See all articles

Thinking of Transferring an IRA to Betterment?

Whether you manage your IRAs yourself, or have another advisor doing so, there may be some reasons to consider moving them to Betterment.

By John Wittig

Manager, Investment Advisor Representative, Betterment |

Published Mar. 02, 2023

Thinking of Transferring an IRA to Betterment? Mar 2, 2023 11:11:53 AM Whether you manage your IRAs yourself, or have another advisor doing so, there may be some reasons to consider moving them to Betterment. Some folks have IRAs because they rolled over former employer-sponsored plans (like a 401(k), 403(b), pension plan, etc.). Others start IRAs via direct contributions. And savvy investors may have done both. Saving in IRAs can help investors reach their retirement goals, but the abundance of options for managing them can make it difficult to determine which strategy is best suited to your needs. Whether you're managing your IRA(s) on your own or paying an advisor to do it for you, you may not be making the most of your money. At Betterment, we invest your money in a low-cost, globally-diversified portfolio, and we offer personalized advice while acting in your best interest. How can you determine the right move for you? Let’s talk about it. In this guide, we’ll: Explain your options for managing IRAs. Walk through key questions you should ask when making your decision. Talk about some considerations to keep in mind when transferring your IRA account to Betterment. Show you how to get started. What can you do with your IRA(s)? IRA accounts can be a great tax advantaged way to save for retirement. While they generally offer more flexibility compared to employer-sponsored plans, it can be easy to be overwhelmed by your potential options: Keep them at your current provider(s) Roll them over to your current or future employer’s plan (if your plan allows) Use the funds for non-retirement needs, though there could be a tax penalty Transfer them to a platform like Betterment Some investors choose to “self-direct” their IRA(s) by selecting and managing their own investments while others have a dedicated advisor manage their IRA(s) for them. If you’re happy with your current strategy, you can always keep your IRA funds with your current institution(s). Alternatively, using a low-cost, transparent advisor that’s legally bound to act in your best interest can help you navigate many of the challenges that come with investing and focus on the factors you can control. At Betterment, our diversified, expert-built portfolios, automated portfolio management, and fiduciary advice take the guesswork out of managing your IRAs. While the flexibility of IRAs offers some benefits, it may make sense to rollover your IRA funds into your current or future employer-sponsored retirement plan, such as a 401(k). There are many reasons moving funds into your active employer plan may be optimal, but it’s often performed when investors are attempting more complex Roth conversion strategies. However, it’s essential to confirm whether your plan accepts rollovers as not all plans do, and Roth IRA funds are not eligible for a rollover into a qualified plan. Finally, some investors may need to tap into their IRAs for needs/goals other than retirement. While there are some IRS exceptions to the tax on “early/premature” distributions (before age 59 ½), withdrawals may result in penalties and/or taxes. How do you know if moving around your IRA(s) makes sense? Before making changes to your retirement accounts, you should know exactly what will happen to your money. Everyone’s situation is a little different. So, how do you know if you should make a switch? While not exhaustive, here are some factors to consider. If you work with an advisor, ask them about the fees and available investment options so you can make an informed comparison. If you’re managing your IRAs on your own, it can help to consider the benefits of automated portfolio management and compare your choice in investment selection to what a new platform could offer. Questions to consider include the following: What investments are currently available, and how do they compare to your other options? What fees are you paying, and how do they compare to your other options? What advice and planning guidance do your options provide? What other features are important to you (e.g., optimized time, risk management, tax efficiency)? When deciding whether to transfer an IRA, you should carefully consider your unique situation and preferences. Research the details of your current account and consult tax professionals and other financial advisors with any questions. What are some potential benefits of transferring IRA(s) to Betterment? While everyone's situation is different, there are some potential benefits you should consider when deciding whether to roll over to Betterment: Get access to expert-built portfolios and automated risk management An IRA held at a fiduciary investment advisor—like Betterment—can provide you with access to expert-built portfolios. What does that mean, exactly? Our investing team monitors and selects low-cost ETFs to create globally diversified portfolios personalized to your goals. This team meets regularly to review and make adjustments to the portfolios (as necessary), in an effort to maximize returns while maintaining an appropriate level of risk for your situation. Additionally, our automated rebalancing and auto-adjust features keep you on track as the markets move and you work towards your long-term retirement targets. We offer a suite of ETF portfolio strategies due to the benefits we believe they offer, but some providers and investment managers may offer additional investment choices such as single stocks, mutual funds, ETFs, and alternative investments along with managing risk through similar automated or manual rebalancing strategies. Manage your investment costs Depending on your current strategy, a switch to a low-cost provider like Betterment can result in fee savings, which can compound over time to significantly increase your long-term returns. At Betterment, we charge one fee for managing your IRA funds—our management fee. Betterment’s IRA management is available for 0.25% (25 bps) per year or $4 per month for those in our Digital plan, or 0.40% (40 bps) per year for those in our Premium plan. Compare that to what you are paying now to get a sense of the difference in fees. The ETFs you invest in through Betterment charge a fee themselves, but we pride ourselves in picking low cost and tax efficient funds, with the goal being to maximize your take home returns. You can explore an overview of the fund fees in each of our strategies here. If you have an existing IRA at Betterment, you can log into your account and view the “Holdings” tab to see a breakdown of the fund fees for your Betterment portfolio so that you can easily compare them with the options at your current IRA provider. While we believe in the value we our service can deliver, Betterment may be more costly than your current strategy or alternatives, so it’s important to review fees and the features offered carefully to make an informed decision. Manage your portfolio in one place Many investors appreciate the peace of mind that comes with having their investments in one place. Understanding a fuller picture of your savings can help you determine optimal savings strategies and benefit from more accurate retirement planning guidance. It can also help you to manage your overall risk and portfolio diversification more effectively to keep you on track for long-term success. Maximize your tax efficiency Investors who are saving for retirement at Betterment in at least two types of accounts (taxable, Traditional IRA, Roth IRA) may benefit from more advanced tax strategies like asset location through our Tax-Coordinated Portfolio. Additionally, managing your investments in one place can help you maximize the effectiveness of tax-loss harvesting in your taxable accounts by making sure the activity in your IRA(s) does not result in wash sales. Access personalized advice Betterment offers personalized retirement planning advice and projections via our in-app tooling. For those looking for assistance on topics not covered by our automated guidance, our team of Certified Financial Planners™ is available via our Advice Packages and Premium plan to provide more in-depth financial planning. How do you start the transfer? At Betterment, transfers are simple, automated, and personalized. You can open up a Betterment IRA, receive and review personalized portfolio recommendations, and generate transfer instructions entirely online. If you’re transferring more than $20,000, you’ll have complimentary access to our Licensed Concierge Team. When you’re ready to transfer an IRA account, it’s easy to get started. Sign up for Betterment and log in to your account, click on “Transfer or rollover” at the top right-hand side of your home screen, then answer a few simple questions. In many cases, you can initiate IRA transfers via the industry standard electronic ACATS transfer process and our platform will take care of the process from there. If that’s not an option, our Support and Licensed Concierge Teams are available to help you navigate the transfer requirements and minimize the paperwork required. Once your funds arrive at Betterment, we’ll automatically align them to your new strategy upon receipt and send you another email confirming your transfer has completed. If you have any questions before or during your rollover process please reach out to rollover@betterment.com, and our Customer Support Team is here to help.

