Betterment FAQs

We do not offer custodial accounts for minors. All customers must be at least 18 years of age in order to consent to all our agreements.

You may, however, create separate savings goals for minors and then make deposits and withdrawals on their behalf. This works great if youre using Betterment as a tool to show them the benefits of saving. You can even select just their goal in the Performance section of your account to show them performance data.

Additionally, if you have a trust set up for the benefit of your children, of which you are the trustee, you can create a Betterment Trust account through this link.

There are no transaction fees with Betterment. That said, there are a few parameters regarding transactions to be aware of:

The minimum amount you can deposit is $10.

The maximum amount you can deposit is $300,000 every two business days.

You can always wire funds into Betterment of any amount, but your bank may charge wire fees.

You must wait 60 days towithdraw from an IRA Rollover deposit.

You can only make oneallocation changeper business day, aswe are not a licensed day-trading account.

Our advice model does not currently account for leaving assets to your heirs, but we plan to add this in the future. For now, you can use the graphing capabilities on the Advice tab to estimate how much will be left at the end of the horizon given the withdrawals you enter.

That being said, can also add beneficiaries to any of your Betterment accounts, which would supersede any will or trust.

Betterments portfolio strategy for socially responsible investing is based on the Betterment Portfolio Strategy, but it is modified to increase overall social responsibility. Explore the assets used in the Betterment SRI Portfolio Strategy and which funds are currently represented.

The exact funds (and weights of each asset) depend on your target allocation.

Stocks

U.S. Socially Responsible Stocks - Large Cap

This set of holdings screens for U.S. companies that have positive environmental, social and governance characteristics (as identified by the index the underlying ETF tracks). Its also one of five funds in the Betterment SRI portfolio strategy that offer exposure to U.S. stocks of certain sizes. Size is one of two factor tilts of Betterments portfolio optimization, which aims to drive higher expected returns. Exposure to stocks with positive environmental, social, and governance attributes enables investors to express their views toward social and economic causes in the large cap space.

DSI is the primary ETF used to gain exposure to stocks with positive environmental, social, and governance characteristics with a large capitalization. The secondary ETF for Betterment SRI, SUSA, has slightly lower liquidity comparatively, and is used to enable Tax Loss Harvesting+.

U.S. Growth Stocks - Mid Cap

This set of holdings offers exposure to mid-cap growth stocks, and when combined with U.S. Value Stocks - Mid Cap, provides exposure to all middle-sized U.S. companies. This class of growth stocks helps to avoid over-weighting a portfolios value tilt while contributing to a portfolios size tilt. U.S. mid cap stocks are typically defined as those companies with between $1 billion and $8 billion in market capitalization in the United States.

VOT is the primary ETF used to gain growth stock exposure among companies with a medium capitalization. Our secondary ETFs, IVOG and IWP, are highly correlated with VOT. VOT is the primary recommendation since it has the lower expense ratio and tightest bid-ask spread. Betterments use of secondary ETFs enables Tax Loss Harvesting+.

U.S. Growth Stocks - Small Cap

This set of holdings offers exposure to small-cap growth stocks, and when combined with U.S. Value Stocks - Small Cap, provides exposure to all small-sized U.S. companies. This class of growth stocks helps to avoid over-weighting a portfolios value tilt while also contributing to a portfolios size tilt. U.S. small cap stocks are typically defined as those companies with below $1 billion in market capitalization in the United States.

VBK is the primary ETF used to gain growth stock exposure among companies with a small capitalization. Our secondary ETFs, IWO and VIOG, are highly correlated with VBK. VBK is the primary recommendation since it has the lowest expense ratio and tightest bid-ask spread. Betterments use of secondary ETFs enables Tax Loss Harvesting+.

U.S. Value Stocks - Mid Cap

This set of holdings is one of three that allocates exposure to value stocks of certain sizes. Size and value are two factor tilts of Betterments portfolio optimization, which aims to drive higher expected returns. While stocks of good value and appropriate size exist in other geographic markets, Betterment expresses these portfolio tilts only in the U.S. to maintain low costs. U.S. Mid Cap stocks are typically defined as those companies with between $1 billion and $8 billion in market capitalization in the United States. Value stocks are those that trade at a lower price relative to their dividends, earnings and/or sales than the average stock.

VOE is the primary ETF used to gain value stock exposure among companies with a medium capitalization. Our secondary ETFs, IWS and IJJ, are highly correlated with VOE. VOE is the primary recommendation since it has the lowest expense ratio and tightest bid-ask spread. Betterments use of secondary ETFs enables Tax Loss Harvesting+.

U.S. Value Stocks - Small Cap

This set of holdings is one of three that allocates exposure to value stocks of certain sizes. Size and value are two factor tilts of Betterments portfolio optimization that aims to drive higher expected returns. While stocks of good value and appropriate size exist in other geographic markets, Betterment expresses these portfolio tilts only in the U.S. to maintain low costs. U.S. Small Cap stocks typically grow at a faster pace than the typical company, and tend to represent an often-volatile segment of the market. Value stocks are those that trade at a lower price relative to their dividends, earnings and/or sales than the average stock.

