A 401(k) rollover to Fidelity is a common and often smart financial move for many individuals, especially when transitioning between jobs or seeking more control over their retirement investments. This comprehensive guide will walk you through every step of the process, ensuring a smooth and tax-efficient transfer.
Ready to take control of your retirement savings?
Are you feeling a bit overwhelmed by the thought of moving your 401(k)? Don't worry, you're not alone! Many people find the idea of transferring their retirement funds daunting, but with a clear, step-by-step approach, it can be surprisingly straightforward. Let's unlock the potential of your retirement savings together by moving them to Fidelity, a leading financial institution known for its wide range of investment options and robust customer support.
The Essential Guide to Transferring Your 401(k) to Fidelity
Rolling over your 401(k) to Fidelity, typically into an Individual Retirement Account (IRA), offers several benefits, including greater investment flexibility, simplified financial management, and potentially lower fees. Whether you're moving funds from a previous employer's plan or consolidating multiple retirement accounts, this guide will help you navigate the process with confidence.
Step 1: Gather Information About Your Current 401(k)
Before you initiate any transfer, it's crucial to have a clear understanding of your existing 401(k) plan. This initial information gathering will save you time and potential headaches down the line.
Sub-heading: What You Need to Know
Current 401(k) Provider: Identify the financial institution holding your 401(k) (e.g., Vanguard, Empower, etc.).
Account Number: Have your 401(k) account number readily available.
Account Type: Determine if your 401(k) is a Traditional 401(k) (pre-tax contributions) or a Roth 401(k) (after-tax contributions). This is critical for tax purposes when choosing your Fidelity account.
Vested Balance: Understand how much of your employer's contributions you are "vested" in. While your own contributions are always 100% yours, employer contributions may have a vesting schedule, meaning you only fully own them after a certain period of employment.
Contact Information for Your Old Provider: Have their customer service phone number and potentially their mailing address handy. This information is often found on your statements or by contacting your former HR department.
Distribution Options: Some 401(k) plans might have specific rules or forms for rollovers. Inquire about their process for initiating a rollover and what forms they require.
Sub-heading: Tips for Information Gathering
Check your latest 401(k) statement. This is usually the best source for most of the details you'll need.
Contact your former employer's HR department. They can provide details about your plan and its administrator if you're unsure.
Don't be afraid to call your current 401(k) provider's customer service. They can walk you through your account details and discuss rollover options.
Step 2: Open Your Fidelity Account
With your existing 401(k) details in hand, the next step is to set up the destination for your funds at Fidelity. Most people choose to roll their 401(k) into a Fidelity IRA.
Sub-heading: Choosing the Right Fidelity IRA
The type of IRA you open at Fidelity depends on the tax nature of your original 401(k) and your future tax strategy.
Traditional 401(k) to Rollover IRA (or Traditional IRA): If your 401(k) was funded with pre-tax dollars, you'll want to open a Rollover IRA or Traditional IRA at Fidelity. This ensures your funds remain tax-deferred.
Roth 401(k) to Roth IRA: If you had a Roth 401(k) (after-tax contributions), you must roll it into a Roth IRA to maintain its tax-free withdrawal status in retirement.
Mixed Assets: If your 401(k) has both pre-tax and after-tax (Roth) contributions, you'll likely need to open two separate IRAs at Fidelity: one Traditional IRA for the pre-tax portion and one Roth IRA for the after-tax portion.
Sub-heading: How to Open Your Fidelity Account
Online: The easiest way to open an IRA at Fidelity is through their website (Fidelity.com). Look for sections like "Open an Account" or "Retirement."
Phone: You can also call Fidelity's customer service line. Their representatives are well-versed in the rollover process and can guide you through opening the correct account.
Required Information: Be prepared to provide personal details like your Social Security Number, date of birth, and employment information. You'll also need to link a bank account for future contributions or withdrawals (though this isn't strictly necessary for the rollover itself).
