How withdrawals work at Fidelity

A withdrawal moves money from your Fidelity account to your bank account or to you directly. The method you use depends on the account type you hold — retirement accounts like IRAs and 401(k)s have different rules than taxable brokerage accounts — and whether you are withdrawing before or after retirement age. Fidelity processes most withdrawal requests within one to three business days, though the money may take an additional one to five business days to appear in your bank account depending on your bank.

You do not need to call Fidelity to withdraw money. You can initiate most withdrawals through the Fidelity website, the mobile app, or by mail. The steps differ slightly by account type, and some withdrawals trigger tax withholding or penalties that you should understand before you proceed.

Key Takeaways

  • Withdrawals from taxable brokerage accounts have no age restrictions or penalties, but you will owe taxes on any gains when you sell.
  • Withdrawals from IRAs before age 59½ usually trigger a 10 percent early withdrawal penalty plus income tax, with limited exceptions for hardship or first-time home purchase.
  • 401(k) withdrawals before age 59½ also face the 10 percent penalty, but you may be able to borrow from your 401(k) instead, which avoids the penalty.
  • Fidelity will withhold federal income tax automatically from retirement account withdrawals unless you elect otherwise, and you may owe state taxes as well.
  • The withdrawal process takes one to three business days at Fidelity, plus one to five additional business days for the money to reach your bank.

Withdrawing from a taxable brokerage account

A taxable brokerage account has no withdrawal restrictions. You can withdraw any amount at any time without penalty. Log into your Fidelity account online or through the app, go to the "Accounts" tab, select the account you want to withdraw from, and click "Withdraw." Choose whether you want the money sent to a linked bank account or mailed as a check. If you are sending it to a bank account, select the account from your list of linked banks or add a new one. Fidelity will ask you to verify the new bank account before processing the withdrawal.

When you sell investments to fund the withdrawal, you will owe capital gains tax on any profit. If you held the investment for more than one year, you pay long-term capital gains tax, which is usually lower than your ordinary income tax rate. If you held it for one year or less, you pay short-term capital gains tax at your ordinary income tax rate. Fidelity does not withhold this tax automatically — you will owe it when you file your tax return. Keep records of what you sold and when you bought it so you can calculate your gain or loss.

Withdrawing from a traditional IRA

A traditional IRA allows you to withdraw money at any time, but withdrawals before age 59½ are subject to a 10 percent early withdrawal penalty plus income tax on the amount you withdraw. Fidelity will withhold 10 percent for federal income tax automatically unless you tell them not to, and you may owe additional tax when you file your return. The 10 percent penalty is separate from the income tax and applies on top of it.

There are exceptions to the early withdrawal penalty. You can withdraw without penalty if you are withdrawing for a first-time home purchase (up to $10,000 lifetime), to pay for higher education expenses, to cover medical expenses that exceed 7.5 percent of your adjusted gross income, or if you become disabled. You can also withdraw without penalty if you set up a series of substantially equal periodic payments under IRS Rule 72(t), though this locks you into a specific payment schedule for at least five years or until age 59½, whichever is later.

To withdraw from a traditional IRA, log into your Fidelity account, go to "Accounts," select your IRA, and click "Withdraw." Choose your withdrawal method and amount. Fidelity will show you the tax withholding amount before you confirm. If you believe you may have access to for an exception to the penalty, you will need to report that on your tax return — Fidelity will not automatically remove the penalty, and the IRS will assess it unless you claim the exception when you file.

Withdrawing from a Roth IRA

A Roth IRA works differently from a traditional IRA. You can withdraw the money you contributed (your "basis") at any time without tax or penalty. You can only withdraw earnings before age 59½ if you meet an exception, and earnings withdrawals before 59½ trigger both the 10 percent penalty and income tax.

The key is knowing how much you contributed versus how much is earnings. Fidelity tracks this for you. When you request a withdrawal, Fidelity will tell you how much of your withdrawal is basis (tax-free) and how much is earnings (subject to tax and penalty if you are under 59½). The process is the same as a traditional IRA: log in, go to "Accounts," select your Roth IRA, click "Withdraw," and choose your method and amount.

