• How do I set up a Tax-Coordinated Portfolio?

    Last Updated: September 27, 2016 9:02AM EDT

     

    Log in to your Betterment account. Click “Set up”at the top of the Summary page to set up Tax-Coordinated Portfolio. Next, follow the steps to set up your portfolio. 

    First, you will select the tax-advantaged goals you would like to include in your Tax-Coordinated Portfolio. This includes:
    • Traditional IRA
    • Roth IRA
    • SEP IRA
    • Traditional 401(k) - only available if Betterment currently manages your 401(k)
    • Roth 401(k) - only available if Betterment currently manages your 401(k)
    Second, you will select the taxable goal you would like to include in your Tax-Coordinated Portfolio. You can only select one taxable goal to include in your new portfolio. You should select a long-term investment goal--a goal with the same time horizon as your retirement accounts.

    Third, you will set an allocation for your entire Tax-Coordinated Portfolio. We will recommend an allocation based on the information you have provided about yourself and your long-term goal.

    Fourth, you will review your new portfolio and click “Finalize new portfolio” to confirm the changes.

    Watch the video below to see how it works here.

    For more information on our estimates and Tax-Coordinated Portfolio generally, see full disclosure here.
  • How does Tax-Coordinated Portfolio save me money on taxes?

    Last Updated: September 27, 2016 9:02AM EDT
    Once you set up your Tax-Coordinated Portfolio, Betterment will look across all of your long-term investing accounts held at Betterment and automatically reorganize which assets are held in which accounts. 

    We’ll generally place your least tax-efficient assets in your tax-advantaged accounts (IRAs and 401(k)s), which already have big tax breaks, while diverting the most tax-efficient assets to your taxable account. In practice, each asset’s after tax return is considered in the context of every available account. The assets are generally then arranged (unequally) across all coordinated accounts to maximize the after-tax performance of the overall portfolio. 

    We do this in a way that keeps your overall allocation the same, while working to boost your after-tax returns. You can read more about how we do this in our white paper. For more information on our estimates and Tax-Coordinated Portfolio generally, see full disclosure here.

    For more information on our estimates and Tax-Coordinated Portfolio generally, see full disclosures here.
  • Is there a downside to using a Tax-Coordinated Portfolio?

    Last Updated: September 27, 2016 9:02AM EDT
    Asset location is a long-term strategy. While it may lower taxes in the short-term, the greater benefits come from a longer investment period. If you’re not planning to invest over a longer horizon, you may still benefit from paying fewer annual taxes, but are likely to see less benefit when it comes time to withdraw your money.

    If all of the accounts you are including in your Tax-Coordinated Portfolio have the same allocation and time horizon, there is little risk to using a Tax-Coordinated Portfolio. Note that Tax-Coordinated Portfolios will still be subject to market risk. If you choose to include a goal that has a different allocation than your tax-advantaged accounts, just know that you are changing the time horizon on that goal. Tax-Coordinated Portfolio is not designed for investors who qualify for a marginal tax bracket of 15% or below. 

    You can read more these and other Special Considerations in our white paper. For more information on our estimates and Tax-Coordinated Portfolio generally, see full disclosures here.
  • What happens if I need to withdraw from one of the goals in my Tax-Coordinated Portfolio?

    Last Updated: September 27, 2016 9:02AM EDT
    Asset location is a strategy meant for long-term investors that is designed to save taxes year after year. However, you will always have access to your funds, with or without this strategy. So while unplanned withdrawals are always an option, activity in a taxable account that results in sales (such as allocation changes or withdrawals) can cause additional taxes, as with any investment account. 

     For more information on our estimates and Tax-Coordinated Portfolio generally, see full disclosures here.
  • How do I get the most out of my Tax-Coordinated Portfolio?

    Last Updated: September 27, 2016 9:02AM EDT
    Asset location works when you have more than one funded account that is taxed differently (such as a taxable, Traditional IRA, and Roth IRA). You should expect more benefit if the accounts are funded with relatively similar balances, and the most benefit if you have meaningful funds in all three types of accounts.

