Look At The Whole Investment Pie
A frequent mistake investors make is not looking at their whole investing pie. When considering your asset allocation, imagine that the assets in every one of your investment accounts are actually in one account. The one big account includes your 401, Roth, or traditional individual retirement account and your taxable investment brokerage account holdings.
Picture your investments and accounts like a strawberry, banana, and rhubarb pie. You dont have one section for the strawberries, another for the banana, and a third for the rhubarb. All the ingredients in your accounts go into the asset allocation pie.
What Do I Request On The Call
After your identity is verified, youll be able to tell the customer service representative that you want to do a direct rollover. A direct rollover is where your funds are directly transferred to your new IRA provider. It often means the check is made out in the name of that IRA provider but for the benefit of you. This is generally the simplest approach. Your 401 provider will usually ask you for the name and mailing address of your new IRA provider and your new IRA account number. We also recommend that you take this opportunity to update your mailing address since they may have an old address for you. Thats because youll be sent additional documents, including a tax-related document known as a 1099-R that tells the IRS youre doing a tax-free rollover.
An indirect rollover is where funds are first transferred to you, or a check is made out in your name. You deposit the funds in one of your own accounts, but then you have 60 days to send that money on to your IRA account if you want the rollover to be tax-free. This can create a little extra work for you which is why most people opt for a direct rollover.
Have a rollover expert on the call with you! Capitalize can handle your 401-to-IRA rollover for you and set up a call with your provider walking you through each step along the way. Get started
Next Steps To Consider
This information is intended to be educational and is not tailored to the investment needs of any specific investor.
Past performance is no guarantee of future results.
Target Date Funds are an asset mix of stocks, bonds and other investments that automatically becomes more conservative as the fund approaches its target retirement date and beyond. Principal invested is not guaranteed.
Investing involves risk, including risk of loss.
Diversification and asset allocation do not ensure a profit or guarantee against loss.
Stock markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments. Investing in stock involves risks, including the loss of principal.
Investors considering investments in bond funds should know that, generally speaking, the bond market is volatile, and fixed income securities carry interest rate risk. Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so holding them until maturity to avoid losses caused by price volatility is not possible.
Fidelity Brokerage Services LLC, Member NYSE, SIPC, 900 Salem Street, Smithfield, RI 02917
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Why You Can Trust Bankrate
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. Weve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next.
Bankrate follows a strict editorial policy, so you can trust that were putting your interests first. All of our content is authored by highly qualified professionals and edited by subject matter experts, who ensure everything we publish is objective, accurate and trustworthy.
Our reporters and editors focus on the points consumers care about most how to save for retirement, understanding the types of accounts, how to choose investments and more so you can feel confident when planning for your future.
Need Help With Your Rollover
- Well help you track down your 401 and initiate the rollover to Fidelity
- Customer support available if you have questions along the way
- Feel confident about your decision to move to Fidelity by answering a few questions to compare with other top providers
We’ve laid out a step-by-step guide to help you roll over your 401 to Fidelity in five key steps:
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Best Fidelity Funds For Your 401k: Strategic Real Return
Manager: Joanna BewickExpenses: 0.77%
Primary manager Joanna Bewick and her team again use an investment allocation guide for Fidelity Strategic Real Return Fund . The fund invests roughly 30% in inflation-protected investments, 25% in floating-rate bonds, 25% in commodities and related investments and 20% in REITs or other real estate investments. .
FSRRX will tend to trade more like a basket of commodities than any single type of bond, but also more like a diversified basket of bonds than any one commodity.
I recommended purchasing this fund in tandem with Strategic Income to broaden our approach to the income landscape in general and to diversify within it as best as possible.
Fidelity Investment Grade Bond Fund
Expense ratio: 0.45%
At a time when even the investment-grade corporate bond market is under duress, active management via the Fidelity Investment Grade Bond Fund makes a lot of sense. History proves as much as FBNDX has a long track record of outperforming investment-grade corporate bond benchmarks.
With a duration of 5.6 years, FBNDX can hold bonds of medium quality, but it can mitigate risk with substantial allocations to U.S. government debt, which is one reason why this Fidelity mutual fund is weathering some of this years bond market volatility. Speaking of volatility reduction, more than a third of FBNDXs non-government holdings are rated between AAA and BBB, indicating that the funds managers are currently emphasizing higher quality fare.
This four-star rated fund has a 30-day SEC yield of 1.78%.
Todd Shriber has been an InvestorPlace contributor since 2014. As of this writing, he did not hold a position in any of the aforementioned securities.