Withdrawing from a 401(k)

A 401(k) withdrawal before age 59½ triggers a 10 percent early withdrawal penalty plus income tax, just like a traditional IRA. However, if your 401(k) plan allows it, you can borrow from your 401(k) instead of withdrawing. A loan does not trigger the penalty or immediate tax, and you repay yourself with interest. The downside is that if you leave your job, the loan usually becomes due within 60 days or it is treated as a withdrawal.

To withdraw from a 401(k) held at Fidelity, log into your account, go to "Accounts," select your 401(k), and look for the withdrawal or distribution option. Some 401(k) plans require you to contact Fidelity by phone or mail to process a withdrawal, so check your plan documents first. Fidelity will withhold 20 percent for federal income tax on 401(k) withdrawals automatically. If you are subject to the 10 percent early withdrawal penalty, you will owe that on top of the 20 percent withholding when you file your tax return.

Withdrawals after age 59½

Once you reach age 59½, you can withdraw from IRAs and 401(k)s without the 10 percent early withdrawal penalty. You still owe income tax on the withdrawal from traditional IRAs and 401(k)s, and Fidelity will withhold it automatically. Withdrawals from Roth IRAs are tax-free as long as your account has been open for at least five years.

At age 73, you are required to take minimum distributions from traditional IRAs and 401(k)s each year. Fidelity will notify you of the amount you must withdraw. If you do not take the required amount, the IRS charges a penalty equal to 25 percent of the shortfall (or 10 percent if you correct it within two years). Roth IRAs do not require minimum distributions during your lifetime.

Withdrawal methods and timing

Fidelity offers three ways to receive your withdrawal: direct deposit to a linked bank account, a check mailed to your address, or a wire transfer. Direct deposit is fastest — Fidelity processes it within one to three business days, and your bank receives it within one to five additional business days. A check takes five to seven business days to arrive by mail. A wire transfer is faster but may carry a fee.

If you need the money urgently, direct deposit to a bank account you use frequently is your best option. Avoid requesting a check if your bank account is not yet linked to Fidelity, because adding a new bank account requires verification, which can delay the withdrawal by several days. If you are withdrawing from a retirement account and Fidelity needs additional information from you — such as proof of a hardship exception — the process will take longer.

Frequently Asked Questions

What happens if I withdraw from my IRA before age 59½?

You will owe a 10 percent early withdrawal penalty plus income tax on the amount you withdraw, unless you may have access to for an exception. Exceptions include first-time home purchase (up to $10,000), higher education expenses, medical expenses over 7.5 percent of your income, or disability. Fidelity will withhold 10 percent for federal tax automatically, but you may owe more when you file your return.

Can I withdraw from my 401(k) without a penalty?

Not before age 59½, unless your plan allows loans or you may have access to for a hardship withdrawal under your plan rules. Some plans allow withdrawals for financial hardship, but the definition varies by employer. Check your plan documents or contact your plan administrator. After 59½, you can withdraw without penalty, though you still owe income tax.

How long does it take to get my money after I request a withdrawal?

Fidelity processes the withdrawal within one to three business days. Your bank then takes one to five additional business days to deposit the money into your account. A mailed check takes five to seven business days to arrive. Wire transfers are faster but may have a fee.

Do I have to pay taxes on a withdrawal from my taxable brokerage account?

You do not owe tax on the withdrawal itself, but you owe capital gains tax when you sell the investments to fund it. If you held the investment for more than one year, you pay long-term capital gains tax. If less than one year, you pay short-term capital gains tax at your ordinary income tax rate. Fidelity does not withhold this tax — you pay it when you file your return.

What is the difference between a Roth IRA withdrawal and a traditional IRA withdrawal?

You can withdraw your contributions to a Roth IRA at any time without tax or penalty. Earnings withdrawals before age 59½ trigger tax and penalty. With a traditional IRA, all withdrawals before 59½ trigger tax and the 10 percent penalty unless you may have access to for an exception. After 59½, traditional IRA withdrawals are taxed as income, while Roth withdrawals are tax-free if your account is at least five years old.