Master Your Future: A Step-by-Step Guide to Changing Investments in Your Fidelity 401(k)
Are you feeling a bit antsy about your current 401(k) investment mix? Perhaps your financial goals have shifted, or the market has moved in ways that make you reconsider your strategy. You're not alone! Many people wonder how to take a more active role in managing their retirement savings. The good news is, changing your investments in a Fidelity 401(k) is a straightforward process that empowers you to align your portfolio with your evolving needs and market outlook.
This comprehensive guide will walk you through every step, from understanding why you might want to make changes to how to execute those changes on the Fidelity NetBenefits platform. Get ready to take control of your financial destiny!
Why Consider Changing Your Fidelity 401(k) Investments?
Before we dive into the "how-to," let's briefly touch upon the "why." Your investment strategy shouldn't be set in stone. Here are some common reasons you might consider adjusting your 401(k) holdings:
Life Events: Marriage, having children, buying a home, or nearing retirement can all significantly impact your risk tolerance and time horizon, necessitating a change in your investment allocation.
Market Fluctuations: Over time, some investments will grow faster than others, causing your portfolio's original asset allocation to drift. This is where rebalancing comes in – selling some of your overperforming assets and buying more of your underperforming ones to get back to your desired mix.
Changing Risk Tolerance: As you get older, you might prefer a more conservative approach, shifting from growth-oriented stocks to more stable bonds. Conversely, if you have a long time horizon, you might want to take on more risk for potentially higher returns.
New Investment Insights: Perhaps you've learned more about different investment types, or new funds have become available in your plan that better align with your philosophy.
Performance Review: Regularly reviewing the performance of your chosen funds and comparing them to benchmarks can help you identify underperformers that you might want to replace.
Remember, a 401(k) is a tax-advantaged account, so changing investments within it typically does not trigger immediate tax consequences. This is a significant advantage compared to making similar changes in a taxable brokerage account.
Step 1: Assess Your Current Situation and Goals - Engage Yourself!
Alright, before you click anything, let's get introspective. This is the most crucial step. Think of it as your personal financial planning session.
Sub-heading: What are your current financial goals?
Are you aiming for early retirement, a comfortable traditional retirement, or something else entirely? Your goals dictate your investment horizon.
Sub-heading: What is your risk tolerance?
Are you comfortable with market volatility, or do significant swings make you nervous? Your risk tolerance should guide your asset allocation. Generally, younger investors with a longer time horizon can afford to take on more risk, while those closer to retirement may prefer a more conservative approach to protect their nest egg.
Sub-heading: Review your existing Fidelity 401(k) allocation.
Log in to your Fidelity NetBenefits account. Navigate to your 401(k) summary. Look for sections that show your current asset allocation – typically a pie chart or breakdown by asset class (stocks, bonds, cash, etc.) and by specific funds. Understanding where your money is currently invested is paramount.
Sub-heading: Research the investment options available in your plan.
Your employer's 401(k) plan will have a specific lineup of investment options. Fidelity usually provides detailed information, including fund objectives, historical performance, and expense ratios. Take the time to understand these. Common options often include:
Target Date Funds: These are "set-it-and-forget-it" funds that automatically adjust their asset allocation to become more conservative as you approach a specific retirement year. Great for those who prefer simplicity.
Index Funds: These funds aim to track the performance of a specific market index, like the S&P 500. They often have low expense ratios.
Mutual Funds: Actively managed funds that invest in a diversified portfolio of stocks, bonds, or other securities.
Bond Funds: Investments primarily in fixed-income securities, generally less volatile than stocks.
Money Market Funds: Highly liquid, short-term investments that are very low risk but also offer very low returns.
Action Item: Take notes! Write down your current allocation, your ideal allocation, and any funds you're considering adding or removing.
Step 2: Develop Your New Investment Strategy
Once you've assessed your situation, it's time to formulate your new strategy.
Sub-heading: Determine your target asset allocation.
Based on your risk tolerance and time horizon, decide on the percentage of your portfolio you want allocated to different asset classes. A common starting point might be a mix of stocks and bonds. For example:
Aggressive: 80% Stocks / 20% Bonds (for younger investors with a long horizon)
Moderate: 60% Stocks / 40% Bonds
Conservative: 40% Stocks / 60% Bonds (for those nearing or in retirement)
Remember, these are just examples. Your ideal allocation is unique to you.
Sub-heading: Select specific funds within your plan's offerings.
Now, match your desired asset allocation to the specific funds available in your Fidelity 401(k) plan. If you want 60% in U.S. stocks, you'll choose an appropriate U.S. stock index fund or mutual fund from your plan's list. Do your due diligence:
Review Fund Performance: Look at historical returns, but remember past performance is not indicative of future results.
Analyze Expense Ratios: These are the annual fees charged by the fund. Lower expense ratios mean more money stays in your pocket.
Understand Fund Objectives: Make sure the fund's investment objective aligns with your strategy.
Tip: If you're unsure, Fidelity provides tools and resources on NetBenefits to help you analyze funds and even offers model portfolios based on different risk levels.
Step 3: Log In to Fidelity NetBenefits and Navigate to Your 401(k)
This is where the rubber meets the road.
Sub-heading: Accessing your account.
Go to the Fidelity NetBenefits website (NetBenefits.fidelity.com).
Log in with your username and password. If you've forgotten them, use the "Forgot username or password" link.
Once logged in, you'll typically see a summary of your accounts. Locate your 401(k) Savings and Investment Plan.
