Unlocking Fidelity Investments: Strategies To Maximize Your Returns

There are several ways to encash your Fidelity investments. You can set up payroll direct to an eligible Fidelity account, send money to or from a bank account with an electronic funds transfer (EFT), wire money from a bank or third-party account, deposit a check via mobile upload or mail a paper check, transfer money from one Fidelity account to another, or transfer money via a third-party payment app like Venmo or PayPal.

Transferring a workplace account to Fidelity

Before you get started:

First, you will need to open a rollover IRA. This is a retirement account that allows you to roll money from your former employer-sponsored retirement plan into an IRA.

The process:

The process varies depending on the rules assigned to your account, but it typically takes 7–10 minutes to complete the online form.

What you need:

You will need a recent statement from your current firm so you can easily find the information needed to process your transfer.

Timing:

Most transfers take 3–5 business days to complete, but some requests may take longer. Transfer requests that must be mailed to your current firm may take 2 to 4 weeks to complete. You should receive an email notification when your assets are in your Fidelity account.

Taxes and fees:

In most cases, if you're moving a retirement account to a Fidelity retirement account of the same type, you will not incur taxes. Fidelity does not charge a fee to move assets from another institution, but your current firm may charge a fee to transfer your assets.

Depositing money into a Fidelity account

Direct Deposit

You can set up direct deposits for your paychecks, Social Security, or pension benefits to go directly into your Fidelity account. To do this, you will need to provide your employer, the government agency, or a third party with your Fidelity account's routing (ABA) number and account number. This information can be found on the Direct Deposit and Direct Debit Information page or on your Portfolio Summary page under the "Routing Number" section.

Electronic Funds Transfer (EFT)

You can send money to or from a bank account using an electronic funds transfer. Before initiating an EFT or bank wire, you will need to link your bank account to your Fidelity account.

Bank Wire

You can wire money to your Fidelity account from a bank or third-party account. To do this, you will need to start the transaction with the institution from which you are sending funds.

Mobile Check Deposit

Fidelity offers the convenience of depositing a check through their mobile app, or you can mail a paper check to their offices.

Third-Party Payment Apps

Fidelity accepts deposits made through popular payment apps such as Venmo or PayPal.

Transfer from Another Fidelity Account

If you have multiple Fidelity accounts, you can easily transfer funds between them.

Automatic Deposits

You can set up automatic deposits from your bank account, cash management account, or investment accounts to make recurring contributions to your Fidelity account.

Payroll Direct

You can set up payroll direct deposits to an eligible Fidelity account.

It's important to note that some methods, such as direct deposit or automatic deposits, may take a few days to process before the funds are available in your account. However, you don't have to wait for the funds to be available to start investing.

Contributing to a 529 college savings plan

A 529 plan is a tax-advantaged savings account designed for education expenses. The funds can be used for a wide range of college expenses, including tuition, fees, books, and room and board at accredited schools nationwide. The money can also be used for tuition expenses for K-12 schools, certain apprenticeship costs, and student loan repayments.

Who Can Open a 529 Plan?

To open a 529 plan, you must be a US resident aged 18 or older with a US mailing and legal address, and a Social Security number or Tax ID. There are no income restrictions on 529 plan accounts.

Who Can Be a Beneficiary?

Anyone with a Social Security or Tax ID number, of any age, can be a beneficiary. The beneficiary can even be the same person who sets up the account.

Tax Advantages of a 529 Plan

There are several tax advantages to saving in a 529 plan. Firstly, no income taxes are due on earnings while the money remains in the account. Withdrawals for qualified education expenses are also typically federal income tax-free and may be free of state tax as well. Additionally, contributions of up to a certain amount are not subject to the federal gift tax. For example, contributions of up to $18,000 annually ($36,000 for a married couple) per beneficiary are not subject to the federal gift or estate tax.

Withdrawals from a 529 Plan

Withdrawals from a 529 plan can be made at any time and for any reason. However, if the money is not used for qualified education expenses, federal income taxes and a 10% federal penalty tax may apply, along with possible state or local taxes. There are some exceptions to the 10% penalty, such as if the beneficiary receives a scholarship or attends a US military academy.

Gifting to a 529 Plan

Friends and family can contribute gifts to a child's 529 plan, which can help accelerate savings. There is no minimum contribution amount, and small amounts can add up over time. For example, if five friends give $20 each for the first ten birthdays of a child's life, that adds up to $1,000 over a decade, plus any potential investment returns. Gifting to a 529 plan can also help with estate planning, as the contributed money is no longer considered part of the gifter's estate for tax purposes.

Contributing to a 401(k) or 403(b)

A 401(k) is an employer-sponsored retirement plan offered by many for-profit companies. The Revenue Act of 1978 created the 401(k) based on an idea by retirement benefit consultant Ted Benna. Similarly, a 403(b) is an employer-sponsored retirement plan, but it is offered by public schools, churches, and 501(c)(3) non-profit organisations. The key difference is that 403(b) plans are offered to not-for-profit organisations and government employees, while 401(k) plans are primarily offered to employees in for-profit companies.

Both 401(k) and 403(b) plans share several similarities. They are both tax-advantaged, meaning workers can preserve more of their investment growth for retirement. They are also both pre-tax accounts, and money contributed is generally withdrawn from employees' paychecks before taxes. This helps workers pay less in taxes that year. Additionally, both plans often include employer contributions in the form of matching contributions.

However, there are some differences between the two plans. 401(k) plans offer more investment choices to employees, including stocks, exchange-traded funds (ETFs), bonds, mutual funds, and target-date funds. On the other hand, 403(b) plans only offer annuities and mutual funds. 401(k) plans also generally have more generous employer matches.

Another difference is the early withdrawal penalties. While both plans penalise workers who withdraw from their accounts before age 59 1/2 with a 10% tax penalty, 403(b) participants enjoy more leeway regarding exceptions. For instance, 403(b) participants can take a distribution if they have a severance from their employer, while 401(k) participants must be at least 55 to take a distribution following service separation.

If your employer offers both a 401(k) and a 403(b), you can contribute to both plans simultaneously to boost your retirement savings. However, there are limits on the combined total of contributions you can make in a tax year. For 2024, the contribution limit is $23,000, and for those aged 50 or older, there is a catch-up contribution limit of an additional $7,500.

Direct and automatic deposits

Direct Deposits

To set up direct deposits, you will need to provide the routing (ABA) number and account number of your Fidelity account to your employer, government agency, or third party. You can find the routing numbers on the Direct Deposit and Direct Debit Information page or on your Portfolio Summary page. It may take a few pay periods for your direct deposit to become active, and your employer should send a confirmation when the setup is complete.

Automatic Deposits

You can schedule regular transfers from your bank, cash management account, or investment accounts to make recurring contributions to your 529 college savings plan and IRA. If you have previously provided your bank information to Fidelity, you can generally start using this feature within 2-4 business days. If you need to add and verify new banking information, it may take longer.

Frequently asked questions