So, you're looking to take control of your old 401(k) and roll it over to Fidelity? Excellent decision! Consolidating your retirement savings can offer more control, potentially lower fees, and a broader range of investment options. It might seem like a daunting task, but trust me, with a proper step-by-step guide, you'll find it's more straightforward than you think.
Let's dive right in and get your retirement savings working harder for you!
The Ultimate Guide to Rolling Over Your 401(k) to Fidelity
A 401(k) rollover is essentially moving your retirement money from one qualified plan (like your old employer's 401(k)) to another, typically an Individual Retirement Account (IRA) or a new employer's 401(k). The goal is to do this without incurring taxes or penalties. Fidelity, being a major financial institution, makes this process relatively smooth.
Step 1: Engage and Assess Your Current 401(k)
Before you do anything else, let's get a clear picture of your current 401(k). This initial assessment is crucial for a smooth rollover.
What to Gather and Confirm:
Who is your current 401(k) provider? This is the financial institution holding your funds (e.g., Vanguard, Empower, your previous employer's direct plan administrator). You'll need their contact information.
What type of 401(k) do you have? Is it a Traditional 401(k) (pre-tax contributions) or a Roth 401(k) (after-tax contributions)? This will determine the type of Fidelity account you should open. If you have both, you might need to open two different IRAs at Fidelity.
What's your account number and current balance? Having a recent statement handy will make your life much easier.
Are you fully vested in your employer's contributions? If you've recently left your job, some employer contributions might still be unvested. Rolling over before vesting could mean losing that money. Check your plan's vesting schedule.
Do you have any outstanding 401(k) loans? If you do, you'll need to repay them before rolling over, or the outstanding balance could be treated as a taxable distribution.
Are there any special considerations? For instance, do you hold company stock within your 401(k)? This can sometimes add a layer of complexity due to "Net Unrealized Appreciation" (NUA) rules, which are best discussed with a tax professional.
Pro Tip: The most efficient way to gather this information is to log in to your old 401(k) provider's website or call their customer service line.
Step 2: Choose Your Destination at Fidelity and Open Your Account
Now that you know what you're working with, it's time to decide where your money will land at Fidelity. Most people choose to roll into an IRA for greater flexibility.
Deciding on the Right Fidelity Account:
Fidelity Rollover IRA (Traditional IRA): This is the most common choice for rolling over a Traditional 401(k). It maintains the tax-deferred status of your funds, meaning you won't pay taxes until you withdraw in retirement. Fidelity often specifically refers to a "Rollover IRA" to distinguish it from an IRA where you make new contributions.
Fidelity Roth IRA: If your old 401(k) was a Roth 401(k), you'll want to roll it into a Roth IRA at Fidelity to maintain the tax-free growth and withdrawals in retirement.
New Employer's Fidelity 401(k): If your new employer also uses Fidelity for their 401(k) plan, you might be able to roll your old 401(k) directly into your new one. This can simplify things, but your investment options will be limited to what your new employer's plan offers. Check with your new HR department or Fidelity NetBenefits for your plan's rules.
Mixed Assets (Traditional and Roth): If your old 401(k) has both pre-tax (Traditional) and after-tax (Roth) contributions, you'll generally need to open both a Traditional IRA and a Roth IRA at Fidelity to properly separate the funds for tax purposes.
Opening Your Fidelity Account:
Once you've decided on the account type, opening it is generally a quick online process.
Visit the Fidelity Website: Navigate to the "Open an Account" section.
Select the Correct Account Type: Be very careful to choose the appropriate IRA type (e.g., "Rollover IRA" or "Roth IRA").
Provide Your Information: You'll need personal details like your Social Security number, address, employment information, and bank account details for initial funding (though you won't be funding it directly with your bank for a rollover).
Review and Submit: Double-check all information before submitting your application.
Note Your Account Number: Once your account is opened, make sure to save your new Fidelity account number. You'll need this for the next step.
