRS Publication 590 about the specifics of your situation.

    You can undo a Roth conversion by logging into your account, clicking on your name at the top right hand corner of your Summary page and then "Settings". Once on the settings page, be sure to select the "Accounts" sub-header. Alternatively, you can log in here

    To the far right of your Roth IRA account, click the ellipsis button (...) and select "Undo Conversion" and then follow the prompts. The wizard will guide you through the steps.

    Note: Once you recharacterize a contribution, you are not allowed to reconvert that amount to a Roth IRA before the beginning of the tax year following your initial conversion, or before 30 days after the day you recharacterized your contribution from a Roth IRA, whichever is later.
  • Do I have to take my Required Minimum Distribution prior to converting to a Roth IRA?

    Last Updated: June 16, 2016 2:04PM EDT
    Yes. If you are 70 ½ or older, you must take your Required Minimum Distribution (RMD) before you can convert your Traditional IRA to a Roth IRA.  

    Our conversion process has a step to do this. Note that IRS rules allow you to take your total RMD from one or more IRA accounts, including those not held at Betterment. Therefore, you can choose to take your RMD from Betterment or from a different IRA account.  

    Please consult a tax advisor and the IRS Publication 590 for additional information related to your specific situation.
  • If you live in Michigan and want to withdraw or convert your IRA...

    Last Updated: June 16, 2016 2:04PM EDT
    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 federal or 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). 
  • How do I know what type of retirement account I have?

    Last Updated: April 24, 2017 2:53PM EDT
    Knowing the type of retirement plan you currently have is an important first step in rolling that plan over to a qualified Betterment Traditional IRA or Roth IRA. The Roth versions of any of these plans will need to be rolled into a Betterment Roth IRA. 

    Various plan types: 
    • 401(k) - Standard pre-tax contributions made by the employee and often includes some matching by the employer. 
    • Roth 401(k) or "Designated Roth Account" - After-tax contributions made by the employee. 
    • 403(b) - Public schools, colleges, universities, charities, state governments, local governments and other tax-exempt entities under section 501(c)(3) of the IRS code are able to offer 403(b) plans.
    • 401(a) - A 401(a) is similar to a 401(k) but are custom-designed plans often only offered to key employees of public sector institutions.  They can be rolled into an IRA after separation from service.
      457 - Public schools, colleges, universities, charities, state governments, local governments and other tax-exempt entities under section 501(c)(3) of the IRS code are able to offer 457 plans.
    • Thrift Savings Plan (TSP) - TSP's are only offered by the federal government to government employees – this can include civilians and military personnel. Other than this plan being sponsored by the federal government rather than a private employer, the Thrift Savings Plan functions much like a 401(k).
    • Defined Benefit Plan or Pension - Contributions are calculated employee benefits using a formula. This formula will often include factors such as salary history and duration of employment. Employers have control over investments, risk, and investment portfolio features.
    • Defined Contribution Plan [401(k), 403(b) plans are also this type] - These often have multiple investment options – stocks, mutual funds and other options may be available in these plans. Employees typically decide if they will contribute and how much of a contribution made from salary deductions.
    • Profit-sharing (Keogh) - These plans are used by self-employed individuals.  They can be rolled into an IRA if they are not being contributed to.
    • Money-purchase plan - These plans are set up by your employer.  They can be rolled over to an IRA after separation from service, or according to the plan document.
    Please note that Traditional (pre-tax) funds will need to be rolled over into a Traditional IRA, and Roth (post-tax) funds will need to be rolled over into a Roth IRA. If you're unsure if which kind(s) of funds your retirement plan has, please contact your current provider. You can also convert your Traditional IRA into a Roth IRA within Betterment if you wish to do so.

    If you are rolling over a Traditional IRA, Roth IRA, Simple IRA or SEP IRA, please see our IRA rollover article for instructions.

    As always, you should always consult a tax advisor and IRS Publication 590 to determine what type of IRA is right for you and how each type of rollover will impact your personal financial situation. As Betterment is not a tax advisor, we will not be able to provide tax advice.
  • Can I transfer an Inherited IRA/401(k) or other retirement plan?