Step 3: Initiate the Rollover with Your Old 401(k) Provider (or Fidelity)
This is the core of the transfer process. There are generally two ways to initiate a rollover: a direct rollover or an indirect rollover. A direct rollover is almost always preferable to avoid tax complications.
Sub-heading: Direct Rollover (Highly Recommended)
In a direct rollover, your old 401(k) provider sends the funds directly to Fidelity. You never physically handle the money, which prevents tax withholding and potential penalties.
Contact Your Old 401(k) Provider: Call their customer service line and inform them you want to initiate a "direct rollover" of your 401(k) to an IRA at Fidelity.
Provide Fidelity's Information: Your old provider will need Fidelity's details, including:
Fidelity's Name: Fidelity Management Trust Company (or FMTC) for IRA rollovers.
Fidelity's Mailing Address: They will provide the appropriate address for direct rollovers.
Your Fidelity Account Number: Ensure you provide the correct new IRA account number.
FBO (For Benefit Of): The check will typically be made out to "Fidelity Management Trust Company FBO [Your Name]" to clearly designate the funds for your benefit.
Complete Any Required Forms: Your old provider may require you to fill out their specific rollover distribution forms.
Confirm Payment Method: Request that the funds be transferred electronically if possible, or via a check made payable directly to Fidelity (FBO you).
Sub-heading: Indirect Rollover (Use with Caution)
An indirect rollover involves your old 401(k) provider sending the funds to you directly. You then have 60 days from the date you receive the funds to deposit them into your Fidelity IRA.
20% Withholding: A major drawback of an indirect rollover is that your old 401(k) provider is required to withhold 20% of the distribution for federal income taxes. If you want to roll over the full amount, you'll need to make up this 20% with your own funds when you deposit into Fidelity. You'll then recover the withheld amount as a tax credit when you file your income taxes.
60-Day Rule: If you fail to deposit the entire amount (including the 20% withheld) into a qualified retirement account within 60 days, the entire distribution will be treated as a taxable withdrawal, potentially subject to income taxes and a 10% early withdrawal penalty if you're under age 59½.
One Rollover Per Year: The IRS generally limits indirect IRA rollovers to one per 12-month period. This rule applies to IRAs, but a rollover from a 401(k) to an IRA is an exception to this specific rule. However, due to the complexity and potential tax consequences, direct rollovers are overwhelmingly recommended.
Sub-heading: What if Your Old Plan is Already with Fidelity?
If your old 401(k) was already administered by Fidelity (via NetBenefits), the process is often simpler. You may be able to initiate the rollover directly through your NetBenefits account, and the transfer can be done electronically without a physical check.
Step 4: Follow Up and Confirm the Transfer
Once you've initiated the rollover, don't just sit back and wait. Proactive follow-up is key to ensuring your funds are transferred accurately and efficiently.
Track the Transfer: Ask your old 401(k) provider for an estimated timeline for the transfer and any tracking numbers if a check is being mailed.
Monitor Your Fidelity Account: Regularly check your Fidelity IRA account online to see when the funds arrive.
Deposit the Check (if applicable): If you received a rollover check made out to "Fidelity Management Trust Company FBO [Your Name]," deposit it into your Fidelity IRA. You can often do this through:
Mobile check deposit via the Fidelity app.
Mailing the check to Fidelity (use the address provided by Fidelity).
Visiting a Fidelity Investor Center in person.
Verify the Amount: Once the funds appear in your Fidelity account, double-check that the amount matches what you expected from your old 401(k).
Step 5: Invest Your Funds at Fidelity
Congratulations! Your 401(k) funds are now safely in your Fidelity IRA. But the journey isn't over yet! Your money will likely be in a "cash" or "money market" position within your IRA. To achieve growth, you need to invest it.
