Betterment Tax Loss Harvesting

Jeremy Biberdorf By: Jeremy Biberdorf June 16, 2022
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4.9/5

4.9 rating based on 5 ratings

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In a nutshell: One of the first brokerages to automate the investment process was Betterment. Simply put, these services—also referred to as robo-advisors—take your risk tolerance and financial goals into account while automatically investing your money in a portfolio that is specifically designed for you. Investors can benefit from working with a financial advisor without paying as much, thanks to robo-advisors.

In this Betterment Tax Loss Harvesting review, we’ll examine the company’s robo-investing service in more detail, discuss its benefits and drawbacks, and explain how to determine if it’s the ideal robo-advisor for you.

FeesAccount MinimumPromotion
0.25%$0None

Betterment Tax Loss Harvesting is best for:

  • Investors who don’t require much maintenance and appreciate a simple user interface
  • Beginning investors with little capital available for deposits
  • Customers who prefer investing with goals

Pros & Cons

Pros

  • It has three different SRI portfolios
  • Multiple goals and tracking progress can be made easily
  • It doesn't require a minimum investment
  • Portfolios are modified to take into account customers' changing objectives and risk tolerance
  • All customers have access to tax-loss harvesting

Cons

  • Does not allow margin or borrow
  • Live customer service is not available on weekends
  • Does not have REITs exposure in Core portfolios
  • You can only view your specific portfolio after creating an account
  • You need $100,000 for the premium package

Compare to Other Investment Platforms

Betterment Logo
4.9 rating based on 5 ratings
4.9/5
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Fees0.25%

Minimum Investment$0

PromoNone

Wealthfron Logo
4.8 rating based on 5 ratings
4.8/5
Learn More

Fees0.25% for most accounts; there are no trading commissions or charges for withdrawals, minimums, or transfers.

Minimum Investment$500

PromoNone

How Does Betterment Tax Loss Harvesting Work?

Account Minimum

● $0

Fees

● 0.25%

Account Fees

● None

Portfolio Mix

● Yes. 14 different ETFs

Account Types

● Individual, traditional IRA,  SEP IRA, Roth IRA, inherited IRA, trust, savings, and checking.

Tax Strategy

● Estimation of annual savings of 0.48% or 15% over 30 years.

Automatic Rebalancing

● Yes

Customer Support

● Yes

One of the numerous brand-new robo advisor companies is Betterment. For accounts with more than $50,000, they provide an automated tax-loss harvesting service called “TLH+” as part of their usual management charge (including taxable accounts and traditional IRA holdings).

For accounts $50,000–$99,999, they charge 0.25 percent annually; for accounts $100,000 and higher, they charge 0.15 percent annually. Even though the costs haven’t increased since 2012, TLH+ is a brand-new service introduced in 2014 and is perhaps of particular interest to attending physicians with taxable investment accounts.

Keep reading this review to see why Betterment Tax Loss Harvesting is our best choice.

Full Betterment Tax Loss Harvesting Review

Betterment published a white paper on TLH+ that contains data that suggests that, under very reasonable assumptions about marginal tax rates for an audience of attending physicians, their algorithm will produce gains that are roughly twice as high as those of existing, simpler automated tax-loss harvesting algorithms. These anticipated benefits are, according to the cynics, almost an order of magnitude more than their 0.15 percent fee.

They achieve this by collecting losses on depreciating assets and moving funds between holdings with associated performance but distinct from one another in the primary, secondary, and tertiary classes.

The algorithm implements this harvesting daily to maximize up to $3,000 annual income deductions from harvested losses (with further losses exceeding this amount carried forward), reduce fund costs, completely prevent short-term capital gains, and comply with the Wash Sale Rule.

Betterment Tax Loss Harvesting Feature

Tax Loss Harvesting+™

The term “tax-loss harvesting” refers to a portfolio management technique that reduces taxes. An investor can utilize a loss from the sale of a security that has experienced a loss to balance, for tax purposes, profits from the sale of another security or asset that has gained in value. The investor can maintain the balance of their portfolio by repurchasing security that is comparable to the one they sold for a loss after.

Smart Rebalancing

To avoid the risk of purchasing high and selling low while rebalancing your investments, this automatic rebalancing schedules your sales and purchases.

It is intended to prevent you from making errors that could cost you money. They’ll alert you when you might be holding too much cash when you could be investing it in the stock market to make it work harder for you.

After a market crash, they will advise you against selling off your assets. They will handle the tax-loss harvesting and rebalancing work for you, saving you time and preventing mistakes from being made if you do it yourself. This can be an excellent option if you need assistance with your investment but don’t want to pay for a real-life financial counsellor.

Betterment Tax Loss Harvesting Pricing

The “Digital” level does not require a minimum balance and costs a 0.25 percent annual fee. The “Premium” option has a $100,000 minimum balance requirement and charges a 0.40 percent annual fee. It includes unlimited calls with a CFP® in addition to the robo-advisory features of the “Digital” package.

Betterment Tax Loss Harvesting FAQ

What Platforms Does It Support?

Betterment supports both web, IOS, and Android platforms.

Is Betterment regulated?

Betterment Securities, an SEC-registered broker-dealer and member of FINRA /SIPC, provides brokerage services to Betterment LLC’s clients. Betterment LLC is an SEC-registered Investment Advisor.

Jeremy Biberdorf

About the Author:

Jeremy Biberdorf is the founder of Modest Money. After working many years in the website marketing industry, he decided to take on blogging full time and also get his finances headed in the right direction. Also check out his contributions to Equities.com and Benzinga.