    Last Updated: April 24, 2017 2:56PM EDT
    Yes, you can transfer an inherited retirement plan. The process is called a trustee-to-trustee transfer. Your current provider will send us a check of your funds directly, for your benefit. We will assist you throughout the whole transfer and set up process, so if you'd like to get started, please email us or give us a call at 888.428.9482.

    With Inherited IRAs, you may need to take Required Minimum Distributions (RMDs). At this time, Betterment does not automate calculation of RMDs, though we hope to provide this feature in the future.

    You will need to calculate your RMD by reviewing the “IRA beneficiaries” section of IRS Publication 590. We will provide the fair market value of your IRA by December 31st of every year with your tax forms, and you can calculate your RMD using this amount.

    According to IRS rules, you will not be able to contribute further to your Inherited IRA at Betterment.




     
  • Why do I need to sell my investments at my current IRA provider?

    Last Updated: June 02, 2017 10:28AM EDT

    If you want to transfer your IRA to Betterment, you will need to sell your investments. Before we can invest your retirement funds in our fully diversified portfolio, you will need to sell your current holdings at your current IRA provider. Many providers will not accept our liquidation instructions so this will help facilitate this process. 

    Selling your investments at your current provider is often quicker and lower cost than Betterment authorizing this on your behalf. Please note, selling your investments will not result in a taxable event.

     

     
  • How much can I contribute to an IRA and what is the deadline?

    Last Updated: April 24, 2017 3:07PM EDT
    The annual limits for 2017 IRA contributions are $5,500 for individuals under 50 years old, and $6,500 for those who are 50 and over.  The limit is assessed across all of your accounts, so if you have reached the limit with one provider you are not allowed to contribute to another account. You can max out your IRA contributions by creating a new deposit in your Traditional IRA or Roth IRA.

    There are additional contribution limits to a Roth IRA, and deduction limits to a Traditional IRA, based on your income and other factors. You can review these here, or speak with your tax advisor.
  • How do I use the indirect rollover process to move my IRA into Betterment?

    Last Updated: May 24, 2017 12:00PM EDT
    The indirect rollover process involves withdrawing from your current IRA and re-depositing the funds into another IRA within 60 days. The rule limits the use of an indirect rollover process to once per individual per 12 month period. If you have used this method in the past 12 months, here are instructions to the direct transfer process instead.

    This method avoids any negative tax consequences and there are just two easy steps:
    1. Ask your provider for an early distribution with no withholding. Your provider may call it a "premature distribution", and this is the same thing. Again - there are no negative tax consequences for this.
    2. Deposit that money into your Betterment IRA within 60 days to avoid tax penalties. Log in and go to the Transfer tab. Enter the amount of your rollover and select "IRA Rollover" as the contribution type:



    Exceptions & Special Conditions:
    • The 12 Month Rule. If you have used the indirect rollover method in the last 12 months, there could be further IRS restrictions. Let us know if this applies to you, and we'll walk you through a direct transfer.
    • Note on Form 1040 at Tax Time. Note your rollover on Form 1040 using the 1099-R your old provider will give you when you file your taxes for this year. Betterment will not give you any tax forms, but will report your rollover contributions to the IRS directly in May on Form 5498.
    • Same-Type Rule. You can only roll over between IRAs of the same type. A Traditional IRA, SIMPLE IRA or SEP IRA can only be rolled over into a Betterment Traditional IRA. A Roth IRA can only be rolled over another Roth IRA.
    • Contribution Limit. Rollover contributions do not count towards your IRA contribution limit, since you're only moving over funds not adding to them. 
    • Simple IRAs. Note that you cannot roll out a SIMPLE IRA before you've held the account for at least two years, according to IRS rules.
    • Spousal IRAs. Note that you cannot roll over a spouse's IRA into your Betterment account - your spouse will need to create their own Betterment account to roll their IRA into. 
    • Inherited IRAs and Annuities - If you are rolling over an Inherited IRA or a qualified annuity, we'll do a trustee-to-trustee transfer instead, to avoid negative tax consequences. Please contact us to get started. You can read more about rolling over inherited IRAs into Betterment here.  To read more about this process and to find specific answers to your tax questions, refer to the IRS Publication 590.
  • Can I roll over my active 401(k) (or other employer sponsored plan) into Betterment?