Step 3: Initiate the Rollover with Your Old 401(k) Provider
This is where the actual transfer of funds begins. There are two main ways to do this: direct rollover and indirect rollover. A direct rollover is almost always preferred.
Understanding Direct vs. Indirect Rollovers:
Direct Rollover (Trustee-to-Trustee Transfer): This is the safest and most recommended method. Your old 401(k) provider sends the money directly to Fidelity. The check is made payable to "Fidelity Management Trust Company FBO [Your Name]" or wired directly. This avoids any tax withholding or the 60-day rule.
Indirect Rollover (60-Day Rollover): Your old 401(k) provider sends the money to you directly. The check will be made payable to you. If this happens, your old provider is required to withhold 20% for federal income tax. You then have 60 days from the date you receive the check to deposit the entire original amount (including the 20% withheld, which you'll have to make up from your own funds) into your new Fidelity IRA. If you don't complete the full rollover within 60 days, the amount not rolled over will be considered a taxable distribution and could incur a 10% early withdrawal penalty if you're under 59 ½. Avoid this method if possible!
Contacting Your Old 401(k) Provider:
Call Them Directly: This is often the most efficient way to initiate the rollover. Have your old 401(k) account information and your new Fidelity account number ready.
Clearly State Your Intent: Tell them you want to perform a direct rollover of your 401(k) to a Fidelity IRA.
Provide Fidelity's Information: Your old provider will need Fidelity's mailing address for checks (if applicable) or wire instructions. Fidelity's general mailing address for rollover checks into an IRA is typically:
Fidelity Management Trust Company (or FMTC), FBO [Your Name]
P.O. Box 770001, Cincinnati, OH 45277-0037 (for regular mail)
100 Crosby Parkway KC1H, Covington, KY 41015-0037 (for overnight mail)
Always confirm the exact address and payee information with Fidelity or your old provider.
Ask About Paperwork: They may require you to fill out a distribution request form. Some providers may also ask for a Letter of Acceptance (LOA) from Fidelity, which Fidelity can provide.
Confirm How the Funds Will Be Sent: Reiterate that you want a direct rollover. Ask if they will mail a check to Fidelity or to you (with "FBO [Your Name]" on it, which still counts as a direct rollover if you forward it promptly). A wire transfer is also possible and often faster.
Get a Confirmation Number: Always ask for a confirmation number for your request.
Step 4: Receive and Deposit Your Funds (If Applicable)
If your old provider sends the check to you (made payable to "Fidelity Management Trust Company FBO [Your Name]"), you'll need to promptly deposit it into your Fidelity account.
Depositing the Check:
Fidelity Mobile App (Recommended): The fastest and easiest way is often to use the Fidelity Investments mobile app. Look for the "Mobile Check Deposit" feature. Take clear photos of the front and back of the check.
Mail the Check: You can mail the check directly to Fidelity using the appropriate mailing address provided in Step 3.
Visit a Fidelity Investor Center: If you have a Fidelity Investor Center nearby, you can drop off the check in person, and a representative can assist you.
Important: Do not cash the check or deposit it into your personal checking account. This could trigger an indirect rollover with the associated tax implications.
Step 5: Invest Your Rolled-Over Funds at Fidelity
Congratulations! Your money is now at Fidelity. However, it will likely be sitting in a cash or "settlement" account. It's crucial to invest these funds to allow them to grow for your retirement.
Choosing Your Investments:
Fidelity offers a vast array of investment options. Consider your risk tolerance, time horizon, and financial goals.
Target Date Funds: These are popular "set-it-and-forget-it" options that automatically adjust their asset allocation as you approach your target retirement date.
Index Funds & ETFs: Low-cost funds that aim to track a specific market index (e.g., S&P 500). Fidelity offers many excellent options like FXAIX (Fidelity 500 Index Fund) or FZROX (Fidelity ZERO Total Market Index Fund).
Mutual Funds & Individual Stocks/Bonds: For those who prefer more active management or specific securities.
Managed Accounts (Fidelity Go®): If you prefer professional help, Fidelity Go® is a robo-advisor service that manages your investments for you based on your risk profile.
