This content may include information about products, features, and/or services that SoFi does not provide and is intended to be educational in nature.
Cashing out stocks essentially means selling them, and most investors should be able to sell their stocks without too much trouble. Buying stocks can be fairly straightforward, whether online or through a financial advisor. But, when it’s time to sell shares, some beginning investors struggle with how to turn their stocks back into cash. After all, money invested in stocks is not immediately cash.
Investors may want to sell stocks for a wide variety of reasons. They might wish to reinvest the cash into another asset with an eye toward long-term gains. Or they could choose to withdraw funds from the stock market to cover short-term, daily expenses with cash earned from the sale. So, how might investors go about cashing out stocks? And, what factors might individuals curious about how to cash out stocks bear in mind? Here’s an overview of the how and when of selling stocks.
• Stocks can be cashed out by selling them through a broker on a stock exchange.
• Steps to cash out stocks include determining investment goals, accessing a brokerage account, placing a sell order, waiting for the sale to be completed, and receiving the proceeds.
• Motivations for selling stocks include accessing cash for expenses, cashing out profits, preventing significant losses, day trading, and offloading low-performing stocks.
• Types of sell orders include market orders, limit orders, stop orders, and trailing sell stop orders.
Ever stared at your investment app and wondered, “How the heck do I actually get my money out of these stocks?” You’re not alone! While everyone talks about buying stocks and watching them grow, there’s surprisingly little guidance on how to turn those digital assets back into cold, hard cash when you need it.
Whether you’re planning to buy a vacation home, pay for a wedding, or just want to access some of your investment gains, knowing how to properly withdraw money from stocks is crucial to avoid costly mistakes
Let’s dive into the process step by step and help you cash out your stocks the smart way!
Understanding Stock Withdrawals: The Basics
Before we jump in, let’s get something straight – you don’t actually “withdraw” money directly from stocks. What you’re really doing is selling your stocks and then withdrawing the cash proceeds from your brokerage account.
Stocks are considered relatively liquid assets, which means they can be converted to cash fairly quickly, especially compared to other investments like real estate. But until you actually sell your stocks, your money remains invested in the market.
How to Cash Out Your Stocks: 5 Simple Steps
Here’s the step-by-step process to turn your stocks into usable money:
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Determine your investment goals: Before selling anything, think about why you’re cashing out and whether it aligns with your financial strategy.
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Access your brokerage account: Log in to your investment platform where you hold your stocks.
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Place an order to sell your stocks: Choose which stocks to sell and what type of sell order to use (more on this below).
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Wait for the sale to complete: Depending on the order type and market conditions, this could take seconds or days.
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Receive the proceeds in your account: After the sale settles (typically 2 business days), the money will be available in your brokerage account to withdraw to your bank.
Let me tell ya, that first big cash-out can be nerve-wracking! I remember being so confused about whether to use a market order or limit order when selling my first big chunk of Apple stock. More on that in a bit…
Why People Cash Out Their Stocks
There are several common reasons you might want to cash out your stocks:
- Major life expenses: Buying a home, paying for college, planning a wedding
- Locking in profits: Taking gains after substantial market growth
- Preventing losses: Selling before a stock drops further
- Portfolio rebalancing: Adjusting your investment mix
- Day trading: Short-term buying and selling for quick profits
- Offloading underperforming stocks: Selling stocks that aren’t meeting expectations
Understanding Types of Sell Orders
When you’re ready to sell, you’ll need to choose what type of sell order to use:
Market Orders
This is the most straightforward option – you’re essentially saying “sell my shares at the current market price, whatever that is.” The upside is that your order executes almost immediately during market hours. The downside is you have no control over the exact selling price.
Limit Orders
With a limit order, you set the minimum price you’re willing to accept for your shares. For example, if a stock is currently trading at $50 and you set a limit order for $55, your order will only execute if the price rises to $55 or above. This gives you more control but may mean your order never executes if the stock doesn’t reach your price.
Stop Orders (Stop-Loss Orders)
A stop order automatically triggers a sale when a stock falls to a certain price. For example, if you own a stock trading at $50 and set a stop order at $40, your shares will be sold if the stock falls to $40, helping protect you from further losses.
Trailing Stop Orders
These are like regular stop orders, but the stop price adjusts automatically as the stock price moves in your favor. This can help you protect gains while giving your investment room to grow.
I personally prefer using limit orders when I’m not in a hurry to sell. The peace of mind knowing exactly what price I’ll get is worth the tradeoff of possibly waiting longer for the sale to execute.
3 Major Mistakes to Avoid When Cashing Out Stocks
1. Withdrawing it all at once
One of the BIGGEST mistakes people make is taking out a large sum all in one tax year. This can bump you into a higher tax bracket and significantly increase your tax burden.
