How to Withdraw Money from an IRA at E*Trade, Schwab, TD Ameritrade, Fidelity, and Ally Invest

Withdrawing money from IRA at Etrade, Schwab, TD Ameritrade, Fidelity, Ally Invest. IRA distribution at online brokerage firms from traditional IRA, ROTH, SEP, and SIMPLE IRA.

Overview of Taking Funds out of a Brokerage IRA

If you need to make a withdrawal from an Individual Retirement Account (hopefully because you’ve reached retirement age and not for any other reason), be aware that the process isn’t as simple as making a withdrawal from a taxable securities or bank account. Brokerage firms may require you to fill out some paperwork, either in hard copy or electronic format, so that Uncle Sam can see when you made the withdrawal and why. This article will examine the withdrawal procedures of E*Trade, Schwab, TD Ameritrade, Fidelity, and Ally Invest.

First, the Government’s Policies

The IRS doesn’t want you taking money out of an IRA before age 59½. If you do, you will be assessed a 10% penalty. On top of that, withdrawals from a Traditional, SEP, or SIMPLE account will also be taxed. Making a withdrawal from a SIMPLE IRA in less than 2 years after it was opened increases the penalty from 10% to 25%.

The government does grant a few exceptions for persons under 59½. Withdrawals made due to disability or to pay health insurance premiums while unemployed will not incur the 10% penalty. Also permissible are withdrawals to fund higher education expenses or to make a first-time home purchase.

Uncle Sam also allows IRA account holders to withdrawal retirement assets for medical expenses if those costs exceed 10% of their adjusted gross income. Persons 65 years old or older receive penalty-free withdrawals if their medical expenses are greater than 7.5% of AGI.

Once you reach age 70½, IRA policies require you to start taking withdrawals. Called required minimum distributions (RMD’s), these apply to Traditional, SEP, and SIMPLE plans. A Roth account does not have an RMD.

The first RMD must be made by April 1st of the year after you turn 70½, and all withdrawals thereafter are due by end of a year. Not taking a withdrawal on time results in a 50% penalty on the amount that should have been taken. An RMD can be taken in cash or securities, or made as a donation to charity.

The IRS has a worksheet on its website to figure the minimum amount that must be taken out each year. E*Trade, Schwab, Fidelity, and TD Ameritrade have convenient calculators that can quickly figure the amount with less effort.

How to Withdraw Money from an IRA at Charles Schwab

Before you can make a withdrawal from an IRA at Schwab, you first must fill out the appropriate form. The broker has two forms, one for distributions before age 70½, and the other for RMD’s. The forms can be filled out electronically, or you can fill out a pdf document and mail it to the broker.

The application for withdrawal can be made for a one-time or recurring distribution. For the periodic option, the broker accepts weekly, semi-monthly, monthly, last business day of the month, every two months, quarterly, semi-annually, or annually.

At Schwab, distributions can be made in cash or securities. For the latter option, investments are moved to a taxable account or to a Roth IRA, which does not have required distributions.

Income paid by securities can also be regularly distributed. The broker allows dividends or interest or both to be withdrawn as they are accrued or on the last business day of the month. And of course, you can select a lump sum distribution.

Withdrawals of all types can be mailed to your home address, transferred to a Schwab Bank account, or sent to a third party. Funds can also be wired.

To find the necessary form on Schwab’s website, go to ‘Service’ at the top of the menu, then select ‘Account Servicing.’ Next, in the left-hand column choose ‘Personal Retirement.’ A list of choices will then be shown. Withdrawal requests for Roth, Traditional, SEP, and SIMPLE accounts can be made here. Forms that are only available in pdf format will be shown with the Adobe Reader icon.

For a complete Charles Schwab review click here.

Charles Schwab IRA distribution

How to Withdraw Money from an IRA at TD Ameritrade

Retirement savers at TD Ameritrade can make Traditional, Roth, SIMPLE, and SEP IRA withdrawals without having to fill out any lengthy paper forms. The broker has a short web-based form that asks if the withdrawal is being made before or after age 59½. A Roth IRA must specify if the account has been open at least 5 years. A withdrawal can be made by ACH, wire, check, or transfer (to another TD Ameritrade account).