Some folks have IRAs because they rolled over former employer-sponsored plans (like a 401(k), 403(b), pension plan, etc.). Others start IRAs via direct contributions. And savvy investors may have done both. Saving in IRAs can help investors reach their retirement goals, but the abundance of options for managing them can make it difficult to determine which strategy is best suited to your needs.

Whether you're managing your IRA(s) on your own or paying an advisor to do it for you, you may not be making the most of your money. At Betterment, we invest your money in a low-cost, globally-diversified portfolio, and we offer personalized advice while acting in your best interest.

How can you determine the right move for you? Let’s talk about it.

In this guide, we’ll:

Explain your options for managing IRAs.
Walk through key questions you should ask when making your decision.
Talk about some considerations to keep in mind when transferring your IRA account to Betterment.
Show you how to get started.

What can you do with your IRA(s)?

IRA accounts can be a great tax advantaged way to save for retirement. While they generally offer more flexibility compared to employer-sponsored plans, it can be easy to be overwhelmed by your potential options:

Keep them at your current provider(s)
Roll them over to your current or future employer’s plan (if your plan allows)
Use the funds for non-retirement needs, though there could be a tax penalty
Transfer them to a platform like Betterment

Some investors choose to “self-direct” their IRA(s) by selecting and managing their own investments while others have a dedicated advisor manage their IRA(s) for them. If you’re happy with your current strategy, you can always keep your IRA funds with your current institution(s).

Alternatively, using a low-cost, transparent advisor that’s legally bound to act in your best interest can help you navigate many of the challenges that come with investing and focus on the factors you can control. At Betterment, our diversified, expert-built portfolios, automated portfolio management, and fiduciary advice take the guesswork out of managing your IRAs.

While the flexibility of IRAs offers some benefits, it may make sense to rollover your IRA funds into your current or future employer-sponsored retirement plan, such as a 401(k). There are many reasons moving funds into your active employer plan may be optimal, but it’s often performed when investors are attempting more complex Roth conversion strategies. However, it’s essential to confirm whether your plan accepts rollovers as not all plans do, and Roth IRA funds are not eligible for a rollover into a qualified plan.

