Ready to take control of your retirement savings? Changing your Fidelity 401(k) investments is a smart move that can help ensure your money is working as hard as possible for your future. It might seem daunting at first, but with a clear, step-by-step approach, you'll be well on your way to optimizing your portfolio.
Let's dive in!
Understanding Your 401(k) and Why Changes Matter
Your 401(k) is a powerful retirement savings tool, often benefiting from employer contributions and tax advantages. However, the initial investment options chosen when you started your job might not always align with your evolving financial goals, risk tolerance, or market conditions. Periodically reviewing and adjusting your investments, also known as rebalancing or reallocating, is crucial for long-term success. This isn't about "timing the market," but rather ensuring your portfolio's risk level and growth potential remain appropriate for your stage of life.
Now, let's get to the practical steps!
Step 1: Assess Your Current Situation and Goals (Engage!)
Before you make any changes, let's take a moment to reflect. Have your financial goals changed since you first set up your 401(k)? Are you nearing retirement, or do you have decades to go? How comfortable are you with market fluctuations?
Understanding your current financial landscape and future aspirations is the most critical first step. Without this, any investment changes might be a shot in the dark.
Sub-heading: What to Consider:
Your Time Horizon: How many years until you plan to retire? A longer time horizon generally allows for more aggressive investments, as you have more time to recover from market downturns. Conversely, a shorter time horizon might warrant a more conservative approach.
Your Risk Tolerance: How comfortable are you with the value of your investments going up and down? Are you able to sleep soundly during market volatility, or do significant dips make you anxious? Be honest with yourself. Fidelity offers tools to help assess your risk tolerance if you're unsure.
Your Existing Investments: Log into your Fidelity NetBenefits® account (we'll get to this in Step 2!). Take a look at your current holdings. What percentage is in stocks, bonds, and other asset classes? Are you heavily concentrated in one area?
Other Accounts: Remember to consider all your investment accounts, not just your 401(k). A holistic view helps you create a truly diversified portfolio. For example, if you have a high allocation to bonds in an IRA, you might be more aggressive in your 401(k).
Step 2: Access Your Fidelity NetBenefits® Account
This is where the magic happens! Fidelity's NetBenefits platform is your central hub for managing your 401(k) investments.
Log In: Go to Fidelity's NetBenefits website (NetBenefits.fidelity.com) and enter your username and password. If you've forgotten them, use the "Forgot username or password" link to reset them.
Navigate to Your 401(k) Plan: Once logged in, you should see your retirement plans listed. Click on your 401(k) plan.
Find Investment Options: Look for a section related to "Investments," "Change Investments," or "Investment Performance & Research." The exact wording might vary slightly depending on your employer's plan setup. Often, you'll find a "Quick Links" menu with an option to "Change Investments" or "Investment Performance & Research."
Sub-heading: Exploring Available Investments:
Your employer's 401(k) plan with Fidelity will have a specific menu of investment options curated by your plan administrator. You won't have access to every single fund Fidelity offers. Typically, these options include:
Target Date Funds: These are "set it and forget it" funds that automatically adjust their asset allocation (stocks vs. bonds) to become more conservative as you approach a specific retirement year. They are a popular choice for those who prefer a hands-off approach.
Mutual Funds: A collection of stocks, bonds, or other securities managed by a professional fund manager. Your plan will likely offer a variety of mutual funds covering different asset classes (e.g., U.S. large-cap stocks, international stocks, various bond funds).
Index Funds: A type of mutual fund designed to mirror the performance of a specific market index, like the S&P 500. They often have lower expense ratios than actively managed funds.
Bonds and Money Market Funds: These are generally considered less volatile than stock funds and can provide stability and income.
Take your time to review the prospectuses or fact sheets for each fund option. Pay attention to the fund's objective, historical performance, and importantly, its expense ratio (the annual fee charged by the fund). Lower expense ratios can significantly impact your long-term returns.
Step 3: Formulate Your New Investment Strategy
Based on your assessment in Step 1 and your exploration in Step 2, it's time to decide how you want to reallocate your investments.
Sub-heading: Common Investment Strategies:
Target Date Fund Approach: If simplicity is key, simply select the target date fund closest to your projected retirement year. Fidelity Freedom® Funds are a common example. This strategy automatically rebalances for you.
Diversified Portfolio Approach: If you want more control, you'll build your own portfolio by selecting a mix of mutual funds or index funds across different asset classes. A common approach is to allocate a certain percentage to U.S. stocks, international stocks, and bonds.
