I finally got rid of my high-fee managed mutual fund and transferred my Roth IRA to Betterment.
One of the financial mistakes I made early on was opening a Roth IRA with my insurance agent. Even though I was smart enough to insist on a mutual fund with no sales load, I did end up with an actively managed mutual fund. The yearly fee was 2%, and that served to erode some of my returns.
For years, I kept my Roth IRA in the funds indicated, making a monthly contribution. Even after I began writing about finances, and I learned about index funds and index ETFs, and low-cost investing, I was too lazy to switch things up.
Until I began using Betterment.
Transferring My Roth IRA to Betterment
Finally, I decided to take the plunge and transfer my Roth IRA to Betterment. Transferring an IRA to Betterment requires a little thought and planning, though. Betterment doesn't handle the transaction, although the site does provide you with instructions on how to make the transfer. Here's how it works:
- While in your account, use the navigation menu to go to the “Transfer” section.
- Next, you can look to the right, where you see an option to rollover an IRA or a 401(k)/403(b). Clicking on that gives you instructions to withdraw money from your existing IRA.
- Withdraw money from your existing IRA, having it put into the bank account connected to Betterment.
- Then, within 60 days in order to avoid penalties and taxes, transfer the money from your bank account to Betterment.
- When you use the Deposit function, make sure you use the dropdown to indicate that IRA Rollover is your Contribution Type. That will help a lot when you do your taxes to show that you performed a rollover, rather than an early withdrawal.
When you withdraw from your IRA, realize that you will likely treat it as an early withdrawal. You can choose not to have 10% withheld as taxes in most cases. In my case, before closed out my old IRA, I had to first cancel the automatic withdrawal I had set up each month. Once that went through, I had to wait for the last transaction to complete — a process that took about 10 business days. Finally, I was able to withdraw the money from my old Roth IRA.
Taking My Time
I began rolling over the money to Betterment over a period of weeks, since all of this happened during a time when we were re-doing the flooring in our home, and I was waiting for a large payment from a client to clear. I didn't want any cash flow issues, so I'm actually still in the process of transferring my Roth IRA since it's still within 60 days. I'm doing it piecemeal. It's a good thing, too, easing our other expenses.
Betterment makes it relatively easy and straightforward to transfer your IRA, even though you need to jump through a couple of hoops. It's fairly easy, and you can move your money on your own terms. And, of course, once you move your money from a high-cost actively managed fund to Betterment, you are likely to see more of your money put to use on your behalf.