Navigating your retirement savings can feel like a complex maze, especially when you're changing jobs or looking for more control over your investments. One of the smartest moves you can make is to roll over your old 401(k) into a new account, often a Rollover IRA at a financial institution like Fidelity. This lengthy guide will walk you through every step of the process, ensuring you understand not just how to do it, but why it's a beneficial move for your financial future.
So, are you ready to take charge of your retirement savings and unlock a world of new possibilities? Let's dive in!
Why Roll Over Your 401(k) to Fidelity?
Before we get into the "how," let's quickly touch on the "why." Rolling over your 401(k) to a Fidelity IRA offers several compelling advantages:
More Investment Choices: Employer-sponsored 401(k)s often have a limited selection of funds. A Fidelity IRA, especially a Rollover IRA, typically provides access to a much wider array of investment options, including individual stocks, bonds, ETFs, and a vast selection of mutual funds. This can give you greater flexibility to build a diversified portfolio that aligns with your specific financial goals and risk tolerance.
Potentially Lower Fees: While 401(k) plans can have competitive fees, some older plans or smaller plans might carry higher administrative costs or less favorable fund expense ratios. Rolling over to a Fidelity IRA can potentially reduce these fees over the long term, allowing more of your money to grow.
Consolidation and Simplicity: If you've had multiple jobs, you might have several old 401(k)s scattered across different providers. Consolidating them into one Fidelity IRA makes it much easier to track your retirement savings, monitor performance, and manage your overall financial plan.
Direct Control and Easier Management: With a Rollover IRA, you have direct control over your investments. You can rebalance your portfolio, make trades, and access your account information whenever you need it, without the limitations often found in employer-sponsored plans.
Potential for Roth Conversion: If you have a traditional 401(k), rolling it over to a Fidelity IRA can open the door to a Roth IRA conversion, allowing for tax-free withdrawals in retirement (though you'll pay taxes on the converted amount upfront).
The Essential Step-by-Step Guide: How to Roll Over Your 401(k) to Fidelity
The process of rolling over a 401(k) to Fidelity can seem daunting, but by breaking it down into manageable steps, it becomes much clearer. We'll focus primarily on rolling over to a Fidelity Rollover IRA, which is often the most straightforward and beneficial option.
Step 1: Engage and Gather Information About Your Old 401(k)
This is where you take the first proactive step in securing your financial future! Don't let old accounts languish.
1.1 Identify Your Old 401(k) Provider
First, you need to know who holds your old 401(k) account. This might be a financial institution like Fidelity itself, or another provider such as Vanguard, Charles Schwab, Empower, or a smaller third-party administrator.
Where to look: Check old statements, benefit packets from your former employer, or even reach out to your previous HR department.
Tip: If your old 401(k) is already with Fidelity (perhaps through NetBenefits), the process will be even simpler, as you can often initiate the transfer entirely online within your Fidelity account.
1.2 Understand Your 401(k) Type
Do you have a Traditional 401(k) or a Roth 401(k)? This is crucial for tax purposes:
Traditional 401(k): Contributions were made pre-tax, and your investments have grown tax-deferred. You'll typically roll this into a Traditional or Rollover IRA to maintain the tax-deferred status.
Roth 401(k): Contributions were made with after-tax dollars, and qualified withdrawals in retirement are tax-free. You'll want to roll this into a Roth IRA to preserve the tax-free growth.
Important Note: If your 401(k) has a mix of traditional and Roth contributions, you may need to open two separate IRAs (one Traditional/Rollover IRA and one Roth IRA) at Fidelity to receive the respective assets.
1.3 Confirm Rollover Eligibility and Vesting
Most 401(k)s are eligible for rollover once you leave your employer. However, it's good practice to confirm this with your old plan administrator. Also, ensure you understand your vesting schedule. Your employer's contributions may have a vesting period, meaning you only fully own them after a certain number of years of service.
Action: Call your old 401(k) provider's customer service line. Ask them:
"What is my current vested balance?"
"Is my account eligible for a direct rollover?"
"What forms or information do you require to process a direct rollover?"
"To whom should the check be made payable, and what address should it be sent to for a direct rollover to Fidelity?"
Step 2: Open Your Fidelity Rollover IRA (or Prepare Your Existing Account)
Now that you have your information, it's time to set up the receiving account at Fidelity.
2.1 Choose the Right Fidelity IRA Account
Based on your 401(k) type from Step 1, select the appropriate Fidelity IRA:
For Traditional 401(k)s: Open a Fidelity Rollover IRA. This account is specifically designed to accept distributions from employer-sponsored plans and maintain their tax-deferred status. If you already have a Traditional IRA at Fidelity, you might be able to roll the funds into that existing account.
For Roth 401(k)s: Open a Fidelity Roth IRA. Again, if you have an existing Roth IRA, you might be able to use that.