    Tax-Coordinated Portfolio can only manage investments held at Betterment. To maximize your tax-saving opportunities, consider moving additional accounts to Betterment.

     For more information on our estimates and Tax-Coordinated Portfolio generally, see full disclosures here.
  • How does Tax-Coordinated Portfolio affect my external accounts?

    Last Updated: September 27, 2016 9:02AM EDT
    Having a Tax-Coordinated Portfolio at Betterment does not affect your external accounts. We can only coordinate accounts that are held with Betterment, so the more you roll over or transfer to your Tax-Coordinated Portfolio, the bigger potential benefit you should expect.

    For more information on our estimates and Tax-Coordinated Portfolio generally, see full disclosures here.
  • How does Tax-Coordinated Portfolio affect my tax forms?

    Last Updated: December 14, 2016 2:37PM EST
    Your Tax-Coordinated Portfolio will not change the forms you receive. You'll get the exact same forms we send today (1099-B, 1099-DIV, 1099-R). These forms will correspond to each account as they would have before. 

    For more information on our estimates and Tax-Coordinated Portfolio generally, see full disclosures here.

     
  • Can I use a Tax-Coordinated Portfolio with my Betterment joint account and/or my Betterment trust?

    Last Updated: September 27, 2016 9:02AM EDT
    We don’t support asset location across joint accounts or trusts just yet. We’ll let you know when you can include those shared accounts in your Tax-Coordinated Portfolio.

    For more information on our estimates and Tax-Coordinated Portfolio generally, see full disclosures here.
  • Can I use a Tax-Coordinated Portfolio with my Betterment 401(k)?

    Last Updated: September 27, 2016 5:30PM EDT
    Yes, if your employer uses Betterment for Business to manage their 401(k) plan, you can include your Betterment 401(k) in your Tax-Coordinated Portfolio just like you would with your IRAs. 

    If your employer does not use Betterment for their 401(k), you can refer them here.
  • Should I roll over before setting up my Tax-Coordinated Portfolio?

    Last Updated: September 27, 2016 9:03AM EDT
    Since we can rebalance tax-advantaged accounts (as compared to your taxable accounts) without causing you taxes, you may want to consider rolling over tax-advantaged accounts (like IRAs) first and then funding your taxable account. Funding your taxable account first won’t cause any harm, but because we’re protecting your account from any unnecessary taxes, it may take longer for your portfolio to reach its optimal location. Learn more about rolling over assets to Betterment and important considerations here.

    For more information on our estimates and Tax-Coordinated Portfolio generally, see full disclosures here.
  • Can I roll over into my Tax-Coordinated Portfolio after I set it up?

    Last Updated: February 16, 2017 2:51PM EST
    Yes. You can initiate a rollover by clicking “Rollover” on the Transfer tab of your Betterment account and following the instructions.

    If you haven’t yet set up your Tax-Coordinated Portfolio, you may want to consider rolling over first. Adding an IRA after setting up your portfolio won't cause any harm, but it may take longer for your portfolio to reach its optimal location. This is because we protect your portfolio from unnecessary taxes by making smaller rebalances in your taxable accounts.

    For more information on our estimates and Tax-Coordinated Portfolio generally, see full disclosures here.
  • Can I change the allocation of my Tax-Coordinated Portfolio?

    Last Updated: September 27, 2016 9:03AM EDT
    You can change it at any point by going to the Advice tab. It’s important to remember that changing your allocation could trigger taxable events, so you should be mindful about changing this, unless your investment objectives have changed. Don’t worry, our Tax Impact Preview will show you a real-time tax estimate before you confirm the transaction.

    If you decide you no longer want these accounts coordinated, email, chat, or call us and we’ll be happy to help.

    For more information on our estimates and Tax-Coordinated Portfolio generally, see full disclosures here.
  • How do I add accounts to my Tax-Coordinated Portfolio?

    Last Updated: September 27, 2016 9:03AM EDT
    To add an account to your Tax-Coordinated Portfolio, click the “Manage” button at the top right-hand corner of your Summary page and follow the prompts.

    For more information on our estimates and Tax-Coordinated Portfolio generally, see full disclosures here.
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