VBR is the primary ETF used to gain value stock exposure among companies with a small capitalization. Our secondary ETFs, IWN and IJS are highly correlated with VBR. VBR is the primary recommendation since it has the lowest expense ratio. Betterments use of secondary ETFs enables Tax Loss Harvesting+.

International Developed Market Stocks

This set of holdings offers exposure to a broad collection of stocks from non-U.S. developed markets such as the United Kingdom, the European Union, Japan, and others. Generally, developed market stocks have a similar risk and return profile as the U.S. Total Stock Market. Greater portfolio diversification can be achieved with allocations to emerging market stocks and bonds in addition to international developed market stocks.

VEA is the primary ETF used to gain exposure to international developed market stocks. Our secondary ETFs, SCHF and IEFA, are highly correlated with VEA. VOE is the primary recommendation since it has the lowest expense ratio and tightest bid-ask spread. The secondary ETFs enable Tax Loss Harvesting+.

International Emerging Market Stocks

This set of holdings offers exposure to a broad collection of stocks from emerging markets, such as China, Taiwan, India, Brazil, Russia, Thailand, and South Africa, among others. International Emerging Market Stocks generally involve higher expected risk compared to Developed Market Stocks, but may lead to higher growth as developing states modernize and gain wealth. Emerging market stocks are less correlated with U.S. Stocks and other developed market stocks, which makes them an important part of a diversified portfolio.

VWO is the primary ETF used to gain exposure to stocks in international emerging markets. Our secondary ETFs, IEMG and SCHE, are highly correlated with VWO. Betterments use of secondary ETFs enables Tax Loss Harvesting+.

Bonds

U.S. High Quality Bonds

U.S. High Quality Bonds provide exposure to the U.S. investment-grade bond market, bringing stability to portfolios, while offering higher cash income than U.S. Treasury bonds alone. The underlying bonds in this set of holdings have been rated no lower than BBB- by Standard and Poors, or Baa3 by Moodys, minimizing credit risk. U.S. High Quality Bonds are still subject to interest rate risk. These bonds are offered by the U.S. government and high-quality U.S. corporations, and also could be comprised of mortgage-backed securities. The average bond maturity of the underlying bonds in this individual asset class is 8 years.

AGG is the primary ETF used to gain exposure to U.S. High Quality bonds, due to its low bid-ask spread. Our secondary ETF, BND, is similar to AGG but has a slightly higher bid-ask spread. Betterments use of secondary ETFs enables Tax Loss Harvesting+ and Tax Coordination.

U.S. Municipal Bonds

U.S. Municipal Bonds are only included in taxable portfolios, since the interest from them is generally federally tax-exempt. The underlying bonds are issued by state and regional governments to finance capital expenditures, such as infrastructure spending. While municipal bond credit risk is slightly higher than risk-free U.S. Treasuries, it still remains very low, which is attractive for risk-averse investors. This characteristic, coupled with favorable federal tax treatment, makes municipal bonds an excellent addition to taxable portfolios.

MUB is the primary ETF used to gain exposure to U.S. Municipal bonds, due to its relatively high liquidity. Our secondary ETF, TFI, is similar to MUB but has a slightly higher bid-ask spread. Betterments use of secondary ETFs enables Tax Loss Harvesting+ and Tax Coordination.

U.S. Inflation-Protected Bonds

U.S. Inflation Protected Bonds are issued by the U.S. Treasury with the value of the principal (but not interest payments) indexed to inflation. This set of holdings serves to insulate a part of the portfolio from the depreciating effects of inflation, while also offering historically low correlation with other types of bonds, helping to achieve greater diversification. Additional diversification in a bond portfolio adds a layer of protection during market downturns.

VTIP is the selected ETF used to gain exposure to U.S. Inflation-Protected Bonds due to its competitive bid-ask spread, low expense ratio, and robust asset base.

International Developed Market Bonds

International Bonds are issued by non-US developed market governments and organizations, largely in Europe and the Pacific regions. The bonds in this set of holdings have high credit quality and provide worldwide interest diversification for a bond portfolio, which helps to mitigate risk. These bonds are issued by a variety of countries and corporations to finance various spending needs, and the likelihood of default by these issuers is relatively low.

The selected ETF for International Developed Market Bonds is BNDX, due to its competitive expense ratio.

International Emerging Market Bonds

International Emerging Markets Bonds are dollar-denominated bonds issued by governments with economies that are rapidly growing and industrializing. This component offers higher expected returns than other types of bonds in the portfolio due to higher expected risk. Their unusually low correlation with other bonds results in higher risk-adjusted expected performance for the bond portion of a portfolio.

