Fidelity Cash Sweep Account Options
Several options are available for uninvested cash in a Fidelity brokerage account. The broker provides an FDIC sweep program with its Cash Management
Account. This is a hybrid brokerage-bank account. Securities can be traded in it, but it is designed primarily for cash management purposes. It comes
with free checks and a Visa debit card. All deposits that aren’t used to purchase securities are swept into FDIC-insured banks that Fidelity has
partnered with. Each Cash Management Account can have up to 5 program banks, which creates a maximum insurance limit of $1,250,000, much higher than
the government’s normal $250,000 cap.
Interest is paid on funds swept to program banks. As of July 2017, the APY is 0.14% for balances above $100,000. Accounts smaller than that earn just
7 basis points. Besides the Cash Management Account, the FDIC sweep program can be used for an IRA and a 529 college savings plan.
Fidelity Money Market Fund Rates
In a regular brokerage account, a money market mutual fund serves as the core position. Fidelity offers two funds that can be used for this purpose.
The first is the Fidelity Government Money Market Fund (SPAXX). It is currently yielding 0.59%. The other is the Fidelity Treasury Fund (FZFXX). It is
earning 60 basis points right now. These funds can be used in either a retirement or non-retirement account. Other money market funds, including
Fidelity Government Cash Reserves (FDRXX) can be used as an IRA’s core account.
Other Fidelity Cash Sweep Options
The third and final option for uninvested cash is to simply leave funds sitting in a brokerage account, where the money will be insured by SIPC. The
insurance limit here is $250,000. This amount is taken from SIPC’s total $500,000 limit for cash and securities per account. So if you elected to
leave $200,000 in a trading account, you would only be eligible for $300,000 of insurance for securities.
Compared to other brokerage firms, Fidelity’s cash management features are some of the best in the industry. Not all brokers offer three core account
options, for example. Fidelity’s major rival, Schwab, only offers FDIC insurance. E*Trade offers an FDIC sweep program as well, but it only yields
0.01%. Merrill Edge provides money market funds as core positions like Fidelity. But Merrill’s funds pay only 0.34% and 0.47%, lower than Fidelity’s
products. WellsTrade provides $1,000,000 of FDIC insurance, lower than Fidelity’s amount.
Fidelity Cash Management
Besides offering three types of core positions, Fidelity also provides a lot of useful cash management features. For example, the broker offers free
bill pay and a convenient overdraft protection feature. The broker’s mobile apps have check deposit. And a suite of Fidelity credit cards can deposit
up to 2% of purchases into a brokerage account.
ATM fees incurred while using Fidelity’s Visa debit card are reimbursed for Cash Management Account holders. A regular brokerage account is not
eligible for reimbursement, and it is also charged $1 per ATM withdrawal, after five per month.
Read detailed review of Fidelity account.
We opened a Roth IRA account with Fidelity, and we admit, we had low expectations from such a big brokerage. Their tools are not the most
advanced in the industry but they are simple and easy to use and understand. They also have competitive pricing and execution compared to other brokers.
You’ll need at least $2,500 or $200 per month to open a retirement account. Account opening process is painless and easy. You can wire them funds, mail a
check, utilize electronic fund transfer or transfer an already existing account to them. It only takes a few days to get it all setup.
Best Broker For No Load Mutual Funds
If you choose to invest your IRA in Fidelity Mutual Funds, you’ll enjoy the following benefits:
- No loads or transaction fees when purchased through Fidelity.
- A wide range of Morningstar 4 and 5-Star funds in virtually every category.
- Free guidance and portfolio analysis.
If you decide to invest in other mutual fund families, you’ll get these advantages:
- Access to over 10,000 funds from hundreds of fund companies.
- No Transaction Fee (NTF) funds: many funds are available with no transaction fees.
- Fidelity experts rated top funds in each investment category.
There is a $12 per year fee for each noncore Fidelity fund under $2,000, so be aware of that. You will also be charged $50 when closing your account.
Fidelity offers mutual funds in many categories including:
- Domestic Stock Funds
- International & Global Stock Funds
- Bond Funds
- Money Market Funds
- Asset Allocation Funds
- Specialized Funds
- Sector Funds
- Index Funds
Other Income Producing Investments
Other income producing investments Fidelity offers:
- CD’s
- Money Market Accounts
- Bond Funds
- Fixed Income ETF’s
- Individual Bonds
Fidelity also offers annuities to help you generate streams of income or increase current savings. Annuities are not FDIC insured like CD’s and therefore are more risky.
Retirement Tools
In addition to these rich investment choices, Fidelity also gives you access to many retirement planning tools. They’re great at helping you plan for
contributions, check that you’re on track to meet your retirement goals and develop income strategies based on you living expense needs. We’ve noted some of the best ones below:
Fidelity Income Strategy Evaluator - find the right mix of income-producing investments to help meet your needs in retirement.
Guaranteed Income Estimator - get an estimate for guaranteed income payments you can receive through a fixed income annuity.
IRA Contribution Calculator - estimate how much you may be able to contribute to your IRA this year and how much might be tax-deductible.
Retirement Quick Check - if you’re more than five years from retirement, use this tool to project how much you’ll need, compare it to what you’re on track to have, and identify changes you can make today to address any shortfall.
Retirement Income Planner - if you’re within five years of retirement or already retired, this helps you create a comprehensive plan to help make your money last by projecting out your expenses against potential income sources in different kinds of market conditions.
Updated on 9/25/2017.
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