How to roll over a Fidelity 401(k)?

As you near retirement, you may want to know what to do with your 401(k) plan. While you may be able to leave your retirement money with your former employer, moving the money to a new account can give you greater control over the money. If your 401(k) plan is with Fidelity, you may consider rolling over the 401(k) money to another retirement plan.

To roll over a Fidelity 401(k), start by setting up a new retirement plan where you will transfer the 401(k) money. The new retirement plan can be an IRA, a new employer's 401(k) plan, or other tax-advantaged retirement plans. Once you've set up the plan, contact Fidelity and request a direct rollover to your new retirement plan. You will be required to verify your identity and provide information about your new retirement plan, including the account number, name of the plan provider, and mailing address of the new plan.

What is a 401(k) rollover?

A 401(k) rollover allows you to transfer retirement money out of a 401(k) plan and deposit it into another tax-advantaged retirement plan. Most commonly, 401(k) participants roll over their money into an Individual Retirement Account (IRA), which provides a bigger pool of investment options and it is not tied to an employer. You can also rollover your 401(k) to your new employer’s retirement plan such as 401(k) or 403(b) plan.

When rolling over a 401(k) plan, you can choose a direct or indirect rollover. If you opt for a direct rollover, the 401(k) money will be transferred directly into the new retirement plan. However, if you choose an indirect rollover, you will receive a mailed check with your 401(k) balance, and you must deposit the money into another retirement plan within 60 days.

How to rollover a Fidelity 401(k)

If your 401(k) is with Fidelity, you can roll over your retirement money to another retirement plan by following several steps. Here is how to roll over your fidelity 401(k):

Decide where to move your 401(k) money

Before initiating the rollover process, you should decide where to rollover your 401(k), and the type of retirement plan you want to roll over into.

If your new employer offers a 401(k) plan, you can choose to roll over your Fidelity 401(k) to the new 401(k) plan. However, you must check if the new employer allows rollovers, and the investment options available in the new plan.

If you want to roll over to an IRA, you should decide whether you want to roll over to a traditional IRA or Roth IRA. If you have a traditional 401(k) and you roll over into a traditional IRA, you won't be required to pay income taxes on the transfer. However, rolling over a traditional 401(k) into a Roth IRA will trigger income taxes, since a Roth IRA is funded with after-tax dollars.

Set up a new retirement account

To roll over your 401(k) money, you will need to have an account opened where the money will be deposited. If you want to roll over to an IRA, and you don't have an IRA account, you should open an IRA with a brokerage or other financial institution before closing down your Fidelity 401(k). If you are happy with Fidelity, you can also consider opening a rollover IRA with them.

If you have an active 401(k) account with your new employer, you may be able to transfer the Fidelity 401(k) into the current account. However, check with your HR representative and 401(k) provider to be sure the transfer is allowed.

Request a direct rollover from Fidelity

Once you have set up a new retirement plan, the next step is to initiate the rollover by contacting Fidelity. The company has a defined rollover process for transfers out of the plan.

You should contact a Fidelity representative to initiate the rollover process. You can initiate the rollover online through your Fidelity account or over the phone by calling a Fidelity representative.

When requesting a rollover, you may be asked to provide your SSN, driving license, or other information to verify your identity. Also, you will be required to provide information about the new retirement plan where you want to roll over your 401(k) money. Some of the information you may be required to provide include your new retirement plan account number, the name of the new retirement plan provider, and the mailing address for paper checks.

Once you have verified your identity, you should request the Fidelity representative to make a direct rollover to the new retirement plan. The funds will be rolled over to the new retirement plan provider either through electronic transfer or paper checks. Where Fidelity issues a paper check, the check will be made in the name of the new plan provider but “for the benefit of” you.

Receive a check and deposit it in the new account

Once Fidelity authorizes the rollover, they will send a check to the address on file. If you requested a direct rollover, Fidelity will mail the check to the new retirement plan’s provider; you won’t get your hands on the money. However, if you request an indirect rollover, Fidelity will mail a check to your address.

Once you receive the mailed check, you must deposit the funds within 60 days from the date of distribution. You can deposit the check in person if the brokerage has a local branch, through mobile deposit, or by mailing the check to your new retirement plan provider. If you decide to mail the check, the check should be made out in the name of the institution "FBO" with your name so they know where to deposit the check.

If you don’t receive the check, or the check gets misplaced in transit, you should call Fidelity and ask them to issue a new check. They will stop the lost check, and nobody will be able to cash the check since it is indicated “for the benefit of” your name.

Invest funds properly

Once you have completed the rollover process, you should make sure the funds are invested properly. You should allocate the funds to investments that will grow over time. If you rollover over to a new 401(k), you should allocate the funds to the pre-selected investments in the plan.

However, if you roll over to a self-directed IRA, you will invest the money yourself from a pool of investments comprising higher-risk higher-return, and lower-risk and lower-return bonds. The combination of investments that you choose depends on your age and risk tolerance.

Report rollover on your tax return

You will be required to report the 401(k) rollover on your tax return in the year when the rollover happened. If you requested a direct rollover, you won’t pay income taxes on the transaction, but you will receive a 1099-R form reporting the 401(k) distribution. You are required to report the 401(k) rollover for tax purposes even if you don’t owe any income taxes on the rollover.