"Thinking about unrolling from your Fidelity 401(k)? It's a significant decision, and understanding the process and its implications is key. Whether you're changing jobs, nearing retirement, or simply rethinking your financial strategy, this comprehensive guide will walk you through every step of unenrolling from your Fidelity 401(k). Let's dive in!"
How to Unenroll from Your Fidelity 401(k): A Step-by-Step Guide
Unenrolling from your Fidelity 401(k) isn't just about stopping contributions; it often involves deciding what to do with the funds you've already accumulated. This guide will cover both aspects, providing you with a clear roadmap.
Step 1: Understand Your "Unenrollment" Goal
Before you do anything, ask yourself: What exactly do I mean by "unenroll"?
Are you looking to simply stop your current contributions to the 401(k)? This is common if you want to temporarily free up cash flow or direct funds elsewhere.
Are you leaving your employer and need to manage the 401(k) from your previous job? This is a common trigger for considering unenrollment options like rollovers or withdrawals.
Do you want to withdraw all the money from your 401(k) entirely? This is usually the most impactful option and comes with significant tax consequences.
Your goal will determine the specific steps you need to take. Let's break down each scenario.
Step 2: Stopping Future Contributions (If Applicable)
If your primary goal is to simply halt future contributions to your current employer-sponsored Fidelity 401(k) plan, this is generally the easiest step.
Sub-heading 2.1: Accessing Your Fidelity NetBenefits Account
The first place to go is your Fidelity NetBenefits account. This online portal is where you manage your workplace retirement plan.
Log In: Go to Fidelity.com or NetBenefits.com and log in with your username and password. If you've forgotten them, use the "Forgot username or password" option.
Navigate to Contributions: Once logged in, look for a section related to "Contributions," "Payroll Deductions," "Manage Contributions," or similar. The exact wording might vary slightly based on your employer's plan setup. You might find it under a "Plan Information" or "Account" tab.
Find Your 401(k) Plan: If you have multiple Fidelity accounts, ensure you select your specific 401(k) plan.
Sub-heading 2.2: Adjusting Your Contribution Rate
Within the contributions section, you should find an option to change your contribution percentage or amount.
Set Contribution to 0% or $0: To stop contributions, simply adjust your deferral percentage to 0% or the dollar amount to $0.
Review and Confirm: Carefully review the changes. The system might show you a summary of the impact of this change on your take-home pay.
Save Changes: Make sure to click "Save" or "Submit" to finalize your request. You may receive a confirmation email or message.
Sub-heading 2.3: Important Considerations for Stopping Contributions
Employer Match: Be acutely aware of how stopping contributions affects any employer matching contributions. Many plans require you to contribute a certain percentage to receive the full match. Losing out on free money can significantly impact your retirement savings. Check your plan's Summary Plan Description (SPD) for details.
Payroll Cycle: Your changes might not take effect immediately. They will typically align with your employer's next payroll cycle.
Re-enrolling: You can usually re-enroll and resume contributions at any time by following the same steps.
Step 3: Managing Your 401(k) Funds When Leaving an Employer
If you're unenrolling because you're leaving your job, you have several important options for your existing 401(k) balance. This is where most people face decisions about their Fidelity 401(k).
Sub-heading 3.1: Understanding Your Vesting
Before anything else, understand your vesting schedule. Your vested balance is the portion of your 401(k) that you fully own. While your contributions are always 100% vested, employer contributions often have a vesting schedule (e.g., 20% vested per year over 5 years).
Check Your Statements: Your Fidelity statements or NetBenefits account will show your vested balance.
Employer HR: If you're unsure, contact your former employer's HR department for clarification.
Sub-heading 3.2: Your Options for the Existing Balance
You generally have four primary options for your Fidelity 401(k) when you leave an employer:
Option A: Leave the Money in Your Former Employer's Plan (If Allowed)
Some plans allow you to keep your money in the 401(k) even after you leave. This can be a good option if you're satisfied with the investment choices and low fees. However, you might lose access to certain features, and your former employer isn't obligated to keep the plan open indefinitely.
