An American Funds redemption is a sale of your mutual fund shares back to the fund at its next calculated net asset value. You can place the order online, by phone, or in writing through Capital Group, and the proceeds usually reach your bank in one to two business days after the trade settles. What you actually keep depends on your share class, how long you’ve owned the shares, and whether the account is taxable or tax-deferred.
How to Place the Sale
The online portal at capitalgroup.com is the fastest route. Log in, choose the account and fund, enter a dollar amount or a share count, and confirm. Online redemptions are capped at $125,000 per investor per day, and the money moves by electronic transfer to your linked bank account.
Phone redemptions go through Capital Group’s transfer agent and are capped at $250,000 per investor per day. You’ll be asked to verify your identity before the representative places the trade. Anything above the phone limit has to come in writing.
Written requests are required for redemptions above the daily caps, for accounts owned by trusts or estates, and any time the transfer agent asks for a Medallion Signature Guarantee. You can download the form from the American Funds site and mail it to the address printed on it.
If your shares sit inside a brokerage account or an employer-sponsored retirement plan, you don’t request the redemption from Capital Group at all. Your advisor or plan administrator handles it, the trade still prices at American Funds’ NAV, but the paperwork and limits follow that firm’s rules.
When You’ll Need a Medallion Signature Guarantee
A Medallion Signature Guarantee is a stamp from a bank, credit union, or brokerage firm certifying your signature. It is not the same as a notary stamp; the guarantee carries a surety bond that protects the transfer agent against forgery.1Investment Company Institute. Medallion Signature Guarantee Considerations and Alternatives It gets triggered by the size of the transaction, by changes to the address or banking instructions on the account, or by transfers of ownership.
Most banks stamp them free for their own account holders. Bring a government-issued photo ID and the paperwork you need signed. Line this up before you submit the redemption, because a rejected request means starting the whole process over.
How Your Shares Get Priced
Mutual funds use forward pricing under SEC Rule 22c-1: you get the next NAV calculated after your order arrives, not the price at the moment you click sell.2eCFR. 17 CFR 270.22c-1 – Pricing of Redeemable Securities for Distribution, Redemption and Repurchase
American Funds calculates NAV once per business day at the close of the major U.S. stock exchanges, normally 4:00 p.m. Eastern Time.3Securities and Exchange Commission. Amendments to Rules Governing Pricing of Mutual Fund Shares An order that arrives before 4:00 p.m. gets that day’s closing NAV. One that arrives at 4:01 p.m. waits for the next business day’s close. On volatile days you won’t know your exact redemption price until after the market closes, and there’s no way to lock in a specific number the way you can with a stock trade.
When the Money Arrives
As of May 28, 2024, most securities transactions settle one business day after the trade date under the T+1 rule.4Investor.gov. New T+1 Settlement Cycle – What Investors Need To Know Direct mutual fund redemptions are governed by the Investment Company Act, which requires payment within seven calendar days, though in practice most settle in one to two business days.
Electronic transfer to a linked bank account is typically free and reaches you one to two business days after settlement. A mailed check adds several more days.5Capital Group. Withdrawals and Distributions Wire transfers are same-day but carry a fee. Your payout is the NAV times the shares redeemed, minus any sales charges that apply.
Fees That Come Out of the Proceeds
American Funds no longer sells Class B shares. The share classes you’ll typically encounter are Class A, Class C, Class F, and Class R, and they carry different back-end rules.
Class C shares carry a 1% contingent deferred sales charge if you redeem within the first year of purchase.6Capital Group. Share Class and Sales Charge FAQ After that first year, there is no back-end charge. The CDSC is calculated on the lower of your original purchase price or the current market value of the shares being sold, so it doesn’t apply to your gains.
Class A shares carry a front-end load at purchase, not at sale. But if you invested $1 million or more (or $500,000 for certain funds) and had the front-end load waived, a CDSC of up to 1% applies if you redeem within 18 months.6Capital Group. Share Class and Sales Charge FAQ The fund sells your oldest shares first, and shares free of any CDSC ahead of those still subject to one, which minimizes the charge automatically.
There’s also a trading restriction to know about. If you redeem $5,000 or more from a fund, you’re blocked from reinvesting in that same fund for 30 calendar days. This isn’t a fee, so it doesn’t reduce your proceeds, but it does prevent you from jumping back in if the fund drops right after your sale.
One more thing can eat into what lands in your account. If American Funds doesn’t have a valid taxpayer identification number on file for you, or the IRS has flagged your account for underreported income, the fund must withhold 24% of your proceeds for federal taxes.7Internal Revenue Service. Backup Withholding You get credit for it on your return, but the check you receive that day will be smaller than you expected.
Tax Consequences in a Taxable Account
A redemption from a regular individual or joint account is a taxable event. Your gain or loss is the proceeds minus your cost basis in the shares sold.
Shares held one year or less produce short-term gains taxed at your ordinary income rate. Shares held longer than one year produce long-term gains taxed at 0%, 15%, or 20% depending on income and filing status.8Internal Revenue Service. Topic No. 409, Capital Gains and Losses For 2026, single filers with taxable income below $49,450 pay 0% on long-term gains; the 20% rate kicks in above $545,500. Married couples filing jointly hit 20% at $613,700.
