Should I move everything to Fidelity Freedom target retirement fund?

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knightrider
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Should I move everything to Fidelity Freedom target retirement fund?

Post by knightrider » Wed Jun 24, 2020 3:26 pm

My 401k ( 700k ) is all invested in Vanguard 2020 target retirement fund ( 0.05% expense ratio ). I now want to do the same for my ROTH, SEP IRA, TIRA and HSA account. The total of all those are 250k.

Seems like FPIFX is what I am looking for. The expense ratio is 0.12 %.

If that is ok, do I just sell everything in my ROTH, SEP, etc.. then buy FPIFX? Or do I do some kind of exchange? Any fees or gotchas to be aware of?

zie
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Re: Should I move everything to Fidelity Freedom target retirement fund?

Post by zie » Wed Jun 24, 2020 3:41 pm

Assuming you want to hold 50% equities, go for it.

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knightrider
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Re: Should I move everything to Fidelity Freedom target retirement fund?

Post by knightrider » Wed Jun 24, 2020 4:22 pm

zie wrote:
Wed Jun 24, 2020 3:41 pm
Assuming you want to hold 50% equities, go for it.
I am not sure my target is any % in equity. I am mostly after a risk tolerance that matches someone who will retire in 2020.

Broken Man 1999
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Re: Should I move everything to Fidelity Freedom target retirement fund?

Post by Broken Man 1999 » Wed Jun 24, 2020 5:20 pm

knightrider wrote:
Wed Jun 24, 2020 4:22 pm
zie wrote:
Wed Jun 24, 2020 3:41 pm
Assuming you want to hold 50% equities, go for it.
I am not sure my target is any % in equity. I am mostly after a risk tolerance that matches someone who will retire in 2020.
Here are the holdings for FPIFX:
Domestic Equities33.10%
International Equities20.79%
Bonds35.94%
Short-Term Debt & Net Other Assets10.17

These holdings are what they are. The question posed by zie simply points out the makeup. But, AAs are usually personal, and should be tailored for the individual. This fund might match your needs perfectly. But there are investors retiring in 2020 who would not use this fund, as it might not be the AA they prefer.

If you use this fund, does it match what you desire for YOUR AA?

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven then I shall not go. " -Mark Twain

02nz
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Re: Should I move everything to Fidelity Freedom target retirement fund?

Post by 02nz » Wed Jun 24, 2020 5:24 pm

The fund you linked is the Fidelity Freedom Index 2020 Fund. That's an important distinction - Fidelity also offers the Freedom series of target retirement date funds, actively managed and with much higher expense ratios (e.g., Fidelity Freedom 2020: https://fundresearch.fidelity.com/mutua ... /31617R605)

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knightrider
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Re: Should I move everything to Fidelity Freedom target retirement fund?

Post by knightrider » Wed Jun 24, 2020 5:33 pm

02nz wrote:
Wed Jun 24, 2020 5:24 pm
The fund you linked is the Fidelity Freedom Index 2020 Fund. That's an important distinction - Fidelity also offers the Freedom series of target retirement date funds, actively managed and with much higher expense ratios (e.g., Fidelity Freedom 2020: https://fundresearch.fidelity.com/mutua ... /31617R605)
Oh, so this is not a retirement fund? I guess I saw the 2020 and assumed it was. I am not interested in paying the high expense ration ( 0.6 % ) for Fidelity Freedom 2020. Any workarounds you would suggest?

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knightrider
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Re: Should I move everything to Fidelity Freedom target retirement fund?

Post by knightrider » Wed Jun 24, 2020 5:35 pm

Broken Man 1999 wrote:
Wed Jun 24, 2020 5:20 pm
If you use this fund, does it match what you desire for YOUR AA?
I haven't given much thought to AA. My goal is to "sit and forget".. Doesn't the target retirement fund take care of all the AA for you? If not, what else should I be looking at and asking myself?

02nz
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Re: Should I move everything to Fidelity Freedom target retirement fund?

