How Long Does it Take to Get Your Money After Selling Stocks?
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The process of selling stocks and accessing funds can be confusing if you’re not familiar with settlement cycles. Previously, when you sold stocks, the transaction didn’t become official immediately. It took two business days to settle. But as of May 28, 2024, this changed. The settlement cycle has now been shortened to just one business day, offering faster access to your funds after a sale.
This shift, known as the T+1 rule, means that funds now get cleared more quickly, providing more flexibility and efficiency to investors. Whether you’re cashing out for a purchase or looking to reinvest quickly, you can now access your funds much sooner.
What is Settlement?
When you sell stocks, you might think the transaction is complete the moment you hit “sell.” However, the process is a bit more complex. The transaction date is the day the trade is made, but it doesn’t become official until the settlement date. Settlement is when ownership officially changes hands, and the seller receives payment while the buyer gets the shares.
Up until 2017, this process took three business days (known as T+3). Then, the SEC shortened it to T+2, which was in effect until May 2024. Under T+2, if you sold stock on a Monday, the settlement would happen on Wednesday. But with the new T+1 rule, that same Monday trade now settles on Tuesday, meaning you receive your funds a day earlier.
What Does the T+1 Rule Mean for Investors?
The new T+1 settlement rule has streamlined the process of trading stocks, bonds, ETFs, and certain mutual funds. Instead of waiting two days to officially complete a sale, investors now only need to wait one day. For those who trade regularly or need quick access to funds, this has been a significant improvement.
For example, if you sell shares of a stock on a Thursday, under the old T+2 system, the funds wouldn’t have been available until the following Monday (assuming no holidays). With T+1 in place, the funds are available on Friday, giving you quicker access to your cash. While it may seem like a small change, it can make a big difference in liquidity and investment planning.
How Quickly Can You Withdraw Funds After a Sale?
Under T+1, you can now access your cash the next business day after selling a stock. However, how fast you can actually withdraw that money depends on how you transfer the funds.
If you use an automated clearing house (ACH) transfer to move the funds to your checking or savings account, it could still take one to three business days. ACH transfers are generally free, but they aren’t instant. If you need the money faster, wire transfers are an option and can be completed the same day, but they come with fees—up to $35 from both the sending and receiving institutions.
Consider a Brokerage Account With Checking Features
If you need quicker access to your stock sale proceeds, consider using a brokerage account that offers checking privileges. Many brokerages now provide accounts that include debit cards and check-writing capabilities, allowing you to access your cash directly without transferring it to another account.
With these cash management accounts, you can withdraw funds from ATMs or make purchases directly from your brokerage account. However, it’s important to note that you might still want a traditional checking account for other transactions, like large cash withdrawals that may exceed your ATM limit.
Bottom Line
The T+1 rule has made stock trading more efficient, giving investors quicker access to their money in today’s fast-paced financial world. This shortened timeframe is particularly useful for traders looking to quickly reinvest or those who need the proceeds for other purposes.
While you can now access your funds the next business day, keep in mind that transferring those funds to a checking or savings account could still take a little extra time unless you use a brokerage account with check-writing or ATM features.