Can You Take Out Money From a Savings Account?

A savings account provides a secure place to store funds and earn interest over time. While primarily intended for building savings, accessing money from these accounts is generally straightforward. Understanding the various methods for withdrawals and the associated considerations can help manage finances effectively.

Methods for Accessing Funds

Several common methods allow individuals to access funds from a savings account. One direct way is by visiting a bank branch in person. At the teller counter, after presenting identification and completing a withdrawal slip, cash can be obtained. This method is typically suitable for larger withdrawal amounts that might exceed daily electronic limits.

Automated Teller Machines (ATMs) offer another convenient way to withdraw cash using a linked debit or ATM card. Banks often impose daily ATM withdrawal limits, which can range from $300 to $1,000, depending on the bank and account type. Using ATMs outside of your bank’s network may incur additional fees.

Electronic transfers provide a flexible option for moving funds between accounts. Money can be transferred online or via phone banking from a savings account to a linked checking account, or even to an external account. Transfers between linked accounts at the same bank usually process quickly, often instantly or within 24 hours. Transfers to external accounts may take one to three business days. Some money market accounts may come with debit card access or limited check-writing privileges.

Common Limitations and Fees

Despite the ease of access, savings accounts often come with specific limitations and potential fees. Historically, a federal rule known as Regulation D limited certain “convenient transactions” from savings accounts to no more than six per calendar month. Although the Federal Reserve suspended this federal requirement in April 2020, many banks still maintain their own internal limits on monthly withdrawals or transfers. Exceeding these limits can lead to various fees or account changes.

Excessive withdrawal fees are commonly charged when a customer exceeds the bank’s transaction limit. These fees typically range from $3 to $15 per transaction. Repeatedly exceeding withdrawal limits might also result in the bank converting the savings account to a checking account, which may not earn interest, or in some cases, closing the account.

Other fees to consider include ATM fees, which can be charged by your own bank for using an out-of-network ATM and by the ATM owner. If a savings account is linked to a checking account for overdraft protection, a withdrawal causing an overdraft might trigger an overdraft fee, usually ranging from $25 to $35. Additionally, some savings accounts require a minimum balance; falling below this threshold can incur a monthly maintenance fee, often between $5 and $15. Review the specific terms and conditions provided by your bank to understand all applicable limitations and fees for your savings account.

Tax Implications of Withdrawals

Understanding the tax implications of savings account withdrawals is important for financial planning. When you withdraw the principal, the money you initially deposited, it is generally not considered a taxable event. This is because you are simply retrieving your own funds, which were typically deposited after taxes had already been paid on that income.

However, any interest earned on the savings account is considered taxable income by the Internal Revenue Service (IRS). This interest is taxable in the year it is credited to your account, regardless of whether you withdraw it or let it remain. The interest income is typically taxed at your ordinary income tax rate, which depends on your total taxable income for the year. Financial institutions are generally required to report interest income to the IRS using Form 1099-INT if the amount earned is $10 or more in a calendar year. Even if less than $10 is earned and a 1099-INT form is not issued, taxpayers are still responsible for reporting all interest income on their tax returns.