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How can I transfer my 401k to my fidelity account?

Nov 11, 2012 by Gary from Punta Gorda, FL in  |  Flag
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4 votes

Hi Gary,

Transfers from 401k plans can be a little bit tricky - depending upon the plan and a number of other issues.

If you are under age 59 and 1/2 and still employed by your employer, it is likely that you cannot transfer the account. If you are OVER age 59 and 1/2 and still employed by your employer, then it is possible that you can transfer your account by doing "in-service-withdrawals." Each plan varies and this option (or lack thereof) is laid out for you in your plan's "Summary Plan Description." Of course, if you no longer work at your employer (you did not say) then you are always able to transfer the account away.

So: Step 1 - Since you have a Fidelity account, make sure the account is a Fidelity IRA. If you transfer the money to a non-IRA account or to a Roth, there will be taxes and possibly penalties. If you don't already have a Traditional IRA - then just open one up.

Step 2. CALL YOUR 401(k) people - the plan providers as well as your HR department. Get a copy of your plan's Summary Plan Description (SPD) and read what it says about withdrawals. DO THIS BEFORE trying to transfer money. It is important to get their input on the transfer. It is possible that there are 1) post-tax contributions, 2) Roth contributions, or 3) single stock positions - that must be handled differently than a normal transfer. Also, they may have their OWN paperwork that they require you to fill out. If they DO - and you do not do THEIR paperwork - then the transfer may be rejected.

Step 3. On the call, see what the distribution options are. Many (most, in fact) 401k plans to NOT have the ability to do a direct trustee-to-trustee transfer. Some do, but many don't. If you are dealing with Fidelity already, then they will transfer it with a phone call. So will Schwab or others. However, many, many 401k plans require that they send YOU the check. So the check will be made out to "Fidelity FBO Gary's IRA." That preserves the integrity of the transfer and you will not be subject to the 20% mandatory tax withholding. When you get the check - do not cash it - just deposit it into your IRA. Sometimes you can transfer existing holdings from your 401K to your IRA - but this is VERY rare. Usually a full liquidation and transfer in cash is necessary.

In my experience of doing these literally thousands of times - following this exact procedure will save you lots of heartache.

Jon Castle http://www.WealthGuards.com

Comment   |  Flag   |  Nov 12, 2012 from Jacksonville, FL

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4 votes

Hi Gary –

The first step would be to contact your 401(k) provider, see if you are eligible to make a transfer based on the plan rules and if so, complete their transfer paperwork , online request or telephone authorization.

Comment   |  Flag   |  Nov 16, 2012 from Shawano, WI

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Complete transfer paperwork provided by Fidelity and submit it to the trustee administering your current plan. This will provide for a direct trustee-to-trustee transfer which will avoid any possibility of an unintended early withdrawal which would make you responsible for income taxes and early withdrawal penalties.

Comment   |  Flag   |  Nov 11, 2012 from Amesbury, MA

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It can certainly be a confusing process and, as stated above, you want to be sure you have complied with your withdrawal rules and opened the appropriate IRA. Along with working with your HR department you can also call a Fidelity representative at 800-343-3548 if you need further assistance.

Comment   |  Flag   |  Nov 13, 2012 from San Diego, CA

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