Author Topic: Moving everything over from Betterment to Vanguard  (Read 1809 times)

Mustachio Bashio

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Moving everything over from Betterment to Vanguard
« on: January 04, 2017, 03:17:13 PM »
So I've decided I wanted to finally dive into investing directly with Vanguard instead of dealing with Betterment fees.  I'd like to just invest in VTSAX, VTIAX, and VBTLX at about 60/30/10.  I have $8.5k in a Sep, $40.7k in a Roth, and $19k in a taxable account, all three of which are in a tax coordinated account and I have tax loss harvesting turned on (though it doesn't show that I've made anything with it so far in the display).  I also have $8.5k in savings in another taxable account with them (set to 50/50 stock/bonds).  I'd love some advice on the easiest way to transfer this over to Vanguard considering the tax coordinated account, the IRAs, if the IRAs are better going into stocks vs bonds, and any other things I should look out for.  I'm assuming I'll have to do some non-admiral shares for the Sep since it's at $8.5k.  Also any advice on what to do with my savings would be great.  Thanks for helping an investing newb!

dandarc

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Re: Moving everything over from Betterment to Vanguard
« Reply #1 on: January 04, 2017, 03:19:17 PM »
Call Vanguard and tell them all that - they'll know what to do.  Their customer service is very good.

Jakejake

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Re: Moving everything over from Betterment to Vanguard
« Reply #2 on: January 04, 2017, 03:39:15 PM »
Call Vanguard and tell them all that - they'll know what to do.  Their customer service is very good.
Yes, this. I just transferred 4 retirement accounts to them. Block out a chunk of time for the call though, because there's being on hold with the first person, then being transferred to an account specialist to make sure you are putting everything into the right type of account - and you may be on hold waiting for them. Then once everything's decided, plan on being on hold, then conference called to a third person who actually sets up the account. Then you get to be conference called in with the vanguard person and the person from Betterment.

Lessons learned: If you have a headset on your phone, this is a good time to use it, so your hands are free for pouring booze. And call in the morning if you can, because they aren't as busy then.

Uturn

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Re: Moving everything over from Betterment to Vanguard
« Reply #3 on: January 04, 2017, 06:52:45 PM »
I did this last year.  Moved a Betterment taxable account, and two former 401k's.  Since we were dealing with 3 different custodians, we scheduled the long call for a few days after my initial call.  Vanguard has folks who do this all day, they know how each 401k and IRA custodian companies work, and they are very helpful.  Once your money is there and shows up on their website, which can take almost a week, distributing it across their various offerings is easy. 

ck25

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Re: Moving everything over from Betterment to Vanguard
« Reply #4 on: January 04, 2017, 07:58:14 PM »
I also made this switch. It was about five months ago but it was a really easy process. I'm sure you don't need a reminder, but just in case remember that if your account is taxable, you will owe short term capital gains tax (i.e., income tax) on any profit if you sell within a year of buying. For us, that means keeping Betterment's asset allocation until we are certain that it's been a year since they made any trades.

Mustachio Bashio

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Re: Moving everything over from Betterment to Vanguard
« Reply #5 on: January 04, 2017, 09:57:45 PM »
Thanks for the responses!  Looks like I'll be calling Vanguard.

@ck25 - I was aware of the capital gains tax, but aren't they constantly trading?  I actually put my 2017 5.5k into my Roth that's with them yesterday before deciding to make the switch.  Would it be worth waiting a year to move those accounts over and just depositing new money into the Vanguard funds since none of them have been around for a year yet, or just deal with the taxes to get it moved over sooner?

ck25

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Re: Moving everything over from Betterment to Vanguard
« Reply #6 on: January 05, 2017, 08:39:14 PM »
So I'm not an accountant, and it's possible that there are ways around avoiding short term capital gains that I'm not aware of/couldn't find while Googling.

Keep in mind that you don't have to sell to move them to Vanguard. Vanguard customer service should be able to help you move the funds exactly as they are from Betterment without creating a taxable event. At least I hope; I haven't gotten my tax bill yet for when I did all of this. :)

I think this FAQ might answer your question about how Betterment avoids short term capital gains even though they might trade to rebalance:
https://support.betterment.com/customer/portal/articles/987453
Specifically,
Quote
Note: In addition to the higher threshold, we built in another restriction into the rebalancing algorithm for taxable accounts. As with any sell trade, TaxMin selects the lowest tax impact lots, but stops before selling any lots that would realize short-term capital gains. Since short-term capital gains are taxed at a higher rate than long-term capital gains, we can achieve higher after-tax outcome by simply waiting for those lots to become long-term before rebalancing, if itís still necessary at that point.

For my situation, I had Tax Loss Harvesting turned on in Betterment, and they harvested a bunch of losses after Brexit. I was worried that if I sold, I could potentially be buying at a higher price and realize a bunch of gains. I went ahead and moved my money to Vanguard anyway, keeping my taxable account money in the same funds that Betterment put them in. I did this mainly because I wanted to avoid further rebalancing and tax loss harvesting while in Betterment so that all of the trades will age to a year and I can sell them without worry. And if you aren't using rebalancing or tax loss harvesting, there's not a lot of reason to pay Betterment a fee, in my mind.