Thinking of parting ways with Betterment? Life circumstances change, investment strategies evolve, and sometimes a different platform better aligns with your current financial goals. Closing an investment account isn't always straightforward, and understanding the process beforehand can save you time and potential headaches. Properly handling the closure ensures you receive your funds efficiently and minimizes any unforeseen tax implications.
Whether you're consolidating investments, exploring new opportunities, or simply reevaluating your financial strategy, knowing how to close your Betterment account is crucial. This guide will walk you through the steps necessary to close your account, providing clarity on potential fees, tax considerations, and the timeline for accessing your funds. We'll help you make an informed decision and ensure a smooth transition.
What are the most common questions about closing a Betterment account?
What are the steps to completely close my Betterment account?
Closing your Betterment account involves several key steps: first, you need to liquidate all your investments within the account. Then, you’ll transfer the funds to an external bank account. Finally, you must contact Betterment's support team to formally initiate the account closure process.
Before initiating the account closure, it’s crucial to understand the implications. Liquidating your investments may trigger capital gains taxes, depending on the performance of your investments and the length of time you held them. Consult with a tax advisor to understand the potential tax consequences. Also, be aware that closing your account will terminate any recurring deposits or automated investment plans you have set up with Betterment. Once you are ready to proceed, navigate to your Betterment account dashboard and initiate the sale of all your holdings. After the sale settles (typically within a few business days), transfer the funds to your linked bank account. With a zero balance in your Betterment account, contact Betterment's customer support team through their website, email, or phone. They will guide you through the final steps of formally closing the account, which usually involves confirming your identity and reiterating your request in writing. Retain any confirmation emails or documentation related to the account closure for your records.Are there any fees associated with closing a Betterment account?
No, Betterment does not charge any fees to close your account. You can close your account and withdraw your funds without incurring any penalties or closure fees.
While closing your Betterment account itself is free, it's important to consider potential tax implications related to withdrawing your funds. Depending on the type of account (e.g., taxable investment account, Roth IRA, Traditional IRA) and how long you've held the investments, withdrawing funds may trigger capital gains taxes or income taxes, as well as potential early withdrawal penalties for certain retirement accounts if you are under a specific age. These taxes and penalties are not Betterment's fees, but rather obligations to the IRS or your state's taxing authority. Therefore, before closing your account, it's prudent to review your account statements, consider consulting a tax advisor, and understand the tax consequences associated with liquidating your investments. Betterment provides resources and tools to help you understand potential tax implications, but ultimately, tax advice is best received from a qualified professional who can assess your specific financial situation.How long does it take to fully close a Betterment account and receive my funds?
The entire process of closing your Betterment account and receiving your funds typically takes approximately 7-10 business days. This timeframe accounts for the sale of your investments and the subsequent transfer of the funds to your designated bank account.
Closing a Betterment account involves several steps, each contributing to the overall timeline. First, Betterment needs to liquidate your investments, which means selling off all the assets held within your account. This process can take a few business days, depending on market conditions and the specific investments held in your portfolio. Once the investments are sold, the proceeds need to settle before they can be transferred. Settlement usually takes 1-3 business days after the sale. Finally, after the funds have settled, Betterment will initiate the transfer to your linked bank account. This transfer typically takes another 1-2 business days to complete. It's important to ensure that your linked bank account information is accurate and up-to-date to avoid any delays in receiving your funds. While Betterment aims to process account closures as quickly as possible, market fluctuations and processing times at partner institutions can occasionally affect the overall duration.What happens to my investments if I close my Betterment account?
When you close your Betterment account, you have two primary options for handling your investments: you can either sell your holdings and withdraw the cash, or you can transfer your investments "in-kind" to another brokerage account. Choosing to sell will trigger capital gains taxes on any profits you've made, while an in-kind transfer generally avoids immediate tax implications.
