John Wittig

How We Help Investors Seamlessly Switch to Betterment Moving investment accounts from one provider to another can be tedious and complicated. We can help make it seamless. Transitioning investment accounts from one provider to another can be complicated. You may be in the early days of exploration. Or you may be ready to make a switch but want to learn more about how Betterment will handle the trading and operational steps required to complete your transfer. How we help customers transition to Betterment We’ve largely automated the process of transferring outside investment accounts to Betterment. Our in-app tooling fully addresses the needs of many customers, and some transfers can be self-serviced entirely online. While our online tools provide a great foundation, personalized guidance from an expert can make for easier transfers and help investors navigate more complex situations. If you’re considering moving accounts to Betterment, our transfer specialists and Licensed Concierge team are available to help you explore the options and complete a smooth transition. Fortunately, IRAs and 401(k)s can be directly transferred without creating a taxable event, so we help investors understand our philosophy, and ensure that the accounts are moved using efficient transfer methods. For taxable accounts, especially those with large embedded gains, we take things a step further, offering personalized tax-impact and break-even analyses. Breaking down our taxable account guidance As your fiduciary, we believe that transparency is key to making well-informed investment decisions. Whether you’re in the early stages of exploring if Betterment’s right for you, or fully sold and ready to get started, knowing the potential tax implications and the trading and operational steps required to complete your transfers is important. Below, we offer a step-by-step preview into the Licensed Concierge-specific process. Step 1: Review Current Situation When a Licensed Concierge associate is connected with a new client, our first priority is to understand their main goals. We start by reviewing their current investment accounts to see if they are properly aligned to their financial goals from a fee, investment mix, and risk perspective. Misalignment in any of these areas can impact a customer’s likelihood of reaching their goals. We prefer connecting with clients over the phone to gather information more efficiently, but we’re also available via email. We’ll also request account statements and fee information so that we can offer a more thorough analysis. Our free, automated tooling will analyze your account details and let you know if you’re taking on too much (or too little) risk, paying too high of fees, or don’t have proper portfolio diversification. Syncing your accounts to Betterment will also allow our human-facing teams to better guide you, if need be. Step 2: Establish A Plan Once we understand a customer’s current situation, our next step is to put together a comprehensive assessment and action plan. While the details are unique to each customer, at a high-level, the moving parts are largely the same. Based on the firm where an account is currently held, the type of taxable account (individual, joint, trust), and the underlying investments, we are able to tell our customers: Whether making a switch to Betterment comes highly recommended based on any red flags from our Step 1 review. Whether the firm and account type can be moved electronically to Betterment through the ACATS network. Which of the current holdings (if any) can be moved to Betterment in-kind without first selling at the current provider. What to expect once we receive the transferred account and begin transitioning it into the target Betterment portfolio. What the estimated tax-impact (if any) will be to move forward with the transfer to Betterment. The above information is delivered to the customer without industry jargon, so that making an official decision is as straightforward as possible. Step 3: Executing The Plan Assuming the customer would like to proceed with a transfer to Betterment, we’ll do a final check to ensure their Betterment account is set up properly. Once everything is in order from our side, we can begin implementing the transfer plan. Since it’s likely that our team has performed transfers from the customer’s current provider to Betterment, we’re usually able to be specific about what to expect throughout the process. We’ll communicate the steps involved, the expected timeline to complete, and when possible, we’ll handle any heavy lifting. We’ll regularly check-in and once the transfer has arrived, we’ll confirm with the customer and ensure any outstanding questions are answered.

