Embarking on the journey of managing your 401(k) investments with Fidelity can feel like a big step, but it's a powerful one toward securing your financial future. Whether you're just starting to think about your retirement savings or you're a seasoned investor looking to fine-tune your strategy, understanding how to change your 401(k) investments is absolutely crucial.
Ready to take control of your retirement nest egg? Let's dive in!
Step 1: Understanding Your Current 401(k) and Investment Goals
Before you make any changes, it's essential to have a clear picture of where you stand and where you want to go. This isn't just about clicking buttons; it's about making informed decisions that align with your personal financial situation and future aspirations.
Sub-heading: Why Review Your Current Investments?
Your 401(k) is a long-term investment vehicle, and markets constantly evolve. Your initial investment choices might not be the most suitable for your current age, risk tolerance, or evolving financial goals. Periodic review is key to ensuring your portfolio remains on track.
Sub-heading: Define Your Risk Tolerance and Time Horizon
Risk Tolerance: How comfortable are you with market fluctuations? Are you able to stomach potential losses for the chance of higher returns, or do you prefer a more stable, albeit potentially slower, growth path? Your risk tolerance will significantly influence your investment choices.
Time Horizon: When do you anticipate needing to access these funds? If retirement is decades away, you might have a longer time horizon, allowing you to take on more risk. If you're nearing retirement, a more conservative approach might be appropriate.
Step 2: Logging into Your Fidelity NetBenefits Account
Fidelity's NetBenefits platform is your gateway to managing your workplace retirement plan. This is where you'll access all the tools and information needed to make changes.
Sub-heading: Accessing NetBenefits Online
Go to the Fidelity NetBenefits website: Open your web browser and navigate to NetBenefits.Fidelity.com.
Log in: Enter your username and password. If you've forgotten them, use the "Forgot username or password?" link to reset them. It's important to keep your login credentials secure.
Sub-heading: Navigating to Your 401(k) Account
Once logged in, you'll typically see a dashboard displaying your accounts.
Locate your 401(k) account from the list of accounts. It might be labeled as "Retirement Savings Plan" or similar.
Click on your 401(k) account to access its details and management options.
Step 3: Exploring Your Investment Options and Current Allocation
Now that you're in your 401(k) account, it's time to understand what's currently happening and what your choices are.
Sub-heading: Viewing Your Current Investment Allocation
Look for a section often labeled "Portfolio," "Holdings," or "Asset Allocation." This will show you a breakdown of your current investments by asset class (e.g., stocks, bonds, cash) and specific funds.
Pay close attention to the percentages allocated to each investment. This is your existing strategy.
Sub-heading: Understanding Available Investment Options
Your employer's 401(k) plan offers a curated list of investment options. These typically include:
Target Date Funds: These are professionally managed funds that automatically adjust their asset allocation over time, becoming more conservative as you approach a specific retirement date. They are a popular choice for hands-off investors.
Index Funds: These funds aim to track a specific market index, like the S&P 500. They often have low expense ratios.
Actively Managed Mutual Funds: These funds are managed by a professional fund manager who actively buys and sells securities with the goal of outperforming a benchmark. They typically have higher fees.
Bond Funds: These funds invest in a diversified portfolio of bonds, providing income and typically less volatility than stock funds.
Money Market Funds: These are very low-risk investments that hold highly liquid, short-term debt instruments, offering stability but typically lower returns.
Take your time to research each fund's objectives, historical performance, and, most importantly, its expense ratio. Higher expense ratios can significantly eat into your returns over the long term.
Step 4: Initiating the Investment Change
This is where you'll actually make the adjustments to your portfolio.
Sub-heading: Finding the "Change Investments" Feature
Within your 401(k) account, look for a "Quick Links" or "Manage Investments" section.
You should find an option like "Change Investments" or "Change Future Investments." Click on this.
Sub-heading: Deciding Between Reallocating Existing Funds vs. Future Contributions
Fidelity typically gives you two main ways to change your investments:
Reallocate Existing Balance: This allows you to sell existing investments and buy new ones to achieve your desired asset allocation. This is often referred to as "rebalancing" your portfolio. In a 401(k), rebalancing does not typically trigger a taxable event.
Change Future Contributions: This directs how your new contributions (from your paycheck) will be invested going forward. This is a simpler way to gradually shift your allocation without selling existing holdings. You can combine this with reallocating existing funds for a more immediate change.
Sub-heading: Making Your Selections
You will be presented with a list of your available investment options.