Finally, some investors may need to tap into their IRAs for needs/goals other than retirement. While there are some IRS exceptions to the tax on “early/premature” distributions (before age 59 ½), withdrawals may result in penalties and/or taxes.

How do you know if moving around your IRA(s) makes sense?

Before making changes to your retirement accounts, you should know exactly what will happen to your money. Everyone’s situation is a little different. So, how do you know if you should make a switch? While not exhaustive, here are some factors to consider.

If you work with an advisor, ask them about the fees and available investment options so you can make an informed comparison. If you’re managing your IRAs on your own, it can help to consider the benefits of automated portfolio management and compare your choice in investment selection to what a new platform could offer.

Questions to consider include the following:

What investments are currently available, and how do they compare to your other options?
What fees are you paying, and how do they compare to your other options?
What advice and planning guidance do your options provide?
What other features are important to you (e.g., optimized time, risk management, tax efficiency)?

When deciding whether to transfer an IRA, you should carefully consider your unique situation and preferences. Research the details of your current account and consult tax professionals and other financial advisors with any questions.

What are some potential benefits of transferring IRA(s) to Betterment?

While everyone's situation is different, there are some potential benefits you should consider when deciding whether to roll over to Betterment:

Get access to expert-built portfolios and automated risk management

An IRA held at a fiduciary investment advisor—like Betterment—can provide you with access to expert-built portfolios. What does that mean, exactly? Our investing team monitors and selects low-cost ETFs to create globally diversified portfolios personalized to your goals. This team meets regularly to review and make adjustments to the portfolios (as necessary), in an effort to maximize returns while maintaining an appropriate level of risk for your situation.

Additionally, our automated rebalancing and auto-adjust features keep you on track as the markets move and you work towards your long-term retirement targets.

We offer a suite of ETF portfolio strategies due to the benefits we believe they offer, but some providers and investment managers may offer additional investment choices such as single stocks, mutual funds, ETFs, and alternative investments along with managing risk through similar automated or manual rebalancing strategies.

Manage your investment costs

Depending on your current strategy, a switch to a low-cost provider like Betterment can result in fee savings, which can compound over time to significantly increase your long-term returns.

At Betterment, we charge one fee for managing your IRA funds—our management fee. Betterment’s IRA management is available for 0.25% (25 bps) per year or $4 per month for those in our Digital plan, or 0.40% (40 bps) per year for those in our Premium plan. Compare that to what you are paying now to get a sense of the difference in fees.

The ETFs you invest in through Betterment charge a fee themselves, but we pride ourselves in picking low cost and tax efficient funds, with the goal being to maximize your take home returns. You can explore an overview of the fund fees in each of our strategies here.

If you have an existing IRA at Betterment, you can log into your account and view the “Holdings” tab to see a breakdown of the fund fees for your Betterment portfolio so that you can easily compare them with the options at your current IRA provider.

While we believe in the value we our service can deliver, Betterment may be more costly than your current strategy or alternatives, so it’s important to review fees and the features offered carefully to make an informed decision.

Manage your portfolio in one place

Many investors appreciate the peace of mind that comes with having their investments in one place. Understanding a fuller picture of your savings can help you determine optimal savings strategies and benefit from more accurate retirement planning guidance.

It can also help you to manage your overall risk and portfolio diversification more effectively to keep you on track for long-term success.

Maximize your tax efficiency

Investors who are saving for retirement at Betterment in at least two types of accounts (taxable, Traditional IRA, Roth IRA) may benefit from more advanced tax strategies like asset location through our Tax-Coordinated Portfolio. Additionally, managing your investments in one place can help you maximize the effectiveness of tax-loss harvesting in your taxable accounts by making sure the activity in your IRA(s) does not result in wash sales.

Access personalized advice

Betterment offers personalized retirement planning advice and projections via our in-app tooling. For those looking for assistance on topics not covered by our automated guidance, our team of Certified Financial Planners™ is available via our Advice Packages and Premium plan to provide more in-depth financial planning.

How do you start the transfer?

At Betterment, transfers are simple, automated, and personalized. You can open up a Betterment IRA, receive and review personalized portfolio recommendations, and generate transfer instructions entirely online. If you’re transferring more than $20,000, you’ll have complimentary access to our Licensed Concierge Team.

When you’re ready to transfer an IRA account, it’s easy to get started. Sign up for Betterment and log in to your account, click on “Transfer or rollover” at the top right-hand side of your home screen, then answer a few simple questions.

In many cases, you can initiate IRA transfers via the industry standard electronic ACATS transfer process and our platform will take care of the process from there. If that’s not an option, our Support and Licensed Concierge Teams are available to help you navigate the transfer requirements and minimize the paperwork required. Once your funds arrive at Betterment, we’ll automatically align them to your new strategy upon receipt and send you another email confirming your transfer has completed.

If you have any questions before or during your rollover process please reach out to rollover@betterment.com, and our Customer Support Team is here to help.