Maximizing Your 401(K) Investments: Adjusting Contributions With Fidelity

A 401(k) contribution refers to the amount of money an individual sets aside from their paycheck to invest in their retirement savings account for the future. This contribution plays a crucial role in building a nest egg for retirement, allowing individuals to accumulate funds over time through regular contributions. The most common types of retirement plans offered by employers are 401(k)s and 403(b)s. Saving in these types of plans is important, but investing your money for potential growth is also essential.

Fidelity offers a range of investment options for individuals looking to change their 401(k) investment amount. This includes target date funds, which automatically rebalance based on how close an individual is to retirement, and target allocation funds, which are based on risk tolerance and time horizon. Individuals can also choose their own investment mix from a menu of options provided by their employer.

It is important to regularly review and adjust 401(k) contributions to ensure they align with financial goals and current situations. Changing 401(k) contributions can be done by accessing an online account and following specific steps to adjust the percentage or amount contributed.

How to log in to your Fidelity account to change your 401(k) contribution

Logging into your Fidelity account to change your 401(k) contribution is a straightforward process. Here is a detailed guide to help you through the steps:

Step 1: Log into Your Fidelity Account

Visit the Fidelity website and enter your login credentials to access your account. Ensure that your login details are secure to protect your financial information. Once logged in, you will be able to access various tools to assist you in planning for retirement.

Step 2: Navigate to the 'Planning & Advice' Section

After logging in, look for the 'Planning & Advice' section. Here, you will find valuable tools and resources to help you assess your retirement goals, simulate different scenarios, and refine your investment strategies. These tools will provide you with the necessary information to make informed decisions about your financial future.

Step 3: Access the 401(k) Contribution Settings

Within the 'Planning & Advice' section, locate and select the 401(k) contribution settings. This is where you can make adjustments to your retirement plan. You will be able to modify the percentage or dollar amount you contribute from each paycheck towards your retirement fund.

Step 4: Choose the Type of Change

You have several options when changing your contributions. You can choose to increase or decrease your contribution percentage or even temporarily suspend contributions based on your current financial situation. Keep in mind that altering your contributions will impact your retirement savings growth trajectory. Increasing contributions can help you reach your retirement goals faster, while decreasing them may slow down the growth of your retirement fund.

Step 5: Enter the New Contribution Amount

Carefully enter the new contribution amount, reflecting any changes to your retirement savings plans. Ensure that the amount aligns with your financial objectives, risk tolerance, and investment timeline. This strategic approach will help you achieve the desired growth and stability for your retirement savings over time.

Step 6: Confirm the Change

Before finalizing, carefully review and confirm the changes. If needed, seek retirement planning assistance or refer to the retirement account FAQs for additional information. It is important to double-check your adjustments to avoid any potential errors or oversights that could affect your retirement savings.

By following these steps, you will be able to successfully log in to your Fidelity account and make informed changes to your 401(k) contribution, bringing you closer to achieving your retirement goals.

Understanding the impact of changing your contribution percentage

Impact on Retirement Savings Growth

Increasing your contribution percentage can help accelerate the growth of your retirement fund over time. This means you may be able to reach your retirement goals faster and build a more substantial nest egg for your future. On the other hand, decreasing your contribution percentage may slow down the growth of your retirement savings. Therefore, it's crucial to carefully consider your financial objectives and how changing your contribution percentage aligns with those goals.

Tax Implications

K) plans offer tax benefits that can reduce your taxable income in the year you make contributions. Contributing more to your 401(k) can lower your taxable income, potentially resulting in a lower tax bill and keeping you in a lower tax bracket. However, it's important to stay within the annual maximum contribution limits set by the IRS to avoid any penalties or tax implications.

Financial Flexibility

Adjusting your contribution percentage can impact your financial flexibility. Increasing contributions may result in lower take-home pay, affecting your ability to manage current expenses and save for other financial goals, such as buying a house or education. Conversely, decreasing contributions can provide more immediate cash flow but may cause you to miss out on the benefits of compounding interest in your retirement savings.

Employer Matching

Many employers offer matching contributions up to a certain percentage or amount. By changing your contribution percentage, you may want to ensure you are still contributing enough to take full advantage of your employer's matching program. This ensures you maximize any "free money" offered by your employer and further grow your retirement savings.

Investment Risk and Returns

Changing your contribution percentage can also impact your investment risk and potential returns. Increasing contributions may expose you to higher market risks, as you will have more funds invested in the market. At the same time, decreasing contributions could provide short-term financial relief but might hinder your ability to achieve higher returns over the long term.

Retirement Planning Support

When considering changing your contribution percentage, it's beneficial to seek retirement planning support and guidance. Financial advisors or retirement planning professionals can help you navigate the complex decisions involved in adjusting your contributions, ensuring that your changes align with your long-term financial goals and risk tolerance.