Post by 02nz » Wed Jun 24, 2020 5:37 pm

knightrider wrote:
Wed Jun 24, 2020 5:33 pm
02nz wrote:
Wed Jun 24, 2020 5:24 pm
The fund you linked is the Fidelity Freedom Index 2020 Fund. That's an important distinction - Fidelity also offers the Freedom series of target retirement date funds, actively managed and with much higher expense ratios (e.g., Fidelity Freedom 2020: https://fundresearch.fidelity.com/mutua ... /31617R605)
Oh, so this is not a retirement fund? I guess I saw the 2020 and assumed it was. I am not interested in paying the high expense ration ( 0.6 % ) for Fidelity Freedom 2020. Any workarounds you would suggest?
Fidelity Freedom Index 20XX is the low-cost, index-fund-based series of target retirement date funds. Fidelity Freedom 20XX is active and has a higher cost. The one you linked is fine; I just wanted to point out the difference because it's easy to overlook (e.g., this thread title doesn't have the word Index). Sorry if that caused more confusion than it cleared up! :happy

zie
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Re: Should I move everything to Fidelity Freedom target retirement fund?

Post by zie » Wed Jun 24, 2020 5:49 pm

knightrider wrote:
Wed Jun 24, 2020 4:22 pm
zie wrote:
Wed Jun 24, 2020 3:41 pm
Assuming you want to hold 50% equities, go for it.
I am not sure my target is any % in equity. I am mostly after a risk tolerance that matches someone who will retire in 2020.
Then I think holding a 2020 retirement fund would achieve that.

Some people would say 50% equities in the current market is too little, and would recommend 60/40 or 70/30 for a balanced retirement allocation. Unfortunately the Fidelity funds that do that, like FBALX/FPURX are pretty expensive(relatively). VBIAX is the Vanguard version, and it's nice and cheap, but it doesn't appear they have an ETF version, so that you can buy it free @ Fidelity (You can buy it from Fid @ $75/transaction I think). Some options:

50/50:

FPIFX
FIWTX is .08% ER, so if you can buy that, it would be cheaper for you.

60/40 -ish is available in the 2025 funds:
FFEDX (.08% ER)

70/30 -ish is available in the 2030 funds:

FFEGX (.08%ER)

and of course the non investor versions like you found(FPIPX for 50/50), if you can't buy the investor class versions.

iShares have AOK, AOM, etc but they are not super cheap either, compared to their Vanguard version.

I think many retirees around here tend to favour a 60/40 allocation more than 50/50 or 70/30, but this does mean more short-term risk, but more longer term growth.

Personally I'd aim towards a 60/40 AA(so a 2025 retirement fund), but you do you. Note, if you do want more than 50/50 and buy a target date, you will have to sell and buy every few years to keep the 60/40 AA, which could get annoying.

There shouldn't be any tax consequences in your tax-advantaged accounts, but there would probably be a taxable event in a taxable account. I can't say definitively as taxes are complicated.

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knightrider
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Re: Should I move everything to Fidelity Freedom target retirement fund?

Post by knightrider » Wed Jun 24, 2020 5:51 pm

02nz wrote:
Wed Jun 24, 2020 5:37 pm
Fidelity Freedom Index 20XX is the low-cost, index-fund-based series of target retirement date funds. Fidelity Freedom 20XX is active and has a higher cost. The one you linked is fine; I just wanted to point out the difference because it's easy to overlook (e.g., this thread title doesn't have the word Index). Sorry if that caused more confusion than it cleared up! :happy
Thanks, makes sense now. I am glad you explained it because I was looking at Fidelity Freedom 20XX the other day and could not understand why the expense ratio was so high! Now I understand it is because it is actively managed. Looking at the composition there are over 20+ funds in it!

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Re: Should I move everything to Fidelity Freedom target retirement fund?

Post by CardinalRule » Thu Jun 25, 2020 7:52 am

Somehow I didn't even know about the index-fund-based series. Interesting, and thanks.
02nz wrote:
Wed Jun 24, 2020 5:37 pm

Fidelity Freedom Index 20XX is the low-cost, index-fund-based series of target retirement date funds. Fidelity Freedom 20XX is active and has a higher cost. The one you linked is fine; I just wanted to point out the difference because it's easy to overlook (e.g., this thread title doesn't have the word Index). Sorry if that caused more confusion than it cleared up! :happy

02nz
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Re: Should I move everything to Fidelity Freedom target retirement fund?

