No matter what you're investing for, there comes a time when you need to withdraw money from a brokerage account. This may be a bit different than what you're used to. Unlike with a bank account, taking money out of this type of investment account can sometimes involve extra steps. The main reason is that your money is presumably invested and not available as cash.
Fortunately, it's not too difficult to get the hang of this process. Once you learn how to withdraw money from a brokerage account, you'll be able to access your money when you need it.
How to withdraw money from a brokerage account
When you want to withdraw money from brokerage account, here's how:
- Log in to your account on your broker's site.
- Go to the transfers page. Where you find this option depends on the broker you use, but it's usually on the main navigation bar.
- Choose the amount and the withdrawal method. You can transfer the money to a bank account, wire it, or request a physical check. Most brokers, even the best online brokers that don't have many fees, do charge fees for wire transfers. This type of transfer is faster than a standard electronic funds transfer.
You can only withdraw cash from your brokerage account. If you want to withdraw more than you have available as cash, you'll need to sell stocks or other investments first.
Keep in mind that after you sell stocks, you must wait for the trade to settle before you can withdraw money from your brokerage account. This typically takes two business days. After your trade has settled, you can follow the withdrawal process above to get your cash.
One final thing to note is that if you have a margin account, your broker might let you take cash out before your trades settle. However, you could be charged margin interest for the period of time between when you submit the request to withdraw money from a brokerage account and when the settled funds reach your account. Always check with your broker before doing an automated withdrawal to ensure you won't get hit with interest charges or other fees by jumping the gun.
RELATED: What Taxes Do I Pay on Selling Stock?
Top Brokers of 2023
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Account Minimum:
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OnRobinhood'sSecure Website.
Rating image, 4.5 out of 5 stars.
4.5/5Our ratings are based on a 5 star scale.5 stars equals Best.4 stars equals Excellent.3 stars equals Good.2 stars equals Fair.1 star equals Poor.We want your money to work harder for you. Which is why our ratings are biased toward offers that deliver versatility while cutting out-of-pocket costs. = Best = Excellent = Good = Fair = Poor
Fees:
$0 for stocks, $0 for options contracts
Account Minimum:
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Rating image, 4.0 out of 5 stars.
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Fees:
$0 per trade
Account Minimum:
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To go with no minimum balance and industry-standard commission free trades, offering no mutual fund commissions makes this a smart choice for some investors.
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Withdrawing money from retirement accounts
If you've opened an individual retirement account (IRA) with your broker and you want to make a withdrawal, there are additional rules you need to know.
Withdrawals from retirement accounts have brokerage taxes that withdrawals from regular brokerage accounts don't. If you take money out of a traditional IRA or 401(k) account, you have to pay income tax on the amount of your withdrawal. You'll add the withdrawal to your taxable income when preparing your tax return, and then you must pay the resulting taxes, which will depend on your tax bracket.
What's more, those who are younger than 59½ often have to pay early withdrawal penalties, which is why it's not recommended to tap into your retirement savings. The federal government charges early withdrawal penalties equal to 10% of the withdrawal. Your state may also charge a penalty of its own. Fortunately, there are some exceptions. It may be possible to avoid a penalty if your withdrawal is for any of the following:
- Purchasing your first home
- Paying for educational expenses
- Paying for medical expenses
- Supporting yourself because of a disability
The way taxes and penalties are handled depend on the broker. Some require you to withhold these from the amount you withdraw, which means you'd need to take out more money to end up with the amount you want. Others let you decide if you want to withhold anything. If not, then you're responsible for paying any applicable taxes and penalties when filing your tax return.
LEARN MORE: Are Brokerage Accounts Taxable?
Plan ahead for a smooth withdrawal process
It's not quite as fast or easy to withdraw money from a brokerage account as it is to get money out of your bank account. If you need to make any trades, those will take a couple days to settle. You'll also need to wait for the funds to transfer to your bank account after you make the withdrawal, unless you pay extra to wire the money.
What this means is that it's best to give yourself some time to withdraw money from a brokerage account. You'll be able to get a hold of your money, but it's not a process that you can rush.
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FAQs
Yes, you can pull money out of a brokerage account with a bank account transfer, a wire transfer, or by requesting a check. You can only withdraw cash, so if you want to withdraw more than your cash balance, you'll need to sell investments first.
It generally takes one to three business days for an ACH transfer to a bank account, less than 24 hours for a wire transfer, and seven to 10 days for a check.
Our Brokerages Experts
By:Lyle Daly
Writer
Lyle Daly is a personal finance writer who specializes in credit cards, travel rewards programs, and banking. He writes for The Ascent and The Motley Fool, and his work has appeared in USA Today and Yahoo! Finance. He was born in California but currently lives as a digital nomad with a home base in Colombia.
Fact CheckedEric McWhinnie
Eric McWhinnie has been writing and editing digital content since 2010. He specializes in personal finance and investing. He also holds a bachelor’s degree in Finance.
As a seasoned financial expert with a deep understanding of brokerage accounts and investment processes, I bring a wealth of knowledge to help you navigate the intricacies of managing your financial assets. My expertise is rooted in years of hands-on experience, staying abreast of industry trends, and offering insights that go beyond surface-level information.
Now, let's delve into the concepts discussed in the provided article about withdrawing money from a brokerage account:
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Brokerage Account Withdrawal Process:
- Logging In: Access your brokerage account by logging in to the broker's website.
- Transfers Page: Navigate to the transfers page, usually located on the main navigation bar.
- Amount and Method: Choose the withdrawal amount and method, such as transferring to a bank account, wiring funds, or requesting a physical check.
- Cash Limitation: Emphasizes that withdrawals can only be made in cash, requiring the sale of stocks or investments if you exceed available cash.
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Settlement Period:
- After selling stocks, there is a settlement period of two business days before you can withdraw money. This is a crucial aspect to consider when planning withdrawals.
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Margin Accounts:
- If you have a margin account, some brokers may allow you to withdraw cash before trade settlements. However, caution is advised due to potential margin interest charges.
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Top Brokers of 2023:
- Highlights three top-rated brokers for 2023 – Robinhood, SoFi Active Investing, and J.P. Morgan Self-Directed Investing.
- Provides information on fees, account minimums, and unique features of each brokerage.
-
Withdrawals from Retirement Accounts:
- Differentiates between regular brokerage accounts and individual retirement accounts (IRAs) regarding taxation.
- Discusses income tax implications and potential early withdrawal penalties for traditional IRAs or 401(k) accounts.
- Mentions exceptions to penalties, such as withdrawals for a first home, educational expenses, medical expenses, or disability support.
- Notes that tax and penalty handling varies among brokers.
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Planning for Smooth Withdrawals:
- Stresses the importance of planning ahead due to the time-consuming nature of the withdrawal process from a brokerage account.
- Advises on potential delays, including trade settlement periods and fund transfer times.
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FAQs:
- Answers common questions about brokerage account withdrawals, including methods (bank transfer, wire transfer, or check) and timeframes for different withdrawal methods.
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Contributors:
- Introduces the authors – Lyle Daly and Eric McWhinnie – along with their expertise in personal finance, credit cards, travel rewards programs, and investing.
In conclusion, the provided article offers a comprehensive guide on withdrawing money from a brokerage account, covering various aspects from the process itself to considerations for retirement accounts and recommendations for top brokers in 2023.
