Rolling over a 401(k) to Fidelity: Step-by-step guide

Rolling over a 401(k) retirement plan to a trusted financial institution like Fidelity can be a smart move to take control of (or consolidate) your retirement savings.

Whether you’re changing jobs, retiring, or simply looking to bring together your retirement accounts, understanding the rollover process is essential. In this comprehensive guide, we will walk you through the steps involved in rolling over your employer-sponsored retirement plan to Fidelity, ensuring a smooth transition to a reputable provider.

Before we dive into the details, it’s important to note that Fidelity is a well-established financial institution with a strong reputation in the industry. Now, let’s explore the step-by-step process of rolling over your 401(k) to Fidelity, enabling you to make informed decisions and secure your financial future.

We’ve laid out a step-by-step guide to help you roll over your 401(k) to Fidelity in five key steps:

1. Confirm a few key details about your 401(k) plan
2. Open your Fidelity account (if you haven’t already)
3. Contact your 401(k) provider
4. Finish any last transfer steps
5. Make sure your funds are being invested properly

STEP 1

Confirm a few key details about your 401(k) plan

First, get together any information you have on your old employer plan (your old 401(k)). It’s okay if you don’t have a ton, but any details like an old account statement or an off-boarding e-mail from your former HR team can help. 401(k) paperwork can be confusing, so just focus on identifying the following three items:

1. Who is the 401(k) “provider”? The provider is just the financial institution where your 401(k) account is located. It’s usually a large financial company chosen by your employer and their logo appears on any old 401(k) statements you have. If you aren’t sure — try searching for your provider using our find your 401(k) tool.
2. Do you have a traditional or Roth 401(k)? This will determine which type of IRA you’ll need to open (more on this in step 2). The vast majority of people have a traditional 401(k), and this is almost always the default option in a 401(k) plan you’d have access to at work. Only 12% of 401(k) plans even offer a Roth 401(k), but it’s worth checking. What’s the difference between the two? Just the way your contributions were taxed. With a traditional 401(k) your contributions came out of your paycheck on a pre-tax basis, but with a Roth 401(k), your contributions came out on an after-tax basis.
3. What’s your provider’s phone number? Jot this down since you’ll need it later on in the process when you initiate your rollover.

STEP 2

Open your Fidelity account

Already have an IRA open at Fidelity? Great — skip this step

In order to move the money out of your 401(k) account, you’ll need to have an account opened for that money to move into. If you’ve decided to move your funds to Fidelity, you have two main options:

1. An IRA — an IRA is an “Individual Retirement Account”. As the name suggests, it’s an account you open up on your own and it isn’t connected to an employer. Fidelity has a few IRA options for you to choose from (more on this later).
2. A new 401(k) — if you have an active 401(k) account at Fidelity with a current employer, you may be able to transfer your former employer’s 401(k) savings into that current account. This isn’t always possible though, and you’ll need to check with your current 401(k) provider and HR person.

We’ve written a full guide on the five key differences between 401(k)s and IRAs if you’re trying to understand all of the differences.

Ultimately, most people who roll over an old 401(k) do so into an IRA for a few key reasons:

• Not tied to an employer — IRAs are generally easier to keep track of since they’re opened by you at an institution of your choice like Fidelity, Vanguard, or Betterment.
• A wider range of investment options — your 401(k) account generally has a limited set of investment options. With an IRA, you can invest your money in a wide range of stocks, ETFs, and even private assets like angel investments and cryptocurrency.
• Quicker process — according to the GAO, rollovers into 401(k)s tend to be more time-consuming and administratively challenging than rollovers into IRAs.

Think of your IRA as helping you do two key tasks:

1. Receive the money you’ve saved in your 401(k) at previous jobs so you can consolidate your savings and keep track of them.
2. Grow that money by allocating it into investments that will increase over time.

The good news? Opening an IRA at Fidelity can be done online and should take you less than 10 minutes if you don’t already have one.