Post by 02nz » Thu Jun 25, 2020 8:57 am

CardinalRule wrote:
Thu Jun 25, 2020 7:52 am
Somehow I didn't even know about the index-fund-based series. Interesting, and thanks.
02nz wrote:
Wed Jun 24, 2020 5:37 pm

Fidelity Freedom Index 20XX is the low-cost, index-fund-based series of target retirement date funds. Fidelity Freedom 20XX is active and has a higher cost. The one you linked is fine; I just wanted to point out the difference because it's easy to overlook (e.g., this thread title doesn't have the word Index). Sorry if that caused more confusion than it cleared up! :happy
Fidelity seems to market the active Freedom series more. Wonder why? :wink:

OpenMinded1
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Re: Should I move everything to Fidelity Freedom target retirement fund?

Post by OpenMinded1 » Thu Jun 25, 2020 9:38 am

knightrider wrote:
Wed Jun 24, 2020 3:26 pm
My 401k ( 700k ) is all invested in Vanguard 2020 target retirement fund ( 0.05% expense ratio ). I now want to do the same for my ROTH, SEP IRA, TIRA and HSA account. The total of all those are 250k.

Seems like FPIFX is what I am looking for. The expense ratio is 0.12 %.

If that is ok, do I just sell everything in my ROTH, SEP, etc.. then buy FPIFX? Or do I do some kind of exchange? Any fees or gotchas to be aware of?
For the Roth IRA and Traditional IRA you should do what's called a direct rollover if you want to take the monies from one investment company and move it to another to invest it in the Fidelity Index 2020 Fund. If you already have the monies invested with Fidelity, and you want to move from other Fidelity funds to the Fidelity Index 2020 Fund, then you would do what's called an exchange or exchanging shares. You definitely don't want to just sell and then buy in a way that involved you getting the money before using it to buy shares in the Fidelity Index 2020 Fund. This would result in tax withholding. Not sure about the SEP or HSA accounts. Also, you probably should exchange or direct rollover Roth to Roth and TIRA to TIRA, not TIRA to Roth for example.

I find it annoying that two funds that are very different can have names that are almost identical. T. Rowe Price does this too. A few years ago this resulted in me investing in a fund I didn't want. It took me a few months to notice.

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Re: Should I move everything to Fidelity Freedom target retirement fund?

Post by rkhusky » Thu Jun 25, 2020 10:24 am

OP, where do you currently hold your non-401k accounts?

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Re: Should I move everything to Fidelity Freedom target retirement fund?

Post by David Jay » Thu Jun 25, 2020 10:39 am

knightrider wrote:
Wed Jun 24, 2020 4:22 pm
zie wrote:
Wed Jun 24, 2020 3:41 pm
Assuming you want to hold 50% equities, go for it.
I am not sure my target is any % in equity. I am mostly after a risk tolerance that matches someone who will retire in 2020.
Risk tolerance is something very personal. Some people can handle move ups and downs, others can’t. Some people call it the difference between riding a Roller Coaster or floating down the Lazy River.

At BH we teach that the main “control knob” for Risk/Reward is one’s asset allocation. More stocks is higher return and more like a roller coaster. Fewer stocks is less return and more like a lazy river.

This is the reason why you were asked about percentage of equity. 50/50 is a good medium, but I recommend thinking this through in more detail to understand your own personality.

Here is a chart from Vanguard showing the past performance of various asset allocations. Pay particular attention to the “worst year” downturn. You need to be able to hold on during a downturn of that size without “freaking out” and selling. Link: https://vanguard.com/us/insights/saving ... llocations
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Re: Should I move everything to Fidelity Freedom target retirement fund?

Post by snailderby » Thu Jun 25, 2020 10:46 am

David Jay wrote:
Thu Jun 25, 2020 10:39 am
knightrider wrote:
Wed Jun 24, 2020 4:22 pm
zie wrote:
Wed Jun 24, 2020 3:41 pm
Assuming you want to hold 50% equities, go for it.
I am not sure my target is any % in equity. I am mostly after a risk tolerance that matches someone who will retire in 2020.
Risk tolerance is something very personal. Some people can handle move ups and downs, others can’t. Some people call it the difference between riding a Roller Coaster or floating down the Lazy River.