Let’s look at an example from Schwab:
Imagine you and your spouse (both age 62) need $50,000 for a down payment on a second home in 2026. You plan to withdraw from your traditional IRA, which is taxed as ordinary income.
Approach 1: Single withdrawal
If you took the full $50,000 in one year with your regular income of $95,000, you’d be bumped into the 22% tax bracket. You’d need to withdraw about $59,814 total to have $50,000 after taxes.
Approach 2: Split withdrawal over two years
By taking $33,450 in year one and $23,368 in year two, you could stay in the 12% tax bracket both years. Your total withdrawal would be just $56,818, saving you nearly $3,000 in taxes!
2. Avoiding selling losers
It might seem counterintuitive, but selling investments that have lost value can actually be a smart tax strategy through tax-loss harvesting. When you sell investments at a loss in a taxable account, you can use those losses to offset capital gains from other investments.
If your capital losses exceed your gains, you can even use up to $3,000 of excess losses to reduce your ordinary income. Any additional losses can be carried forward to future tax years.
3. Picking the wrong accounts to withdraw from
Don’t assume you should take all your money from a single account type. A smart withdrawal strategy often involves tapping different account types based on their tax treatment:
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Tax-deferred accounts (401(k)s, traditional IRAs): Withdrawals are taxed as ordinary income (up to 37% federal rate) and may incur a 10% penalty if you’re under 59½.
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Taxable brokerage accounts: Long-term capital gains are taxed at lower rates (0-20%, depending on your income).
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Roth accounts: Qualified withdrawals are tax-free if you’re over 59½ and the account is at least five years old.
To Sell or To Borrow?
Sometimes, borrowing against your investments instead of selling them might make sense, especially if:
- You’re in a down market and don’t want to sell at a loss
- You expect your investments to earn more than the interest cost
- You want to avoid triggering capital gains taxes
Options for borrowing include:
- Home equity loans/lines of credit
- Margin loans from your broker
- Securities-based lines of credit
These options come with their own risks, so proceed with caution. The interest on home equity loans may be tax-deductible if used for home improvements or purchasing a second home.
Platforms for Buying and Selling Stocks
When it’s time to sell your stocks, you have several options:
Online Brokerage Accounts
Most investors today use online platforms like SoFi Invest, Charles Schwab, Fidelity, or Robinhood. These platforms typically offer commission-free trading and user-friendly interfaces.
Financial Advisors
Some investors prefer to work with financial advisors who can execute trades on their behalf and provide guidance on tax implications and portfolio strategy.
Tax Implications of Selling Stocks
Taxes are a HUGE consideration when cashing out stocks! Here’s what you need to know:
Capital Gains Taxes:
- Short-term gains (assets held less than a year) are taxed as ordinary income
- Long-term gains (assets held more than a year) are taxed at preferential rates (0%, 15%, or 20% depending on your income)
Higher earners may also face an additional 3.8% Net Investment Income Tax.
Tax-Loss Harvesting:
Using losses to offset gains can be a powerful tax strategy. For example, if you have $10,000 in capital gains and $12,000 in capital losses, you can use the losses to completely offset the gains, plus use $2,000 of the remaining losses against your ordinary income.
Reinvesting vs. Cashing Out
Sometimes, instead of withdrawing your money completely, you might consider reinvesting your profits into other assets. Here are the pros and cons:
Pros of Reinvesting:
- Potential compound growth over time
- Portfolio diversification opportunities
- Hedge against inflation
Cons of Reinvesting:
- Can’t use money for immediate financial needs
- Still subject to capital gains taxes on the sale
- Continued exposure to market risk
Real-World Example: Planning a Large Withdrawal
Let’s say you’ve invested $100,000 over the years, and it’s now worth $180,000. You need $60,000 for a home renovation project. Here’s a smart way to approach it:
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Review your portfolio to identify which investments to sell based on performance, future prospects, and tax implications
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Consider tax-loss harvesting by selling some underperforming investments to offset gains
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Split the withdrawal across two tax years if possible (maybe $30,000 each year)
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Diversify your withdrawal sources by taking some money from taxable accounts and some from tax-advantaged accounts
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Rebalance your remaining portfolio after the withdrawal to maintain your desired asset allocation
Frequently Asked Questions
How long does it take to get money after selling stocks?
Typically, stock sales settle in T+2 (trade date plus two business days). After settlement, you can transfer the cash to your bank account, which usually takes 1-3 additional business days.
Do I get money immediately when I sell stock?
No, you don’t receive the money immediately. While the sale is recorded right away, the actual settlement takes about two business days, and then you’ll need to transfer the funds to your bank account if you want to withdraw them.
