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  • #31
    We are in the process of setting up our first taxable account and decided against betterment for several reasons. The funds in our taxable account aren't really meant for retirement. We are putting over 120k a year maxing out all our retirement accounts, back door Roth and HSAs and feel like that's enough. We've had a considerable amount in cash that keeps growing and the 0.90% interest rate in our checking account led us to seek a better return. We don't have plans for those funds and can be flexible when/if we ever wanted to take them out of the market.

    So, Betterment wants you to have a monetary goal and our goal was not a cash amount but simply a higher return than our checking account without huge amounts of risk and they aren't really set up for this type of goal. Another reason we did not go with Betterment was that our retirement portfolio has a vanguard ETF that Betterment uses which means we would need to move it to another fund to avoid wash sales and there were no good options. And we can't opt out of funds at Betterment and can't choose our own funds. All these things plus the fee made us decide to just open up a Vanguard brokerage account. I guess we need to learn a bit about Tax Loss Harvesting. The TLH feature was the appeal of Betterment. In the end it didn't seem worth all the hassle.

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    • #32
      Which Vanguard ETF did you have overlap with?

      Yeah avoiding the wash rule across ALL your accounts PLUS your spouse/household can be a real headache.

      Although TLH is real appealing, at some level I wonder if it's a penny pinchy strategy and losing focus on the bigger picture.

      At first thought it would seem all that's needed is to just transfer some money and then turn on the TLH+ switch, instead you really need to "prep" your entire portfolio so you don't run into trouble. Of course Betterment would love to have you xfer all your money to them so you don't need to worry .

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      • #33
        It would be great if you could customize the ETF mix in the betterment account for TLH purposes

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        • #34




          We are in the process of setting up our first taxable account and decided against betterment for several reasons. The funds in our taxable account aren’t really meant for retirement. We are putting over 120k a year maxing out all our retirement accounts, back door Roth and HSAs and feel like that’s enough. We’ve had a considerable amount in cash that keeps growing and the 0.90% interest rate in our checking account led us to seek a better return. We don’t have plans for those funds and can be flexible when/if we ever wanted to take them out of the market.

          So, Betterment wants you to have a monetary goal and our goal was not a cash amount but simply a higher return than our checking account without huge amounts of risk and they aren’t really set up for this type of goal. Another reason we did not go with Betterment was that our retirement portfolio has a vanguard ETF that Betterment uses which means we would need to move it to another fund to avoid wash sales and there were no good options. And we can’t opt out of funds at Betterment and can’t choose our own funds. All these things plus the fee made us decide to just open up a Vanguard brokerage account. I guess we need to learn a bit about Tax Loss Harvesting. The TLH feature was the appeal of Betterment. In the end it didn’t seem worth all the hassle.
          Click to expand...


          I'm in a similar predicament to you in that we have multiple accounts between my wife and myself.  We are meeting our retirement savings goals, though the absolute $ amount isn't as high as yours.  We are not aiming for retirement in our 40's like many others here, however the taxable account is primarily for big expenses in the vague distant future -- we want growth, we don't need it for emergencies, but no other big expenses (major trips, major renovations to house, whatever) will come up that we can't anticipate but which we want money for.  If we don't use it then it can be considered an early retirement fund or a gift for the kids.

          When I signed up for Betterment I thought they would TLH and pay attention to the outside securities I linked to them so they would avoid the wash sale across accounts, not just within Betterment.  Since they don't do actually care about external accounts it's going to be much less useful than I thought.  We have VTI in our retirement portfolios with new contributions made regularly, and VTI is a big part of the Betterment portfolio so makes things tricky.  I do not plan on transferring them any other assets.

          Since I have no fees the first few months I'm going to leave it where it is for now -- any TLH triggering a wash sale at the amount I deposited is going to be so minor that I'm not super worried about the tax consequences.  However ultimately I may end up moving it to Vanguard or TIAA (where our current accounts are) to make life easier.
          An alt-brown look at medicine, money, faith, & family
          www.RogueDadMD.com

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          • #35
            Curious, how will you know that a wash sale is triggered by an external account? Sounds like the juice ain't worth the squeeze.