Article printed from InvestorPlace Media, https://investorplace.com/2020/03/the-7-best-fidelity-mutual-funds-to-own-for-your-401k/.
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Deposit Your Money Into Your Fidelity Account
You can have the money sent directly to us to deposit into your account, or deposit it yourself.
Important: The check should be made payable to Fidelity Management Trust Company , FBO . Be sure to ask your former plan administrator to include your IRA account number on the check.
Please note: When a rollover check is made payable directly to you, you must deposit the money into your IRA within 60 days of receiving the check to avoid income taxes and a possible early withdrawal penalty.
Covington, KY 41015-0037
A Small Change Can Make A Big Difference
Sometimes the little things in life make the biggest difference. That’s true when it comes to saving for retirement too.
When you start saving for retirement, aim for an amount that’s manageable Then, challenge yourself to save 1% or more each year toward retirement. While 1% is a small percentage of your annual earnings, after 20 or 30 years it can make a big difference in your total savings.
Remember, a key to growing your savings is to increase your contributions each year. If your plan lets you set automatic increases every year, definitely take advantage of it. Overall, Fidelity recommends building up to saving 15% of your income toward retirement annually . But remember, you don’t have to get there overnight, and you can change your contribution amount if you need to.
Go ahead, challenge yourself to save a little more. Whether it’s a 1%, 3%, or even 5% increase, the extra money you save today could make a big difference in helping you achieve the retirement you envision.
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Annuities Provide Growth Potential And Flexibility
American Fidelity offers a variety of annuities that can be used as investments within a 403, 457, IRA or Roth IRA plan to help individuals plan for retirement. American Fidelity also offers annuities as non-qualified, after-tax annuities for personal retirement savings. Annuities provide a valuable savings vehicle with growth potential and flexibility. A key advantage that annuities offer over typical methods of saving is the opportunity for guaranteed lifetime income. Annuities can provide benefits and features that may be beneficial to a diversified portfolio and can be a valuable retirement planning tool.
- Fixed Annuity: An insurance contract that allows the owner to accumulate interest with minimal risk. American Fidelity guarantees both the principal and interest on our fixed contracts and there is a guaranteed minimum rate of interest which the contract will never pay less than, as long as the contract is in force.
- Variable Annuity*: This contract allows the potential for greater returns on investments over the long term by allowing the owner the ability to invest in various market-based portfolios. In a variable contract, principal, interest, and market gains are not guaranteed and are therefore not suitable for everyone.
How To Maximize Your 401 Match
U.S. News & World Report – 02/11/2020
Many companies offer a 401 match to employees who save for retirement, but it’s not always easy to qualify for the match and take it with you when you leave the job. There might be waiting periods before you are eligible for a 401 match and vesting schedules that prevent you from keeping the match if you don’t stay at that job for a specific period of time.
How Does 401 Matching Work?
Some companies contribute to a 401 plan on behalf of employees regardless of whether the worker saves in the plan, while other firms offer to make a contribution to the 401 plan only if the employee also saves some of his or her own money in the plan. The exact amount of a 401 match varies by employer, but it is often 50 cents or $1 for each dollar the employee contributes. There is also often a cap on the amount the employer will match, such as 6% of pay. A 401 match does not count against the employee’s 401 contribution limit for tax deduction purposes, but it is subject to a different IRS annual limit.
Here’s how to take advantage of 401 matching contributions:
– Find a job with a good 401 match.
– Set up automatic 401 withholding.
– Watch out for 401 waiting periods.
– Follow the 401 match rules.
– Don’t stick with the 401 default contribution.
– Pay attention to the 401 vesting schedule.
Find a Job With a Good 401 Match
Set Up Automatic 401 Withholding
Watch Out for 401 Waiting Periods
Follow the 401 Match Rules
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Why Bonds Diversification And Income
Bonds can provide a steady stream of income by paying interest over a set period of time . Theres a spectrum of risk and return between lower-risk bonds and those that are more risky.
The credit risk of the bond issuer determines how much interest the bond may pay. Bonds issued by the US government pay a relatively low rate of interest but have the lowest possible risk of default. Corporate bonds typically pay a higher interest rate than Treasury securities of similar maturity. On corporate bonds, interest rates vary as a reflection of the creditworthiness of the bond issuer.
Because bonds have different risks and returns than stocks, owning a mix of stocks and bonds helps diversify your investment portfolio, and mitigate its overall volatility. Adding different types of investments to your mix with varying levels of risk and potential return can potentially help your investment mix weather different types of market environments and help smooth out the ups and downs of your overall portfolio.