If you choose to liquidate your assets and withdraw the cash, Betterment will sell your ETF shares at the current market price. The proceeds, minus any applicable fees or taxes, will then be transferred to your linked bank account. Be aware that selling your investments can result in capital gains or losses, which will need to be reported on your tax return. The timing of the sale can also impact the amount you receive, as market fluctuations can occur between the time you initiate the closure process and when the sale is executed. Alternatively, you can opt for an "in-kind" transfer, which means transferring your existing investments (the actual ETF shares) directly to another brokerage account. This avoids selling your assets and potentially triggering taxable events. However, the receiving brokerage must support the same ETFs held in your Betterment account. To initiate an in-kind transfer, you'll typically need to open an account with the receiving brokerage and initiate the transfer request from their end. Betterment will then coordinate the transfer of your assets. This process can take a few days to a couple of weeks to complete. Also, be aware that while the transfer itself is not a taxable event, you will eventually be responsible for taxes when you sell those investments in the future. Ultimately, the best option depends on your individual circumstances, investment goals, and tax situation. Consider consulting with a financial advisor or tax professional to determine the most suitable approach for closing your Betterment account and managing your investments going forward.Can I transfer my Betterment investments to another brokerage instead of selling?
Yes, you can typically transfer your Betterment investments to another brokerage account instead of selling them, a process known as an "ACATS transfer" (Automated Customer Account Transfer Service). This allows you to maintain your investment positions without triggering taxable events.
Transferring your assets "in-kind" is generally preferable to selling, especially if you have unrealized gains. Selling would trigger capital gains taxes, whereas an ACATS transfer simply moves your existing investments to a new custodian. Most major brokerages readily accept ACATS transfers from Betterment. You'll initiate the transfer request from the brokerage you're moving *to*, providing them with your Betterment account information. However, there are a few points to consider. Not all assets held in your Betterment account may be transferable in-kind. Some brokerages might not support specific ETFs or fractional shares. In such cases, Betterment would need to liquidate those non-transferable assets before the transfer. Additionally, Betterment may charge a transfer-out fee, so it's wise to check their fee schedule. Finally, remember that the transfer process can take several business days to complete, during which time you won't be able to trade those assets.Do I need to report closing my Betterment account on my taxes?
No, you don't report the *act* of closing a Betterment account itself on your taxes. However, you *do* need to report any taxable events that occurred as a result of closing the account, such as capital gains or losses from selling investments, or any dividend income you received before closing.
When you close your Betterment account, the assets within are typically liquidated (sold) unless you choose to transfer them to another brokerage account. This liquidation triggers a taxable event if you made a profit (capital gain) or experienced a loss (capital loss) on your investments. Betterment will provide you with a Form 1099-B, which details your sales and proceeds. This form is crucial for accurately reporting your capital gains or losses on Schedule D of Form 1040 when you file your taxes. If you only had tax-advantaged accounts like a Roth or Traditional IRA and only transferred the assets, then you may not need to report anything. Remember that capital gains are taxed at different rates depending on how long you held the investment (short-term vs. long-term). Short-term capital gains (assets held for a year or less) are taxed at your ordinary income tax rate, while long-term capital gains (assets held for more than a year) are taxed at preferential rates, generally lower than your ordinary income tax rate. Also, if your losses exceed your gains, you can typically deduct up to $3,000 of capital losses against your ordinary income each year. It's always a good idea to consult with a tax professional if you have any questions about reporting your investment activity.How do I withdraw all my money before closing my Betterment account?
To withdraw all your money from Betterment before closing your account, you must first initiate a complete account transfer or liquidation. This can be done through the Betterment website or mobile app by navigating to the "Transfer" or "Withdraw" section, specifying the full amount to be withdrawn, and choosing your preferred method of receiving the funds (e.g., ACH transfer to your bank account). Once the withdrawal is complete and a zero balance is confirmed, you can then proceed to close your Betterment account.
To elaborate, the process typically involves selling all your investments within the Betterment account. After the sale is executed, the cash proceeds are then transferred to your linked bank account. The exact timeframe for this process can vary, but it generally takes a few business days for the investments to settle and the funds to arrive in your bank account. It's important to be aware of potential tax implications associated with selling investments, as capital gains taxes may apply. Once you've confirmed that all funds have been successfully transferred out of your Betterment account and your balance is zero, you can contact Betterment's customer support team to formally close your account. Alternatively, some platforms offer a self-service option to close the account through their website or app. Be sure to confirm the closure in writing with Betterment to avoid any future issues.And that's all there is to it! Closing an account can feel like a big step, but hopefully this guide made the process a little easier. Thanks for taking the time to read this, and we hope you'll find our other articles helpful down the road. We'd love to see you back here again soon!