If you currently use the robo-advisor, Wealthfront, and you want to cash out your investments, you might be wondering what the Wealthfront withdrawal fee is. This article covers the ins and outs of withdrawal fees, penalties and how long it takes to withdraw funds from Wealthfront.
Wealthfront’s fee structure is relatively straightforward. In short, Wealthfront doesn’t charge any fees at all for withdrawing funds, as long as you take out a minimum of $250 each time and you always have at least $500 in your account. You can withdraw funds as frequently as you like, providing you adhere to these requirements.
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When you request a withdrawal, Wealthfront has to sell some of your investments to release the funds. If some investments sell at a profit, then you would have a tax liability on these.
However, Wealthfront aims to minimize your tax liability by selling investments that have made a loss first. They then sell investments which are taxed at the lower long-term capital gains rate, followed lastly by any investments that may increase your tax obligation.
This tax-efficient strategy should mean that you incur only a very slight tax liability when you withdraw small amounts. Wealthfront also aims to rebalance your portfolio when they sell your investments so that they are not too heavy in one asset class or too light in another.
IRAs within Wealthfront are subject to traditional IRA rules and penalties may apply if you withdraw your money too soon. If you decide to draw funds before the age of 59 ½ years, you may find yourself slapped with a 10% tax penalty.
However, in certain circumstances, for example, if you’re buying your first home, if you’ve become disabled or have unreimbursed medical expenses, it may be possible to avoid this penalty.
Once you reach 70 ½ years of age, you’ll need to take a required minimum distribution (RMD) each year from your IRA. You can use the required minimum distribution worksheets from the IRS to work out how much you’ll need to withdraw. If you don’t take the amount that you’re supposed to at the right time, you may be subject to a 50% tax penalty on the RMD amount not taken.
Generally, most withdrawals take between 3 and 4 business days for your requested funds to clear in your bank account. The time of day when you make your withdrawal request and which bank you use may have implications as to exactly when you’ll receive your funds.
Wealthfront will send you an email within 1 business day to confirm your withdrawal request. After you’ve verified this, the relevant trades will be executed, which will take 2 business days from that date to settle. Once that’s happened, your funds will be transferred to your bank account, which may take another 1-2 days.
If you happen to request a withdrawal very soon after making a deposit, this may cause a delay in receiving your funds. This is down to Wealthfront’s anti-money laundering policy.
The only fee Wealthfront charges is an annual fee of 0.25% for all investments under management. This fee is deducted each month. No fees are charged to open or close an account with Wealthfront, nor are there any fees associated with trades.
If you wish to transfer investments from another provider to your Wealthfront account, you won’t incur a fee from Wealthfront, but you may receive an account closing or transfer fee from the account provider you’re transferring from.
Wealthfront’s Path tool can be incredibly useful, if you want to map out those all important life goals such as planning for retirement, buying a home or saving for your children’s college education. Path aims to answer your questions around how much you should be putting to one side now so that you can achieve your future financial goals and hopefully enjoy later life.
There are similar online tools and mobile apps around that you may like explore. Personal Capital, for example, is a digital wealth manager that not only allows you to invest (providing you have investable assets of $100,000 or more), but also provides a suite of free financial planning tools, even if you don’t want to open an investment account.
These tools can be used to track spending, set a budget, calculate your net worth and see a complete picture of your account balances in one place.
If saving money, budgeting and keeping your overdraft in good shape is your priority as opposed to investing per se, you might be interested in checking out this article about overdraft apps and tools that we published previously on this site.
*The information detailed above is correct at the time of publishing.