It’s important to understand that diversification and asset allocation do not ensure a profit or guarantee against lossbut they may help you reach your investment goals while taking on the least amount of risk required to do so.
Fidelity Zero Extended Market Index Fund
Expense ratio: 0%
For investors looking to fill in the gaps created by large-cap blend funds, the Fidelity ZERO Extended Market Index Fund is one of the best Fidelity mutual funds to consider and as is the case with the aforementioned FZROX, FZIPX is basically free as it has a 0% and no transaction costs.
However, there is utility beyond the low/non-existent cost structure. Returning to the idea that FZIPX fills in gaps ignored by large-cap funds, this index fund includes a broad universe of mid- and small-cap stocks usually arent found in large-cap benchmarks such as the S& P 500. Due to that strategy, FZIPX is a mid-cap blend fund.
One advantage of FZIPX is badly lagging energy ranking as its smallest sector weight. Down almost 40% year-to-date, FZIPX is another example of an attractive Fidelity that has been severely dislocated from recent highs that could morph into a winner for long-term investors when better market conditions return.
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Best Fidelity Funds For Your 401k: Low
Manager: Joel TillinghastExpenses: 0.82%
Still inimitable, still head and shoulders above even the best crop of giants you can find in the space, lead manager Joel Tillinghast is about as far a cry from leveraged stocks as you can get.
Fidelity Low-Priced Stock invests in low-priced stocks, which for his purpose are stocks $35 or less. While that sounds like a gimmick, its the secret to this funds genius, and was Joels brainchild, making him of one of the best managers of any generation. It can lead to a small-/mid-cap tilt, but it also can lean toward even mega-caps in ultra-bear markets .
FLPSX began trading in December 1989 and has a market value of over $30 billion. The fund is heavily weighted toward consumer discretionary , with ample weight given to information technology and financials . Top holdings for now are UnitedHealth Group Inc. , Seagate Technology PLC and Next plc. Its noteworthy that of the funds weve discussed so far, FLPSX is the only one with more than 5% of the fund currently in cash .
Joel is a stock pickers stock picker if hes around the water cooler, other managers are keen to hear what he has to say. While unsung by the media, he is a manager that compares with Peter Lynch, his mentor while Joel was learning the trade. His stealth advantage: Hes always been a global investor.
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 account, youll need to have an account opened for that money to move into. If youve decided to move your funds to Fidelity, you have two main options:
Weve written a full guide on the five key differences between 401s and IRAs if youre trying to understand all of the differences.
Ultimately, most people who roll over an old 401 do so into an IRA for a few key reasons:
Think of your IRA as helping you do two key tasks:
The good news? Opening an IRA at Fidelity can be done online and should take you less than 10 minutes, if you dont already have one.
Other Features You Should Know
Itâs common among broker-launched online advisors to pair computer algorithms with dedicated financial advisors. Fidelity Go takes a different approach, with humans handling investment and trading decisions for portfolios.
That oversight makes Fidelity Go a good choice for those who are reluctant to hand off all of the control to a robot â though those advisors arenât there to answer your phone calls.
Like other advisors, Fidelity Go uses a questionnaire â designed to gauge your risk tolerance and financial goals â and computer algorithms to match investors to a portfolio. We especially like that without signing up or sharing any personal information, users can take that questionnaire and view a portfolio recommendation and sample investments.
Fidelity Goâs Target Tracking lets customers set goals while Fidelity monitors their progress. Customers also have access to the robo-advisorâs other financial planning tools and apps, as well as the companyâs educational resources, which are strong.
Go With The Simplest Option
Alternatively, you can opt for a target-date fund, which takes most of the guesswork out of the equation. With these funds, you select a “target” retirement year and risk tolerance, and the fund is automatically set to an appropriate asset allocation for you. These are great options for beginner investors.
“Most people aren’t interested in researching selecting funds for their 401,” Charles C. Weeks, a Philadelphia-based CFP, tells CNBC Make It. “Target date funds will help people avoid blowing up their portfolios by making avoidable mistakes like putting too much in one asset class, chasing returns by investing based on past performance and/or letting greed and fear dictate their investment strategy.”
Over time, the fund will automatically rebalance, becoming more conservative as you near retirement. If you choose a target-date fund, you only need to choose the one fund otherwise you’re essentially canceling out its benefits. Another mistake to avoid with target-date funds is choosing a year without researching how it will change its mix of stocks and bonds over time, Howard Pressman, a Virginia-based CFP, tells CNBC Make It.
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