No matter what you are investing in, there comes a time when you need to withdraw money from a brokerage account. This may be slightly different than what you are used to. Unlike a bank account, withdrawing money from this type of investment account can sometimes involve additional steps. The main reason is that your money is supposedly invested and is not available as cash.
Fortunately, it’s not too difficult to get familiar with this process. Once you learn how to withdraw money from a brokerage account, you will 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 your brokerage account, here’s how:
- Log into your account on your broker’s website.
- Go to the transfers page. Where you find this option depends on the broker you use, but it is usually found in the main navigation bar.
- Choose the amount and withdrawal method. You can transfer the money to a bank account, transfer it or request a physical check. Most brokers, even the best online brokers who don’t have a lot of fees, charge fees for wire transfers. This type of transfer is faster than a normal electronic funds transfer.
You can only withdraw cash from your brokerage account. If you want to withdraw more than you have available in cash, you will need to sell stocks or other investments first.
Keep in mind that after selling shares, you must wait for the transaction to close before you can withdraw money from a brokerage account. This typically takes two business days. After the transaction is established, you can follow the withdrawal procedure above to get your money back.
One last thing to note is that if you have a margin account, your broker may let you withdraw cash before your trades close. However, you may be charged margin interest for the period of time between the time you submit your request to withdraw money from a brokerage account and when the regulated funds reach your account. Always check with your broker before making an automatic withdrawal to make sure you are not hit with interest or other fees by jumping the gun.
Withdrawing money from retirement accounts
If you have opened an Individual Retirement Account (IRA) with your broker and want to make a withdrawal, there are additional rules you need to know.
Withdrawals from retirement accounts have brokerage fees that regular brokerage account withdrawals do not. If you take money from a traditional or 401 (k) IRA account, you must pay income tax on the amount of your withdrawal. You will add the levy to your taxable income when preparing your tax return, so you will have to pay the resulting taxes, which will depend on your tax bracket.
Additionally, those under the age of 59 and a half often have to pay early withdrawal penalties, which is why tapping into retirement savings is not recommended. The federal government charges early withdrawal penalties equal to 10% of the withdrawal. Your state may also charge a penalty. Fortunately, there are some exceptions. It may be possible to avoid a penalty if your withdrawal is for one of the following:
How taxes and penalties are handled depends on the broker. Some require you to withhold them from the withdrawn amount, which means you would have to withdraw more money to get the desired amount. Others let you decide if you want to keep something. If not, you are responsible for paying any taxes and penalties applicable at the time of filing the tax return.
Plan ahead for a smooth withdrawal process
It is not as quick or easy to withdraw money from a brokerage account as it is to withdraw money from your bank account. If you need to make exchanges, it will take a couple of days to resolve them. You will also need to wait for the funds to be transferred to your bank account after making the withdrawal, unless you pay extra to transfer the money.
This means that it is best to give yourself some time to withdraw money from a brokerage account. You will be able to withhold your money, but it is not a process you can rush.
- According to this source How to withdraw money from a brokerage account
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