EMB is the primary ETF used to gain exposure to International Emerging Market Bonds, due to its low expense ratio, tight bid-ask spread, and high level of market liquidity. Our secondary ETFs, VWOB and PCY, are similar to EMB. Betterments use of secondary ETFs enables Tax Loss Harvesting+.

U.S. Investment-Grade Corporate Bonds

U.S. Corporate Bonds are issued by corporations to finance business activities. U.S. Investment-Grade Corporate Bonds generally offer much more attractive yields and opportunities for capital appreciation to compensate investors for default risk. They also diversify the bond portion of a portfolio, resulting in higher risk-adjusted expected returns. The underlying bonds in this set of holdings have been rated no lower than BBB- by Standard and Poors, or Baa3 by Moodys, minimizing credit risk. U.S. Investment-Grade Corporate Bonds are still subject to interest rate risk.

LQD is the primary ETF used to gain exposure to U.S. Investment-Grade Corporate Bonds, due to is tight bid-ask spread and stronger asset base. Our secondary ETFs, VCIT and ITR, are similar to LQD. Betterments use of secondary ETFs enables Tax Loss Harvesting+ and Tax Coordination.

U.S. Short-Term Treasury Bonds

U.S. Short-Term Treasury Bonds are issued by the U.S. Treasury with short maturity terms between one month and one year, offering extremely low risk exposure. Generally, U.S. Short-Term Treasury Bonds are considered a cash alternative, generating nominal benefit through interest payments. At lower stock allocations, these bonds help to decrease the risk of an overall portfolio.

The selected ETF for U.S. Short-Term Treasury Bonds is SHV, due to its competitive expense ratio.

Yes! Betterment makes rollovers simple and efficient, minimizing your time spent and keeping costs low so we can maximize your moneys growth. Our 60-second rollover process is among the fastest in the industry. To get started, click here.

It is important to note that when deciding whether to rollover an old 401(k) account or other retirement account, you should carefully consider your personal situation and preferences. Relevant factors may include that: (i) 401(k) accounts may offer greater protection from creditors than IRAs. (ii) In some cases, the ability to take penalty-free distributions at an earlier age or to defer minimum required distributions. (iii) Some 401(k) accounts may also allow for loans or distributions in a broader set of circumstances than IRAs. (iv) Some 401(k) plans may also offer specific educational and advisory services to participants that are unavailable to some IRAs. (v) Some 401(k) plans may have lower fees and expenses than some IRAs. (vi) Some IRAs may offer a broader range of investment options that some 401(k) plans. (vii) Special tax rules may apply to the rollover of employer securities.

You should research the details of your previous 401(k) and speak to a tax and/or other advisors about whether the features of your 401(k) are relevant to your personal situation. The rollover process is currently automated for rollovers from select providers. If you have a provider that is not part of our automated process, you will receive an email with a checklist for completing your rollover to Betterment. In processing you rollover request, Betterment will be acting at your direction.

The information in this section is provided by Betterment LLC, a registered investment advisor.

Yes, you can have more than one portfolio strategy in your account. But each goal can only be invested in one strategy.

We do things differently. Often, brokerages that do automated tax loss harvesting will switch out of a replacement security after 30 days. If there is a market upswing during that time, customers will incur a short-term capital gain when the broker does the switchback. We have eliminated this switchback tax because we are able to manage two similar ETFs per asset class in a portfolio using our innovative Parallel Position Management system.

What else makes us different? We provide the real numbersnot marketing hype around tax loss harvesting. Other investment managers may tout a bigger number on their websites, but look closely and you'll see that the number represents the mean annual offset, not real tax alpha given different liquidation scenarios. Measuring the value of harvesting this way is misleading, and not the way we present the benefit. However, when we used that method and compared apples-to-apples, we found that over the last 13 years, Betterment's mean annual tax offset was 2x greater than what you can get with methods used by the competition.

How did we accomplish that? One reason is TLH+ avoids tax-indifferent switchbacks, and never caused negative tax offsets over that period, even though the portfolio was rebalanced.

Given that improvement, here's how tax alpha looks for a sample investor. A person with annual income of $100,000 living in a high-income tax state such as California who initially invested $50,000 and invested $1,500 per month (increasing those deposits annually by 5% to account for salary growth and inflation), would have seen a real value +0.77% in additional returns between 2000-2013, even assuming that he liquidates 50% of the portfolio in 2014.

Thats extra returns for doing nothing other than turning on TLH+ no extra risk, no additional costs. Just smart investing. The competition ignores liquidation, which would expose their algorithms as being far less effective. With TLH+...

You are never exposed to short-term capital gains in an attempt to harvest losses. Through our proprietary Parallel Position Management system, a dual-security asset class approach which enforces preference for one security, we never trigger capital gains in an attempt to harvest losses.

You have zero cash drag at all times. With fractional shares, and seamless handling of all inflows during wash sale windows, every dollar is always invested at the desired allocation risk level.