For Mixed 401(k)s: Open both a Fidelity Rollover IRA and a Fidelity Roth IRA.
2.2 How to Open a Fidelity IRA
Opening an account with Fidelity is generally straightforward:
Online: Visit the Fidelity website (Fidelity.com) and navigate to the "Open an Account" section. Select "IRA" and then "Rollover IRA" or "Roth IRA." The online application will guide you through providing personal information, such as your Social Security number, date of birth, and employment details.
By Phone: You can also call Fidelity directly at 800-343-3548. A representative can assist you with opening the correct account and answer any questions.
In Person: If you prefer, visit a Fidelity Investor Center near you for in-person assistance.
Pro Tip: When opening your Fidelity IRA, have your personal information (SSN, driver's license, previous employer details) readily available to expedite the process. It's often helpful to have your new Fidelity IRA account number handy when you proceed to the next step of contacting your old 401(k) provider.
Step 3: Initiate the Rollover with Your Old 401(k) Provider
This is the most critical step, where the actual transfer of funds begins.
3.1 Direct Rollover is Key!
Always, always opt for a direct rollover (also known as a trustee-to-trustee transfer).
What is a Direct Rollover? In a direct rollover, your old 401(k) provider sends the funds directly to Fidelity. The check is typically made payable to "Fidelity Management Trust Company FBO [Your Name]" or something similar. This method avoids any mandatory tax withholding and potential penalties.
Why avoid Indirect Rollovers? In an indirect rollover (or 60-day rollover), the funds are sent to you directly. Your old provider is required to withhold 20% for federal taxes, even if you intend to roll it over. You then have 60 days to deposit the full amount (including the 20% withheld, which you'd have to make up from other sources) into your new IRA to avoid taxes and penalties. If you fail to deposit the full amount within 60 days, the withheld portion (and any portion not rolled over) becomes a taxable distribution, potentially subject to a 10% early withdrawal penalty if you're under 59 ½. Avoid this hassle and potential tax hit by choosing a direct rollover!
3.2 Contact Your Old 401(k) Provider to Request the Rollover
Call Them: This is usually the most efficient way. Have your old 401(k) account number and your new Fidelity IRA account number ready.
State Your Intent Clearly: Tell them you want to initiate a "direct rollover" of your entire 401(k) balance to a "Fidelity Rollover IRA" or "Fidelity Roth IRA" (specify which one).
Provide Fidelity's Information: They will likely ask for Fidelity's mailing address for rollovers. You can typically find this on Fidelity's website, but a common address is:
Fidelity Management Trust Company
PO Box 770001
Cincinnati, OH 45277-0037
For overnight mail:
Fidelity Management Trust Company
100 Crosby Parkway KC1H
Covington, KY 41015-0037
Request the Check to be Payable To: Emphasize that the check should be made payable to "Fidelity Management Trust Company FBO [Your Name]" and not to you personally. Ask them to include your Fidelity IRA account number on the check or in accompanying documentation.
Complete Any Required Forms: Your old provider may require you to fill out a distribution request form or rollover authorization form. They might also need a "Letter of Acceptance (LOA)" from Fidelity, which Fidelity can provide. Ask them how to submit these forms.
Step 4: Track the Rollover and Deposit Funds (If Applicable)
Once you've initiated the rollover, there's a waiting period.
4.1 Monitor the Transfer
Direct Transfer (Electronic): If your old provider can do an electronic direct transfer (less common but ideal), the funds will appear in your Fidelity IRA within a few business days.
Direct Transfer (Check): More often, your old provider will mail a check directly to Fidelity. This can take 7-14 business days or sometimes longer, depending on their processing times and mail service.
Stay informed: Ask your old provider for a reference number or tracking information if available. You can also periodically check your Fidelity account online to see if the funds have arrived.
4.2 Deposit the Check (If Sent to You by Mistake)
While a direct rollover is highly recommended, sometimes a check might be sent to you directly (even if you requested a direct rollover). If this happens:
Do NOT Cash the Check! Immediately endorse it "For Deposit Only to Fidelity Account [Your Account Number]" (if required by Fidelity, check their instructions) and deposit it into your Fidelity IRA.
Act Quickly: You still have that 60-day window to deposit the full amount to avoid taxes and penalties. Remember, 20% would have been withheld, so you'd need to make up that difference from other funds if you want to roll over the entire original amount.
How to Deposit to Fidelity:
Mobile Check Deposit: The fastest way! Use the Fidelity Investments app on your smartphone to snap a picture of the check.
Mail: Mail the check to Fidelity at the addresses provided in Step 3.2.
Fidelity Investor Center: Visit a local Fidelity office to deposit the check in person.
Step 5: Invest Your Rolled-Over Funds at Fidelity
Congratulations! Your money is now safely in your Fidelity IRA. But the work isn't done.