Sub-heading: Finding the "Change Investments" section.
The exact navigation might vary slightly based on your employer's plan setup, but generally, you'll look for something like:
Click on your 401(k) account name to view its details.
Look for a section or menu item related to "Investments," "Change Investments," "Asset Allocation," or "Rebalance." Often, there's a "Quick Links" menu near your account summary that will have an "Investment Performance & Research" or "Change Investments" option.
If you're having trouble finding it, don't hesitate to use the search bar on Fidelity's site or their virtual assistant.
Step 4: Execute Your Investment Changes
There are two main types of changes you'll typically make:
Changing Existing Balances (Rebalancing/Exchanges): This moves money already invested from one fund to another.
Changing Future Contributions (Investment Elections): This directs where your new contributions from your paycheck will go.
It's crucial to change both to ensure your entire strategy is aligned.
Sub-heading: Changing Future Investment Elections
This tells Fidelity how to invest any new money that comes into your 401(k) from your paychecks.
On the "Change Investments" screen, look for an option like "Change Investment Elections" or "Future Contributions."
You'll likely be presented with a list of available funds and fields to input your desired percentage allocation for new money.
Input the desired percentage allocation for each fund. Ensure the total adds up to 100%.
Review your selections carefully before confirming.
Save your changes.
Sub-heading: Exchanging Current Investments (Rebalancing)
This is how you move money that is already invested between funds.
Navigate back to the "Change Investments" screen if you're not already there.
Look for an option like "Exchange Multiple Investments" or "Rebalance."
You'll typically see a list of your current holdings. You will need to specify:
Which funds you want to sell from.
The percentage or dollar amount you want to sell.
Which funds you want to buy into.
The percentage or dollar amount you want to buy.
Fidelity often makes this process intuitive. You might simply input your desired new allocation percentages for your entire current balance, and the system will automatically calculate the necessary buys and sells to achieve that.
Select your rebalance option: Often, you'll choose "Rebalance my account now, one time." Some plans might offer automatic rebalancing, but check for any associated fees.
Review the summary of your trades before submitting. Double-check all percentages and fund selections.
Confirm and submit your changes.
You'll typically receive a confirmation message and/or an email confirming your transaction. The changes usually take a business day or two to process.
Step 5: Monitor and Review Regularly
Your work isn't done after making the changes!
Sub-heading: Check your portfolio after the changes.
After a few business days, log back into Fidelity NetBenefits to ensure your changes have been processed correctly and your allocation reflects your new strategy.
Sub-heading: Schedule periodic reviews.
Financial experts often recommend reviewing your portfolio at least once a year, or when there are significant life changes or market events. This allows you to:
Assess performance: Are your investments performing as expected?
Rebalance: Does your asset allocation still match your target? Market movements can cause drift, requiring rebalancing.
Re-evaluate goals: Have your financial goals or risk tolerance changed?
Regular monitoring ensures your 401(k) continues to work optimally for your long-term financial health.
10 Related FAQ Questions:
How to check my current investment allocation in Fidelity 401(k)?
You can check your current investment allocation by logging into NetBenefits.fidelity.com, selecting your 401(k) account, and looking for a "Portfolio," "Asset Allocation," or "Holdings" section, often presented with charts.
How to know which investment options are available in my Fidelity 401(k) plan?
After logging into NetBenefits, navigate to your 401(k) account details, and look for "Investment Performance & Research" or "Fund Lineup." This section will list all the investment options your employer's plan offers.
How to change future contributions only in Fidelity 401(k)?
Log in to NetBenefits, go to your 401(k) account, select "Change Investments" or "Investment Elections," and then specify the new percentages for your incoming contributions. Ensure the total adds up to 100%.
How to rebalance my entire Fidelity 401(k) account?
To rebalance, log in to NetBenefits, navigate to your 401(k) account, find "Change Investments" or "Exchange Multiple Investments," and follow the prompts to adjust your existing holdings to your desired new allocation.
How to avoid paying taxes when changing investments in my Fidelity 401(k)?
Changes within a 401(k) are typically not taxable events because it's a tax-deferred retirement account. You only pay taxes when you withdraw money in retirement.
How to set up automatic rebalancing for my Fidelity 401(k)?
Some 401(k) plans offered through Fidelity may have an automatic rebalancing feature. You would typically find this option within the "Change Investments" or "Account Features" section. Check your plan's specific documents or contact Fidelity for details, as fees may apply.
How to understand the expense ratios of funds in my Fidelity 401(k)?
When viewing fund details on NetBenefits (often under "Investment Performance & Research"), you'll find information on expense ratios. This is a percentage charged annually by the fund for its management and operational costs. Lower expense ratios are generally better.
How to get help if I'm confused about changing my Fidelity 401(k) investments?
Fidelity offers extensive customer support. You can call their 401(k) team (the number is often available on the NetBenefits contact page, usually 800-835-5095 for for-profit organizations or 800-343-0860 for tax-exempt organizations), use their online chat, or visit a Fidelity Investor Center.
How to tell if a target date fund is right for me in my Fidelity 401(k)?
Target date funds are suitable if you prefer a hands-off approach. They automatically adjust their investment mix to become more conservative as you approach your chosen retirement year. If you want more control over individual fund selection, they might not be for you.
How to determine my risk tolerance for my Fidelity 401(k) investments?
Fidelity NetBenefits often provides risk assessment questionnaires or tools within the planning and advice sections. These tools can help you understand your comfort level with investment volatility and suggest appropriate asset allocations.