Your harvests also serve as an opportunity to rebalance across all asset classes, rather than re-invest solely within the same asset class. This further reduces the need to rebalance during volatile stretches, which means fewer realized gains, and higher tax alpha.

You never experience disallowed losses through overlap with your IRA. We use a tertiary ticker system, completely eliminating the possibility of harvested losses being permanently disallowed due to IRA activity. This makes our TLH+ ideal for those who invest in both taxable and tax-advantaged accounts.

*TLH+ is available to all Betterment customers regardless of their balance, at no additional cost. Other services require a balance of $50,000 or more to access a tax loss harvesting service.

You can read more about the benefits of TLH+ and how it works inside your account in our white paper. *

Yes, if there are multiple trustees, each trustee can access the trust account with his or her own login. If you would like to provide access to multiple trustees, please contact us at [email protected] and we will be happy to assist.

Your tax forms will be available on 2/15/19.

To access your tax forms, click here, or log in to your account from a web browser, and select " Documents " from the menu and then "Tax Forms." Your tax forms will be available for download as PDF statements.

Betterment does not support TXF or OFX files nor integration import ability with Quicken.

For help, view our comprehensive Tax Guide here.

An exchange-traded fund (ETF) is a security that tracks an index, a commodity or a basket of assets just like an index fund, but trades like a stock on an exchange. ETFs track fairly closely to the indexes that they follow, such as the S&P 500 or the Dow Jones Industrial Average. ETFs are bought and sold like stocks throughout the day, and therefore experience continually changing prices. Betterment uses ETFs in both our stock and bond portfolios because of the liquidity, diversification, and low management fees they provide. For more information on the ETFs you are invested in with Betterment, please visit our portfolio page.

For each externally synced portfolio, the " Holdings " pie chart displays how much exposure each portfolio has in each of the 5 major asset classes (US Stocks, US Bonds, International Stocks, International Bonds, Cash) as well as "Other". For diversified mutual funds or ETFs that may contain multiple asset classes (e.g. a target date fund), the allocation looks "through" the fund, meaning it splits up the fund by the relevant asset classes to give a more precise visualization of the actual holdings. For example, a target date fund like VFFVX, the Vanguard Target Retirement 2055 Fund, has allocations to stocks, bonds, and cash, even though it is most heavily weighted towards US stocks. Unlike some other allocation tools, we display VFFVXs allocation to each of the given asset classes rather than assigning 100% of VFFVXs allocation to one single asset class like US stocks or a fund type like Target date fund. Knowing your portfolios true allocation can help you better understand the risks you are taking and make decisions about the allocations in other accounts. Is this allocation data real time?Your balance in each account and fund is updated daily. However, the underlying allocation data is only published by mutual funds on a quarterly basis, so your current portfolio allocation is only an approximation of the current actual allocation. Is current portfolio allocation used to determine the fee level of a fund?Our fee assessment of a fund uses the overall fund type (E.g. US Total Market Stock Funds, International Bond Funds or Commodity Funds) and not the asset classes within the fund. While the overall fund type is related to the underlying allocation, the actual fund expense ratios are set per fund and not per asset class within the fund.

No. Because IRAs are Individual Retirement Accounts they can only be held in personal (individual) Betterment accounts.

However, you can have BOTH a joint account and a personal account. This will allow you to create non-IRA goals in your joint account, while keeping your IRA in your personal Betterment account.

In the future we will be enabling moving specific non-IRA goals from your personal account to your joint account.

To automatically adjust your allocation, you must first be logged in to Betterment from a browser, not the mobile app.

For existing accounts, you can edit your allocation settings from several places.

Within "Advice" of a specific goal, click on Portfolio Projections and expand the Target allocation section. Clicking on the Turn on auto-adjust button will take you to the allocation settings page where you can switch the auto-adjust toggle to enable or disable automatic allocation adjustment.

When you enable the auto-adjust feature, if your allocation is not following Betterments allocation advice, your allocation will be reset to our recommended target allocation.

If you are adding a new account, you will be prompted to review your allocation settings when opening the account. If you decide to follow Betterments allocation advice, you will, by default, have your allocation automatically adjusted as you near your goal completion date. If you decide that youd rather not have your allocation adjusted, you can turn off the auto-adjust feature and select your own target allocation.

To help you understand your future retirement balance and spending ability, we let you project your retirement goal in two ways: before-tax and after-tax. Both options adjust for inflation, so youre always looking at the forecasted spending power value of your money.

Before-tax: Helps you forecast your retirement account balance over time. You can compare this to other projections or use it to get an idea of how your balance can grow.

After-tax: Helps you forecast your retirement account balance over time once taxes are taken out. This can help you plan for how much money youll actually have to spend. For example, a $40,000 distribution from a traditional IRA will be taxed at ordinary income tax rates. Assuming a 25% ordinary income tax rate, you would have $30,000 to spend afteryou'vepaid your taxes.

