How to Cash Out Fidelity Investments: Your Comprehensive Step-by-Step Guide
So, you've made some smart moves with Fidelity and now you're ready to enjoy the fruits of your labor. Perhaps you need funds for a down payment, a significant purchase, or simply to rebalance your personal finances. Whatever your reason, cashing out your Fidelity investments can seem like a complex process, but it doesn't have to be. This detailed guide will walk you through every step, ensuring a smooth and successful withdrawal.
Ready to turn those investments into spendable cash? Let's dive in!
Step 1: Understand Your Account Type and Its Implications
Before you even think about hitting "sell," it's absolutely crucial to understand the type of account you hold with Fidelity. The rules, tax implications, and even withdrawal methods can vary significantly based on whether it's a retirement account, a taxable brokerage account, or a specialized account like a 529 plan or HSA.
1.1: Identify Your Fidelity Account
Taxable Brokerage Accounts: These are your standard investment accounts where you invest after-tax money. Gains are subject to capital gains tax (short-term or long-term) when you sell.
Retirement Accounts (IRA, 401(k), etc.):
Traditional IRA/401(k): Contributions are often tax-deductible, and your money grows tax-deferred. Withdrawals in retirement are taxed as ordinary income. Early withdrawals (before 59½) are generally subject to a 10% IRS penalty in addition to income tax, though some exceptions apply (first-time home purchase, qualified education expenses, disability, etc.).
Roth IRA/401(k): Contributions are made with after-tax money, and qualified withdrawals in retirement are tax-free. You can withdraw contributions at any time, for any reason, without penalty or taxes. However, earnings withdrawals are tax-free and penalty-free only if the account has been open for 5 years AND you meet certain conditions (age 59½, disability, first-time home purchase, etc.).
SIMPLE IRA: Similar to Traditional IRAs, but with specific employer contribution rules. Early withdrawals within two years of your first contribution can incur a higher 25% penalty.
Fidelity Go Accounts: These are robo-advised accounts. To withdraw, you'll first need to liquidate the underlying investments managed by Fidelity Go.
Other Accounts (e.g., 529 College Savings, Health Savings Accounts (HSA)): These have specific rules for qualified withdrawals. Non-qualified withdrawals can lead to penalties and taxes.
Why is this important? Because withdrawing from a retirement account prematurely could lead to significant tax penalties and a reduced nest egg. Always consider the long-term impact before withdrawing from these accounts.
Step 2: Determine What You Need to Cash Out
Do you need to liquidate all your holdings, or just a portion? Do you have enough cash already in your Fidelity account, or do you need to sell investments first?
2.1: Check Your Available Cash Balance
Log in to your Fidelity account. Navigate to your "Portfolio" or "Account Summary." Look for your cash balance or "Available to Withdraw" amount. If you have sufficient cash in your core position (the sweep account where uninvested cash is held), you can proceed directly to withdrawal.
2.2: Selling Investments (If Necessary)
If your cash balance isn't enough, you'll need to sell some of your investments (stocks, ETFs, mutual funds, bonds, etc.) to convert them into cash.
For Stocks, ETFs, Bonds:
Go to Accounts & Trade > Trade.
Select the account from which you wish to sell.
Choose the security you want to sell.
Enter the quantity or dollar amount you wish to sell. You can choose to sell "All Shares" if liquidating completely.
Select your order type (e.g., Market Order for immediate execution at the current market price, or Limit Order for a specific price).
Review your order carefully before placing it.
Once placed, the trade will execute.
For Mutual Funds:
Go to Accounts & Trade > Trade.
Select the account.
Click on Trade Mutual Funds.
Choose "Sell a mutual fund" and select the fund you own.
Enter the quantity (number of shares) or dollar amount to sell.
Preview and Place Order.
Important Note on Settlement Times: When you sell investments, the proceeds don't become immediately available for withdrawal.
Stocks and ETFs: Typically have a T+2 settlement period, meaning the cash from your sale will be available two business days after the trade date.
Mutual Funds: Settlement times can vary, but are often T+1 or T+2, though some may take longer.
Plan your withdrawals accordingly, especially for large amounts or time-sensitive needs.
Step 3: Choose Your Withdrawal Method
Fidelity offers several convenient ways to get your money, each with its own speed and characteristics.
3.1: Electronic Funds Transfer (EFT) to Your Bank Account (Most Common & Recommended)
This is typically the fastest and most convenient method for transferring funds to an external bank account.
Prerequisites: You must have a linked bank account on file with Fidelity. If not, you'll need to link one first (see Step 3.1.1).
Process:
Log in to Fidelity.com.
Navigate to Accounts & Trade > Transfers (or Move Money).