    Last Updated: April 24, 2017 3:15PM EDT
    Your plan provider likely will not let you roll over a 401(k) while it is still active. This same logic applies to 403(b)s, Pensions and other employer sponsored retirement plans. For most providers, they require you to be retired or no longer employed at the company to be allowed to roll over retirement funds. Ask your provider to see what their rules are.
  • Can I transfer my existing SEP IRA to Betterment?

    Last Updated: May 08, 2017 3:31PM EDT

    Yes. Simply go to the Transfer page of your account and click "Rollover". There are no negative tax consequences for a direct transfer.

  • Who is Sunwest Trust?

    Last Updated: April 24, 2017 6:26PM EDT
    Betterment uses Sunwest Trust as our IRA administrator and custodian for our IRA accounts. When it comes to an IRA, there are two types of “custodians” playing complimentary roles in ensuring the proper administration and effective management of your account.

    An IRA is essentially a trust account - an account set aside for a beneficiary (you) for a later time - that receives tax-advantaged benefits in exchange for complying with contribution and distribution restrictions. As such, there is a necessity to ensure the IRA account is administered properly with regards to IRS requirements, which is why we use Sunwest Trust as our IRA administrator custodian. The funds themselves are held and managed by Betterment, who is the broker-dealer custodian.

    At Betterment, we take the security of your funds very seriously and are always doing everything in our power to ensure it. As a SEC and FINRA register broker-dealer with SIPC insurance which cover each account type up to $500,000, you can rest assured that your funds are being managed with your best interests in mind.
  • Which providers are supported by Betterment’s e-fax IRA rollover process?

    Last Updated: September 26, 2017 5:38PM EDT

    We currently support the following providers for paperless, e-fax rollovers:

    • American First
    • BPAS (Benefit Plans Administrative Services)
    • Capital One Bank
    • Community America Credit Union
    • Contra Costa Federal Credit Union
    • CIT Bank
    • Edward Jones
    • Exeter Trust Company
    • First Trust Company of Onaga
    • FTJ Fundchoice
    • Fidelity
    • Interactive Brokers
    • Invesco Investment Services
    • Jackson (Fixed / Index)
    • Janus
    • Lincoln Financial (Annuity)
    • Mass Mutual
    • Nationwide Financial
    • Northcoast Asset Management
    • Options House
    • Penn Mutual
    • Pentagon Federal Credit Union
    • Publix Employees Federal Credit Union
    • Quest IRA
    • Raymond James
    • RBC
    • Self Directed IRA Services
    • Sterne Agee
    • Thrivent Financial
    • TradePMR
    • Waddell & Reed
    • Whitney Bank
    • Woodbury Financial Services


    *Please note that after submitting your rollover to Betterment, it typically takes three weeks for your prior provider to complete the transfer.

  • Where do I mail my rollover check?

    Last Updated: April 24, 2017 6:28PM EDT
    If you receive a check for a rollover or transfer made out to "Sunwest Trust", you can mail the check to one of the two addresses:

    Regular Address:
    Sunwest Trust
    P.O Box 203945
    Dallas, TX 75320

    Overnight Address:
    Wells Fargo Lockbox
    Sunwest Trust
    2975 Regent Blvd #203945
    Irving, TX 75063

    Please note that you should never mail checks to us if they are made out to your name directly, as we cannot accept checks made out to you.
  • How much have I contributed to my Betterment IRAs so far, and what is the deadline?

    Last Updated: May 08, 2017 4:20PM EDT

    You have two options:

    1. On the Transfer tab, as you proceed to make a deposit into your IRA, we will inform you of how much you have remaining to contribute based on the total contributions made here into your Betterment IRAs. Note that this does not consider any IRA contributions you have made outside of Betterment.
    2. You can also check your Betterment IRA contributions by accessing the Activity tab in your account. Under the “SELECT AN ACCOUNT” dropdown, select your Traditional IRA or Roth IRA. Update your date range and ensure all filters are unchecked except for “Deposits.” Once you do this, click the “Download as CSV” button, which will give you the ability to sum all of your contributions for the year thus far.
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