The Benefits of Rolling Over a 401(k) or 403(b) to Betterment Whether you have a single old plan or several, there are some good reasons to consider rolling them over to Betterment. When you switch jobs, your old employer-sponsored retirement plan (401(k), 403(b), etc.) still belongs to you, but it becomes inactive and you can’t continue to make contributions. So what should you do with it? Whether you have a single plan or several, there are some good reasons to consider transferring your old 401(k) or 403(b). Betterment makes it simple to roll over your old employer-sponsored retirement plan into an IRA – or a Betterment 401(k) if you’re fortunate enough to have one through your current employer. Either way, 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 know if that’s the right move for you? Let’s talk about it. In this guide, we’ll: Explain your options when dealing with an old 401(k) or 403(b). Walk through key questions you should ask when making your decision. Talk about the potential benefits that can come with rolling over your old account to Betterment. Show you how to get started. What can you do with your old 401(k) or 403(b)? Employer-sponsored accounts can be a great way to save for retirement. They have valuable tax advantages and come with higher contribution limits than an IRA. But after you leave a job, it’s important to consider what you do next with your plan. You have a few options: Keep it where it is. Roll it over to your current or future employer’s plan. Roll it over to an IRA. Take a cash distribution to your personal checking account. Keeping your 401(k) or 403(b) where it is or moving it to your new plan may result in high fees, confusing investment selections, a lack of financial planning options, or a portfolio not appropriate for your goals. And taking a cash distribution to yourself is a taxable event that can cause the IRS to hit you with early distribution fees. None of those situations are ideal. By contrast, rolling over your 401(k) or 403(b) into an IRA gives you more control over your investment options, could lead to lower fees, and can allow you to organize your funds from most previous employer-sponsored plans by combining them in one place. At Betterment, your IRA can be invested in any one of our diversified, expert-built portfolios and personalized to your own appetite for risk. How do you know if switching is right for you? Before rolling over your 401(k) or 403(b) into an IRA, 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 switch? While not exhaustive, here are some factors to consider. Start by asking your old plan provider about fees and investment options so you can make an informed comparison. Operationally, we don’t charge for rollovers on our end, but your old 401(k) or 403(b) plan provider may charge you for closing your account with them. Next, consider taxes. When rolling over a 401(k), 403(b), or any other-employer sponsored plan, we use the direct rollover method designed to prevent any withholding or negative tax consequences. But there are two important things to remember: Be sure to designate a withdrawal from your current provider as a rollover. If you have a traditional 401(k) or 403(b), you should roll it over into a traditional IRA. If you have a Roth 401(k) or 403(b), you should roll it over into a Roth IRA. If you withdraw from a traditional 401(k) or 403(b) as a “non-rollover” before age 59 ½, you’ll face a 10% penalty for an early withdrawal. If you roll over from a traditional plan into a Roth IRA, you’ll have to pay income taxes on the money. These situations are unnecessary for investors in most circumstances. Other questions to consider include the following: What investments are currently available and how do they compare to your other options? What are your current fees and how do they compare to your other options? Will you need protections from creditors or legal judgments? Are there required minimum distributions associated with certain accounts? How does your employer plan treat employer stock? Could the rollover impact your Roth conversion strategy? When deciding whether to roll over a retirement account, 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 the benefits of rolling over to Betterment? At Betterment, rollovers are simple, automated, and personalized. In just a short time, you can open up a Betterment IRA, receive and review personalized portfolio recommendations, and generate rollover instructions entirely online. If you’re transferring more than $100,000, you’ll have complimentary access to our Licensed Concierge team. Here’s why you should consider rolling over your 401(k) or 403(b) into an IRA with Betterment. Access more investment options IRAs can include more investment options than a 401(k) or 403(b) plan. With employer retirement plans, administrators typically only give you a few options to choose from and limited to no guidance on which options may be best for you. You might end up in a portfolio that’s not appropriate for your retirement goals, or you might have to choose from limited high-cost mutual funds. An IRA held at a brokerage or investment advisor—like Betterment—can provide you with access to a broader universe of funds. Our investment advice and portfolios are built with global diversification, relatively low costs and long-term performance in mind. Lower your investment fees IRA fees can be lower than those your plan administrator charges. In many 401(k) and 403(b) plans, the expense ratios (fees) on mutual funds and ETFs can also be much higher than those within IRAs. And depending on your plan, keeping funds within your 401(k) plan after leaving your employer may subject you to management fees. At Betterment, we charge one fee—our management fee. We don’t charge you to open or close accounts, make withdrawals, or change your allocation. 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. Manage your portfolio in one place Many investors appreciate the peace of mind that comes with having all their investments in one place. Understanding a fuller picture of your savings can help you make better estimates about your future budget. It can also help you to manage your overall risk and portfolio diversification more effectively to keep you on track for long-term success. Depending on your situation, moving your retirement assets to one provider may also improve the tax-efficiency of your taxable investments. How do you start the rollover? When you’re ready to rollover an account, it’s easy to get started. Sign up for Betterment and log into your account, click on “Transfer or rollover” at the top right-hand side of your home screen, then answer a few simple questions. We need to know about your 401(k) or 403(b) provider, the type of funds held in your account, and their estimated values. We’ll email you a full set of personalized instructions, including any information we need to complete the transfer. This will include your unique Betterment IRA account number, how your provider should make your rollover check payable, and where the rollover check should be mailed. Some providers mail the check directly to Betterment, others will mail the checks to you and request that you forward them to Betterment. Regardless, as long as you follow our instructions it’ll be considered a direct rollover without penalties or taxes.  Some providers may also require you to fill out their rollover paperwork, or they may ask you to give them a call. If so, there’s generally no way around it. But your email from Betterment should give you all the information they’ll ask you for. Once the check arrives, we’ll automatically invest it and send you another email confirming your rollover has completed. This process also applies to other employer-sponsored plans beyond 401(k)s and 403(b)s, including pensions, 401(a)s, 457(b)s, profit sharing plans, stock plans, and Thrift Savings Plans (TSPs). 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.