High earners face an additional 3.8% Net Investment Income Tax on capital gains once modified adjusted gross income exceeds $200,000 for single filers or $250,000 for joint filers.9Internal Revenue Service. Net Investment Income Tax That pushes the effective federal rate at the top end to 23.8%.
Choosing Your Cost Basis Method
Cost basis is what you originally paid for the shares, including reinvested dividends and capital gains distributions. American Funds offers three methods for identifying which shares you’re selling.
Average cost is the default. It adds up your total investment across all purchases and divides by the total shares, giving you one blended cost per share. It’s simple but doesn’t let you steer the tax result.
First-in, first-out sells your oldest shares first. If you’ve held the fund for years and the price has risen, your oldest shares carry the lowest basis and the largest gain, so FIFO tends to produce a higher tax bill. Those old shares do reliably qualify for the lower long-term rate.
Specific identification lets you pick the exact tax lots to sell. It’s the most flexible option, letting you target lots at a loss or lots that have crossed the one-year mark for long-term treatment. You have to specify the lots at the time of the redemption, not afterward, so know your lot details before you place the trade.
The Wash Sale Rule
If you redeem shares at a loss and buy back into the same fund, or a substantially identical one, within 30 days before or after the sale, the IRS disallows the loss.10Office of the Law Revision Counsel. 26 USC 1091 – Loss From Wash Sales of Stock or Securities The disallowed amount gets added to the basis of the replacement shares, so it isn’t gone forever, but you can’t use it on this year’s return. Automatic investment plans and dividend reinvestments cause this more often than people realize. If you’re selling to harvest a loss, either wait 31 days to reinvest in the same fund or buy a different fund that plays a similar role.
Reporting the Sale
American Funds reports your proceeds and cost basis to you and to the IRS on Form 1099-B, which you’ll receive in early February following the tax year of the sale.11Internal Revenue Service. About Form 1099-B, Proceeds From Broker and Barter Exchange Transactions You report the transaction on Schedule D of Form 1040.12Internal Revenue Service. About Schedule D (Form 1040), Capital Gains and Losses If the basis on the 1099-B doesn’t match your records, which is common for inherited shares or shares transferred in from another firm, correct it on Form 8949 and attach an explanation. Skipping that step is a reliable way to draw an IRS notice.
Redemptions Inside Retirement Accounts
Selling American Funds shares inside a Traditional IRA, Roth IRA, or 401(k) is not a taxable event. You’re moving between investments inside the same tax-sheltered wrapper. No capital gains math, no 1099-B, no Schedule D. Tax only enters the picture when money actually leaves the account.
Traditional Accounts
Withdrawals from a Traditional IRA or traditional 401(k) are generally taxed as ordinary income, regardless of what the underlying fund did. A distribution before age 59½ also carries an additional 10% early withdrawal penalty on top of the income tax.13Internal Revenue Service. Topic No. 557, Additional Tax on Early Distributions From Traditional and Roth IRAs
A number of exceptions can waive the 10% penalty, though the distribution is still taxed as income. Common ones include total and permanent disability, a series of substantially equal periodic payments over your life expectancy, separation from an employer’s plan in or after the year you turn 55 (50 for certain public safety employees), unreimbursed medical expenses above 7.5% of adjusted gross income, up to $10,000 for a first-time home purchase from an IRA, up to $5,000 per child for qualified birth or adoption expenses, and up to $22,000 for a federally declared disaster. The full list is longer and differs between IRAs and employer plans.14Internal Revenue Service. Retirement Topics – Exceptions to Tax on Early Distributions
Roth Accounts
Qualified Roth IRA distributions are completely tax-free and penalty-free. A distribution qualifies if the account has been open at least five tax years and you’ve reached 59½, become disabled, or are a first-time homebuyer (up to $10,000).15Internal Revenue Service. Roth IRAs Your original contributions can come out anytime without tax or penalty, since you already paid tax on that money going in.
Required Minimum Distributions
Traditional IRAs and employer retirement plans require you to start taking minimum distributions at a certain age. Under current rules, the starting age is 73 for most account holders.16Internal Revenue Service. Retirement Plan and IRA Required Minimum Distributions FAQs Starting in 2033, the age rises to 75 for people born after 1959. Roth IRAs are exempt from RMDs during the owner’s lifetime.
Your first RMD must be taken by April 1 of the year after you turn 73, and every RMD after that by December 31. Missing the deadline carries a 25% penalty on the amount you should have withdrawn, reduced to 10% if you correct it within two years. If you hold American Funds in a retirement account and are approaching 73, make sure the redemption and distribution both clear before the deadline. Capital Group can set up automatic withdrawals for you, but compliance is on you.
Setting Up Automatic Withdrawals
If you need regular income rather than one-off sales, you can put a systematic withdrawal plan in place. Capital Group lets you set up automatic withdrawals online for eligible account types, choosing the amount, frequency, and destination account.5Capital Group. Withdrawals and Distributions Each automatic withdrawal is still a redemption at that day’s NAV and carries the same tax consequences as a one-time sale in a taxable account. What you gain is a predictable cash flow without watching the NAV yourself.