Check Plan Rules: Contact Fidelity or your former employer's HR to see if this is an option and if there are any minimum balance requirements.
Monitor Your Account: If you choose this, remember to periodically review your account and investment performance.
Option B: Rollover to a New Employer's 401(k)
If your new employer offers a 401(k) plan with Fidelity or another provider, you might be able to roll your old 401(k) funds directly into it. This keeps your retirement savings consolidated and tax-deferred.
New Plan Eligibility: Confirm with your new employer's HR or plan administrator if they accept rollovers and what their process is.
Initiate Rollover with Fidelity:
Contact Fidelity: Call Fidelity's customer service for workplace investing or navigate their NetBenefits website.
Provide New Account Details: You'll need the new 401(k) plan's information (plan name, account number, trustee information, etc.).
Direct Rollover: Request a direct rollover (also called a trustee-to-trustee transfer). This means the money goes directly from Fidelity to your new plan, avoiding any withholding or potential tax issues. Fidelity will often send a check directly to the new plan administrator, made out "FBO [Your Name]".
Follow Up: Ensure the funds are successfully transferred to your new account.
Option C: Rollover to an Individual Retirement Account (IRA)
This is a very popular option as it gives you more control and typically a wider range of investment choices than a 401(k). You can open an IRA (Traditional or Roth) at Fidelity or any other brokerage firm.
Open an IRA: If you don't already have one, open a Traditional IRA or Roth IRA.
Traditional 401(k) to Traditional IRA: This is a non-taxable event.
Traditional 401(k) to Roth IRA (Roth Conversion): This is a taxable event. You will pay income tax on the amount converted in the year of conversion. Consider your tax bracket and future expectations before doing this.
Roth 401(k) to Roth IRA: This is generally a non-taxable event.
Initiate Rollover with Fidelity:
Contact Fidelity: Call their customer service or use their online rollover tools.
Provide IRA Details: You'll provide your new IRA account number and the receiving institution's information.
Direct Rollover (Recommended): Request a direct rollover to your IRA. This prevents the funds from being directly distributed to you, which would trigger mandatory 20% tax withholding and a potential 60-day deadline for you to deposit the funds yourself (an "indirect rollover").
Indirect Rollover (Use with Caution): If you receive a check made out to you, you have 60 days from the date of distribution to deposit the full amount into an IRA to avoid taxes and penalties. If you miss this deadline or don't deposit the full amount, the undeposited portion will be treated as a taxable withdrawal.
Invest Funds in IRA: Once the funds arrive in your IRA, you'll need to actively invest them according to your financial goals and risk tolerance.
Option D: Cash Out / Take a Lump-Sum Distribution
This is generally the least recommended option for long-term retirement savings due to significant tax implications and penalties.
Understand the Consequences:
Income Tax: The entire amount (unless it's a Roth 401(k) and you meet qualified distribution rules) will be treated as taxable income in the year you receive it. This could push you into a higher tax bracket.
Early Withdrawal Penalty: If you are under age 59½, you will typically owe an additional 10% early withdrawal penalty on the taxable portion of the distribution, on top of your regular income taxes. There are some exceptions (e.g., Rule of 55, qualified medical expenses, disability), but they are specific.
Mandatory Withholding: Fidelity is generally required to withhold 20% of the distribution for federal income taxes. This 20% is not the total tax you'll owe, just a prepayment.
Loss of Future Growth: You lose the significant advantage of tax-deferred or tax-free growth that your 401(k) offered.
Request Distribution: Contact Fidelity to request a lump-sum distribution. They will guide you through the necessary forms and disclosures.
Receive Funds: The funds will typically be sent via check or direct deposit.
Step 4: Completing the Unenrollment Process and Follow-Up
Regardless of your chosen path, follow these steps to ensure a smooth transition.
