top of page
  • Writer's pictureMark Fonville, CFP®

Fidelity 401k Rollover: What You Need to Know

Updated: Oct 10, 2023


Fidelity 401k Rollover: What You Need to Know

Welcome to your ultimate guide on Fidelity 401k rollovers.


Making the right financial move can seem daunting, especially when it comes to retirement savings. But fear not, because in this article, we have everything you need to know about Fidelity 401k rollovers.


If you're considering switching jobs or retiring, rolling over your 401k into a Fidelity account can offer you valuable advantages. By learning the ins and outs of this process, you can make informed decisions that will shape your financial future.


But, if you need personalized advice around retirement, you should consider talking to a financial advisor who specializes in retirement income, tax and investment planning.

 

Next Steps: Falling portfolio values can be stressful. We recommend speaking with a financial advisor. This tool will connect you with a fiduciary financial advisor at Covenant Wealth Advisors with over 15 years of experience.


Here's how it works:

  • Answer these few easy questions, so we can understand your situation.

  • Schedule a call with a credentialed financial advisor who can help you on the path toward achieving your financial goals. It only takes a few minutes.

  • Check out the advisors' profile and have an introductory call on the phone or introduction in person, and choose who to work with in the future.



 

In this guide, we'll dive deep into the benefits of a Fidelity 401k rollover, the steps involved, potential tax implications, and the key factors to consider before making the move. Whether you're a seasoned investor or just starting to build your retirement plan, this article is packed with invaluable insights to help you navigate the process.


Join us as we unravel the complexities of Fidelity 401k rollovers and empower you to take control of your financial destiny. It's time to make the right choice for your retirement savings.


Let's get started.


What is a 401k rollover?


A 401k rollover is a process of transferring your retirement savings from one qualified plan to another without incurring any tax penalties. When you switch jobs or retire, you may have the option to roll over your 401k plan into an Individual Retirement Account (IRA) or a new employer's 401k plan.


A Fidelity 401k rollover involves transferring your 401k plan to a Fidelity IRA account. This allows you to consolidate your retirement savings into a single account and take advantage of Fidelity's investment options, low fees, and exceptional customer service.


Reasons to consider a Fidelity 401k rollover


There are several reasons why you may want to consider a Fidelity 401k rollover. First and foremost, it allows you to take control of your retirement savings by consolidating all your accounts into one place. This makes it easier to manage your investments and track your progress towards your retirement goals.


Second, Fidelity offers a wide range of investment options, including mutual funds, exchange-traded funds (ETFs), individual stocks, and bonds. By rolling over your 401k plan into a Fidelity IRA, you can choose from a diverse selection of investment options that align with your risk tolerance and investment objectives.


Third, Fidelity's fees are among the lowest in the industry. This means you can keep more of your hard-earned money invested in your retirement account, rather than paying high fees to manage your investments.


Understanding the benefits of a Fidelity 401k rollover


Rolling over your 401k plan into a Fidelity IRA offers several benefits, including:


Consolidation of retirement accounts

By rolling over your 401k plan into a Fidelity IRA, you can consolidate all your retirement accounts into one place. This makes it easier to manage your investments and track your progress towards your retirement goals.


Wide range of investment options

Fidelity offers a diverse selection of investment options, including mutual funds, ETFs, individual stocks, and bonds. This allows you to build a well-diversified portfolio that aligns with your risk tolerance and investment objectives.


Low fees

Fidelity's fees are among the lowest in the industry, which means you can keep more of your hard-earned money invested in your retirement account. This can have a significant impact on your long-term savings.


Exceptional customer service

Fidelity is known for its exceptional customer service. Whether you need help choosing investments, managing your account, or planning for retirement, Fidelity's team of experts is available to assist you every step of the way.


Steps to initiate a Fidelity 401k rollover


Initiating a Fidelity 401k rollover is a straightforward process. Here are the steps involved:


1. Open a Fidelity IRA account: If you don't already have a Fidelity IRA account, you'll need to open one. This can be done online in just a few minutes.


