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I recently had my Traditional IRA transferred to another company.

When looking at my account, there is a Holdings section that indicates 100% allocation to Sweep Cash.

What kind of investment is Sweep Cash? How does it compare to other forms of investment?

Nathan Merrill
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Sweep cash is typically a cash balance "swept" from your broker's non-interest paying cash base for your account to an interest-paying, usually FDIC-insured if in the US, account. The broker controls when money is moved from the brokerage account, or from the interest-paying account, based on their need to use the cash for your transactions and fees.

If you're in the US, and you have money in a sweep cash account, you may want to ensure that account is not with a bank where the size of the account, combined with other accounts you might have with that bank, exceeds FDIC limits. Often brokers will let you pick who the sweep cash account is kept with to avoid FDIC limitation violations.

davmp
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  • I'm definitely not over the FDIC limits. I don't quite understand the first paragraph: Is my account interest paying? I'm trying to figure out if I need to take action to remove it from sweep cash. – Nathan Merrill Aug 04 '17 at 16:56
  • As I understand it, the whole point of a sweep cash account is to move it somewhere that pays interest. Secondarily, to move it somewhere with gov't insurance (FDIC in the US) against loss. I'd contact your broker to ask what interest rate you're getting and confirm it gets interest at all. – davmp Aug 05 '17 at 00:10
  • US bank accounts are currently paying very low interest -- my sweep is 0.02% (and my retail MM is 0.01%) although now the Fed has finally started moving the wholesale rate up it is expected bank interest will also go up. Compared to other investements, cash has no downside (no risk, or as near as humanly possible) and no upside (no chance of gain more than the general market rate which is usually about the same as inflation). If you want your IRA invested in something other than cash, look at the options offered by the (new) custodian and pick one/some. – dave_thompson_085 Aug 06 '17 at 10:40