Tax Coordination

Withdrawing Funds from Tax-Coordinated Portfolios Betterment's Tax-Coordinated Portfolio (TCP) strategy is designed for long-term investors to enhance after-tax returns by optimizing asset location across different account types. However, withdrawals from TCPs can have tax implications and may affect the portfolio's balance. Here's what you need to know: Impact of Withdrawals on Tax Coordination Potential Tax Consequences: Making withdrawals or transfers from accounts within a TCP can lead to ...

Log in to Betterment. From the menu, select the account you wish to include in your Retirement goal with Tax Coordination. Select "Goal Settings" and choose "Setup Tax-Coordination."

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 retirement goal using Tax Coordination, 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 ...

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 important considerations before rolling over assets to ...

If you are investing in multiple accounts, a sophisticated tax optimization strategy known as asset location can increase your after-tax returns. While asset location requires detailed, continual work if you're trading on your own, our Tax Coordination approach is automated, and is built into retirement goals at Betterment. Our Tax Coordination feature optimizes and automates a strategy called asset location for your retirement goals. Asset location can deliver additional after-tax returns ...

Yes, you can transfer an account via the ACATs system that has been part of a Tax-Coordinated Portfolio (TCP). What Happens When You ACATs Out a Tax-Coordinated IRA: Following the outbound ACATs, there will be a liquidation of fractional shares that will be sent as a cash residual. Following the liquidation in the IRA, there may be some rebalancing that takes place in the Taxable account, but Betterment should prioritize losses and minimize the taxable impact. Please note: The principal ACATS ...

To use Tax Coordination on another account, choose your Retirement Goal from the menu on the left after logging in on a web browser, and then scroll down and choose “+ Add new account.”

You can do so by clicking on your Retirement goal > Settings > Feature (Tax-Coordination) > Edit > Modify Tax Coordination > I no longer want Tax Coordination > Send request to Customer Support, and completing the flow. You will be given the opportunity to leave a note regarding your intentions/questions for the Customer Support team that handles those requests. Note: Requesting tax-coordination to be disabled does not automatically disable TCP right away. The request is sent ...

Tax Coordination, Betterment's automatic approach to asset location, is available in Retirement Goals. Currently, Tax Coordination is not available for joint accounts or trusts.

To add an existing account to Tax Coordinated goal, choose your Retirement goal from the menu on the left after logging in on a web browser, then select the “Settings” tab, “Edit tax-coordination”, then “Include another account.”

You can change the overall allocation of your Retirement Goal with Tax Coordination at any point, by selecting your retirement goal from the menu and then clicking "Portfolio Analysis". You'll be able to review your current allocation and Betterment's suggestion for you. When ready to make an adjustment, click " Adjust." It’s important to remember that changing your allocation could trigger taxable events. Don’t worry, our Tax Impact Preview will show you a real-time tax estimate before you ...

Tax Coordination is designed to avoid rebalancing that would realize taxable gains as a function of its regular tax-efficient rebalancing formula. Regular rebalancing as a result of tax-coordination will occur in your taxable account without realizing taxable gains when possible (for example, when securities are trading at a loss). However, in certain circumstances, rebalancing may occur in the taxable account portion of a TCP that realizes taxable gains. For example, withdrawals or transfers ...

Yes, if your employer uses Betterment for Business to manage their 401(k) plan, you can use Tax Coordination for your Betterment 401(k), just like you would with your IRAs. Both will exist within your Tax-Coordinated Retirement goal. If your employer does not use Betterment for their 401(k), you can refer them.

Tax Coordination 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.

Having Tax Coordination 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 accounts, the bigger potential benefit you should expect.

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 for Tax Coordination have the same allocation and time horizon, there is little risk to using Tax Coordination. Note that Tax ...

Once you set up Tax Coordination, 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 ...

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