3 Ways to Use Your Portfolio for Short-Term Borrowing
Discussion of smart, flexible ways to access short-term liquidity. In this episode, we explore three liquidity strategies using your portfolio—60-day IRA rollovers, margin loans, and pledged asset lines. Video podcast with David Moser.
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About this Episode
In moments when you need short-term liquidity—whether for a home down payment, a business opportunity, or bridging a timing gap—your portfolio can offer more flexibility than you might think.
In our latest podcast, Wealth Advisor David Moser explores three strategic solutions available to Vector clients through their Schwab accounts. We talk though how each solution can provide access to funds based on your existing portfolio value.
Overview
60-Day IRA Rollover
Withdraw from your IRA without tax or penalty—as long as the funds are returned within 60 days. This can be a smart strategy for short-term cash needs, such as bridging a home sale. Keep in mind, this strategy requires selling investments, which means sitting out of market participation during the rollover period.
Margin Loan
Borrow against your brokerage account—no credit check or approval required. Your investments remain intact, and you avoid triggering potential capital gains. This option offers quick, flexible liquidity and, as a Vector client, you benefit from reduced negotiated interest rates through Schwab.
Pledged Asset Line (PAL)
A more structured loan against your brokerage account, typically suited for larger borrowing needs (minimum $100K). While it requires an application and setup process, it offers potentially higher borrowing limits—often around 60–70% of your portfolio’s value—compared to a margin loan.
Each of these tools are generally available for investors with financial assets held at a custodian like Schwab—and each comes with its own pros and cons depending on your goals, account type, and timeline.
Our role at Vector is to help you consider solutions that fits your financial plan best. If you’d like to learn more or explore which lending strategy may be right for you, we’re here to help.
Chapters
00:00 … Introduction and Welcome
00:26 … Overview of Short-Term Lending Solutions
01:52 … 60-Day Rollover from an IRA
03:12 … Margin Loan
05:56 … Pledged Asset Line
08:32 … Risks and Drawbacks
09:41 … Final Thoughts
Transcript (adapted for readability)
Ezra:
Welcome back to the Vector Wealth podcast. I’m joined today by David Moser, a seasoned wealth advisor who’s been with Vector for over a decade. Today, we’re diving into how clients can use their Schwab investment portfolios for short-term lending solutions.
David:
Thanks for having me. I’m excited to explore how your relationship with Vector—and your Schwab portfolio—can be used as a financial resource beyond long-term investing. While there are many short-term borrowing options like HELOCs, personal loans, or borrowing from family, this conversation focuses on solutions available through your investment accounts at Schwab.
Ezra:
Let’s start with the basics. What options do Vector clients have through Schwab for short-term liquidity? And can you share a scenario where these might come into play?
David:
There are three main strategies we help clients explore:
60-Day IRA Rollovers
Margin Loans
Pledged Asset Lines (PALs)
Each has unique benefits and trade-offs. These tools are especially helpful when clients need quick access to capital—say, during a real estate transaction or a short-term liquidity gap.
1. 60-Day IRA Rollover
David:
This option is available only to IRA accounts. You’re allowed to withdraw funds from your IRA once every 12 months and avoid taxes or penalties, if the money is returned within 60 days.
A real-world example: A client is buying a new home but their current one hasn’t closed yet. If they need $200,000 for the down payment, we can sell that amount from their IRA, send them the cash, and once their current home sells, they return the funds within the 60-day window. No tax consequences if it’s done on time.
Ezra:
That’s a smart bridge. But with a 60-day rollover, clients are selling investments, right?
David:
Exactly. The funds must be pulled from the portfolio, which means missing out on market participation during that time. So, it’s a solid tool, but not without trade-offs.
2. Margin Loan
Ezra:
How does a margin loan compare?
David:
Margin loans are available only in taxable brokerage accounts—not IRAs or retirement accounts. Instead of selling investments, you borrow against the value of your portfolio. Generally, you can borrow up to 50% of the account’s value.
Since your investments remain intact, you avoid triggering capital gains, and there’s no need for a credit check or formal approval process. It’s quick, flexible, and a great solution when you need liquidity for a few months but want to stay invested.
Ezra:
Is there a cost to borrowing on margin?
David:
Yes—Schwab charges interest on the borrowed amount. The rate typically includes a fixed component plus a spread tied to a benchmark like the Federal Funds Rate.
Here’s the good news: Vector clients benefit from a negotiated reduced margin rate with Schwab, which can lower borrowing costs compared to retail rates.
3. Pledged Asset Line (PAL)
Ezra:
Let’s move to the third option—Pledged Asset Lines.
David:
PALs are also secured by your brokerage account, similar to margin loans, but they’re more structured. They require an application and approval process, and they’re designed for larger borrowing needs—minimum loans typically start at $100,000.
You can often borrow a higher percentage of your portfolio value than with margin loans—up to 60–70%, depending on the asset mix. Like margin, the investments remain in place, and you avoid triggering taxable events.
Ezra:
Any other differences?
David:
Yes, a few key distinctions:
PALs are shown on separate statements from your brokerage account.
You won’t have access to check writing, debit cards, or bill pay features tied to the loan.
It’s a better fit for larger, longer-term needs—like business investments or real estate bridge loans—versus the short, flexible use of margin.
Risks and Considerations
Ezra:
Are there any risks or limitations clients should be aware of?
David:
Definitely.
60-Day IRA Rollover: If you don’t return the funds within 60 days, it becomes a taxable distribution—and potentially subject to penalties. You’re also selling investments, so you could miss out on growth.
Margin and PAL: Both are based on the value of your portfolio. If the market drops and your account value falls, you could exceed your borrowing limit. In that case, you might need to repay part of the loan or sell investments to restore the loan-to-value percentage.
Final Thoughts
Ezra:
Thanks for walking us through those. These sound like valuable tools when used correctly.
David:
They are. Whether you’re facing a timing issue or exploring creative lending strategies, these options can offer flexibility without disrupting your overall investment plan.
If you or someone you know is in need of short-term liquidity and has assets staged in their investment portfolio, let’s talk. We’ll walk through the best solution for your personal situation and ensure it aligns with your broader financial goals.
These discussions aim to spark dialogue about enhancing retirement readiness and making more informed financial decisions. At Vector, we delve into the nuances of scenario planning, offer insights and guidance tailored to each client's unique circumstances. If you or someone you know is pondering their financial future or seeking clarity on their retirement plan, we're here to help.
This discussion is hosted by Vector’s David Moser.
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