step by step guide to opening a fidelity IRA

To facilitate the recharacterization of my Roth IRA contribution from last year, I had to open up a traditional IRA at Fidelity. Even though I had four separate accounts with Fidelity at that time, I actually never went through their online account opening process. I was surprised and pleased just how easy it was (disclaimer: I'm not getting paid for this endorsement, though I wouldn't mind ).

The process literally took fewer than 10 steps, and they were very, very easy. (Also, it was great to have the option to save my application at any time, and return to it later if needed.)

Step 1:

First, I logged into my online account, and then clicked on the "Open Account" link up to. On the screen that showed up, I selected "Traditional IRA."


Step 2:

After selecting the type of account I wanted to open, Fidelity gave me a "prep" page that told me the type of information I'd need to complete the process. Most of it is stuff you should know off the top of your head (e.g., social security number, employer information, etc.) but some stuff you have to dig out -- for me, that stuff included driver's license, beneficiary information and bank account information.

Step 3:

The next page that popped up was for my personal information. Luckily, since I was already logged in, most of the fields were already populated. The information I filled out included social security, citizenship, driver's license and addresses.


Step 4:

After my personal information was in, I was then asked to fill out information about my employer, and whether or not I was affiliated with a brokerage, NASD or served as a corporate officer in a public company. Nyet to all of that.

Step 5:

With that stuff out of the way, Fidelity then asked me to choose my investment profile. This involved providing my income, net worth and investment objective. The latter is where you indicate if you're a cautious investor (can't stomach huge risk), or if you're more aggressive. Since I'm relatively young, and I like the idea of big gains (no risk, no reward, right?), I checked off the "most aggressive" box. Keep in mind that you're not bound by your selection here -- I think its just a way for Fidelity to understand the type of investor you are.


Step 6:

This was really the only step I wasn't sure about. The section is called Key Account Features, and this is where you put in your beneficiary information and choose whether to go paperless. Neither of those things confused me. Rather, it was the question on how much I wanted to start the account with.

Since I was recharacterizing, and not really putting in "extra" money, I wasn't sure if I could put in the amount I was transferring over, or if I had to put in something other than that. I gave Fidelity a quick call, and they told me I could put anything, as long as it was over $2,500. Again, the answer here wasn't binding (at least not immediately).


Step 7 & 8:

(Yes, they were that easy I decided to combine them.) In these two steps, I basically verified the information I had entered, and checked off the appropriate boxes to indicate I understood and agreed with Fidelity's terms.

Step 9:

Voila! My account was created, and my new account number appeared right away. Since I was already set up with an online account, my new IRA also showed up on my portfolio within minutes. Very impressive.

Overall, the process of opening up a traditional IRA for the recharacterization was very easy. I also spoke with Fidelity's customer service reps to ask some questions about the recharacterization form. There was some trickiness with question 1c (basically asking what holding within the Roth IRA I wanted to transfer from), but other than that, it was as smooth and painless as the account opening process. The total number of questions on that page was less than 3, if I remember correctly.

After that was done, I signed it, and walked the document over to the Fidelity office one block away from where I work. If only everything in personal finance could be that easy. =P

**I completed this Friday afternoon, so the transfer hasn't been fully completed yet. I'm keeping my fingers crossed that there'll be no hiccups -- if there are, you'll be sure to know about it! =)

recharacterizing my roth ira contribution - continued

Due to my need to recharacterize my 2006 Roth IRA, I had sent Fidelity an email asking how to go about that. Below is their response:

Yes, you can recharacterize the $4,000 Roth IRA contribution to a non-deductible Traditional IRA.

There are no tax implications for recharacterizing to a Traditional IRA before April 17, 2007. With a recharacterization, Fidelity would transfer your 2006 Roth IRA contributions, plus any earnings the contributions have made this year, and move to a Traditional IRA account as your 2006 contribution. Since you do not have a Fidelity Traditional IRA account, you would need to establish a Traditional IRA. While the deadline is April 17, 2007, Fidelity needs to receive your Recharacterization request no later than April 10, 2007 in order to complete process by April 17, 2007.

If you timely file either a Federal tax return or an extension request, the IRS automatically provides a 6-month extension to process a recharacterization for the prior year.

To establish a Traditional IRA account, you will need to fill out a Fidelity IRA application. You can fill out the application online and submit it electronically, or I can mail a new account application to your home.

To access the new account application online:
1. Please go to http://www.Fidelity.com
2. At top of page, click the link "Open an Account" and then the "Open Now" link.
3. On left hand side, choose the "Traditional or Roth IRA" link
4. At this point, you will be asked to either fill out and submit the application online or fill out, print, and mail application to Fidelity.

Please fill out the "Fidelity Request for Recharacterization Form" to request the recharacterization. Upon receipt we will recharacterize your Roth IRA into a Traditional IRA.

You can download this form at our Web site:
http://personal.fidelity.com/retirement/pdf/crechar.pdf

Please complete the form and return to Fidelity for processing. You will have your confirmation letter within three to five business days of Fidelity receiving your request.

Please note that non-deductible Traditional IRA contribution and recharacterizations are both normally reported on IRS Tax Form 8606.

Sounds easy enough, right? Now, it's time to execute. It's nice to find out that as long as I file my taxes on time, I'll have an extension to get this recharacterization completed correctly. It wasn't that exciting, however, to see that yet another IRS tax form will be needed. =\

retirement on my mind

Here are a couple of links worth reading:

• The first is a quick recap of the traditional IRA. This has come up with me recently because, due to two relocations in 2006 being imputed to me as income, I realized I was disqualified from making a Roth IRA contribution (which I already did). Hopefully, recharacterization would be too much of a hassle.

• The second is a write-up on life cycle funds. Many of my friends have been getting into this because they're really not the type to track their investments too closely. They want to save, but with the least amount of attention needed. Life cycle funds are a decent choice, but as you'll read, not for everyone.