The benefits and risks of changing your 401(k) contribution

Changing your 401(k) contribution can have several benefits and risks that individuals should be aware of to make informed decisions. Here are some key points to consider:

Benefits of Changing Your 401(k) Contribution:

• Enhanced retirement fund growth: Adjusting your contribution strategy can potentially increase your retirement savings over time. This allows you to build a bigger nest egg for your future, providing financial freedom to pursue your post-retirement aspirations.
• Maximizing employer match: Increasing your contribution amount can help you take full advantage of your company's employer-matching contributions. This means you receive a higher amount of "free money" from your employer, boosting your overall retirement savings.
• Accelerating retirement savings: By increasing your 401(k) contribution, you can reach your retirement goals faster. This is especially beneficial for individuals over 50 who are looking to retire sooner, as they can make catch-up contributions to bulk up their overall savings.
• Aligning with financial changes: Changing your contribution can be advantageous when your financial situation evolves, such as receiving a salary increase or reducing debt. It ensures that your retirement savings remain aligned with your current financial circumstances.
• Tax benefits: Increasing pre-tax contributions can lower your taxable income for the year, potentially reducing your overall tax bill and keeping you in a lower tax bracket. The tax-deferred nature of 401(k) accounts allows your investments to grow without immediate taxes.

Risks of Changing Your 401(k) Contribution:

• Reduced take-home pay: Increasing your 401(k) contribution might result in lower paychecks, making it challenging to meet short-term financial obligations, especially as you approach the annual contribution limits.
• Impact on other financial goals: Higher contributions to your 401(k) could limit your ability to save for other important financial goals, such as purchasing a house, funding your children's education, or investing in other opportunities.
• Fluctuating fund returns: Increasing contributions might expose you to higher market risks, while decreasing contributions may hinder long-term growth. It's important to understand how market fluctuations can affect your fund returns and tailor your strategy accordingly.
• Employer and IRS limitations: Your employer and the IRS may impose restrictions on how often and by how much you can adjust your contributions, limiting your flexibility in responding to changing circumstances.
• Withdrawal rules and penalties: Modifying your contribution levels can impact the growth potential of your retirement savings. Withdrawing money from your 401(k) account before retirement age may lead to early withdrawal penalties.

It is essential to carefully consider these benefits and risks before making any changes to your 401(k) contribution. Regular reviews of your retirement plan and investment choices are crucial to ensure they align with your long-term financial goals and risk tolerance.

How to change the weight of different asset classes in your portfolio

To change the weight of different asset classes in your portfolio, you can follow these steps:

Step 1: Understand Your Investment Goals and Risk Tolerance

Before making any changes, it is essential to have a clear understanding of your investment goals and risk tolerance. Consider your long-term financial objectives, investment horizon, and comfort with market volatility. This will help you determine the appropriate mix of asset classes for your portfolio.

Step 2: Review Your Current Portfolio

Log into your Fidelity account and review your current portfolio's performance and composition. You can find this information by navigating to the “Investments” section on the main menu and then clicking on “Change Investments” on the secondary menu. Evaluate whether your current asset allocation aligns with your investment goals and risk tolerance.

Step 3: Determine the Desired Asset Allocation

Decide on the desired allocation of asset classes (such as stocks, bonds, and short-term investments) that you want in your portfolio. Consider the potential returns and risks associated with each asset class and how they fit with your investment strategy. You may refer to the model portfolios provided by Fidelity as a guide.

Step 4: Make the Necessary Changes

Once you have determined the desired asset allocation, you can proceed to make the necessary changes to your portfolio. Go back to the “Change Investments” screen and click on “Exchange Multiple Investments." Start the rebalancing process by clicking on "Start Your Rebalance." Input the desired percentage allocation for each fund and review your changes before submitting them.

Step 5: Monitor and Rebalance Your Portfolio Regularly

Investing is an ongoing process that requires regular attention and adjustments. Monitor your portfolio's performance and rebalance it as needed to maintain your desired asset allocation and risk level. Consider setting up automatic rebalancing, which will automatically adjust your portfolio to maintain your desired allocations.

It is important to note that changing the weight of different asset classes in your portfolio is a practice known as rebalancing. You can also change your investments without rebalancing, such as buying and selling assets to shift your investments across organizations or commodities. However, rebalancing ensures that your portfolio remains aligned with your investment goals, risk tolerance, and changing market conditions.

How to change how much of your paycheck you contribute

To change how much of your paycheck you contribute to your 401(k) investment with Fidelity, you can follow these steps:

Step 1: Log into Your Fidelity Account

First, you'll need to access your Fidelity account by logging in with your secure credentials. This will give you access to the retirement account management tools you need to make changes.

Step 2: Navigate to the 401(k) Contribution Settings

Once you're in your account, find the 401(k) contribution settings section. This is where you can adjust the percentage or dollar amount you contribute from each paycheck towards your retirement fund.

Step 3: Choose the Type of Change

You have a few options when changing your contributions. You can increase or decrease the contribution percentage or even suspend contributions temporarily if needed. Keep in mind that altering your contributions will impact your retirement savings growth.

Step 4: Enter the New Contribution Amount

Enter the new contribution amount carefully. Consider how this change aligns with your long-term retirement goals and risk tolerance.

Step 5: Confirm the Change

Before finalizing, review and confirm the changes. Double-check the details to avoid any errors or oversights that could affect your retirement savings plan.

By following these steps, you can adjust your 401(k) contribution amount with Fidelity to suit your financial goals and needs. Remember that consistent saving and regular reviews of your retirement plan are essential for maximizing your savings and securing a comfortable financial future.

Frequently asked questions