Choosing the right IRA

Fidelity offers two IRA products:

In order to pick the best account for you, there’s one up-front question to answer:

Do you want to make your own investment decisions, or would you rather have the investing decisions made for you so you can just set-it-and-forget-it?

If you want to make your own decisions, then you’ll want to open the self-directed Fidelity IRA. That allows you to make your own trading decisions and invest in whichever financial securities you’d like.

If you want the investment decisions made for you, then you’ll be best served by opening a Fidelity Go IRA, which is their automated IRA product (also known as a “robo-advisor”). When you open a Fidelity Go account, you’ll answer a series of questions, known as a “risk-tolerance questionnaire”, and your answers will be used to create a diversified portfolio that suits your personal and financial situation. That portfolio is then rebalanced automatically over time without you having to do any work. It’s a great tool for those who don’t want to spend much time managing their investments.

STEP 3

Contact your 401(k) provider

You’re making great progress. You know where your 401(k) is and you have an IRA at Fidelity to transfer your money into. The next step is to initiate your rollover by contacting your 401(k) plan administrator (sometimes called your plan provider or account custodian).

Often, the easiest way to do this is by phone. Your 401(k) provider’s phone number should be visible on an old account statement.

In order for your call to go smoothly, follow these tips:

1. Set aside 30 minutes and a quiet space in which to make the call. Most of the time the call itself will take around 10 minutes, but there can often be a waiting time before you’re connected to a Fidelity representative.
2. If you have an old 401(k) statement, keep it handy. No worries if you don’t — you’ll be asked for your Social Security number and some other personal details to verify your identity.
3. Before you do the call, log into your new Fidelity IRA account. Note down the following information:
   • Your Fidelity IRA account number
   • Fidelity’s mailing address — found here. This is relevant because often your 401(k) provider won’t digitally transfer your funds — they’ll physically mail a check with your money to your new IRA provider (it’s a little outdated, we know).
   • Any other check-related instructions. For Fidelity, 401(k) rollover checks going into an IRA need to be made out to Fidelity Management Trust Company (or FMTC), FBO [your name]. FBO indicates who the checks are “for the benefit of” which is you! If you are rolling over into a new 401(k) at Fidelity, the check should be made out to Fidelity Investments Institutional Operations Company, Inc. (or FIIOC), FBO [your name].

Then place the call. Be prepared for a little hold time but in our experience, the entire call should take no longer than 30 minutes.

STEP 4

Finish any last transfer steps

1. Chances are that by this stage you’re done, and your 401(k) provider has initiated the process of rolling over your 401(k) into your new Fidelity IRA. If so, congrats on getting to the finish line!But there can sometimes be a small extra step at this stage. That’s because some 401(k) providers will only distribute your 401(k) funds to you, not to another institution. If that’s the case then they’ll send a check with your money to your mailing address. It’s then up to you to deposit the check into your Fidelity account. Fidelity offers a few methods for depositing a check:
   1. Mail the check to Fidelity using the mailing address found here
   2. Deposit the check with your smartphone using Fidelity Mobile check deposit
   3. Drop the check off in person at a Fidelity Investor Center

STEP 5

Make sure your IRA is being invested appropriately

Remember there are two goals of rolling over an old 401(k) into an IRA — the first is to consolidate your 401(k) assets, and the second is to grow those assets by allocating them into investments that will increase in value over time.

Your very last step in executing a rollover is to make sure that the second goal is being met and that the funds in your Fidelity IRA are being appropriately invested. If you opened an automated Fidelity Go IRA then this should happen automatically. That’s because as soon as your funds arrive they’ll be allocated into a portfolio that was created for you during the sign-up process for your new IRA account. You should still log in and check to make sure that’s the case, but usually, there’s nothing more for you to do.

