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401(k) plan review – Fidelity BrokerageLink


fidelity brokeragelink reviewIn 2011, my company restructured our 401(k) plan. Previously, we had about 50 mutual funds and investments to choose from in the 401(k) plan. As you know, people can be paralyzed into making no decision at all when there are too many choices. I think 50 choices are way too much and many employees didn’t participate in the 401(k) plan. So the company revamped their plan to reduce choices and added the Fidelity BrokerageLink option.

With the new plan, we have about 13 investments plus target date funds to pick from in addition to the company stock. If the employee did not make investment elections, then their contributions default to the target date funds. I think this is good for many employees. It’s easier to choose from a smaller pool of investments and if the employee doesn’t know much about investing, they can still benefit from the target date funds. There was a huge outcry when this plan was introduced because employees thought that their choices would be limited. However, this is not the case because of the Fidelity BrokerageLink option.

From what I understand, the Fidelity Brokerlink plan is a bit different for every company so check your documentation if you have any questions. The plan opens up a huge number of options for me. I can access nearly 5,000 mutual funds that are listed on the Fidelity FundNetwork and any ETFs. Unfortunately, my plan does not include stocks.


  • FundsNetwork NTF Funds: no transaction fee and no load. There is a $75 short-term trading fee if you held the funds for less than 180 days. Once you place 15 short-term trades in 12 months, Fidelity will charge a transaction fee each time you trade for the following 12 months. Basically, if you are a frequent trader, you’ll pay plenty of transaction fees.
  • FundsNetwork TF Funds: $75 transaction fee per investment.
  • ETF: $7.95 per trade.

Many of the Fidelity’s low management fee Spartan funds are NTFs and would be a good choice for long term investors. However, I am more familiar with Vanguard and Fidelity BrokerLink enables me to purchase Vanguard ETFs. I like Vanguard’s low fee business model and their wide selections of ETFs.

It’s easy for me to pick a sector or market segment and then purchase the corresponding Vanguard ETF. I was low on small cap and emerging market, I added VB and VWO over the last few months.

To minimize fee, you can stash your contribution in a Fidelity total market fund (NTF) and then convert it to an ETF after 180 days. For example, if you contribute $200 every paycheck, then it doesn’t make sense to pay the $7.95 fee and purchase an ETF every 2 weeks. I think it’s better to save up in a NTF Fidelity fund for 6 months to about $2,400 and then buy a batch of ETF.

All in all, I’m quite happy with the Fidelity BrokerageLink account. I suspect it’s partially due to the nice 6 months we’ve had in the stock market. What about you? Are you happy with your 401(k) plan? Do you think you would be better off with the Fidelity BrokerageLink account?

If you don’t have a Roth IRA account, you should open one to give yourself the more options in the future. Open an E*TRADE Roth IRA. No Fees. No minimums and get up to $600 when you rollover or transfer.

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Joe started Retire by 40 in 2010 to figure out how to retire early. He spent 16 years working in computer design and enjoyed the technical work immensely. However, he hated the corporate BS. He left his engineering career behind to become a stay-at-home dad/blogger at 38. At Retire by 40, Joe focuses on financial independence, early retirement, investing, saving, and passive income.

For 2018, Joe plans to diversify his passive income by investing in US heartland real estate through RealtyShares. He has 3 rental units in Portland and he believes the local market is getting overpriced.

Joe highly recommends Personal Capital for DIY investors. He logs on to Personal Capital almost daily to check his cash flow and net worth. They have many useful tools that will help every investor analyze their portfolio and plan for retirement.
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{ 26 comments… add one }
  • George Huss February 29, 2012, 4:55 am

    Hi RB40:

    Well done you for using the Fidelity BrokerageLink platform. Tell me, what are you doing to limit your downside risk in the account?


    • retirebyforty February 29, 2012, 9:15 am

      I can set up trailing stop limit orders, but I haven’t done so.
      My philosophy on the 401(k) is to rebalance it to my asset allocation. If the market goes down, I just keep buying more shares to average the cost.

  • MoneyCone February 29, 2012, 6:44 am

    Good for you! In my opinion, if your 401K provider is either Vanguard, Fidelity or Schwab you are lucky. All are stellar companies with a good selection of low cost funds.

    • retirebyforty February 29, 2012, 9:16 am

      I’m quite happy with the change. I didn’t like the choices previously. There were too many bad choices.

  • Well Heeled Blog February 29, 2012, 7:11 am

    Ditto what MoneyCone said. I am grateful that my company offers a 401K, but I wish it had more low cost, index fund options. I still contribute as much as I can though, because when I leave to go back to school, I can roll over all that money into my accounts at Vanguard.

    • retirebyforty February 29, 2012, 9:17 am

      I’m thinking about rolling over to Vanguard once I leave my job too. I need to research a bit more.

