Closing your brokerage account requires several steps to address your assets and the way you wish to handle the funds in your account. Tax consequences may arise from premature liquidations of certain assets, and capital gains or losses may accrue as a result of selling certain securities. These consequences are often avoided when you close one brokerage account and transfer the assets over to a new firm. In addition to the closure steps required by your broker, discuss potential tax issues with your financial advisor or tax professional prior to liquidating any assets.
1. Liquidate the assets you hold with your broker or transfer the assets to another brokerage firm. If you transfer your assets, you may have to complete documents with your current and new broker to facilitate the transaction.
2. Convert foreign currencies. Amounts you withdraw in liquidation as well as transfer transactions must be made in your domestic currency. Your broker has tools available to perform the conversion.
3. Determine the treatment of your retirement account balances. Retirement funds may be withdrawn or rolled over to another plan managed by a new broker. In general, withdrawals made before you reach age 59 ½ are subject to early withdrawal penalties. If you roll over retirement funds to a new plan within 60 days, you are not subject to the penalty. All withdrawals that are not rolled over are subject to income tax.
4. Obtain account statements and records substantiating your transactions. In addition to obtaining final statements for your brokerage account, gather any prior statements absent from your records. You may need this information for tax purposes.
5. Perform any additional account closure tasks required by your broker. Specific activities vary from one firm to another but may include canceling subscriptions, returning devices or equipment and verifying clearance of recent investment deposits.
6. Close the account. Some brokers allow you to close your account online; others require that you work with an account closure representative. Check with your broker to determine the options available to you to finalize the process.
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