To produce your after-tax projection, we take into account the following:

Your current balances and what type of account(s) they are in.

Your estimated tax bracket at the time of withdrawal.

An assumption that youll put your planned future contributions into traditional accounts.

Traditional accounts are generally associated with the highest tax rate each of us pays, so this conservative assumption helps to prevent you from saving too little due to taxes.

An assumption that youll pay long-term capital gains rates on the full balance of your taxable accounts. Again, this is a very conservative approach to estimating future after-tax value because in reality you only owe taxes on gains.

Tax loss harvesting can be beneficial for many investorsprovided that the IRS allows you to write off losses against capital gains and/or up to $3,000 of ordinary income. Any losses not used to offset gains and/or $3,000 of ordinary income can be carried forward indefinitely until used up. The earlier you start tax loss harvestingand the higher your current tax bracketthe more beneficial it can be over time.

However, harvesting causes you to lower your basis, which can mean more taxes in the futureunless youdon'tplan to liquidate your investments. That means deferring all gains can be an especially good strategy if you plan to donate to charity or leave your assets to your heirs, which results in a step-up in basis.

There are some specific instances when you should not use TLH+ or should proceed with caution. Tax deferral may be undesirable if your future tax bracket will be higher than your current. If you expect to achieve (or return to) substantially higher income in the future, tax loss harvesting may be exactly the wrong strategyit may, in fact, make sense to harvest gains, not losses.

In particular, we do not advise you to use TLH+ if you can currently realize capital gains at a 0% tax rate. Under current law, this may be the case if your taxable income is below $39,375 as a single filer or $78,750 if you are married filing jointly. See the IRS website for more details. Also, if you are planning to withdraw a large portion of your taxable assets in the next 12 months, you should wait to turn on TLH+ until after the withdrawal is complete to reduce the possibility of realizing short term capital gains.

Please consult your tax advisor if you have questions about how these guidelines may apply to your personal situation.

You can read more about best use cases in our white paper.

What primarily differentiates the Goldman Sachs Smart Beta Portfolio from the Betterment portfolio is that the equity portion of the portfolio features allocations to Smart Beta ETFs that have larger allocations to companies screened for the four factors (value, high quality, strong momentum, low volatility).

The Goldman Sachs Smart Beta Portfolio strategy invests in securities that have specific characteristics: the strategy tilts towards stocks based on four well-established drivers of performance, often referred to as factors. The factors are - good value, strong momentum, high quality, and low volatility.

With a time-weighted return, which is the industry standard return calculation used by Betterment, it is entirely possible to have a positive % return, despite having a net loss on your investments (or conversely, a negative % return with a net gain on your investments).

A time-weighted return assesses the performance of the underlying investmentswithout being distorted by the timing or size of cash flows in and out of the account (i.e. deposits and withdrawals.)

Your time-weighted return is positive, because the underlying portfolio that you are invested in has increased in value since you began investing. You can see that graphically by looking at the % Returns graph on your Performance tab in your account.

However, your dollar earnings are negative because you deposited the majority of your current investment when the value of your underlying portfolio was higher than it is now. You can see that by comparing the % Returns graph to the $ Values graph on your portfolio page.

Here's an extreme example to illustrate this:

Suppose, I invested $10 to start, and the market gains 50%. Now I have $15 in the account! Let's say then I make a $100,000 deposit and the market goes down 10% immediately after that, In this case, I would have negative dollar gains, since I just lost about $10k (much more than my initial $5 gain). It was not because the portfolio has performed poorly thus far in fact, its been positive overall since I started (it went up 50% and then down 10%). However, most of my money was invested when I was at the top.

In short, my time-weighted return is positive because my portfolio performed well. My simple dollar return is still negative, because of the timing of my cash flows. You can see both of these numbers in your own situation in the Summary tab of your Betterment account, by simply expanding each goal.

While most customers find the external account sync process frictionless, there are instances where additional troubleshooting is required. In most cases, the sync can be fixed by you, without additional support needed from our side. For this reason, we suggest taking the following actions first:

Open a second browser window and test your external account username and password credentials by logging into your current now. If the login is successful, proceed.

Take note of the URL you see when you are on your firms login page.

Switch back to your Betterment account and from " Home ", select the Sync external account button.

Begin typing the name of your current firm into the search bar. (Even if you see your firm listed in one of the pre-populated circles.) You will see a list of possible firms populate in a drop down window.

Review the listed options and select the specific firm option that has a URL that most closely matches the one you see when you go to your current firms login page. (Tip: if you didnt follow steps 1 and 2, actually go to your firms login page now to confirm.)

Follow the in-app prompts to finalize the sync.

Note: It can take up to 24 hours for some firms data to fully pull through, so if the sync is not immediately successful, its worth it to wait to contact us.

If after 24 hours the sync is still not successful, please send an email to [email protected] with completed answers to the following questions. (We must have complete answers to the 3 questions below to proceed.)