Sub-heading: Exploring Fidelity's Investment Options
Fidelity offers a vast array of investment choices to suit various risk tolerances and financial goals:
Mutual Funds: Fidelity is renowned for its diverse selection of mutual funds, including actively managed and passively managed index funds.
Exchange-Traded Funds (ETFs): ETFs offer diversification and can be traded like stocks.
Stocks and Bonds: For those who prefer to build their own portfolio, individual stocks and bonds are available.
Target Date Funds: These are "set-it-and-forget-it" funds that automatically adjust their asset allocation as you approach your target retirement date.
Managed Accounts (e.g., Fidelity Go): If you prefer professional management, Fidelity offers robo-advisors or human financial advisors to manage your portfolio for a fee.
Sub-heading: Tips for Investing
Reassess Your Risk Tolerance: Your investment strategy should align with your comfort level for risk and your time horizon until retirement.
Diversify: Don't put all your eggs in one basket. Spread your investments across different asset classes (stocks, bonds, real estate) and sectors.
Consider Professional Guidance: If you're unsure how to invest, consider speaking with a Fidelity financial advisor. They can help you create a personalized investment plan.
Automate Investments: If you plan to make regular contributions to your IRA, set up automatic transfers to keep your investment strategy consistent.
Frequently Asked Questions (FAQs) about 401(k) Rollovers to Fidelity
Here are 10 common questions with quick answers to further assist you in your 401(k) rollover journey:
How to: Choose between a Traditional IRA and a Roth IRA for my rollover?
Answer: If your 401(k) contributions were pre-tax (Traditional 401(k)), roll into a Traditional IRA to maintain tax-deferred growth. If your 401(k) contributions were after-tax (Roth 401(k)), roll into a Roth IRA to maintain tax-free withdrawals in retirement.
How to: Avoid taxes and penalties during a 401(k) rollover?
Answer: Always opt for a direct rollover. This ensures the funds go directly from your old plan provider to Fidelity, avoiding tax withholding and the 60-day rule.
How to: Handle a check made out to me during a rollover?
Answer: If you receive a check made out to you, it's an indirect rollover. You must deposit the full amount (including any 20% withheld for taxes) into your Fidelity IRA within 60 days to avoid it being considered a taxable withdrawal and potentially incurring penalties.
How to: Know if my old 401(k) provider will allow a direct rollover?
Answer: Most 401(k) providers offer direct rollovers. Call your old provider's customer service or check their website for their specific rollover procedures.
How to: Transfer multiple old 401(k)s to Fidelity?
Answer: You can roll over multiple old 401(k)s into a single Fidelity IRA. Simply follow the same step-by-step process for each old 401(k) account.
How to: Track the status of my 401(k) rollover to Fidelity?
Answer: After initiating, contact your old 401(k) provider for status updates. Once they've processed it, you can often track the incoming transfer directly through your Fidelity online account.
How to: Invest my funds after they arrive in my Fidelity IRA?
Answer: Once the funds are in your Fidelity IRA (likely in cash), you'll need to actively choose investments. Log into your Fidelity account and navigate to the "Trade" or "Invest" section to select mutual funds, ETFs, stocks, or other investment vehicles.
How to: Find out about fees associated with my old 401(k) and the new Fidelity IRA?
Answer: Your old 401(k) plan's Summary Plan Description (SPD) will outline any exit fees. Fidelity's IRA accounts generally have no account opening or maintenance fees, but mutual funds and ETFs you choose will have their own expense ratios.
How to: Get help if I encounter issues during the rollover process?
Answer: Both your old 401(k) provider and Fidelity have dedicated customer service teams to assist with rollovers. Don't hesitate to call them for guidance or to troubleshoot any problems. Fidelity representatives are highly experienced in this process.
How to: Decide if rolling over my 401(k) is the right choice for me?
Answer: While generally beneficial, consider factors like investment options, fees, administrative complexity, and potential creditor protection differences between your old 401(k) and a Fidelity IRA. Consulting a financial advisor can provide personalized advice.
