Betterment Announces the Latest Breakthrough in Tax-Smart Investing: Tax-Coordinated Portfolio™

NEW YORK, Sept. 27, 2016 /PRNewswire/ -- Betterment, the largest independent robo-advisor, today announced the release of Tax-Coordinated Portfolio™, a feature that automates the well-known investment strategy of asset location to boost an investor's cumulative after-tax returns. Betterment is the only robo-advisor to provide automated asset location.

Millions of Americans wind up saving for retirement in some combination of three account types: (1) Taxable, (2) Tax-deferred (traditional IRA), and (3) Tax-exempt (Roth IRA). Each type of account has different tax treatment, and these rules make certain investments a better fit for one account type over another. Choosing wisely can significantly improve the after-tax value of their savings, when more than one account is in the mix.

Tax-Coordinated Portfolio manages multiple accounts as a single portfolio, placing less tax-efficient investments into more favorably taxed accounts. Betterment's research shows that in one generalized scenario, saving in all three types of accounts showed an estimated annualized after-tax benefit of 0.48% which amounts to an extra 15% over 30 years.

"At Betterment, we've always aimed to make sophisticated investment practices available to everyone, regardless of how much money or free time they have to manage their own investments," said Jon Stein, Founder and CEO of Betterment. "Tax-Coordinated Portfolio is the latest breakthrough that is allowing us to fulfill this promise. We believe it is the most advanced asset location feature on the market today and will truly make a difference in our customers' retirement savings."

"Asset location is the closest thing there is to a free lunch in wealth creation," Boris Khentov, VP of Operations and a tax attorney at Betterment. "Customers saving for retirement in more than one type of account should be using it to increase their after-tax returns. However, doing it properly is a complex, mathematically rigorous, and continuous process. Betterment's Tax-Coordinated Portfolio automates this sophisticated strategy every step of the way, helping our customers make the most of their investments."

Since launching in 2010, Betterment has continued to add new features and improve its industry-leading service. Tax-Coordinated Portfolio is just one of Betterment's suite of tax-efficient features, which include Tax Loss Harvesting+ and Tax Impact Preview.

Betterment, which manages more than $5.6 billion in assets for more than 185,000 customers, offers them a globally diversified portfolio of index-tracking exchange-traded funds (ETFs) with personalized advice in a goal-based investing framework. Customers can open and customize regular investment accounts, traditional/SEP/Roth IRAs, trust accounts, and accounts for retirement income. Betterment also has expanded its platform to serve the RIA and 401(k) markets. For more information, please visit Betterment.com or watch the Tax Coordinated Portfolio video.

Contact Info:
Joe Ziemer, [email protected], 212-228-1328
Arielle Sobel, [email protected], 646-836-9246

Betterment is the largest independent robo-advisor, helping people to intelligently manage and grow their wealth through smarter technology. With more than 185,000 customers and over $5.6 billion in assets under management, the service offers a globally diversified portfolio of ETFs, designed to help provide you with the higher expected returns for retirement planning, building wealth, and other savings goals. Betterment also helps customers get on track for a comfortable retirement with RetireGuide™, a retirement planning tool that lets people know how much they should save and if they are investing correctly. Betterment was a CNBC Disruptor 50, FT 300 and Webby award winner, and it has been featured in the New York Times, Forbes, and the Wall Street Journal. Betterment helps people work to achieve a smarter financial future with minimal effort and for a fraction of the cost of traditional financial services. 

Investing in securities involves risks, and there is always the potential of losing money when you invest in securities. Determination of largest independent robo-advisor reflects Betterment LLC's distinction of having highest number of assets under management, based on Betterment's review of assets self-reported in the SEC's Form ADV, across Betterment's survey of independent robo-advisor investing services as of July 11, 2016. As used here, "independent" means that a robo-advisor has no affiliation with the financial products it recommends to its clients.

The estimated additional annualized return of 0.48% assumes that the initial balance is equally distributed across three types of accounts: a taxable account, a tax-deferred account (such as a traditional 401(k) or IRA) and a tax-exempt account (such as a Roth 401(k) or IRA). It also assumes a 70% allocation to stocks across the entire 30-year period, and a California resident in a 28% federal tax bracket both during the entire period, and at liquidation. The incremental return was calculated using the Monte Carlo projection method across more than 1,000 simulated market scenarios. It compared the total after-tax value of all three accounts when managed by TCP to the benchmark, which was the after-tax value of all the accounts under the same market scenarios, but uncoordinated (i.e. managed by Betterment separately, as standalone Betterment portfolios). As such, these projections make no claim about the value of Betterment's service as compared to any particular non-Betterment investing strategy. Instead, they estimate specifically the value of the TCP service, as applied to Betterment's baseline passive investing strategy. There are additional assumptions around these estimates, which are necessarily numerous and complex, due to the nature of this projection method. TCP may not be suitable for taxpayers subject to a Federal tax bracket of 15% or lower. You should not use TCP to coordinate accounts with materially different time horizons. TCP is not optimal for accounts which you rely on for liquidity in case of unforeseen circumstances. For much more on this research, including additional considerations on the suitability of TCP to your circumstances, please see our white paper and our full disclosures.

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