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What Kind Of Investor Are You
Don’t have the time, expertise, or interest it would take to choose investments and maintain an appropriate mix of investments in your IRA? Consider a professionally managed target date or asset allocation fund.
Target date funds let an investor pick the fund with the target year closest to their expected retirement. The target date fund manager then selects, monitors, and adjusts the investment mix over time. Asset allocation funds can be another simple way to diversify your portfolio using a single fund. In these funds, the manager sets and maintains a fixed asset mix.
For those doing it on their own, a diversified mix of investments is important. That way, a portfolio isn’t dependent on any one type of investment, although diversification does not ensure a profit or guarantee against loss. If you want to do it yourself, consider funds that hold a mix of investments in companies both big and small, from different parts of the world, and in different industries and sectors.
Low-fee investments that simply track the broad market through a benchmark index, may also be worth considering.
Traditional Vs Roth Ira
The big difference between traditional and Roth IRAs is when you pay taxes.
With a traditional IRA, you contribute pre-tax dollars. While this is better for your immediate cash flow as you’re taking out less from your disposable income now, your money grows tax-deferred and later in retirement you will have to pay income tax on any funds you choose to withdraw. This is a good option if you think you will be in the same or a lower tax bracket when you retire. If you withdraw either your pre-tax contributions or earnings from your traditional IRA before age 59 and a half, you’ll be taxed in addition to incurring a 10% early withdrawal penalty fee.
With a Roth IRA, you pay taxes upfront by contributing after-tax dollars. While this is a bigger hit to your immediate cash flow since you are taking out more from your disposable income now, your money grows tax-free and so in retirement, withdrawals are generally not taxed as long as your account has been open for at least five years. This is a good option if you think you will be in a higher tax bracket when you retire.
You can withdraw your after-tax contributions from your Roth IRA at any age tax- and penalty-free. If you withdraw any earnings you’ve made on your investments before age 59 and a half, you will incur a 10% early withdrawal penalty . Some exceptions to this early withdrawal penalty on Roth IRAs include first-time home purchases, college expenses and birth or adoption expenses.
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Look Out For Your Check In The Mail And Deposit Into Your New Account
Fidelity will only distribute your 401 funds directly to you, using the mailing address they have on file for your account. Once you get the check, its then up to you to deposit that check with your new IRA provider.
There are a few ways you can deposit your check depending on the provider:
- Mobile deposit the easiest option is to check your providers mobile app to see if they have a mobile deposit option. Not all providers provide this option but its worth checking. Mobile deposits are the quickest option and typically take 3-5 business days to show up in your account.
- Deposit in person at a local branch if your provider has a physical branch near by, you can also deposit the check in person. Checks deposited in person typically take 3-5 business days to show up in your account.
- Send the check by mail you can also send the check by mail to the provider using the address you previously looked up. Funds that are mailed can take up to 15 business days to show up in your account.
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.
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Benefits Of Using A Fidelity Advisor Ira
- A wide selection of Fidelity Advisor Funds® with access to practically every segment of the world’s markets
- Advance notification to investors who must take required minimum distributions
- Access to systematic investing programs and the potential benefit of dollar cost averaging*
- A dedicated team of retirement specialists to answer questions and work with you and your clients to establish a Fidelity Advisor IRA that may help meet a variety of investment goals
- Convenient account access for your clients, virtually 24 hours a day, 7 days a week
Can You Roll A Traditional 401 Into A Roth Ira
You can choose between either a Roth IRA or a traditional IRA in a rollover, regardless of whether you have a traditional or Roth 401.
However, from a tax perspective, it typically makes more sense to roll over from a Roth account to a Roth account, and from traditional 401 to traditional IRA. If you go from a traditional plan to a Roth IRA, you may have to pay taxes on the amount you convert.
Again, this is where it pays to have the advice of an investment advisor who can walk you through the process and minimize taxes during a rollover IRA.
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How Risk Tolerance Affects The Amount Allocated To Stock
With creating your asset mix, you should feel comfortable that the ups and downs of the stock market won’t undermine your ability to reach your long-term goals. That way you’ll be less likely to panic and sell when stocks fallbecause doing so can lock in losses and could make it harder to recover and reach your goals.
How much risk can you stomach? Take a look at the worst case market scenarios for the 4 different investment mixes shown below. During the worst market year since 1926, the conservative portfolio would have lost the least17.67%, while the aggressive portfolio would have lost the most60.78%. The chart also shows how each investment mix performed over a long period of time, in different markets. The average return: 5.94% for the conservative vs. 9.63% for the aggressive mix.
Choose an investment mix you are comfortable with
Past performance is no guarantee of future results.
How Age Affects How Much To Invest In Stocks
Why every year counts
Age can also be used as an initial guideline when determining how much to invest in stocks when you’re investing for retirement. That’s because the longer the money will be invested, the more time there is to ride out any market ups and downs. That could help realize the potential for growth in your investments, which may be an important factor in saving enough for retirement. In general, the younger you are, the heavier your investment mix could tilt toward stockas much as you are comfortable with and fits with your time horizon, risk preferences, and financial circumstances. The chart shows how a $6,000 IRA investment could grow to $64,059 over 35 years.