Pro tip: If you need additional advice beyond just your 401k rollover like tax planning in retirement, creating income in retirement, or planning for retirement, you can contact us to speak with one of our financial advisors.


2. Contact your 401k plan administrator: Contact your 401k plan administrator and request a rollover distribution. They will provide you with the necessary paperwork and instructions.


3. Complete the paperwork: Fill out the necessary paperwork to initiate the rollover distribution. This typically includes a distribution request form and a Fidelity IRA account application.


4. Submit the paperwork: Once you've completed the paperwork, submit it to your 401k plan administrator. They will process the distribution and send the funds to your Fidelity IRA account.


5. Choose your investments: Once the funds are in your Fidelity IRA account, you can choose your investments based on your risk tolerance and investment objectives.


Potential tax implications of a Fidelity 401k rollover


It's important to understand the potential tax implications of a Fidelity 401k rollover. If you're rolling over your 401k plan into a traditional IRA, the transfer is tax-free as long as you complete the rollover within 60 days. However, if you miss the 60-day deadline, the distribution will be subject to income taxes and potentially an early withdrawal penalty.


If you're rolling over your 401k plan into a Roth IRA, the transfer will be subject to income taxes. However, once the funds are in your Roth IRA account, they will grow tax-free and you won't have to pay taxes on any qualified withdrawals in retirement.


Warning: We recommend talking to a financial advisor to help avoid serious tax mistakes. Covenant can help.


Common mistakes to avoid when doing a Fidelity 401k rollover


When doing a Fidelity 401k rollover, there are several common mistakes to avoid. These include:


Missing the 60-day deadline

If you're rolling over your 401k plan into a traditional IRA, it's important to complete the rollover within 60 days. If you miss the deadline, the distribution will be subject to income taxes and potentially an early withdrawal penalty.


Not considering your investment options

When rolling over your 401k plan into a Fidelity IRA, it's important to consider your investment options carefully. Fidelity offers a wide range of investment options, so take the time to choose investments that align with your risk tolerance and investment objectives.


Forgetting about fees

While Fidelity's fees are among the lowest in the industry, it's still important to understand the fees associated with your investments. Make sure you're aware of any fees before choosing your investments.


Ignoring After-Tax 401k Contributions

Have you made after-tax contributions to your 401k plan? If so, you'll want to make sure to analyze your options for rolling over after-tax money to a Fidelity Roth IRA instead of a Fidelity Rollover IRA.


Cashing Out

Cashing out instead of rolling over results in immediate income taxes and, if under age 59½, a 10% early withdrawal penalty.


Forgetting about Old 401(k)s

Neglecting to roll over old accounts can lead to increased fees and reduce the ability to strategically manage retirement assets.


Not Rolling Over Employer Stock

Forgetting to consider the net unrealized appreciation (NUA) tax strategy for highly appreciated employer stock can lead to higher taxes.


Not Considering Loan Repayment

If you have an outstanding loan from your 401(k), understand the repayment rules to avoid it being considered a taxable distribution.


Poor Timing

Performing a rollover during market volatility may lead to selling low and buying high.


Unfortunately, mistakes are common. You may avoid common and not so common mistakes by talking to an experienced financial advisor at Covenant Wealth Advisors. Contact us for a free retirement assessment.


Tips for choosing the right Fidelity 401k rollover option


When choosing a Fidelity 401k rollover option, here are some tips to keep in mind:


Consider your investment objectives

Before choosing a Fidelity 401k rollover option, consider your investment objectives. Are you looking for growth, income, or a combination of both? This will help you choose investments that align with your goals.


Decide between a traditional or Roth IRA

When rolling over your 401k plan into a Fidelity IRA, you'll need to decide between a traditional or Roth IRA. Consider your tax situation and retirement goals when making this decision.


Understand the fees

Make sure you understand the fees associated with your Fidelity IRA account and any investments you choose. This will help you make informed decisions that align with your long-term financial goals.


Comparing Fidelity 401k rollover options with other providers


While Fidelity is a popular choice for 401k rollovers, it's important to compare your options with other providers before making a decision. Some other providers to consider include Vanguard, Charles Schwab, and TD Ameritrade.


