Where your contributions go depends on how you set up your investment elections

When you contribute to a Fidelity Simple IRA, the money does not automatically sit in a single place. You choose how to divide each contribution among the investment options Fidelity offers — mutual funds, individual stocks, bonds, money market funds, or a stable value fund. This choice is called your investment allocation, and you can change it at any time.

The process works the same whether you are the account owner making employee deferrals or an employer making matching or non-elective contributions. You set up your allocation once, and Fidelity routes future contributions according to those instructions. If you do not set up an allocation, Fidelity will place contributions into a default investment — usually a money market fund or a target-date fund depending on your plan setup.

Key Takeaways

  • You set your allocation through Fidelity's website or by phone, choosing what percentage of each contribution goes to each investment option.
  • Your allocation applies to all future contributions unless you change it, so you do not have to re-elect after every paycheck.
  • You can split contributions among as many investments as you want, but most people use between two and four options.
  • Changing your allocation takes effect on the next contribution date, not retroactively on money already invested.

Setting up your allocation online through Fidelity NetBenefits

Log into your Fidelity NetBenefits account and navigate to the Retirement section. Look for a link labeled "Investment Elections" or "Contribution Allocation" — the exact wording varies by plan. Click it to see the list of investment options available in your Simple IRA.

Next to each investment option, enter the percentage of your contribution you want to go there. The percentages must add up to 100 percent. For example, you might put 60 percent into a target-date fund and 40 percent into a bond fund. Once you enter your percentages, click Confirm or Submit. Fidelity will show you a summary of your choices. Review it, then click Final Confirmation or a similar button to lock in your allocation.

Your new allocation takes effect on the next contribution that processes after you submit it — usually within one to three business days. If you contribute through payroll, the change applies to your next paycheck. If you make manual contributions, it applies to your next deposit.

Calling Fidelity to set up or change your allocation

If you prefer to speak with someone, call the phone number on the back of your Fidelity statement or on your plan documents. Have your account number and Social Security number ready. Tell the representative you want to set up or change your investment allocation for your Simple IRA contributions.

The representative will read you the list of available investments and ask you what percentage you want in each one. They will confirm your choices before finalizing the change. This method is useful if you are unsure which investments to choose or if you have questions about the options available to you.

Understanding your investment options

Fidelity Simple IRAs typically offer a range of choices. Target-date funds automatically adjust their mix of stocks and bonds as you approach retirement — they are a hands-off option if you do not want to rebalance manually. Index funds track a market benchmark like the S&P 500 and usually have low fees. Actively managed funds employ a manager who picks individual stocks or bonds; they charge higher fees but may outperform in some market conditions.

A stable value fund or money market fund holds short-term, low-risk investments and pays a modest return — useful as a conservative anchor in your allocation. Individual stocks and bonds let you build a custom portfolio but require more research and monitoring on your part. Most people new to retirement investing start with a target-date fund that matches their expected retirement year, then add other options as their knowledge grows.

Splitting contributions across multiple investments

You do not have to choose just one investment. Many people divide their contributions to spread risk. A common approach is to put 70 percent in a stock-heavy target-date fund and 30 percent in a bond fund. Another is to use three or four funds that cover different market segments — for example, U.S. large-cap stocks, international stocks, bonds, and a money market fund.

The more investments you choose, the more you will need to monitor and potentially rebalance over time. If one investment grows much faster than the others, your allocation can drift away from your original plan. Fidelity offers automatic rebalancing tools that can reset your portfolio to your target percentages on a schedule you choose — quarterly, annually, or on another timeline.

What happens if you do not set an allocation

If you do not make an election, Fidelity will place your contributions into a default investment. For many Simple IRA plans, this is a money market fund or a conservative stable value fund. Some plans use a target-date fund based on your age. Check your plan documents or call Fidelity to find out what the default is for your account.

A money market fund is very safe but typically earns less than stocks or bonds over the long term. If you are young and have decades until retirement, leaving contributions in a money market fund by default means you are missing potential growth. It is worth taking 10 minutes to set up an allocation that matches your goals and risk tolerance.

Changing your allocation after contributions are already invested

Your allocation only controls where future contributions go. Money you have already invested stays where it is unless you move it. If you invested $5,000 in a bond fund last year and now want to shift to stocks, you have two separate decisions to make: change your allocation for future contributions, and separately decide whether to move the existing $5,000.

Moving money that is already invested is called a reallocation or exchange. You can do this through Fidelity NetBenefits or by calling Fidelity. There are no taxes or penalties for moving money within your Simple IRA — the IRS allows unlimited exchanges between investments in the same account. However, if you move money out of the Simple IRA entirely (to a different IRA or to your bank account), tax and penalty rules apply.

Frequently Asked Questions

Can I change my allocation more than once a year?

Yes. You can change your allocation as often as you want, and there is no limit on how many times you adjust it. Each change takes effect on the next contribution date. Some people adjust their allocation once a year during open enrollment; others change it quarterly or whenever their financial situation shifts.

What if I want to move money I already invested to a different fund?

You can move existing money through Fidelity NetBenefits under "Exchanges" or "Reallocate Assets," or by calling Fidelity. This is separate from your contribution allocation and does not affect where future contributions go. There are no taxes or penalties for moving money between investments within your Simple IRA.

Do I need to pick the same allocation for employee deferrals and employer contributions?

No. If you are both an employee and an employer on your Simple IRA, you can set different allocations for your own deferrals and for the employer contributions you receive. Set them separately in Fidelity NetBenefits or ask the representative on the phone to help you distinguish between the two.

What if I am not sure which investments to choose?

Start with a target-date fund that matches your expected retirement year — Fidelity offers these for most decades. This single fund handles the mix of stocks and bonds for you and adjusts automatically as you age. If you want more control later, you can always change your allocation or add other investments.

Does Fidelity charge a fee to change my allocation?

No. Changing your allocation is free. Some individual investments within your Simple IRA may charge their own fees (called expense ratios), but Fidelity does not charge you to move money between them or to update your contribution allocation.