All else equal, as you get closer to retirement, you may want to adjust your allocation. Being too aggressive could be risky as you have less time to recover from a market downturn. As a general rule, in the absence of changes to risk tolerance or financial situation, one’s asset mix should become progressively more conservative as the investment horizon shortens. However, investing too conservatively could limit the growth potential of your money. So, it may make sense to gradually reduce the percentage of stocks in your portfolio, while increasing investments in bonds and short-term investments.
To learn more about building an asset mix that fits you, read Viewpoints on Fidelity.com: How to start investing
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Initiate Your Rollover With Fidelity
Youre making great progress. Youve confirmed key details about your 401 plan and you have an IRA to transfer your money into. The next step is to initiate your rollover with Fidelity. Fidelity has two methods for requesting a rollover to another institution:
If you are rolling over your Fidelity 401 to an IRA at Fidelity, you can request a rollover online, through your NetBenefits account. For rollovers to another institution, youll have to call or use the form.
What Is An Ira
IRAs are tax-advantaged investment accounts. They offer a range of investments for your money, such as individual stocks, bonds, mutual funds, CDs and cash.
You can open an IRA at most banks and credit unions, as well as through online brokers and investment companies.
If you already make automatic contributions into a 401 account through your employer, you may wonder if you also need an IRA. IRAs supplement these other retirement accounts and come with their own advantages. They are accessible and easy to set up, plus individuals can shop around for the right investments for their finances versus being limited to their employer’s 401 plan. This gives you the flexibility to make your own investment selections, with the guidance of the brokerage firm or bank that manages your account.
You can also set up automatic contributions into your IRA from your checking or savings account. IRAs typically don’t come with account setup fees, but you’ll likely have to pay transaction and advisory fees when applicable, as well as fund expense ratio fees which cover operational costs.
Before funding an IRA, you need to understand the contribution limits and tax implications. How much you can contribute and deduct from your taxes depends on your age, income, tax filing status and whether or not you have a retirement plan through your employer.
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Fidelity 401k Investment Options
You have two main choices for your 401k investment options: fixed annuities and variable annuities. Fixed annuities are backed by a guarantee that the fund owner will receive at least some interest, if not all of it. Variable annuities are more risky, however, because the owner can invest up to ninety five percent of his or her salary into the portfolio. If you want to maximize the amount of money that you invest in a 401K plan, you should consider a variable annuity.
A diversified portfolio is best when there is low volatility, and the Fidelity Low-Priced Stock offers both. Both of these funds are able to generate substantial returns, but they offer different levels of risk. If you arent comfortable with this risk, you should consider a professional management program. With this option, Edelman Financial Engines researches your plan options and monitors them for you. This service costs money, but you dont have to pay it out of pocket.
The Fidelity Puritan fund is best for moderate investors. It offers an all-in-one portfolio solution and has consistently produced above-average returns and low volatility over the last three years. You can learn more about this fund by visiting the provider website of Fidelity. It is currently the number one 401k investment option available and ranks in the top 100 funds. You can find it at Fidelitys provider website.
Confirm A Few Key Details About Your Fidelity 401
First, get together any information you have on your Fidelity 401. Its okay if you dont have a ton, but any details like an old account statement or an offboarding e-mail from your former HR team can help. 401 paperwork can be confusing, so just focus on identifying the following items:
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How Do I Choose An Ira
Though there are several different types of IRAs, you may not be eligible for all of them. Individual taxpayers can choose from traditional and Roth IRAs, while anyone who is self-employed or a small business owner can choose from SEP and SIMPLE IRAs.
When choosing an IRA to start saving for retirement, you’ll most likely be deciding between a traditional or Roth IRA. Key factors to think about are your financial goals, timeline to retirement and risk tolerance. If you’re closer to retirement, you’ll probably want to go with investments that are lower risk and have less potential to lose money as you near your nonworking years. The advantage of choosing an IRA from a well-known brokerage firm or bank is that they help you assess what would be the best investments depending on your other goals, how soon you want to retire and how conservative you want to be.
For the more active investors, look at IRAs offered by online brokers like E*TRADE. For the more passive investors, consider an IRA from a robo-advisor, such as those from Betterment. Robo-advisors rely on algorithms to manage your portfolio for you, taking into consideration your risk tolerance and goals.
For a more personal experience, consider IRAs offered by big brokerage firms like Charles Schwab, Fidelity Investments and Vanguard that provide access to human advisors.
Make Sure Your Ira Is Being Invested Appropriately
Remember there are two goals of rolling over an old 401 into an IRA the first is to consolidate your 401 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 second goal is being met and that the funds in your IRA are being appropriately invested. If you chose an automated IRA then this should happen automatically. Thats because as soon as your funds arrive theyll 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 thats the case, but usually theres nothing more for you to do.
If you choose a self-directed account then youll 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 youre 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.
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Confirm A Few Key Details About Your Massmutual 401
First, get together any information you have on your MassMutual 401. Its okay if you dont have a ton, but any details like an old account statement or an offboarding e-mail from your former HR team can help. 401 paperwork can be confusing, so just focus on identifying the following items:
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