Select Withdraw Money or Transfer to a Bank.
Choose the Fidelity account you want to withdraw from.
Select the linked bank account you want to send the money to.
Enter the amount you wish to withdraw.
Review the details of your transfer carefully, including the estimated arrival date.
Confirm the transaction.
Timing: Funds typically arrive in your linked bank account within 1-3 business days once the underlying investments have settled (if you sold any).
Limits: Fidelity generally has a daily limit for EFTs, often around $100,000 per day. For larger amounts, consider a wire transfer.
3.1.1: How to Link a Bank Account to Fidelity
If you haven't already, you'll need to link your external bank account. This is a one-time setup process.
Log in to Fidelity.com.
Go to Accounts & Trade > Transfers.
Under "Manage," select Link a Bank.
You'll typically have options to link instantly via your bank's online login credentials (most common and fastest) or by manually entering your bank's routing and account numbers.
If manual, Fidelity will usually send small trial deposits to your bank account, which you'll need to verify on the Fidelity website a few days later to confirm the link.
Once linked, the account will be available for transfers.
3.2: Wire Transfer
Wire transfers are ideal for large, time-sensitive withdrawals as they are generally the fastest way to get funds to an external bank.
Process:
Log in to Fidelity.com.
Go to Accounts & Trade > Transfers.
Look for Wire Transfer options.
You'll need the recipient bank's routing number, account number, account name, and potentially the bank's physical address. For wires to someone else, you'll also need their name, address, and contact information.
Enter the amount.
Review carefully – wire transfers are often irreversible.
Confirm.
Timing: Funds sent before Fidelity's daily cut-off time (typically 4 PM ET) are often available the same business day.
Fees: Fidelity typically does not charge fees for outgoing wire transfers, but the receiving bank may impose a fee.
Limits: Daily wire transfer limits generally go up to $1 million per client. For amounts exceeding this, you may need to call Fidelity directly.
3.3: Request a Check
If you prefer a physical check, Fidelity can mail one to your address of record or directly to your bank.
Process:
Log in to Fidelity.com.
Go to Accounts & Trade > Transfers (or Move Money).
Select Request a Check.
Choose the Fidelity account.
Enter the amount.
Specify the payee and mailing address.
Confirm your request.
Timing: Checks typically arrive within 5-7 business days via U.S. mail.
Fees: There is generally no fee to have a check sent.
3.4: Fidelity Debit Card (for eligible accounts like Fidelity Cash Management)
If you have a Fidelity Cash Management Account or an eligible brokerage account with a linked debit card, you can access your cash directly.
ATM Withdrawals: Use your Fidelity debit card at ATMs. Fidelity Cash Management accounts reimburse all ATM fees worldwide. Other brokerage accounts may have specific reimbursement policies.
Point-of-Sale Purchases: Use your debit card for everyday purchases.
Limits: Daily ATM withdrawal and spending limits apply. You can view these limits on the Fidelity debit card page online.
Important: Debit cards are typically not issued for retirement or managed accounts.
Step 4: Account for Tax Implications
This is a critical step and often the most complex, especially for retirement accounts. Fidelity does not provide tax advice, so it's highly recommended to consult with a qualified tax advisor.
4.1: Taxable Brokerage Accounts
Capital Gains: When you sell investments for a profit in a taxable brokerage account, you incur capital gains.
Short-term capital gains (for investments held for one year or less) are taxed at your ordinary income tax rate.
Long-term capital gains (for investments held for more than one year) are taxed at preferential rates, which are generally lower than ordinary income tax rates.
Cost Basis: Fidelity tracks your cost basis, which is essential for calculating capital gains or losses. You can usually choose your tax lot identification method (e.g., FIFO - First-In, First-Out, or Specific ID) when selling.
Tax Loss Harvesting: If you have investments with losses, you might consider selling them to offset capital gains and potentially a portion of your ordinary income.
4.2: Retirement Accounts (IRAs, 401(k)s)
Traditional IRA/401(k) Withdrawals:
Under 59½: Generally subject to ordinary income tax and a 10% early withdrawal penalty.
59½ and Older: Withdrawals are taxed as ordinary income but are not subject to the 10% penalty.
Required Minimum Distributions (RMDs): If you are age 73 or older (or age 70½ if you turned 70½ before January 1, 2020), you are generally required to take annual distributions from these accounts. Failing to take RMDs can result in a 50% IRS penalty on the amount not withdrawn. Fidelity can help calculate your RMDs.
Roth IRA/401(k) Withdrawals:
Contributions: You can withdraw your Roth contributions tax-free and penalty-free at any time, for any reason.