What is the login URL you usually use to access your current account information?

This helps ensure we are targeting the correct brokerage.

2) What types of account(s) are you looking to sync?

For example: 401(k) or other employer-sponsored account, IRA (Roth or traditional), standard taxable brokerage account, or banking (checking/savings/mortgage).

3) Upon login, do you usually answer security question or need to send a PIN to your phone/email?

With a time-weighted return, which is the industry standard return calculation used by Betterment, it is entirely possible to have a negative% return, despite having a net gain on your investments (or conversely, a positive % return with a net loss on your investments). A time-weighted return assesses the performance of the underlying investmentswithout being distorted by the timing or size of cash flows in and out of the portfolio (i.e. deposits and withdrawals). Your time-weighted return is negative because the underlying portfolio that you are invested in has decreasedin value since you began investing. You can see that graphically by looking at the % Returns graph from "Performance". However, your dollar earnings are positive because you deposited the majority of your current investment when the value of your underlying portfolio was lower than it is now. You can see that by comparing the % Returns graph to the $ Values graph on your "Holdings" page. Here's an extreme example to illustrate this: Suppose, I invested $10 to start, and the market loses 50%. Now I have $5 in the account! Let's say I then make a $100,000 deposit and the market goes up 10% immediately after that.In this case, I would have positive dollar gains, since I just gained about $10k (much more than my initial $5 loss). It was not because the portfolio has performed well thus far in fact, its been negativeoverall since I started (it went down50% and then up 10%). However, most of my money was invested when I was at the bottom. In short, my time-weighted return is negative because my portfolio performed badly. My simple dollar return is still positive, because of the timing of my cash flows.

A Flexible Portfolio gives you more control over your investments, and allows you to modify the individual asset class weights in the Betterment portfolio strategy to best fit your preferences. Well provide a risk and diversification assessment of your changes.

Learn more about when using a Flexible Portfolio might make sense.

Once you set up your Tax-Coordinated Portfolio, Betterment will look across all of your long-term investing accounts held at Betterment and automatically reorganize which assets are held in which accounts.

Well generally place your least tax-efficient assets in your tax-advantaged accounts (IRAs and 401(k)s), which already have big tax breaks, while diverting the most tax-efficient assets to your taxable account. In practice, each assets after tax return is considered in the context of every available account. The assets are generally then arranged (unequally) across all coordinated accounts to maximize the after-tax performance of the overall portfolio.

We do this in a way that keeps your overall allocation the same, while working to boost your after-tax returns. You can read more about how we do this in our white paper. For more information on our estimates and Tax-Coordinated Portfolio generally, see full disclosure here.

For more information on our estimates and Tax-Coordinated Portfolio generally, see full disclosures here.

Asset location is a long-term strategy. While it may lower taxes in the short-term, the greater benefits come from a longer investment period. If youre not planning to invest over a longer horizon, you may still benefit from paying fewer annual taxes, but are likely to see less benefit when it comes time to withdraw your money.

If all of the accounts you are including in your Tax-Coordinated Portfolio have the same allocation and time horizon, there is little risk to using a Tax-Coordinated Portfolio. Note that Tax-Coordinated Portfolios will still be subject to market risk. If you choose to include a goal that has a different allocation than your tax-advantaged accounts, just know that you are changing the time horizon on that goal. Tax-Coordinated Portfolio is not designed for investors who qualify for a marginal tax bracket of 15% or below.

You can read more these and other Special Considerations in our white paper. For more information on our estimates and Tax-Coordinated Portfolio generally, see full disclosures here.

You can adjust your existing portfolio strategy by first selecting a goal from the menu. Once you reach your goal's Overview, navigate toHoldings, andclick the Edit button below Portfolio Strategy.

If you are creating a new goal, you will be given the option to view Other portfolio strategies on the Recommended Portfolio Strategy page as part of the goal creation process.

When you deposit money with Betterment, every dollar is seamlessly invested in up to 12 different asset classes, optimized for your selected asset allocation.

You can see the full breakdown of the ETFs at each allocation by clicking here to read about our investment selection methodology.

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To view your legal account number(s), log in to Betterment from a web browser and select "Settings" from the menu and then " Accounts ".

The income portfolio is comprised of only bond ETFs. The portfolio is suited for an investor who is looking to generate a steady stream of income. To put this into context, the portfolio seeks to generate bond interest from the funds periodically, at a rate that is generally higher than a portfolio that includes both stocks and bonds, such as the Betterment portfolio.

We use astandard time-weighted return to calculate percentage returns for each goal on the Summary page, and to display returns over time on the Performance page. This return can be thought of as the amount one dollar would have changed if it was invested at the same time as your first deposit.

The time-weighted return is unaffected by deposits to and withdrawals from your account, and allows for easy assessment of your investment, and a fair comparison with other investments. In the investment industry,a time-weighted rate of return best reflects the firms ability to manage [their] portfolios according to a specified mandate, objective, or strategy. You can read thefull explanation of time-weighted returns here.