Taking Action:
Log in to Your Fidelity Account: Access your newly funded IRA.
Navigate to the Investment Section: Look for options to "Trade," "Invest," or "Manage Investments."
Select Your Investments: Choose the funds or securities that align with your strategy.
Allocate Your Funds: Ensure you invest the entire amount that was rolled over. Don't let it sit in cash and miss out on potential growth!
Set Up Automatic Investments (Optional): If you plan to make future contributions to this IRA, consider setting up automatic transfers from your bank account.
Step 6: Monitor and Review Your Retirement Plan
Your rollover is complete, but your retirement planning isn't a one-time event.
Ongoing Management:
Regularly Review Your Investments: At least once a year, check if your investments are still aligned with your goals and risk tolerance.
Consider Rebalancing: If your asset allocation drifts significantly due to market performance, rebalance to get back to your target percentages.
Stay Informed: Keep an eye on market conditions and any changes to tax laws that might affect your retirement savings.
Consult a Financial Advisor: If you feel overwhelmed or need personalized advice, consider speaking with a Fidelity financial advisor or an independent planner.
Frequently Asked Questions (FAQs) about 401(k) Rollovers to Fidelity
Here are 10 common questions with quick answers to help you further:
How to choose between a Traditional IRA and a Roth IRA for my rollover?
Choose a Traditional IRA if your old 401(k) was pre-tax (most common) to maintain tax-deferred growth. Choose a Roth IRA if your old 401(k) was a Roth 401(k) to maintain tax-free growth and withdrawals. If you have both, you'll need both types of IRAs.
How to avoid taxes and penalties during a 401(k) rollover?
Always opt for a direct rollover where the funds are transferred directly from your old provider to Fidelity. If you receive a check, ensure it's made payable to "Fidelity FBO [Your Name]" and deposit it immediately. Do not take possession of the funds or let the 60-day window expire.
How to find out if my old 401(k) is eligible for a rollover?
Generally, once you leave an employer, your 401(k) is eligible for a rollover. However, it's best to confirm with your former employer's HR department or your old 401(k) provider, as some plans have minimum balance requirements to remain with them.
How to handle company stock in my old 401(k) during a rollover?
If you have highly appreciated company stock, rolling it over to an IRA might impact Net Unrealized Appreciation (NUA) tax benefits. It's highly recommended to consult a tax advisor before rolling over company stock to understand the implications.
How to track the progress of my 401(k) rollover?
After initiating the rollover, get a confirmation number from your old provider. Then, regularly check your Fidelity account for the incoming funds. If there are delays, contact both your old provider and Fidelity customer service with your confirmation number.
How to invest my money after it arrives in my Fidelity IRA?
Once the funds appear in your Fidelity account, they will likely be in a cash position. Log in to your Fidelity account, navigate to the "Trade" or "Invest" section, and choose your desired investments (e.g., target date funds, index funds, ETFs, mutual funds) to get your money working for you.
How to consolidate multiple old 401(k)s into one Fidelity IRA?
You can roll over multiple old 401(k)s into a single Fidelity IRA (or a Traditional and a Roth IRA if you have mixed assets). Simply follow the steps for each old 401(k) plan, directing all rollovers to the same Fidelity account(s).
How to decide between rolling over to an IRA vs. a new employer's 401(k)?
Rolling into an IRA offers maximum control over investment choices and generally lower fees. Rolling into a new employer's 401(k) simplifies consolidation but limits you to that plan's investment options. Consider your comfort level with managing investments and the quality of your new employer's 401(k) plan.
How to get help if I encounter issues during the rollover process?
Both your old 401(k) provider and Fidelity have dedicated customer service teams for rollovers. Don't hesitate to call them. Fidelity's representatives are generally very helpful and can guide you through specific scenarios or issues.
How to ensure my mailing address is current for a check-based rollover?
Before initiating a check-based rollover, confirm your current mailing address with both your old 401(k) provider and Fidelity. An incorrect address could lead to delays or even lost checks, creating significant headaches.