At BH we teach that the main “control knob” for Risk/Reward is one’s asset allocation. More stocks is higher return and more like a roller coaster. Fewer stocks is less return and more like a lazy river.

This is the reason why you were asked about percentage of equity. 50/50 is a good medium, but I recommend thinking this through in more detail to understand your own personality.

Here is a chart from Vanguard showing the past performance of various asset allocations. Pay particular attention to the “worst year” downturn. You need to be able to hold on during a downturn of that size without “freaking out” and selling. Link: https://vanguard.com/us/insights/saving ... llocations
+1

Once you've found an asset allocation that matches your risk tolerance, you can pick a target-date index fund with that asset allocation. It might turn out to be a 2020 fund, or it might not.
Last edited by snailderby on Thu Jun 25, 2020 4:21 pm, edited 1 time in total.

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Re: Should I move everything to Fidelity Freedom target retirement fund?

Post by Jack FFR1846 » Thu Jun 25, 2020 10:56 am

For any target date fund anywhere, you really want to look at the AA that the fund brings. It may be very different from what you want. Vanguard can be different from Fidelity and either of them can change the fund makeup (and have) anytime they want. I like to say to approach these funds only from the AA and not from the name. People might look at them more if they named them something like Dimebag Darrell Target date fund instead of a 2004 fund or a Kurt Cobain Target date fund instead of a 1994 fund.
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knightrider
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Re: Should I move everything to Fidelity Freedom target retirement fund?

Post by knightrider » Thu Jun 25, 2020 10:59 am

rkhusky wrote:
Thu Jun 25, 2020 10:24 am
OP, where do you currently hold your non-401k accounts?
Everything is in Fidelity.

rkhusky
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Re: Should I move everything to Fidelity Freedom target retirement fund?

Post by rkhusky » Thu Jun 25, 2020 11:17 am

knightrider wrote:
Thu Jun 25, 2020 10:59 am
rkhusky wrote:
Thu Jun 25, 2020 10:24 am
OP, where do you currently hold your non-401k accounts?
Everything is in Fidelity.
Then not much is stopping you from moving everything in your tax-advantaged accounts to FF Index 2020. I imagine that Fidelity has an exchange button like Vanguard does. You would want to select “all shares” or the equivalent.

rkhusky
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Re: Should I move everything to Fidelity Freedom target retirement fund?

Post by rkhusky » Thu Jun 25, 2020 11:23 am

Vanguard TR 2020 is at 50/50 stocks/bonds and will glide to 30/70 over the next 7 years, where it will stay.

The FF Index 2020 fund is at 54/46, in 2025 it will be at 46/54, in 2030 it will be at 36/64, in 2035 it will be at 27/73, and in 2040 and after it will stay at 20/80. To summarize, the FF Index funds are about 50/50 on their target date and glide to 20/80 over 20 years.

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knightrider
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Re: Should I move everything to Fidelity Freedom target retirement fund?

Post by knightrider » Thu Jun 25, 2020 12:41 pm

rkhusky wrote:
Thu Jun 25, 2020 11:17 am
Then not much is stopping you from moving everything in your tax-advantaged accounts to FF Index 2020. I imagine that Fidelity has an exchange button like Vanguard does. You would want to select “all shares” or the equivalent.
Sounds good. In a year or so I might switch to the 2030 or 2025 target retirement fund. I assume I can do the same exchange then without worrying about any fees/penalty?

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Re: Should I move everything to Fidelity Freedom target retirement fund?

Post by rkhusky » Thu Jun 25, 2020 1:41 pm

knightrider wrote:
Thu Jun 25, 2020 12:41 pm
rkhusky wrote:
Thu Jun 25, 2020 11:17 am
Then not much is stopping you from moving everything in your tax-advantaged accounts to FF Index 2020. I imagine that Fidelity has an exchange button like Vanguard does. You would want to select “all shares” or the equivalent.
Sounds good. In a year or so I might switch to the 2030 or 2025 target retirement fund. I assume I can do the same exchange then without worrying about any fees/penalty?
Correct.