Earnings: Earnings withdrawals are tax-free and penalty-free if the account has been open for at least 5 years AND you meet a "qualified distribution" condition (e.g., age 59½, disability, first-time home purchase up to $10,000). If not qualified, earnings may be subject to tax and the 10% early withdrawal penalty.
Tax Withholding: Fidelity will typically ask you about federal and state tax withholding when you initiate a retirement account withdrawal. Be mindful of this to avoid underpayment penalties.
4.3: Specialized Accounts (529, HSA)
529 College Savings Plans: Qualified withdrawals for eligible educational expenses are tax-free. Non-qualified withdrawals are subject to ordinary income tax on the earnings portion and generally a 10% federal tax penalty.
Health Savings Accounts (HSAs): Qualified withdrawals for eligible medical expenses are tax-free. Non-qualified withdrawals are subject to ordinary income tax and a 20% penalty if you are under age 65.
Step 5: Review and Confirm
Before finalizing any withdrawal, always double-check all the details.
Account Selection: Ensure you've selected the correct Fidelity account.
Recipient Account: Verify the bank account details (routing number, account number) if you're transferring funds.
Amount: Confirm the exact amount you wish to withdraw.
Timing: Understand the estimated arrival time for your funds.
Tax Withholding (if applicable): Make sure your tax withholding preferences are set correctly for retirement distributions.
Once you've reviewed everything, confirm your withdrawal request. You'll usually receive a confirmation number or email.
Step 6: Monitor Your Funds
Keep an eye on your Fidelity account for the status of your withdrawal and check your external bank account to confirm receipt of funds. Fidelity's "Activity & Orders" section on their website is a good place to track your transactions.
Step 7: Keep Records
It's always a good practice to keep records of your transactions, especially withdrawals, for tax purposes and your personal financial planning. Download and save transaction confirmations.
Frequently Asked Questions (FAQs)
Here are 10 common "How to" questions related to cashing out Fidelity investments:
How to check my available cash balance on Fidelity?
You can check your available cash balance by logging into your Fidelity account and navigating to your "Portfolio" or "Account Summary" page. Your core position or "Available to Withdraw" amount will be displayed.
How to link a new bank account to Fidelity for withdrawals?
To link a new bank account, log in to Fidelity.com, go to "Accounts & Trade" > "Transfers," and then select "Link a Bank." You can usually link instantly with your bank login or manually with routing and account numbers, which may require verifying small trial deposits.
How to sell investments on Fidelity before withdrawing cash?
Log in to Fidelity.com, go to "Accounts & Trade" > "Trade." Select the account and the specific investment (stock, ETF, mutual fund) you wish to sell. Enter the amount or quantity and choose your order type, then preview and place the order.
How to avoid early withdrawal penalties from a Fidelity IRA?
To avoid early withdrawal penalties (typically 10% for those under 59½), ensure your withdrawal qualifies for an IRS exception, such as a first-time home purchase, qualified education expenses, disability, or a series of substantially equal periodic payments. Consult a tax advisor.
How to transfer a large sum from Fidelity via wire transfer?
Log in to Fidelity.com, navigate to "Accounts & Trade" > "Transfers," and select the "Wire Transfer" option. You will need the recipient bank's routing and account numbers, and the recipient's name and address. Wires often clear the same business day for large amounts.
How to request a physical check from Fidelity?
Log in to Fidelity.com, go to "Accounts & Trade" > "Transfers" and select "Request a Check." Specify the Fidelity account, the amount, the payee, and the mailing address. Checks typically arrive in 5-7 business days.
How to get cash from my Fidelity account using a debit card?
If you have a Fidelity Cash Management Account or an eligible brokerage account with a debit card, you can use it for ATM withdrawals or point-of-sale purchases. Fidelity Cash Management accounts reimburse all ATM fees.
How to understand the tax implications of withdrawing from my Fidelity account?
The tax implications depend on your account type (taxable, Traditional IRA, Roth IRA, 529, HSA). For taxable accounts, you'll owe capital gains tax. For retirement accounts, withdrawals may be taxed as ordinary income and/or incur penalties, depending on your age and the account type. Always consult a tax professional.
How to ensure my withdrawal is processed quickly?
For the fastest processing, ensure your bank account is already linked for electronic funds transfers (EFTs). If liquidating investments, be aware of settlement times (T+2 for stocks/ETFs, T+1/T+2 for mutual funds). Wire transfers are the quickest for large, urgent needs.
How to contact Fidelity customer service for withdrawal assistance?
You can contact Fidelity customer service by calling their general customer service line at 800-343-3548, available 24/7. You can also use their online chat service or visit a local Fidelity Investor Center.
