Closing a Betterment account may become necessary for various reasons perhaps you’ve found a different investment platform, your financial goals have changed, or you simply want to manage your portfolio on your own. While Betterment is known for its user-friendly robo-advisory services and low management fees, the process of closing your account requires attention to detail to ensure you don’t encounter unexpected issues, such as tax consequences or delayed transfers. Understanding how to close a Betterment account properly will help you transition smoothly without jeopardizing your investments or financial data.
Understanding Betterment Account Types
Before you initiate the account closure process, it’s important to identify the type of Betterment account you have. Betterment offers several types of investment and financial accounts, including:
- Individual taxable investment accounts
- Joint accounts
- Traditional and Roth IRAs
- SEP IRAs
- Trust accounts
- Cash Reserve and Checking accounts
The steps to close a Betterment account can differ depending on the account type, particularly if your account has tax-advantaged status, such as an IRA. Be sure you understand the nature of your account and what steps apply to it specifically.
Things to Consider Before Closing a Betterment Account
Before you proceed with account closure, take time to review these critical factors:
1. Tax Implications
Closing an investment account may involve selling assets, which can trigger capital gains taxes. Betterment will typically liquidate your holdings if you’re withdrawing funds to a bank account instead of transferring to another brokerage. Consider the tax consequences, especially if your account has grown significantly over time.
2. Pending Transactions
If you’ve recently made deposits, withdrawals, or trades, allow those transactions to settle before attempting to close your account. Attempting to close an account with pending activity can result in delays or errors.
3. Transferring vs. Withdrawing Funds
You have two primary options: withdraw your money to a linked bank account, or transfer your assets in-kind to another brokerage using the Automated Customer Account Transfer Service (ACATS). In-kind transfers do not require asset liquidation and may help avoid taxes from selling investments.
4. Closing vs. Deactivating
If you’re planning to return to Betterment later or don’t want to lose your transaction history, consider deactivating your account instead of closing it permanently. Contact Betterment support if this option interests you.
How to Close a Betterment Investment Account
Here’s a step-by-step guide to closing a taxable Betterment investment account:
Step 1: Log in to Your Betterment Account
Go to the Betterment website or open the mobile app. Use your credentials to log into the account you wish to close.
Step 2: Withdraw Your Funds
Navigate to your portfolio and select the option to withdraw money. You’ll have to:
- Choose the amount to withdraw (full balance or partial)
- Select your linked bank account as the destination
- Confirm any trade sales required to raise the cash
The funds may take 45 business days to arrive, depending on your bank and settlement times.
Step 3: Wait for Trades to Settle
Betterment must complete any sell orders to liquidate your holdings before they can send your funds. Settlement usually takes 2 business days (T+2) from the trade execution date. Monitor your account until all positions are cleared.
Step 4: Contact Customer Support (Optional)
If your account balance is near zero and you no longer plan to use Betterment, you can email or chat with customer support to request formal account closure. Include your name, account type, and confirmation that you wish to close the account.
Step 5: Confirm Closure
Once your balance reaches zero and any remaining dividends have been cleared, your account may be automatically deactivated. You can verify this by checking your dashboard or contacting support for confirmation. Be sure to download any tax documents or statements before the closure is final.
How to Close a Betterment IRA or SEP IRA
Closing a retirement account has more serious implications, including potential penalties if you’re under the age of 59½. Here are your options:
Withdraw Funds (Taxable Event)
Withdrawing from a traditional or Roth IRA before retirement age may trigger a 10% early withdrawal penalty and income taxes. Consider this route only if absolutely necessary.
Transfer to Another IRA Provider
You can initiate a trustee-to-trustee transfer to another financial institution without tax consequences. To do this:
- Open an IRA at the new institution
- Request an ACATS transfer from your new provider
- Provide Betterment account information and authorization
- Wait 510 business days for the transfer to complete
Once the IRA is empty, contact Betterment to close the now-vacant account.
How to Close a Betterment Checking or Cash Reserve Account
Closing a Betterment Checking or Cash Reserve account is similar to closing an investment account but typically easier and faster:
- Withdraw any remaining funds to your linked bank account
- Wait for the balance to reach zero
- Check for any pending transactions or interest credits
- Contact Betterment support via chat or email to request closure
Once your balance is clear and no future payments are expected, the account can be formally closed.
What Happens After You Close a Betterment Account?
After closing your Betterment account, you’ll still have access to your login credentials for a limited time to retrieve documents such as:
- Year-end tax forms (Form 1099)
- Statements for your records
- Confirmation of account closure
Make sure to download these materials as they may be required for your taxes or future financial planning. It’s also wise to unlink any external accounts and delete the Betterment app if you no longer plan to use their services.
Reopening a Betterment Account in the Future
If you decide to return to Betterment, you can generally reopen your account using the same email address, though your investment goals, portfolios, and settings may need to be reestablished. Note that previous account data may not be restored if the account was fully terminated.
Tips for a Smooth Account Closure
- Plan your closure around the end of the tax year if possible
- Review your portfolio performance and any unrealized gains
- Communicate clearly with customer support if issues arise
- Double-check that your final withdrawal clears before closing
- Save your documents to a secure location
Closing a Betterment account is a straightforward process when approached with preparation and care. Whether you’re transitioning to another investment provider, simplifying your financial life, or adjusting your goals, make sure to understand the implications, manage your tax obligations, and follow the proper steps. By taking a thoughtful approach, you can close your Betterment account confidently and maintain control over your financial future.