If you choose the self-directed Fidelity IRA account then you’ll have to invest the money yourself. Often the simplest option is to purchase a target-date retirement fund — this is an investment vehicle that puts your money into a combination of higher-risk, higher-return stocks and lower-risk, lower-return bonds. The exact mix changes as you age so that you have more stocks when you’re younger and less as you get older: because stocks generate higher returns but are more volatile we should own more of them early on when we can withstand their fluctuations in order to achieve their higher long-term returns.

Otherwise, you can assemble a portfolio on your own by making trades.

Key Benefits of Choosing Fidelity for Your 401(k) Rollover

When considering a rollover of your 401(k) retirement plan, it’s important to select the right financial institution that offers the most advantages.

Fidelity Investments emerges as an excellent choice for your rollover needs, providing a range of benefits and services.

1. Tax-advantaged Opportunity: You won’t pay taxes on potential growth until you make withdrawals—and can still make contributions to the account. What’s more, moving money from a former workplace plan to a Fidelity rollover IRA is free from taxes or penalties.
2. Penalty-Free Access to Funds for Important Expenses: Fidelity offers the advantage of penalty-free withdrawals for specific expenses, providing you with greater financial flexibility. Whether it’s a first home purchase, a momentous life event like a birth or adoption, or college expenses, you can access your rollover IRA funds without incurring any penalties.
   • However, it’s important to note that a 10% early withdrawal penalty may apply for other withdrawals taken prior to reaching the age of 59½, highlighting the significance of careful financial planning.
3. Enhanced Investment Flexibility: A rollover IRA with Fidelity offers you a wider range of investment choices compared to employer-sponsored plans. This increased flexibility allows you to craft an investment portfolio that aligns with your unique financial goals and risk tolerance. Fidelity provides a diverse selection of investment options, including mutual funds, company stocks, bonds, ETFs, and more. This empowers you to make strategic investment decisions and diversify your portfolio for potential growth.
4. Required Minimum Distributions (RMD): While enjoying the investment flexibility of a rollover IRA, it’s important to be aware of the requirement to take annual distributions once you reach the age of 73 (commonly referred to as the Required Beginning Date). Fidelity assists in managing this obligation by ensuring compliance with the IRS’s required minimum distribution (RMD) rules. They can guide you through the process of withdrawing a specific amount from your rollover IRA each year, ensuring adherence to the regulations while preserving your retirement savings.

For those interested in initiating a rollover, you can find Fidelity’s address below for reference:

Fidelity Investments

100 Crosby Parkway KC2Q

Covington, KY 41015

You can also visit fidelity.com to view other mailing addresses.

Conclusion

401(k) rollovers are a great way for you to tax-efficiently transfer the savings in old 401(k) accounts you have. If you roll over into an IRA, you may also be able to invest in a wider range of assets.

The process can seem a little daunting, but there are just five key steps to follow. Most people who complete a rollover are glad they did. The assets in accounts like your IRA will probably end up being your biggest source of financial support when you retire. Investing a little time to get those assets set up and working for you in the right way can really pay off.

If you’re looking for additional tax advice, consider working with a qualified CPA or other credentialed tax advisor before effecting your Fidelity IRA transfer. Before investing, be sure to read the prospectus for any fund you might be considering.

Extras

Roth conversions

For those who want extra credit: you may have heard of the term “Roth conversion”. That’s when somebody rolls over a traditional 401(k) into a Roth IRA. Why would somebody do this? It all comes down to taxes. Recall that with a traditional 401(k) your contributions are made pre-tax.

When you roll over a traditional 401(k) into a traditional IRA, your assets continue to grow with no taxes being paid — until you start withdrawing your money, usually at the time of retirement. At that point, you’ll pay income taxes at whatever your rate will be then. If you believe your income tax rate at retirement will be greater than your income tax rate today, then it might make sense to consider a Roth conversion.

This allows you to pay income taxes on your rollover amount today, at the projected lower rate.

Then, the money in your Roth IRA can grow to be withdrawn tax-free in retirement.