As an example, because this return calculation removes the effect of specific deposit patterns, two investors that start investing at the same time in a 80/20 Betterment portfolio will always have the same time-weighted return, regardless of their deposit or withdrawal pattern.*

If one investor consistently experienced very good luck, always depositing when the portfolio had decreased in value and withdrawing when the portfolio had increased in value, they could well end up in the short term having made money, even during a time when the assets in the portfolio had gone down in value overall. However, they would still have a negative time-weighted return, reflecting how their portfolio had actually performed independently of their timing.

*This is true if we assume perfect rebalancing. In practice, different deposit patterns will produce slightly different rebalancing patterns (at Betterment,more frequentdeposits mean more frequent rebalancing), and so slightly different returns will arise.

Betterment only supports joint accounts with rights of survivorship. This means that upon the death of either owner of the joint account, the ownership of the account goes to the surviving joint account holder. Both holders of the joint account have full access to the joint account and are able to view the account, create goals, transfer funds, and change allocations.

Betterment reports two main types of returns calculations:

Earnings performance is found under the $ VALUES PERFORMANCE sub-tab, and takes into account the timing and size of cashflows into and out of the account.

Time-weighted return is found under the % RETURN PERFORMANCE sub-tab, and reflects the returns of your portfolio ignoring size and timing of cash flows.

This FAQ will focus on Simple Earnings performance.

Simple Earnings Percentage

The Simple Earnings Percentage is a simple measure of how much your portfolio has grown, as a percentage of how much you invested. It should not be used to compare to other accounts, unless those accounts had the same exact cash flows (whichisn'ta likely situation).

The earnings percentage is generally calculated as:

The amount your account has earned

Divided by the amount you have invested (there are exceptions to the ruleread on to learn more.).

Your earnings percentage is a very simple and intuitive way to represent how much you have earned by investing. It does have some drawbacks.

Adjusting the Simple Earnings Percentage

The simple earnings percentage has drawbacks that can lead to very unintuitive results. Whenever the current net amount invested is very different than the amount that was invested for the majority of the period, then the simple earnings percentage communicates very little about the success of the account.

In these cases, Betterment adjusts the simple earnings percentage so that the calculation provides a useful picture of the account. Our adjustment consists of dividing the investment earnings by the average amount invested over the periodrather than the current net amount invested. This alternative calculation is invoked whenever the value of the current net invested amount is less than 80% of the average daily invested amount. Well explain this logic with some examples.

Imagine that you invest $100,000 with Betterment and earn $1,000 in the first 30 days. Your account is now worth $101,000. Your earnings percentage is equal to 1%, which is calculated by dividing the earnings, $1,000, by the net amount invested, $100,000.

Now, imagine that on the last day of the month you withdraw $90,000 to put a downpayment on a house. Your net total investment is now $10,000 (100,000 - 90,000), but your balance is $11,000. By the simple earnings percentage calculation, your return is now $1,000 divided by $10,000, or 10%. This number does not accurately reflect your actual returns.

In these cases, your actual earnings percentage is better represented by dividing the amount earned by your average invested amount over the time period. Because you had about $100,000 for most of that month, except the last day when it was $10,000, your average invested is $97,000. So your earnings percentage in this case is $1,000 / 97,000 = 1.03%. While this adjusted percentageisn'ta perfect reflection of reality either, it does tend to be much more representative of your actual return than the distorted 10% number.

In order to decide when to use this alternative earnings percentage logic, we check if your average daily invested amount is substantially different than your current invested amount.

Annualized Simple Earnings

If you hover on the Total Simple Earnings card, you may also see your annualized simple earnings. This value will only show if that goal has been invested for more than one year.

The annualized simple earnings adjusts your simple earnings percentage for how longyou'vebeen invested. For example, supposeyou'vebeen invested for 4.12 years (just over 4 years and 1 month), and you have an Simple Earnings Percentage of 20.9%. You might ask How much is that, on average, for each year?

To calculate the Annualized Simple Earnings Percentage, we adjust simple earnings using the formula below:

Annualized Earnings = [(1 + Earnings Percentage) ^ (1 / years invested)] - 1

In the example above, wed have:

4.7% = [(1 + 0.209) ^ (1/4.12)] - 1

We calculate RMDs for Traditional IRAs annually, and show the amount on your tax statement at the end of January. You can take this amount and set up automatic withdrawals at the frequency you like within Transfer, or take the withdrawal manually.

During your initial consult with a member of our team, well get a sense of your needs so we can help pair you with an advisor in our network. The advisors in our network are all CERTIFIED FINANCIAL PLANNER professionals, and individually may offer expertise in certain fields. Our team will recommend between one to three potential matches, with whom you will have the opportunity to schedule a free consult before you make a decision.

