Settled cash is money in your brokerage account that has fully cleared the trade settlement process and is available to withdraw, spend, or reinvest without restriction. Until the proceeds of a sale finish settling, or a deposit finishes clearing, your broker treats that money differently from truly available funds. The balance on your dashboard may not match what you can actually pull out to your bank, and trying to trade aggressively with unsettled money can trigger account restrictions that last three months.
How Cash Becomes Settled
When you sell a stock or ETF, the trade executes immediately, but the money doesn’t land in your account the same second. A clearinghouse sits between buyer and seller, confirming that shares actually change hands and cash actually gets delivered. That verification takes time. The day you click sell is the trade date. The day the clearinghouse finishes moving everything is the settlement date. Between those two dates, your proceeds are unsettled.
Since May 28, 2024, most U.S. securities settle on a T+1 basis, meaning one business day after the trade date. This covers stocks, ETFs, corporate bonds, municipal securities, and most exchange-listed mutual fund shares. The SEC shortened the cycle from the previous T+2 standard by amending Rule 15c6-1 under the Securities Exchange Act.1U.S. Securities and Exchange Commission. Shortening the Securities Transaction Settlement Cycle Sell shares on Monday and the cash settles by Tuesday’s close. Sell on Friday and you’re waiting until Monday.
The “plus one” counts business days only. Weekends and market holidays don’t count.2Charles Schwab. 8 Things to Know About T+1 Settlement A holiday weekend can stretch the wait to three or four days.
Dividends work on a different clock. You’re entitled to a dividend if you owned the stock before the ex-dividend date, but the cash doesn’t appear until the payable date, which is often a week or more later.3Investor.gov. Ex-Dividend Dates: When Are You Entitled to Stock and Cash Dividends Once paid, dividend cash is generally settled right away because no trade needs to clear.
Cash Available to Trade vs. Cash Available to Withdraw
Most brokerage dashboards show at least two different cash figures, and they rarely match. “Cash available to trade” includes unsettled proceeds from recent sales that your broker will let you reinvest right away. “Cash available to withdraw” only includes money that has fully settled and isn’t tied up in a pending order. The withdrawable number is always equal to or less than the tradable one.
Several things widen the gap. Proceeds from a sale today won’t appear in your withdrawable balance until tomorrow at the earliest. Pending buy orders reduce withdrawable cash even before they execute, because the broker reserves those funds. Deposits made by check or ACH may show as tradable before the deposit itself has cleared, meaning you can buy securities with the money but can’t yet pull it back out.
When you’re planning a withdrawal, look at the “available to withdraw” line specifically. The bigger number can mislead you into thinking cash is free that isn’t.
What You Can and Can’t Do With Unsettled Cash
Your broker will usually let you buy new securities with unsettled proceeds. What you can’t do is turn around and sell those new shares before the original sale settles. Two violations catch people out:
- Good faith violation. You buy shares using unsettled proceeds from a previous sale, then sell the newly purchased shares before the original proceeds settle. Three of these in a rolling 12-month period typically triggers a 90-day restriction.
- Freeriding. You buy shares when the account doesn’t have enough settled cash to cover the purchase, then sell those same shares to generate the money to pay for them. Even a single instance can trigger a 90-day account restriction under Regulation T.4eCFR. 12 CFR Part 220 – Credit by Brokers and Dealers (Regulation T)
During a 90-day restriction, you can only buy securities if the account already holds enough settled cash before you place the order. You can still sell existing holdings, but active trading in a cash account becomes essentially impossible for the duration. Some brokerages offer a limited number of one-time waivers, but availability varies by firm.
Regulation T, issued by the Federal Reserve Board, also sets the payment window for cash purchases. The “payment period” is the standard settlement cycle plus two business days, giving you three business days from the trade date to fully pay for a purchase under T+1. Fail to pay within that window and your broker is required to liquidate enough securities to cover the shortfall.4eCFR. 12 CFR Part 220 – Credit by Brokers and Dealers (Regulation T)
The simplest way to stay clear of all this: wait for cash to settle before using it to buy something you plan to sell quickly.
Withdrawing Settled Cash
Once the cash shows as available to withdraw, moving it out is straightforward. You’ll need a linked external bank account, which requires your bank’s nine-digit routing number and your account number. Most brokerages let you link accounts through their website or app, and some verify the link with small test deposits before allowing transfers.
You’ll typically have three transfer options:
- ACH transfer. The most common. Funds move through the Automated Clearing House network and generally arrive in your bank account within one to three business days. Most brokerages don’t charge for ACH withdrawals.
- Wire transfer. Faster but not free. Wired funds typically arrive the same business day if initiated before the cutoff. Expect a fee in the range of $15 to $25 per transfer, depending on the firm and whether you initiate online or by phone.5Charles Schwab. Charles Schwab Pricing Guide for Individual Investors
- Check request. Some brokerages will mail a physical check. The slowest option, and increasingly uncommon.
Even after your brokerage releases the funds, the receiving bank controls when the money actually posts. Some banks credit incoming ACH transfers the same day; others batch-process them overnight. If you need the money by a specific date, initiate the withdrawal a few business days early and account for holidays in between.
Settled Cash in a Margin Account
Margin accounts make the withdrawable figure more complicated. Margin lets you borrow against your portfolio, and that borrowed amount creates a debit balance your broker subtracts from any credit balance when deciding what you can withdraw. Margin activity can push withdrawable cash to zero even while the account shows a positive total value.
Short positions layer on more. If you’ve sold securities short, the market value of those positions factors into the debit balance. An account with a $140 credit balance and a $160 short position has no withdrawable cash at all. Before requesting a withdrawal from a margin account, check the “available to withdraw” figure rather than trusting the total.
How Settled Cash Is Protected
Cash sitting in a brokerage account doesn’t carry the same protection as money in a bank. The Securities Investor Protection Corporation covers up to $500,000 per customer if a brokerage firm fails, but only $250,000 of that limit applies to cash.6SIPC. What SIPC Protects SIPC protection applies only when the brokerage itself fails. It does not cover investment losses.
Many brokerages sweep idle cash into FDIC-insured bank accounts through cash sweep programs, adding $250,000 in FDIC coverage on top of SIPC. Interest rates on these default sweeps tend to be very low, sometimes under 0.10% APY, while money market sweep options at the same broker may yield significantly more. Worth checking which sweep your account uses.
Taxes When You Withdraw
Moving settled cash from a brokerage account to your bank is not itself a taxable event. The tax is triggered by the sale that produced the cash, not the transfer that follows. If you sold shares at a gain, you owe capital gains tax on the difference. Held more than a year, the gain qualifies for long-term rates; held a year or less, it’s taxed as ordinary income.7Internal Revenue Service. Topic No. 409, Capital Gains and Losses
Don’t withdraw your full proceeds assuming every dollar is yours to spend. Set aside an estimate for taxes on any gains. Your brokerage will report the sale on Form 1099-B at year end, and you’ll reconcile it on your return. The withdrawal itself generates no additional tax form.