Sub-heading 4.1: Submitting Required Forms
Fidelity will likely require you to complete and submit specific forms for any distribution or rollover.
Online Forms: Many forms can be completed digitally through your NetBenefits account.
Paper Forms: Some situations may require printing, signing, and mailing/faxing paper forms.
Accuracy is Key: Double-check all information, especially account numbers and routing details, to prevent delays or errors.
Sub-heading 4.2: Confirming the Transaction
Once you've submitted your request:
Confirmation: Fidelity will usually send you a confirmation of your request.
Processing Time: Allow several business days to a few weeks for the transaction to process. Rollovers involving checks can take longer due to mailing time.
Verify Funds: For rollovers, verify that the funds have arrived in the new account. For distributions, confirm they've been received in your bank account.
Tax Documents: Keep an eye out for IRS Form 1099-R from Fidelity, which reports the distribution. You'll need this for tax purposes.
Sub-heading 4.3: Seeking Professional Advice (Highly Recommended)
Unenrolling from a 401(k), especially when taking a distribution or considering complex rollovers, can have significant financial and tax implications.
Financial Advisor: Consult a qualified financial advisor to discuss the best strategy for your specific situation and long-term financial goals. They can help you weigh the pros and cons of each option.
Tax Professional: A tax advisor can explain the tax consequences of different choices and help you minimize your tax liability.
Frequently Asked Questions (FAQs)
Here are 10 common questions about unenrolling from a Fidelity 401(k):
How to stop 401(k) contributions with Fidelity?
Log into your Fidelity NetBenefits account, navigate to your 401(k) plan, find the "Contributions" or "Payroll Deductions" section, and set your contribution rate to 0%. Save your changes.
How to roll over a Fidelity 401(k) to an IRA?
Open an IRA (Traditional or Roth) with your chosen brokerage. Then, contact Fidelity's workplace investing customer service and request a direct rollover from your 401(k) to your new IRA, providing the necessary account details.
How to transfer my Fidelity 401(k) to a new employer's 401(k)?
Confirm with your new employer's plan administrator if they accept rollovers. Then, contact Fidelity and request a direct rollover of your funds to your new employer's 401(k), providing their plan details.
How to withdraw cash from my Fidelity 401(k) if I've left my job?
Contact Fidelity customer service and request a lump-sum distribution. Be aware that withdrawals before age 59½ typically incur a 10% early withdrawal penalty in addition to regular income taxes, and 20% will be withheld for federal taxes.
How to find my Fidelity 401(k) account number?
Your account number is usually listed on your Fidelity NetBenefits online account portal, on your periodic statements, or you can call Fidelity customer service to retrieve it.
How to understand the Rule of 55 for 401(k) withdrawals?
The Rule of 55 is an IRS provision allowing penalty-free withdrawals from a 401(k) if you leave your job (or are terminated) in the year you turn 55 or later. However, income taxes still apply, and it only applies to the 401(k) from the employer you just left. Consult a financial advisor for specific eligibility.
How to avoid early withdrawal penalties on my Fidelity 401(k)?
The best ways are to wait until age 59½, roll over the funds to an IRA or new 401(k), or qualify for an IRS exception (like the Rule of 55, qualified medical expenses, disability, or a first-time home purchase up to $10,000).
How to check my 401(k) vesting schedule with Fidelity?
Your vesting status is typically available on your Fidelity NetBenefits account under your plan details or in your Summary Plan Description (SPD). If not, contact your former employer's HR department.
How to change my investment options in my Fidelity 401(k) after unenrolling?
If you've rolled your 401(k) into an IRA or a new 401(k), you'll manage investments within that new account. If you left funds in your old Fidelity 401(k), you can usually still access NetBenefits to adjust your investment allocations within the plan's available options.
How to contact Fidelity for 401(k) support?
You can typically find their customer service phone number on Fidelity.com or NetBenefits.com under the "Contact Us" section. They usually have dedicated lines for workplace investing plans.