All Betterment customers are invested into a globally diversified portfolio (with over 5,000 companies)of low-cost and liquidETFs. Funds are invested into this portfolioaccording to your chosen allocation (depending on how much risk you want to take). You can find the portfolio here.

The key issue is to protect yourself from inadvertently triggering a wash sale while harvesting a loss in your Betterment account. This could happen when making certain purchases in an external account.

The IRSs wash sale rule prevents you from realizing a loss from selling a security if a substantially identical security is purchased by the taxpayer 30 days after or before the sale. The rationale is that a taxpayer should not enjoy the benefit of deducting a loss if he or she did not truly dispose of the security, but in effect replaced it.

TLH+ will automatically manage your purchases when they are made inside your Betterment taxable account, as well as your Betterment IRA.

However, the rule applies when a substantially identical purchase is made in any account you own, including an IRA elsewhere, or even in your spouses account. (See more about the What is the wash sale rule? )

Purchases in non-Betterment accounts are not monitored, and could result in wash sales.

It is very important to note that just owning a substantially identical security is not the issue. The issue is typically buying more of it, but this could happen on auto-pilot, if for example, your dividends are automatically reinvested to buy more of what you have. You can also create an issue by selling the security in an external taxable account, but only if the sale is at a loss.

So how do you make sure that you do not inadvertently trade a substantially identical security in an external account? Of course, trading exactly the same ETF would qualify, but the definition could extend to an index fund that may have a different name, but is the same in substance. A conservative way to avoid a substantially identical purchase is to avoid purchasing an index fund that tracks the same index as the one that was sold.

Betterment cannot make this determination for you. However, you can follow these steps and examine your external investments for potential issues.

First, you should check if any ETF or mutual fund held in a non-Betterment account tracks the same index as any of the ETFs in our portfolio. You can check the indices followed by our ETFs here.

For example, VTI, one of the ETFs we purchase and harvest, tracks the CRSP US Total Market Index. So does the mutual fund VTSAX, also from Vanguard. Despite the fact that they are different types of investments, selling the ETF at a loss while purchasing the mutual fund inside the wash sale window could trigger a wash sale.

Another example is any fund that tracks the S&P 500. The large cap funds in Betterment's portfolio track value-tilted indexes, so a fund that tracks the S&P 500 index with no tilt should not be problematic (e.g. VFINX, VFIAX, SPY, FUSEX, FUSVX and many more).

There are more fund providers than index creators, and in many cases, ETFs from different providers will track the same index. The information page for a given ETF should list the index that it tracks.

If none of your external investments track the same index, then you can utilize TLH+ without concern. One example that may look problematic at first glance is an actively managed fund which happens to use the same index as a benchmark. If it is trying to beat the index, rather than track it, such a fund shouldnt be an issue.

If an index fund you hold definitely does track the same index, the best solution will depend is on the account type and trading activity in that account.

Non-traded assets: Wash sales occur only due to buy or sell trades, so if you are sure your account, whatever the type, will not trade (buy or sell) the security, it should be safe to turn on TLH+, even if you hold substantially identical assets there. Be aware that automated transactions, like automatic dividend reinvestment, can cause wash sales.

IRA: If the investments are in an IRA, you should roll over your IRA to Betterment. This ensures that no IRA washes will ever occur. You will not incur any taxes due to the rollover, and Betterment has one of the best rollover concierges in the industry.

Taxable account: If the assets are in a taxable account, and you cannot be sure that you will not be trading them, you should assess if moving the holdings over to Betterment would make you better off in the long run. The cost of capital gains taxes from liquidating may well be more than made up for with the benefits of a switch, including lower fees. With our investment-switch calculator you can check whether or not this makes sense for each of your investments.

Previous Employer 401k: If you have a 401k with a previous employer, you can roll over those assets to a Betterment IRA tax-free, and benefit from TLH+ with IRA wash sale protection.

Current Employer 401k: If your current employers 401k plan has investments tracking the same index, only purchases (not sales) of additional shares of those investments could result in wash sales in your Betterment account. One way to mitigate this is by investing exclusively in target date funds in your 401k. These are diversified and tend to be very low cost. While we cannot give tax advice, it is extremely unlikely that a target date fund would be deemed substantially identical to any ETF in the Betterment portfolio. This is because a target date fund consists of stocks and bonds, whereas Betterment uses stock ETFs and bond ETFs separately to build a portfolio. A good target date fund is basically an index fund with both stocks and bonds built in.

You can learn about all of the assumptions that go into Betterment's retirement planning methodology here.

Many of the assumptions that we make can be modified by selecting your primary retirement goal from the menu and then "Plan". Once you click "Edit Assumptions" you'llbe able to edit and review the following:

Social Security assumptions

Age you plan to retire

Assumed lifespan

Inflation rate

Rate of return for synced external accounts

Annual savings assumptions

For more accurate retirement planning advice, you can securely sync external accounts you're using for retirement.