You can initiate a withdrawal back to your bank, at any time, via "Manage Transfers." It’s your money, and is always accessible to you. It’s important to plan ahead, as withdrawals generally take 4-5 business days to arrive in your bank account.
Full withdrawal terms and conditions are listed on page 21, section 20 of the Betterment Client Agreement: www.betterment.com/customeragreement
Why 4-5 business days?
When you withdraw from an investment account, the securities you hold must be sold before the cash can be sent to your bank. Betterment processes each request as quickly as possible, subject to market settlement and bank processing timelines. Between trade settlement and ACH processing, this typically means that most customers receive their requested funds in 4-5 business days.
Are there any withdrawal fees or penalties?
There are no transaction fees, account closure fees, or limits to withdraw. If you withdraw 100% of your money invested with Betterment before the end of a calendar quarter, we'll only assess a prorated fee for the total days your money was managed by Betterment. We do not charge fees for accounts with a $0 balance.
Selling shares may have tax consequences. Betterment will always sell your shares in a way that minimizes taxes for you. We’ll sell shares that have lost value first (short-term losses, then long-term losses), and then we’ll sell shares that have gained value (long-term gains, then short-term gains).
Tax Impact Preview allows you to see an estimate of the taxes you may owe before you make a withdrawal.
What are the different IRA distributions options to choose from?
IRA distributions are withdrawals of funds from your IRA account. There are four main distribution options on the Transfer page, which correspond to specific distribution codes on the tax form 1099-R.
- Early Distribution. If you are under age 59 ½, you will see the option for an “early distribution,” which may mean that you will pay a 10% tax penalty along with any taxes owed on the withdrawal.
- Normal Distribution. If you are over 59 ½, you will see the option for a “Normal Distribution,” which is generally not penalized, but may still be taxed.
- Removal of excess contributions. This is a corrective distribution that is generally used if you have contributed too much to the account for the given tax year. While Betterment does not allow you to make annual contributions beyond $5,500 (or $6,500 if you are over age 50), you can still exceed the annual limit by contributing elsewhere, by making an indirect rollover deposit larger than the distribution made from your previous retirement account, or by exceeding the income limits for a Roth IRA. When removing excess contributions, you are generally required to remove both the excess contributions and the gains accrued on those contributions, which we can calculate for you. If the contribution was made at Betterment, our website will automatically calculate the gains for you in most cases, if you select this distribution type.
- Beneficiary distribution due to death. This distribution is generally used in the event of a death or when making distributions from an inherited IRA.
- Disability distribution. This distribution is described by an excerpt from IRS Publication 590B: “If you become disabled before you reach age 59 ½, any distributions from your traditional IRA because of your disability are not subject to the 10% additional tax. You are considered disabled if you can furnish proof that you cannot do any substantial gainful activity because of your physical or mental condition. A physician must determine that your condition can be expected to result in death or to be of long, continued, and indefinite duration.” There may be other conditions that are required in order to avoid the 10% penalty on your distribution.
For more on IRA distributions, please review IRS Publication 590B.
Can I set up an automatic withdrawal?
Currently, you can only set up automatic withdrawals from Betterment goals that have corresponding retirement income advice. If you have a Retirement Income goal, you can set up and customize automatic withdrawals to your own schedule, including frequency and day of the month or week. You can make changes or stop and start the payments from "Manage Transfers." You can also continue to take withdrawals manually and your dynamic withdrawal advice will adjust accordingly.
If you live in Michigan and want to withdraw or convert your IRA…
As a Michigan resident, if you want to convert or withdraw from your IRA, the State of Michigan requires you to fill out Form MI W4P with your tax withholding instructions and return it to us.
Why do you have to do this? Well, since Betterment does not withhold state taxes for you (it reduces the amount of money that can grow tax-free in your Roth IRA), you must check Box 1 to state that you opt out of state tax withholding.
Please sign the form and return to us at firstname.lastname@example.org. If you download the free Adobe Reader, you can fill it out and sign it electronically (and easily).
Other things to be aware of
- Betterment does not support outbound wire transfers to your bank account nor do we issue checks made out to you personally.
- Changing your linked bank account after requesting a withdrawal can delay a withdrawal.
- The dollar value reflected in your withdrawal request may fluctuate due to market volatility until the trades are executed.