Can I withdraw money from stocks without selling?
Not directly. However, you can borrow against your stocks through a margin loan or a securities-based line of credit, which allows you to access cash without selling your investments.
Are there fees for selling stocks?
Many brokerages now offer commission-free stock trades, but there might still be other fees or taxes to consider. Always check your broker’s fee schedule.
Final Thoughts
Cashing out stocks isn’t just about clicking the “sell” button – it requires careful planning to minimize taxes, avoid disrupting your investment strategy, and ensure you’re meeting your financial goals.
Before making any large withdrawals, consider consulting with a financial advisor who can help you navigate the tax implications and develop a withdrawal strategy tailored to your specific situation.
Remember, the key to successful stock withdrawals is planning ahead. By understanding the process and avoiding common mistakes, you can access your investment gains efficiently while keeping your overall financial plan on track.
Have you ever cashed out stocks for a major purchase? What challenges did you face? Drop me a comment below and share your experience!
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By Michael Flannelly. February 25, 2025 · 13 minute read
This content may include information about products, features, and/or services that SoFi does not provide and is intended to be educational in nature.
Cashing out stocks essentially means selling them, and most investors should be able to sell their stocks without too much trouble. Buying stocks can be fairly straightforward, whether online or through a financial advisor. But, when it’s time to sell shares, some beginning investors struggle with how to turn their stocks back into cash. After all, money invested in stocks is not immediately cash.
Investors may want to sell stocks for a wide variety of reasons. They might wish to reinvest the cash into another asset with an eye toward long-term gains. Or they could choose to withdraw funds from the stock market to cover short-term, daily expenses with cash earned from the sale. So, how might investors go about cashing out stocks? And, what factors might individuals curious about how to cash out stocks bear in mind? Here’s an overview of the how and when of selling stocks.
• Stocks can be cashed out by selling them through a broker on a stock exchange.
• Selling stocks can provide cash for major expenses or to reinvest in other assets.
• Steps to cash out stocks include determining investment goals, accessing a brokerage account, placing a sell order, waiting for the sale to be completed, and receiving the proceeds.
• Motivations for selling stocks include accessing cash for expenses, cashing out profits, preventing significant losses, day trading, and offloading low-performing stocks.
• Types of sell orders include market orders, limit orders, stop orders, and trailing sell stop orders.
Accessing Cash for Life Expenses
“Your goals will largely determine whether or not long-term investing is the right choice for you. So you might want to spend time outlining what you want to achieve—which may depend on your life stage—and how much money you’ll need to achieve it.”
-Brian Walsh, CFP® and Head of Advice & Planning at SoFi
If investors know they’ll need cash for a major life expense, such as buying a car or home, they may choose to cash out some stocks. Selling shares might ensure there’s enough cash around to cover big expenses.
One benefit to having cash on hand instead of having money invested in stocks is that cash is not subject to the ups and downs of the stock market. However, the value of cash is impacted over time by inflation.
Some investors might also opt to move money out of stocks into potentially more secure investments, such as bonds or a money market account, until they’re ready to pay for that large expense.
If it appears as though a recession is coming or investors have seen significant gains in their portfolio, they might choose to cash out to lock in the profits. It’s important to understand, however, that attempting to time the stock market to avoid losses during unstable economic conditions is risky. What seems to be a trend in the market one day may or may not indicate how the markets may perform in the future.
Investors may want to ask themselves whether they’re interested in cashing out based on an emotional reaction (fear of recent market ups and downs, for instance) or a need for profits.
The goal of investing in stocks is to earn profits or generate a positive return – online investing, or otherwise – is to not take losses. Still, there are some instances in which it could make sense to sell at a loss.
For example, an investor may sell specific stock holdings to prevent the likelihood of deeper losses in the future. Another scenario that might drive an investor to want to sell stocks is an industry-wide hardship, where numerous companies in one sector of the economy experience financial calamity at the same time. Industry-wide hardships may negatively impact the value of specific stock holdings.
In other instances, a company might reduce or eliminate shareholder dividends. Earning dividends may be a prime reason an investor bought the stock in the first place, so they decide to sell the stock because it’s no longer part of their investment strategy.
Day trading is one way of selling stocks, but it can involve significant risks. Day trades are the purchasing and selling (or vice versa) of the same stock on the same day. Here, traders are attempting to gain profit through short-term trades — typically through the use of technical or market analyses, which can require an in-depth knowledge of the intricacies of trading.
If it were possible to clearly predict future stock movements, everyone might want in on the stock market. But, stocks are volatile. Rather than guessing based on company news and technical indicators, traders who wish to make shorter term trades might choose to set a price goal. For instance, if they buy shares at $10 each, they could set a goal to sell them when they reach $18 per share.