Enter the percentage you wish to allocate to each fund. Ensure that your total allocation adds up to 100%.
For existing balances, you'll specify how much of each current holding you want to sell and what new funds you want to buy.
Tip: Fidelity usually provides tools or calculators to help you visualize different asset allocations and their potential impact. Don't hesitate to use these!
Step 5: Reviewing and Confirming Your Changes
Before you finalize anything, it's crucial to double-check your selections.
Sub-heading: Verifying Your New Allocation
Fidelity will present you with a summary of your proposed changes.
Carefully review the new percentages for each fund and ensure they match your desired allocation and risk profile.
Check that the total allocation still sums to 100%.
Sub-heading: Understanding the Impact and Risks
Fidelity will likely display disclaimers regarding market risk and investment performance. Read them carefully. Remember that past performance is not indicative of future results.
Sub-heading: Final Confirmation
Once you're satisfied with your selections, click "Submit" or "Confirm" to finalize your investment changes. You should receive a confirmation message or email from Fidelity.
Step 6: Monitoring Your Investments and Rebalancing Periodically
Changing your investments isn't a one-and-done task. It's an ongoing process of monitoring and adjustment.
Sub-heading: Regular Portfolio Reviews
Set a schedule for reviewing your 401(k) investments. Many financial advisors recommend doing this at least annually, or whenever there are significant changes in your life (e.g., marriage, new child, job change, nearing retirement).
Check if your asset allocation has drifted from your target due to market performance. For example, if stocks have performed exceptionally well, they might now represent a larger portion of your portfolio than you intended, increasing your overall risk.
Sub-heading: The Importance of Rebalancing
Rebalancing means bringing your portfolio back in line with your desired asset allocation. You can do this by:
Selling high and buying low: Selling some of your overperforming assets and using the proceeds to buy more of your underperforming (or appropriately performing) assets to restore your target percentages.
Directing new contributions: Adjusting your future contributions to flow more heavily into underweighted asset classes. This allows you to rebalance gradually without selling anything.
Fidelity typically does not offer automatic rebalancing for 401(k) accounts, so this is a manual process you'll need to undertake. Check your plan documents for specifics.
Frequently Asked Questions (FAQs) - How to Change 401(k) Investments Fidelity
Here are 10 common questions about changing your 401(k) investments with Fidelity, with quick answers to guide you:
How to know if I should change my 401(k) investments? You should consider changing your 401(k) investments if your risk tolerance or time horizon has changed, if your current asset allocation has drifted significantly from your target, or if you identify new investment options that better align with your goals and have lower fees.
How to find my current 401(k) investment allocation on Fidelity NetBenefits? Log in to NetBenefits, select your 401(k) account, and look for sections like "Portfolio," "Holdings," or "Asset Allocation" to see your current investment breakdown.
How to choose the best investment options for my 401(k)? The "best" options depend on your individual circumstances. Consider your risk tolerance, time horizon, and research the fund's objectives, historical performance, and expense ratios. Target Date Funds are often a good starting point for those who prefer simplicity.
How to rebalance my 401(k) with Fidelity? You rebalance by logging into NetBenefits, navigating to your 401(k) account, and using the "Change Investments" feature to sell overweight holdings and buy underweight ones to return to your target allocation.
How to change my future 401(k) contributions on Fidelity? Within the "Change Investments" section of your 401(k) on NetBenefits, you'll typically find an option to adjust how your future contributions will be allocated among the available funds.
How to understand the fees associated with 401(k) investments on Fidelity? Each fund has an expense ratio, which is an annual fee expressed as a percentage of your investment. You can find this in the fund's prospectus or summary on the Fidelity website. Lower expense ratios are generally better for long-term growth.
How to avoid common mistakes when changing 401(k) investments? Avoid making emotional decisions based on short-term market fluctuations. Don't invest in options you don't understand, and always ensure your allocations align with your long-term goals and risk tolerance.
How to get help with my 401(k) investment decisions on Fidelity? Fidelity offers various resources, including educational materials, online tools, and access to financial professionals. You can often find contact information for plan representatives or general customer service on the NetBenefits site.
How to know if my 401(k) plan offers automatic rebalancing? Most employer-sponsored 401(k) plans through Fidelity do not offer automatic rebalancing, meaning you'll need to do it manually. Check your Summary Plan Description (SPD) or contact your plan administrator for confirmation.
How to track the performance of my 401(k) investments on Fidelity? Fidelity NetBenefits provides performance tracking tools within your account dashboard, allowing you to view your returns over various periods and compare them to benchmarks.
