Rollover 401(K) Plan to Fidelity IRA Account
This time last year, I left my previous employer after nearly three years. With the new job, there were quite some changes in addition to new responsibilities at work. Among them, rolling over my old 401(K) plan to an IRA account was the last item on the to-do list and I didn’t do the rollover until only a couple of weeks ago, nearly one year after I left the old job (the other rollover took me even longer to do). The reason for the delay was entirely because of my laziness. The old 401(K) account was with Fidelity invested in mutual funds and, other than the funds’ normal expenses, I don’t pay additional administrative fee or maintenance fee to have my investments under my old employer’s management (see how much your 401(K) plan is costing you). Hence, the long delay, even though the choices of investments might not be exactly what I wanted (the funds the plan offered were not generally available funds, so it’s difficult to make a direct performance or cost comparison). Actually, if the funds were generally available Fidelity funds, I probably would just keep them where they were.
Early this month, I finally made the move to rollover the old 401(K) account to an IRA account and the process didn’t involve Vanguard. In stead I chose Fidelity for several reasons: First, the 401(K) account is already at Fidelity, so rolling it over to an IRA account at Fidelity has the least delay/disruption and requires minimal work from me. Second, we already have IRA accounts at Vanguard, so I don’t want to put all my eggs in one basket. Finally, there are a few funds I quite like at Fidelity.
Of course, since the funds I owned in my 401(K) account were not standard Fidelity funds, it was impossible to roll them over as in-kind, which also means that I had to first liquidate my entire account before using the money to buy Fidelity funds. The process itself was very straightforward and smooth, all done online in a couple of minutes. However, there is one thing I don’t like about Fidelity 401(K) rollover is that it doesn’t have the option to invest the money during the process of opening a new Rollover IRA account. At Vanguard, I can choose how I want to invest the fund coming to Vanguard, so when the money arrives (many times you don’t know when it will arrive from an external institution), it would be invested right away based on my instruction. That’s not the case at Fidelity though. All I could do was having the money as cash in the new account, then selecting funds I want to buy at a later time when the money is in. If I don’t want the money in the account doing nothing, I basically have to constantly monitor the account. Since I have both the source and destination at Fidelity, it took only one day for the money to be available, so I didn’t have to check every day, but it was inconvenient at least. In fact, because I had to make my investment selections at a later time, I even got a call from a local Fidelity representative asking about my plan for investing the money after the account was rolled over.
As for my investment choices, I chose a simple but diversified asset allocation that is very heavy on equity because there will be more then 20 years before I need to tap into my retirement savings and stocks are the best option for long-term growth. Here’s what I have in my new Fidelity Rollover IRA account at the end:
- 35% Fidelity Contrafund (FCNTX), large growth, 0.81% ER
- 30% Fidelity Low-Price Stock Fund (FLPSX), mid-cap, 0.88% ER
- 20% Fidelity International Discovery Fund (FIGRX), foreign large blend, 0.90% ER
- 15% Fidelity Total Bond Fund (FTBFX), intermediate bond, 0.45% ER
Since I already own FCNTX and FIGRX in another IRA account at Fidelity, I basically just treated the two accounts as one when allocating the assets. I have long been a fan of small-/mid-cap funds, owning a few in different accounts as I believe small-cap or mid-cap funds generally outperform large-cap funds in the long-term, and FLPSX is my choice in that category.
Going forward, there will be no new money added to the accounts (annual contributions in IRA go to accounts at Vanguard), so all I need to do is rebalancing the funds periodically to stay with the allocation target
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