How To Decide If You Should Switch Financial Firms Taking your assets to a different firm can have a big impact on your long-term investments. Here’s how to consider if it’s worth it. In 1 minute Thinking about switching financial firms? Whether high fees are hurting your returns or your portfolio isn’t performing as well as you hoped, there can be plenty of good reasons to consider transferring your investments to a new firm. The right financial firm can help you reach your goals and feel more comfortable with your investments. Thankfully, no matter how much you have invested, you’re never “stuck” with a strategy that isn’t a good fit or no longer appropriate for your goals. Start with your financial goals. Are they decades away, or are you going to reach them in a couple years? For short-term goals, transferring isn’t always worth it. But with long-term investments, lower costs, increased tax efficiency, and automation could have an impact on long-term returns. Before you make a decision, ask yourself these five questions: Will transferring allow you to invest in better assets? If other investment options may give you higher returns, transferring could be a smart move. Is your portfolio automated? Automation can help you avoid common investor mistakes, help keep your portfolio balanced, and may offer tools to maximize potential opportunities to save on taxes. Could you pay less in fees? Fees can be harder to notice than taxes, but they vary widely from one firm to another, and they can take a big bite out of your portfolio every year. How easy is it to adjust your asset allocation and keep your portfolio up-to-date with your goals? Your assets should fit the goals you’re trying to achieve. Some firms (like Betterment) are designed to take the guesswork out of asset allocation by recommending the appropriate risk level for your goals and keep you on track via automatic rebalancing and auto-adjust features if certain criteria are met. Do you own mutual funds in a taxable account that pay capital gain distributions? Even when a mutual fund’s performance is down, you may have to pay additional taxes from capital gain distributions. Depending on how you answer those questions, you may want to consider transferring your investments. In 5 minutes In this guide we’ll: Discuss the main concerns with switching financial firms Explain situations where it could be smart to move Help you calculate the impact of transferring your assets When you’re driving, sometimes it just makes sense to change lanes. The same can be true with investing. Sometimes the firm you’ve invested with has high fees and other costs that hold you back from reaching your financial goals. Or their guidance has led to lower performance than you expected. In the right circumstances, transferring your investments could help you reach your goals sooner. But it’s not always the best strategy. Before you transfer, it helps to think through all the variables. Let’s see if switching financial firms could be a smart move for you. What’s your timeline to reach your goals? If you plan on reaching your financial goals in the next couple years, transferring may not be the best choice. You may end up paying taxes, and your portfolio won’t be spending much time at the new firm anyway. The longer you plan to hold your assets, the more valuable a transfer could be. Which is worse: taxes or fees? While qualified retirement accounts can generally be moved to a new provider without penalties or taxes, that’s not always the case for taxable accounts. One of the main barriers that keeps investors from transferring their taxable assets is that your new provider may invest in a portfolio that has different assets in it than your old provider. This forces you to sell some or all of these assets. If these investments are trading at a large gain—way above what you originally bought them for—then there may be significant tax implications of making the switch. Over a long enough timeline, annual fees can hurt your investments more than taxes. But it can be hard to think of it that way. Some fees usually kick in before returns ever hit your accounts—you may be losing money you’ve never even seen. But when you transfer your assets, capital gains taxes put a dent in funds you already possess. The decision boils down to paying more upfront in taxes to enable a switch versus staying put in a less optimal portfolio with higher expenses. Keep in mind: unless you gift your portfolio to someone else, you have to pay capital gains taxes someday anyway. But a difference in fees could quietly shave off value from your accounts every year. Tax deferral is worth something, but how much? Could you invest in better assets? Take a hard look at your returns in your current investments. Could they be better? For example, index funds tend to perform better over time than actively-managed funds. Those better returns could increase your account balance over time. Are your investments automated? If you or someone else has to manually maintain your portfolio, you can miss opportunities to improve performance. Betterment maintains your investments with features like rebalancing, dividend reinvestment, portfolio diversification, tax-efficient options, and more, that can be automated. Automation can also help you avoid reacting to market volatility and losing sight of your goal. Could you pay less in fees? Every financial institution has a different fee structure, and some cost much more than others. Between your annual advisory fees, trading fees, and other costs, you could be losing a lot more than you have to. How easy is it to adjust your allocation? As your goals change, you get closer to reaching them, or the market becomes more volatile, you may want to adjust your asset allocation. But how that works and how easy it is to do varies from one firm to another. At Betterment, you can easily make adjustments in the app, and we’ll even help you choose an appropriate allocation for your goals. Some firms allow you to manage your account yourself and choose from thousands of investment options, but it can be challenging or time consuming to do so. Others offer managed accounts with limited options and flexibility and they may have transaction and commission fees. If your firm makes it difficult or confusing to change your allocation, you may want to consider switching to a firm that provides a better experience. Do you own mutual funds in a taxable account that pay capital gains distributions? Mutual funds invest in individual stocks and bonds. When a mutual fund manager sells investments in the fund, they may realize capital gains, which they’ll pass to individual shareholders—investors like you. You pay taxes on these distributions. Less ideal: mutual funds can pay out capital gain distributions even if the fund’s overall performance is down for a year. If the taxes you’d owe from selling your investments are lower than the taxes you’d pay on the annual, and likely ongoing, capital gain distribution from the fund, it could be wise to sell your shares before the distribution is paid out.