Monday, May 15, 2006

Fidelity Rollover IRA

When I changed jobs from Cleveland to San Diego, I "left behind" one very important thing... my 403b account. My old employer used Fidelity as the custodian and I basically had access to all Fidelity funds plus a sprinkling of others (some Janus and Pimco funds). When I started my new job in San Diego, the 403b account also uses Fidelity as the custodian. Because both employers used Fidelity, I never felt the need to do anything with my old 403b account. There were no extraneous fees or what I felt was limited access to sub-par mutual funds since I could access the entire Fidelity lineup.

Today, I called Fidelity asking about the pros/cons of rolling over my 403b into an IRA. It boiled down to the following: more flexibility and more favorable status for beneficiaries on the IRA. More flexibility meant that with a rollover IRA, I can access many more mutual fund companies and even ETFs. Apparently, Fidelity has agreements with some companies (Janus and Pimco for example, notably, NOT vanguard) where you can purchase their funds and not pay a transaction fee ($75). The other positive of a rollover IRA was if I happened to be so unfortunate as to die, the rollover IRA would continue to remain in a favorable tax status to my designated beneficiary (i.e. spouse) and not necessarily be cashed-out. If I died and my money was still in the 403b, the employer would most likely cash-out the money and pay out a lump sum to my beneficiary, thus losing tax-benefit status and also incurring a penalty to the IRS.

For these reasons, I have decided to change my 403b over to a rollover IRA (the final option is to not rollover and just cash-out... this was not an option for me). In addition, Fidelity provides portfolio advice!

Now, for those that have read my blog, you know that I am a much bigger Vanguard enthusiast and often criticize Fidelity. However, I have been pleased with my returns in my retirement account at Fidelity so for now, will keep the rollover with Fidelty. I will keep you posted on the whole rollover process. I wonder if during the advice session, Fidelity will encourage their own mutual funds?
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