Author Topic: In-Kind transfer from Betterment to Vanguard best way to avoid cap gains?  (Read 1819 times)

chloe1733

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So, over the course of the past 2 years, we've been depositing $600 a month with Betterment. Suffice it to say - my portfolio has not performed nearly as well as MMMs has with them. (We have a lifetime return of 5%, but a time-weighted return of 0.0%. Over that same time, my Vanguard funds have done about 8% consistently.)  With ~$10,000 in the account, we have lifetime earnings of about $500. Additionally, because they also occasionally will pick or sell a Vanguard fund, and I have a similar auto-deposit to Vanguard, I'm somewhat concerned about going awry of the wash-sale rule.

So - we'd like to move the money over to Vanguard.

Problem is, because Betterment "automatically rebalances" anytime a dividend is received, they're constantly buying and selling portions of the portfolio, subjecting us to short term cap gains taxes if we then pull it out. I've asked if they can turn off "automatic rebalancing" - they won't. I've asked if they can restrict rebalancing only to new dividends coming in and not any existing funds - they won't.

So how do I get my money out of there without getting dinged on short term cap gains? I've thought about maybe doing an in-kind transfer to Vanguard, letting it wait a year in Vanguard, and then selling those securities and re-investing in the Vanguard funds I want.

Is that my best option? Or is there something else I'm missing here? Anyone want to tell me I'm really stupid for withdrawing from Betterment in the first place? I'm all ears.

seattlecyclone

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Re: In-Kind transfer from Betterment to Vanguard best way to avoid cap gains?
« Reply #1 on: September 28, 2016, 10:22:38 AM »
I've heard horror stories of cost basis information getting lost in the transition between brokers. I wouldn't personally mess around with that to save $100 (or less) on taxes.

neo von retorch

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Re: In-Kind transfer from Betterment to Vanguard best way to avoid cap gains?
« Reply #2 on: September 28, 2016, 10:29:24 AM »
I recently did an in-kind transfer of taxable investments from Betterment to Vanguard. Betterment sent me a CSV of my cost-basis information, which I sent to Vanguard through their web site message system. They recently informed me that they incorporated the information.

tonysemail

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Re: In-Kind transfer from Betterment to Vanguard best way to avoid cap gains?
« Reply #3 on: September 28, 2016, 12:10:59 PM »
I recently did an in-kind transfer of taxable investments from Betterment to Vanguard. Betterment sent me a CSV of my cost-basis information, which I sent to Vanguard through their web site message system. They recently informed me that they incorporated the information.

that's great.  thanks for sharing.

but i would also pay the $100 tax and be rid of the hassle.

neo von retorch

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Re: In-Kind transfer from Betterment to Vanguard best way to avoid cap gains?
« Reply #4 on: September 28, 2016, 01:39:06 PM »
Yes - considered it but in my case it was going to be a lot more than $100 in tax! So I decided this was best. For now, my asset allocation is basically correct, but not quite in the funds I want, so once these are long-term holdings, I plan to shift those holdings into my preferred funds.