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Re: Should I move everything to Fidelity Freedom target retirement fund?

Post by sycamore » Thu Jun 25, 2020 1:51 pm

OP, as rkhusky noted, each Fidelity Freedom Index fund follows a glidepath.
Fidelity's document on that glidepath is here: https://www.fidelity.com/bin-public/060 ... s-work.pdf. It assumes the target year is the year a person turns 65, but as noted above you should pick your AA first and then decide on the target date that matches.

The Fidelity Freedom Index Income Fund has a static allocation - it's where the glidepath flattens out.

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Re: Should I move everything to Fidelity Freedom target retirement fund?

Post by knightrider » Mon Jun 29, 2020 11:23 am

OpenMinded1 wrote:
Thu Jun 25, 2020 9:38 am
If you already have the monies invested with Fidelity, and you want to move from other Fidelity funds to the Fidelity Index 2020 Fund, then you would do what's called an exchange or exchanging shares.
Some of my funds are not by Fidelity. For example my SEP IRA is all the Vanguard fund BND. Do I have to sell those, wait for the cash to settle then buy the new Fidelity fund?

And for the funds that I already have with Fidelity, is this the correct choice to "exchange" them below? For example, my TIRA is all FFONX

Image

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Re: Should I move everything to Fidelity Freedom target retirement fund?

Post by sycamore » Mon Jun 29, 2020 12:03 pm

knightrider wrote:
Mon Jun 29, 2020 11:23 am
OpenMinded1 wrote:
Thu Jun 25, 2020 9:38 am
If you already have the monies invested with Fidelity, and you want to move from other Fidelity funds to the Fidelity Index 2020 Fund, then you would do what's called an exchange or exchanging shares.
Some of my funds are not by Fidelity. For example my SEP IRA is all the Vanguard fund BND. Do I have to sell those, wait for the cash to settle then buy the new Fidelity fund?
Worst case, yes, you'll have to wait. There are different settlement times for mutual funds versus stocks/ETFs. See https://www.fidelity.com/learning-cente ... tocks-etfs.

Suggest you go ahead and sell BND today. Wait a minute for the sale to go through (if you use a market order it'll happen right away) and then try to buy the new fund in the same account. Fidelity may allow you to request a purchase because they'll see you have money pending from the settlement of the BND sale. If they don't allow you to make a purchase, try again tomorrow.
knightrider wrote:
Mon Jun 29, 2020 11:23 am
And for the funds that I already have with Fidelity, is this the correct choice to "exchange" them below? For example, my TIRA is all FFONX

Image
Yes, that's one way to do it. Since you're planning to exchange all of FFONX, you might as well use the "Sell All Shares and use proceeds to buy another" option to avoid the risk of accidentally mistyping the #shares you want to sell.

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knightrider
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Re: Should I move everything to Fidelity Freedom target retirement fund?

Post by knightrider » Mon Jun 29, 2020 12:38 pm

sycamore wrote:
Mon Jun 29, 2020 12:03 pm
Suggest you go ahead and sell BND today. Wait a minute for the sale to go through (if you use a market order it'll happen right away) and then try to buy the new fund in the same account. Fidelity may allow you to request a purchase because they'll see you have money pending from the settlement of the BND sale.
Many thanks, that worked!

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knightrider
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Re: Should I move everything to Fidelity Freedom target retirement fund?

Post by knightrider » Mon Jun 29, 2020 12:40 pm

sycamore wrote:
Mon Jun 29, 2020 12:03 pm
Suggest you go ahead and sell BND today. Wait a minute for the sale to go through (if you use a market order it'll happen right away) and then try to buy the new fund in the same account. Fidelity may allow you to request a purchase because they'll see you have money pending from the settlement of the BND sale.
Many thanks, that worked! Though I was not sure what dollar amount to use to buy the new fund. For example it said I had $24,398 available so I said buy $24,390 of FPIFX instead of the full $24,398.. Similar problem with the other accounts. Right now everything is showing as "pending/unsettled" so I will check back tomorrow if it worked as I expected.

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knightrider
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Re: Should I move everything to Fidelity Freedom target retirement fund?