5.1 Don't Let Your Money Sit in Cash!
When funds arrive in your Fidelity IRA, they are often initially held in a default money market account. This means they are essentially sitting in cash and not growing.
5.2 Strategize Your Investments
This is your opportunity to take advantage of Fidelity's broader investment universe.
Explore Fidelity's Tools: Fidelity offers numerous tools and resources to help you choose investments:
Fidelity Funds: Explore their wide range of mutual funds and ETFs, including low-cost index funds.
Fidelity Go: If you prefer a hands-off approach, Fidelity Go is their robo-advisor service that will manage your investments for you based on your risk profile.
Guidance from Fidelity Advisors: You can connect with Fidelity representatives or financial advisors for personalized investment advice.
Consider Your Goals and Risk Tolerance: Think about your retirement timeline, how comfortable you are with market fluctuations, and your overall financial goals. This will help you decide on an appropriate asset allocation (mix of stocks, bonds, etc.).
Rebalance Regularly: Periodically review your investment performance and rebalance your portfolio to ensure it remains aligned with your strategy.
Key Considerations for a Smooth Rollover
Timing: While there's no strict deadline to roll over a 401(k) (you can often leave it with your old employer), it's generally best to do it sooner rather than later to consolidate your accounts and take advantage of Fidelity's investment options.
Taxes: A direct rollover is generally a non-taxable event. The only time you'd owe taxes is if you convert a traditional 401(k) to a Roth IRA, in which case the converted amount is treated as taxable income in the year of conversion.
Required Minimum Distributions (RMDs): If you're over 73 (or 75 for those born in 1960 or later) and subject to RMDs, ensure any RMDs are taken from your old 401(k) before initiating the rollover.
Employer Stock: If your 401(k) holds company stock, there are special tax rules (Net Unrealized Appreciation, or NUA) that might make it beneficial to consider a different strategy. Consult a tax advisor for this specific situation.
Loan Against 401(k): If you have an outstanding loan against your old 401(k), it must typically be paid off before you can roll over the account. Otherwise, the unpaid loan balance could be treated as a taxable distribution.
10 Related FAQ Questions
Here are some common questions about 401(k) rollovers to Fidelity, with quick answers:
How to Check My Old 401(k) Balance?
You can typically check your old 401(k) balance by logging into your old plan provider's website, reviewing recent account statements, or contacting your former employer's HR or benefits department.
How to Find My Old 401(k) Provider if I Don't Remember It?
Start by contacting your former employer's HR or benefits department. They should be able to provide you with the name of the 401(k) plan administrator and their contact information.
How to Avoid Taxes and Penalties During a 401(k) Rollover?
Always opt for a direct rollover (trustee-to-trustee transfer). This ensures the funds go directly from your old 401(k) provider to Fidelity, avoiding any mandatory 20% tax withholding and potential early withdrawal penalties.
How to Roll Over a Roth 401(k) to Fidelity?
You will roll over a Roth 401(k) into a Fidelity Roth IRA. The process is similar to a traditional rollover, but it's crucial to ensure the receiving account is a Roth IRA to maintain the tax-free growth and withdrawals.
How to Roll Over Multiple Old 401(k)s to Fidelity?
You can roll over multiple old 401(k) accounts into a single Fidelity Rollover IRA (or Roth IRA, as appropriate). You'll simply repeat the process outlined above for each old 401(k) provider.
How to Roll Over My 401(k) to a New Employer's 401(k) Instead of an IRA?
While this guide focuses on rolling over to a Fidelity IRA, you can roll an old 401(k) into your new employer's 401(k) if their plan allows it. Contact your new employer's HR department or their 401(k) plan administrator for their specific rollover instructions.
How to Invest My Funds Once They Are in My Fidelity Rollover IRA?
Once the funds are in your Fidelity IRA, you can choose from Fidelity's wide range of investment options, including mutual funds, ETFs, stocks, and bonds. You can also use Fidelity's robo-advisor service, Fidelity Go, for a managed approach, or consult with a Fidelity advisor for personalized guidance.
How Long Does a 401(k) Rollover to Fidelity Typically Take?
A direct rollover can take anywhere from a few business days (if electronic) to 2-4 weeks (if a check is mailed). The exact timing depends on the processing speed of your old 401(k) provider.
How to Get Help from Fidelity with My Rollover?
Fidelity has dedicated rollover specialists. You can call their customer service line at 800-343-3548 for assistance with opening accounts, understanding the process, or troubleshooting any issues.
How to Know if Rolling Over My 401(k) is the Right Choice for Me?
Consider your investment preferences, desired level of control, fees, and the investment options available in your old 401(k) versus a Fidelity IRA. Generally, for more control and investment choice, a rollover IRA is a strong option. If in doubt, consider consulting a financial advisor.