Example: You might decide on an allocation of 70% stocks (40% U.S. large-cap, 15% U.S. small-cap, 15% international) and 30% bonds.
Core and Satellite Approach: This involves placing the majority of your assets in broad, low-cost index funds (the "core") and a smaller portion in more specialized or actively managed funds (the "satellites") to potentially boost returns or add specific exposure.
Remember, diversification is key to managing risk. Don't put all your eggs in one basket!
Step 4: Execute Your Investment Changes
Once you've decided on your new allocation, it's time to make the changes on NetBenefits.
Change Future Contributions: This is usually the easier of the two. You'll specify what percentage of your new contributions (from your paycheck) will go into each selected fund.
Exchange Existing Balances (Rebalance): This involves selling a portion of your existing holdings in certain funds and using that money to buy into other funds to reach your desired allocation.
Partial Exchange: You can choose to move a specific dollar amount or percentage from one fund to another.
Full Exchange: You might decide to sell all of one fund and reinvest it elsewhere.
Be aware of transaction timing: Trades typically execute at the closing price of the next business day after you place your request.
Sub-heading: Tips for Execution:
Review Before Submitting: Double-check all your selections and percentages before you click "Submit." A small error can have a big impact.
Confirm: After submitting, you should receive a confirmation. Save it for your records.
Don't Panic Sell/Buy: Avoid making emotional decisions based on short-term market fluctuations. Stick to your long-term strategy.
Step 5: Monitor and Rebalance Periodically
Changing your investments isn't a one-and-done event. Your portfolio will naturally drift over time as some investments perform better than others.
Set a Schedule: Most financial advisors recommend reviewing your 401(k) investments at least once a year, or whenever there are significant changes in your life (e.g., marriage, new child, job change, nearing retirement).
Check Performance: Log in to NetBenefits to see how your chosen funds are performing.
Rebalance as Needed: If your allocation has strayed significantly from your target (e.g., your stock allocation has grown from 70% to 85% due to a strong market), consider rebalancing. This means selling some of your overperforming assets and buying more of your underperforming ones to get back to your target percentages. This helps maintain your desired risk level. Fidelity's platform often has tools to show your current asset allocation and help you rebalance.
By following these steps, you can confidently manage your Fidelity 401(k) investments and stay on track for a secure retirement.
10 Related FAQ Questions (How to...)
Here are some common questions and quick answers to help you further:
How to find my 401(k) investment options on Fidelity NetBenefits?
Log in to NetBenefits, navigate to your 401(k) plan, and look for "Investments," "Change Investments," or "Investment Performance & Research" under "Quick Links."
How to understand the fees associated with my Fidelity 401(k) investments?
Look for the "expense ratio" in the fund's prospectus or fact sheet on NetBenefits. Lower expense ratios mean more of your money stays invested.
How to decide on the right asset allocation for my 401(k)?
Consider your time horizon until retirement and your personal risk tolerance. Fidelity offers tools and resources to help you assess these factors. Generally, younger investors can afford more risk (higher stock allocation), while older investors may prefer less (higher bond allocation).
How to rebalance my Fidelity 401(k) without incurring taxes?
Changes within a 401(k) plan are typically not taxable events, as the account is tax-advantaged. You can buy and sell funds without immediate tax consequences.
How to know if a target date fund is right for me?
Target date funds are excellent for hands-off investors who want a professionally managed, diversified portfolio that automatically adjusts risk over time. If you prefer more control or have a complex financial situation, you might opt for individual funds.
How to change my future 401(k) contributions to new investments?
On NetBenefits, there will be a specific section to "Change Contributions" or "Future Investments" where you can allocate percentages of your incoming money to different funds.
How to exchange my existing 401(k) investments to new funds?
Look for an "Exchange" or "Rebalance" option within your 401(k) investment section on NetBenefits. You can then specify which funds to sell and which to buy.
How to get help with my Fidelity 401(k) investment choices?
Fidelity offers resources like educational articles, planning tools on NetBenefits, and customer service representatives (via phone or chat) who can guide you through the process and explain options, though they cannot provide personalized investment advice. Your employer's HR department may also have resources.
How to view the performance of my 401(k) investments on Fidelity?
Within your 401(k) account on NetBenefits, look for sections like "Performance," "Holdings," or "Investment Performance & Research" to see how your funds are performing.
How to avoid common mistakes when changing 401(k) investments?
Avoid emotional decisions (don't react to short-term market swings).
Don't over-diversify (too many funds can lead to overlapping investments).
Don't under-diversify (putting all your money in one or two funds).
Regularly review your portfolio, but don't obsess over it. Stick to your long-term plan.