  • Dollar D @ The Dollar Disciple February 29, 2012, 7:29 am

    My company doesn’t even match the 401k contributions so I don’t contribute (I put the money towards real estate instead). Sounds like your plan is pretty good though!

    • retirebyforty February 29, 2012, 9:18 am

      Sorry to hear that. Don’t you think the tax advantage is worth contributing to the 401(k)?
      Real estate is another great choice.

  • Jeff @ Sustainable Life Blog February 29, 2012, 9:00 am

    I think that it’s great that if you dont make a fund election, it defaults to target date. I’d imagine that there’s a lot of people out there who started filling out paperwork then got overwhelmed by the choices and quit.

  • frugalportland February 29, 2012, 10:01 am

    man, I wish I had 401(k) options — that sounds great! Right now, I’m investing in an IRA…

    • retirebyforty February 29, 2012, 1:21 pm

      Roth IRA? That’s even more flexible, but no matching. 🙁

  • Roshawn @ Watson Inc February 29, 2012, 10:36 am

    We have definitely had a good stock market for the last 6 months; I like your strategy of buying larger amounts less frequently, provided that someone has the necessary discipline.

  • Leigh February 29, 2012, 10:53 am

    My 401(k) plan has a good selection of Vanguard index funds, though at the investor shares level. This means I have access to the following core funds:

    1) Vanguard 500 Index Fund Investor Shares
    2) Vanguard Total Bond Market Index Fund Investor Shares
    3) Vanguard Total International Stock Market Index Investor Shares
    4) Vanguard Retirement Savings Trust (stable value)

    I also have access to all of Vanguard’s target date funds and a bunch of other active ones from other brands that I ignore, except when I get mail saying that the plan has swapped one active fund for another one and I laugh and wonder why I would care about that.

    I really have no interest in a BrokerageLink type option in my 401(k) at this time since I have access to such great Vanguard funds. It would be nice if we had the Total Stock Market Index Fund in our 401(k) or a REIT index fund, but other than that, I’d say I’m pretty lucky to have the options in my employer’s 401(k) plan.

    • retirebyforty February 29, 2012, 1:23 pm

      We had only a few Vanguard funds previously. I like it much better now that I can buy ETFs.
      It’s great to hear that you are happy with your 401(k). Many people are dissatisfied and don’t contribute.

  • CultOfMoney February 29, 2012, 1:05 pm

    The 401k plan available through my work is so-so. They offer about a dozen choices plus a dozen more target date funds. I’d like to see sector and commodity funds, but they just don’t have them. We also have another deferred comp plan that has more choices, but I don’t contribute to this one.

    • retirebyforty February 29, 2012, 1:24 pm

      I don’t think many 401k plans offer that level of flexibility. (sector choices.) That’s why I like BrokerageLink so much.

  • SB @ One Cent at a Time February 29, 2012, 3:20 pm

    I am also using Fidelity for my fund needs. For 401 (k) I am with my employer provided brokerage which is wells fargo

    • retirebyforty February 29, 2012, 11:11 pm

      How do you like the Wells Fargo plan?

  • krantcents February 29, 2012, 4:33 pm

    I had a 403B with Fidelity which I just converted to an IRA. I have a brokerage accounts with Fidelity and Vanguard. My current 403B with TIAA-CREF and I have accounts (IRAs) with Charles Schwab. Overall, I have a good choice of funds, stocks, and ETFs.

    The market has come back since the crash of 2008, but certain sectors are still lagging.

  • 101 Centavos March 1, 2012, 2:43 am

    Good developments for you, RB40. The limited choices in 401K mutual funds is something that I’ve always thought of as a drawback. Our own plan with Hewitt allows for 50% of the total funds to be converted to a self-directed brokerage account. The only limitations in this account are no options trading and no foreign securities (ADRs excepted).

    • retirebyforty March 1, 2012, 11:18 pm

      Your plan sounds good too and you can buy individual stocks. I like self-directed.

  • Dee at Small House March 1, 2012, 7:51 am

    Like the way you laid it all out here..

    It is such a challenge (at least for me) to figure out where to put extra cash in today’s economic climate.

    We have a tendency to stick w real estate.. not saying it’s the best plan.. it’s just what we know.

    dee 🙂

    • retirebyforty March 1, 2012, 11:19 pm

      I like real estate too, but I think it’s still good to diversify.

  • Buck Inspire March 5, 2012, 11:33 pm

    Good point about having too many choices. Sometimes it can get a little overwhelming. Your post reminded me to rollover my old 401k. Thanks!

    • retirebyforty March 6, 2012, 3:21 pm

      You definitely need to rollover your 401k. Don’t leave it at the old company since you never know when they will change the plan.

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