Roth IRA Transfer Using Betterment

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.

7 thoughts on “Roth IRA Transfer Using Betterment”

  1. I’m starting a Roth w/ insurance agent just to getcheaper car insurance with a companion policy.I want no load too. Maybe I shouldn’t go through w it.

    1. Double-check your situation. Run the numbers. Figure out if your fund fees outweigh the discount. Over time, it might end up that you could spend more in fees than you save in insurance premiums.

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  3. Did you have to pay any closeout fees on your IRA account that your closed at your old broker? If so, did Betterment reimburse those fees?

    1. Miranda Marquit

      I didn’t have any closeout fees, and to my knowledge (but you’d have to double-check), Betterment does not reimburse those fees.

  4. You wrote:
    “You can choose not to have 10% withheld as taxes in most cases.”

    I tried to sign up for an account as of this date (4/26/2017). When I got to the questions about withholding and terms of service, I left the withholding box blank and accepted the TOS. Betterment returned an error saying I could not have withholding taken out. Checking their retirement FAQ, it says ”
    “… Betterment does not currently withhold taxes from distributions. You will need to figure your taxes separately and ensure you are making any required payments to the IRS.”

    Under what circumstances *CAN* you have withholding?

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