Using ACH takes 1 to 3 business days and is free of charge. There’s a daily maximum of $250,000. The broker reminds its clients that early withdrawal penalties may be imposed and includes a link that discusses what types of distributions are penalty-free.

Besides a lump-sum distribution, recurring withdrawals can be established. Available choices include weekly, every other week, monthly, quarterly, annually, every 6 months, first business day or last business day of the month, or any Friday.

Federal and state taxes can be withheld if you wish. The minimum amount for federal taxes is 10%, while state tax withholding has a 5% minimum.

For a complete TD Ameritrade review click here.

TD Ameritrade IRA distribution

How to Withdraw Money from an IRA at Fidelity

Retirement account holders can transfer cash, but not securities, out of a Traditional, Roth, SIMPLE, or SEP IRA at Fidelity. Unlike TD Ameritrade, Fidelity will only move cash out of a retirement account. You simply need to sell the securities and wait until the funds are available for withdrawal. Taxes can be withheld from the IRA distribution if desired.

Both one-time and recurring withdrawals from Fidelity IRA’s require a pdf document to be filled out and submitted to the broker. If you choose to withdraw the entire account, Fidelity will sell all the securities. A Medallion signature guarantee is required for distributions over $100,000.

A check can be mailed to your address on file. Alternatively, funds can be moved electronically, or a bank wire transfer can be selected. The final method is available for both domestic and international financial accounts. A domestic wire transfer may be charged $15. If the wire is sent to a foreign account denominated in a currency other than U.S. dollars, Fidelity may charge up to 3% for the exchange.

For a complete Fidelity review click here.

Fidelity IRA distribution

How to Withdraw Money from an IRA at Ally Invest

At Ally Invest, the Roth IRA has its own distribution request form. It is available in pdf format. It needs to be filled out and then faxed or mailed to the broker. The form asks for the reason for the request, such as death, disability, or excess contribution removal. A one-time distribution can be requested. Alternatively, regular withdrawals can be established. The broker accepts monthly, quarterly, weekly, or bi-weekly. Obviously, Ally doesn’t offer as many options here as the other brokers have provided.

Taxes can be withheld from Roth IRA distributions, although distributions aren’t taxable under normal circumstances. Funds can be sent via paper check, to another brokerage account that uses Apex as the clearing agent, or by wire.

A separate form must be used for distributions from Traditional, SEP, and SIMPLE accounts. The form is similar and has the same features as the Roth version. Choosing a wire transfer costs $20. Ally waives the fee if the wire is sent from an Ally Bank account to an Ally Invest account. Overnight delivery also costs extra.

For a complete Ally Invest review click here.

Ally Invest IRA distribution

How to Withdraw Money from an IRA at E*Trade

E*Trade is the lone broker in our survey to offer a unique IRA called the Complete IRA. This retirement account is strictly for people over the age of 59½ who currently have a Traditional, Roth, SEP, or SIMPLE account with the firm. Once one of these accounts is converted to the Complete version, all withdrawals are counted as IRA distributions. Withdrawals can be made using a debit card, writing a check, or using the broker’s free bill pay. Taxes are not withheld from these transactions.

The first order of checkbooks is free, and E*Trade doesn’t charge anything for checkwriting. The debit card is also free, and the account has no annual fee or minimum balance requirement. This seems like the best way to take money out of an IRA at E*Trade if you’re over 59½.

The broker also has the traditional IRA distribution request form, which can be used for non-Complete accounts. The form can be submitted on-line or by completing the pdf version and mailing it to the broker. The form can be used for early withdrawals and required minimum distributions.

A one-time distribution is available, along with monthly, quarterly, semi-annual and annual withdrawals. Distributions can be taken by check, ACH, or wire ($25 fee).

For a complete E*Trade review click here.

E*Trade IRA distribution

Discount Brokers IRA Distribution Summary

Withdrawing funds from an IRA involves more red tape than a taxable account needs. Taking money out before age 59½ involves even more hassle. TD Ameritrade receives top honors for having a simple on-line form, while E*Trade gets honorable mention for its Complete IRA.