When comparing providers, consider factors such as investment options, fees, and customer service. Choose a provider that offers the investment options and services that align with your long-term financial goals.


Resources and tools to help with your Fidelity 401k rollover decision


There are several resources and tools available to help you make informed decisions about your Fidelity 401k rollover, including:


Fidelity's website

Fidelity's website offers a wealth of information about 401k rollovers and other retirement planning topics. You can also use their online tools to compare investment options and estimate your retirement income.


Financial advisors

If you need more personalized guidance, consider working with a financial advisor such as our firm, Covenant Wealth Advisors. We can help you evaluate your options and make informed decisions based on your unique financial situation. Even better, we specialize in retirement income planning, tax planning, and investing for retirement specifically for individuals aged 50+ who have over $1 million of investments.


Retirement planning calculators

There are several retirement planning calculators available online that can help you estimate your retirement income and determine how much you need to save to reach your goals.


Should you partner with an independent financial advisor or a Fidelity financial advisor?


Fidelity is a well-known and service friendly custodian for 401k rollovers. We know this first hand because most of our investment advisory clients house their accounts at Fidelity.


While Fidelity may be a great choice for your 401k rollover, Fidelity may not provide the comprehensive advisory services you need as you transition to and through retirement.


For investors with over $1 million in savings and investments, you may benefit by working with an experience financial advisor independent of Fidelity, but who also utilizes Fidelity services for account custody.


At Covenant Wealth Advisors, we specialize in all facets of retirement and can help you answer many questions including the following:


  • How can I reduce taxes in retirement?

  • What is the optimal order of withdrawal from my retirement accounts in retirement?

  • When can I retire?

  • How can boost after-tax returns on my retirement portfolio?

  • Will I be able to maintain my lifestyles in retirement?

  • How can I maximize social security benefits?

  • How do I inflation-proof my retirement income?

  • What should my investment strategy be in retirement?


Talk to a fiduciary financial advisor at Covenant Wealth Advisors by requesting your free retirement assessment today.


Conclusion


In conclusion, a Fidelity 401k rollover can offer you valuable advantages when it comes to managing your retirement savings. By consolidating your accounts, choosing from a diverse selection of investments, and taking advantage of low fees and exceptional customer service, you can take control of your financial future.


But, Fidelity may not offer the specialized and comprehensive advice you need around retirement. For more personalized advice, you may benefit by partnering with an experienced financial advisor at Covenant Wealth Advisors.


When making the decision to do a Fidelity 401k rollover, it's important to consider your investment objectives, understand the potential tax implications, and choose the right provider for your needs. By following the steps outlined in this guide and using the available resources and tools, you can make informed decisions that align with your long-term financial goals.


 

Disclosure: Covenant Wealth Advisors "CWA" is a registered investment advisor with offices in Richmond and Williamsburg, VA. CWA was not compensated by Fidelity for this article and Fidelity is not affiliated with CWA. Past performance is no guarantee of future returns. Investing involves risk and possible loss of principal capital. The views and opinions expressed in this content are as of the date of the posting, are subject to change based on market and other conditions. This content contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected. Please note that nothing in this content should be construed as an offer to sell or the solicitation of an offer to purchase an interest in any security or separate account. Nothing is intended to be, and you should not consider anything to be, investment, accounting, tax, or legal advice. If you would like accounting, tax, or legal advice, you should consult with your own accountants or attorneys regarding your individual circumstances and needs. No advice may be rendered by Covenant Wealth Advisors unless a client service agreement is in place. Hypothetical examples are fictitious and are only used to illustrate a specific point of view. Diversification does not guarantee against risk of loss. While this guide attempts to be as comprehensive as possible but no article can cover all aspects of retirement planning. Be sure to consult an advisor for comprehensive advice.

コメント


Don't Miss Out

Join 8,067+ individuals who receive our retirement insights by email and get a free copy of "Key Issues To Consider Before You Retire."

bottom of page