Post by knightrider » Tue Jun 30, 2020 4:53 pm

I was able to buy the FPIFX index fund but am now left with some "fractional shares" of the old funds. See below:

Image

And when I try and sell this 0.927 share it says, "Quantity must be whole number"

Image

02nz
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Re: Should I move everything to Fidelity Freedom target retirement fund?

Post by 02nz » Tue Jun 30, 2020 5:04 pm

knightrider wrote:
Tue Jun 30, 2020 4:53 pm
And when I try and sell this 0.927 share it says, "Quantity must be whole number"
Because it's an ETF, and normally you can't buy/sell fractions of shares of ETFs and stocks. Call Fidelity, preferably during market hours, and they'll be able to sell for you. It's also possible it will be automatically liquidated, but I'm not sure about that.

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Re: Should I move everything to Fidelity Freedom target retirement fund?

Post by ovacikar » Tue Jun 30, 2020 6:19 pm

You can buy or sell fractional shares in Fidelity phone app.

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knightrider
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Re: Should I move everything to Fidelity Freedom target retirement fund?

Post by knightrider » Wed Jul 01, 2020 9:01 am

02nz wrote:
Tue Jun 30, 2020 5:04 pm
knightrider wrote:
Tue Jun 30, 2020 4:53 pm
And when I try and sell this 0.927 share it says, "Quantity must be whole number"
Because it's an ETF, and normally you can't buy/sell fractions of shares of ETFs and stocks. Call Fidelity, preferably during market hours, and they'll be able to sell for you. It's also possible it will be automatically liquidated, but I'm not sure about that.
Thanks. Surprising why this has to be done over phone? Surely it's a problem everyone faces.

Is there any risk of it accumulating unwanted fees if I just leave it there for years?

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Re: Should I move everything to Fidelity Freedom target retirement fund?

Post by sycamore » Wed Jul 01, 2020 9:05 am

I wonder if the "Sell All Shares" option will let you sell it?

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Re: Should I move everything to Fidelity Freedom target retirement fund?

Post by nedsaid » Wed Jul 01, 2020 9:09 am

knightrider wrote:
Wed Jun 24, 2020 3:26 pm
My 401k ( 700k ) is all invested in Vanguard 2020 target retirement fund ( 0.05% expense ratio ). I now want to do the same for my ROTH, SEP IRA, TIRA and HSA account. The total of all those are 250k.

Seems like FPIFX is what I am looking for. The expense ratio is 0.12 %.

If that is ok, do I just sell everything in my ROTH, SEP, etc.. then buy FPIFX? Or do I do some kind of exchange? Any fees or gotchas to be aware of?
The Vanguard Target Date Retirement funds are excellent as are the Fidelity Freedom Index Funds. If you don't have Index Target Date funds to choose from, good active choices are Fidelity Freedom and the T Rowe Price Target Date Funds. American Funds have good Target Date Retirement funds too if you can get them without a load and with a cheaper share class. Good choices out there.

But yes, Fidelity Freedom Index funds are a perfectly good choice. As others have noted, make sure you can live with whatever asset allocation the providers choose.
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Re: Should I move everything to Fidelity Freedom target retirement fund?

Post by 02nz » Wed Jul 01, 2020 9:19 am

knightrider wrote:
Wed Jul 01, 2020 9:01 am
02nz wrote:
Tue Jun 30, 2020 5:04 pm
knightrider wrote:
Tue Jun 30, 2020 4:53 pm
And when I try and sell this 0.927 share it says, "Quantity must be whole number"
Because it's an ETF, and normally you can't buy/sell fractions of shares of ETFs and stocks. Call Fidelity, preferably during market hours, and they'll be able to sell for you. It's also possible it will be automatically liquidated, but I'm not sure about that.
Thanks. Surprising why this has to be done over phone? Surely it's a problem everyone faces.

Is there any risk of it accumulating unwanted fees if I just leave it there for years?
No fees. IIRC when I sold all my holdings of one ETF at another brokerage, say 50.5 shares, the 50 shares sold right away but the remaining 0.5 took maybe a week or so before it was liquidated automatically, so maybe that's what Fidelity does as well.

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