Cash Management FAQs

Withdrawals

Q1: Where can I find the new withdrawals feature?

A1: In your “Live Portfolios” window, you will see a new option next to each account labeled “Withdraw”. Click on that button to submit a withdrawal for the associated account.

Q2: How do I know when the cash will be available in the account?

A2: When possible, withdrawal requests submitted prior to 11:30AM EST will be traded the same day, and requests received after 11:30AM EST will be traded the next business day. The settlement time is not dependent upon 55ip, and can vary based on security type (ETF vs. Mutual Fund) and the custodian that you use.

Tax-Smart Withdrawals

Q1: For what accounts are tax-smart withdrawals available?

A1: When a taxable account has been onboarded onto 55ip with tax-management, tax-smart withdrawals will be available for that account.

Q2: How does a tax-smart withdrawal work to minimize the tax bill?

A2: 55ip will run the withdrawal through our tax bill optimizer to identify the positions to sell that will result in the smallest tax bill. Note that the smallest tax bill will result in an increase in tracking error. However, we do include six total tax bill options ranging from the smallest tax bill (which will have the largest tracking error) to the tax bill with a tracking error of 0. This will help you find the right balance between tax bill and tracking error (tracking error meaning the alignment of the portfolio holdings with the target model). We will run the withdrawal through our tax bill optimizer with your selected target tax bill/tracking error while avoiding any wash-sale violations.

Q3: What happens if I turn off the tax-smart withdrawal on a tax-managed account and request a withdrawal?

A3: We will still try to avoid any wash-sale violations on the withdrawal, but we will stay as close as possible to the target model weights (minimizing the portfolio tracking error).

Q4: If I request a tax-smart withdrawal with a smaller tax bill, but it leads to a larger tracking error, what will happen to that account next time that account is traded?

A4: For accounts with tracking error rebalancing, if the resulting tracking error exceeds the threshold for rebalancing, the next time the account is traded we will rebalance the portfolio back to the target model. When J.P.Morgan or BlackRock updates their model positions, we will rebalance immediately. Note that when using tax-smart withdrawals, selecting a high tracking error alternative may accelerate rebalancing and any associated capital gains.

Systematic Withdrawals

Q1: How does a systematic withdrawal work for taxable, tax-managed accounts?

A1: Similar to the answer for Q3 in the tax-smart withdrawals section, we avoid any wash-sale violations on each of the systematic withdrawals while also minimizing the portfolio tracking error.

Auto-Investing Cash

Q1: How does 55ip decide what excess cash to invest into the portfolio?

A1: Any cash over the cash buffer will be invested into the portfolio, whether those are dividends, interest payments, deposits, etc.

Q2: How does 55ip invest the cash into a tax-managed portfolio versus a non-tax-managed portfolio?

A2: For tax-managed portfolios, we invest the cash in a way that moves the portfolio closer to the target model without creating any wash-sale violations. To invest the cash in portfolios without tax-management, we rebalance the entire portfolio.