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            • #36
              Short answer is a little bit of vigilance. But it will get old quick -- whole point of it was supposed to be automated so I don't have to pay attention and it happens. Once I have to pay attention it loses half its value.

              It did a bit of TLH for me last week and I am not even able to easily figure out on their website what transactions did it. So this will get old quick.

              I started with a relatively small amount of money by WCI reader standards and a wash sale on a few hundred $ won't hurt anything. But I anticipate moving this to vanguard soon.
              An alt-brown look at medicine, money, faith, & family
              www.RogueDadMD.com

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              • #37
                I'm curious of the actual logistics. Is it something that at the end of the year you can just put into turbotax and it will figure it out?

                Or are you trying to be proactive where you set a calendar reminder of when your vanguard fund will do a reinvestment and then you check Betterment if they made any sales?

                I know on the Betterment site they suggest turning off all reinvestment. So wondering if on your external vanguard accounts you can choose to have all your reinvestments go into a target fund. So you're able to still hold say VTI in your external account and then choose to do the reinvestment from dividends in a target date fund to avoid triggering wash.

                Not sure if you can set something up like that automatically.

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                • #38




                  I’m curious of the actual logistics. Is it something that at the end of the year you can just put into turbotax and it will figure it out?

                  Or are you trying to be proactive where you set a calendar reminder of when your vanguard fund will do a reinvestment and then you check Betterment if they made any sales?

                  I know on the Betterment site they suggest turning off all reinvestment. So wondering if on your external vanguard accounts you can choose to have all your reinvestments go into a target fund. So you’re able to still hold say VTI in your external account and then choose to do the reinvestment from dividends in a target date fund to avoid triggering wash.

                  Not sure if you can set something up like that automatically.
                  Click to expand...


                  I don't think the IRS/tax forms that come from brokerage accounts list that level of detail re: when transactions occurred and what would trigger a wash sale between different brokerages.  They do tell you if you had a wash sale within that brokerage/account.

                  Even if they did provide individual transaction date,  I don't think TurboTax is sophisticated enough to know what equity transactions would trigger a wash sale.

                  I believe many people recommend turning off dividend re-investment for that exact purpose.

                  However the logistics that I'm more worried about coordinating are 401k/403b purchases -- based on my understanding a purchase in those accounts can  also trigger a wash sale and wipe out capital losses.  Given that my wife's purchases occur with paychecks every 2 weeks and mine occur with paychecks on the last business day of the month, it may be all but impossible to avoid a wash sale if I understand these rules correctly.  Betterment doesn't let me pick any of the investments, and I'm not forgoing the best investment choices in my 401k/403b just to justify the automated TLH.

                  If someone else has a better understanding of this let me know.  But as I consider this more, given that between my wife and me we have 3 purchases/month into our 401k/403b (unless we max out early in year), it'll be impossible to avoid wash sales if Betterment is using holdings that are similar to what we have in those accounts.
                  An alt-brown look at medicine, money, faith, & family
                  www.RogueDadMD.com

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                  • #39
                    I agree Vagabond. I’m a novice investor and am still learning the ropes. Do you know if you’re able to get a sense of the capital gain on your investment done during the year ? I know they report dividends to me but don’t know if they routinely tell you when they sell shares to re-allocate funds. Have you worked with their customer service department ? Are you happy using them so far?

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                    • #40




                      I agree Vagabond. I’m a novice investor and am still learning the ropes. Do you know if you’re able to get a sense of the capital gain on your investment done during the year ? I know they report dividends to me but don’t know if they routinely tell you when they sell shares to re-allocate funds. Have you worked with their customer service department ? Are you happy using them so far?
                      Click to expand...


                      I am not sure exactly what you are asking. They do a good job communicating income, tax lost harvesting, and return rate via emails and on the online dashboard. Due to the steady, upward movement of all equity markets over the last year plus, there has been little or no opportunity to tax lost harvest.

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