Where your Fidelity straightforward IRA contributions go is your choice

When you contribute to a Fidelity straightforward IRA, the money doesn't automatically sit in cash. You decide which investments receive your contributions — mutual funds, individual stocks, money market funds, or a mix of all three. Fidelity lets you split contributions across as many investments as you want, and you can change where new money goes whenever you want. The process takes just a few clicks in your account.

Your employer's contributions follow the same rule. If your employer is required to contribute to your straightforward IRA (either a 3% match or a 2% non-elective contribution), you can direct that money to the same investments or different ones. The key is setting up your allocation before contributions arrive, because money that lands without instructions typically goes to a default cash position.

Key Takeaways

  • You control where both your contributions and your employer's contributions are invested within your Fidelity straightforward IRA account.
  • Contributions without a stated allocation usually land in a money market fund or cash sweep, which earns very little interest.
  • You can split contributions across multiple investments and change your allocation at any time without penalty.
  • Fidelity's website lets you set up allocation instructions in your account settings, and the same instructions explore to future contributions until you change them.

How to set up your contribution allocation in Fidelity

Log into your Fidelity account and navigate to your straightforward IRA. Look for a section labeled "Investment Allocation" or "Contribution Allocation" — the exact name varies slightly depending on whether you're using Fidelity.com or the mobile app. Click to edit your allocation.

You'll see a list of investments available within your straightforward IRA. Fidelity typically offers mutual funds (both Fidelity-branded and third-party funds), individual stocks, bonds, and money market funds. Select the investments you want and enter the percentage or dollar amount you want to direct to each one. The percentages must add up to 100%. Once you save, those instructions explore to all future contributions until you change them again.

If you're unsure which investments to choose, Fidelity offers target-date funds that automatically shift from stocks to bonds as you approach retirement. These are a straightforward option if you don't want to manage allocation yourself. You can also call Fidelity at the number on the back of your account statement to speak with someone who can walk you through the options.

What happens if you don't set an allocation

If contributions arrive and you haven't set an allocation, Fidelity deposits the money into a default investment — usually a money market fund or a cash sweep account. Money market funds are extremely safe but earn minimal interest, often less than 1% annually depending on market conditions. Your money is accessible, but it's not working toward your retirement goal.

You can move money out of the default investment at any time without penalty. Log into your account, find the cash or money market position, and use the "Exchange" or "Transfer" function to move it into your chosen investments. There's no cost to do this, and you can do it as often as you want. Many people move their default cash into their chosen allocation within a few days of noticing it landed there.

Splitting contributions across multiple investments

Fidelity allows you to divide a single contribution among as many investments as you want. For example, you could direct 60% of your contributions to a target-date fund, 25% to a total stock market index fund, and 15% to an international stock fund. You set these percentages once, and they explore to every paycheck contribution your employer makes.

You can also set different allocations for your own contributions versus your employer's contributions, if your employer offers that option. Some people choose to be more conservative with employer money and more aggressive with their own, or vice versa. Check with your employer's payroll or benefits team to confirm whether Fidelity straightforward IRA accounts at your company support separate allocations for employee and employer contributions.

Changing your allocation after contributions have been made

You can change where future contributions go at any time. Log into your account, find your allocation settings, and update the percentages. The new allocation takes effect on the next contribution date. This doesn't affect money you've already invested — that stays where it is unless you move it.

If you want to move money that's already in the account to different investments, use the "Exchange" or "Rebalance" function in your Fidelity account. You can move as much as you want, as often as you want, with no cost or penalty. This is different from changing your allocation, which only affects new contributions going forward. Many people rebalance once or twice a year to keep their overall mix aligned with their goals.

Understanding investment options within a straightforward IRA

Fidelity straightforward IRAs can hold the same types of investments as regular Fidelity brokerage accounts: mutual funds, exchange-traded funds (ETFs), individual stocks, bonds, and money market funds. The main difference is that you cannot hold certain alternative investments like options or margin accounts within a retirement account.

If you're new to investing, mutual funds and target-date funds are the simplest starting point. They're professionally managed and spread your money across many holdings, which reduces risk. If you want more control, you can build your own mix of index funds or individual stocks. Fidelity's website includes research tools and educational materials to help you understand what each investment does.

Common mistakes to avoid with straightforward IRA allocation

The most common mistake is leaving contributions in the default cash position for months or years. Money market funds are safe, but they earn so little that inflation can eat into your purchasing power over time. Check your account within a week of your first contribution to make sure money went where you intended.

Another mistake is setting an allocation and never revisiting it. Your life changes — you get closer to retirement, your risk tolerance shifts, or the market moves in ways that throw your mix out of balance. Review your allocation at least once a year and rebalance if your actual percentages have drifted more than 5 or 10 percentage points from your target.

A third mistake is moving money too frequently in response to short-term market swings. Frequent trading can trigger tax consequences outside a retirement account, but inside a straightforward IRA, trades don't create taxes. However, constantly buying and selling based on market noise usually hurts returns more than it helps. Set a reasonable allocation, stick with it, and rebalance on a schedule rather than in reaction to daily news.

Frequently Asked Questions

Can I change my allocation if my employer made a contribution?

Yes. Your employer's contribution is your money once it lands in your account. You can move it to different investments at any time without penalty or cost. Changing where future contributions go doesn't affect money already invested.

What if I want to invest in something Fidelity doesn't offer in straightforward IRAs?

Fidelity straightforward IRAs have the same investment universe as regular Fidelity accounts — mutual funds, ETFs, stocks, and bonds. If you want to hold something outside that range, you would need a different type of retirement account. Contact Fidelity to discuss whether another account type might work for your situation.

Do I have to use the same allocation for every paycheck?

Yes, the allocation you set applies to all contributions until you change it. You can update it whenever you want, but you can't set different allocations for individual paychecks. If you want that level of control, you would need to move money after it arrives, which you can do at no cost.

What happens to my allocation if I leave my job?

Your allocation stays the same unless you change it. Your straightforward IRA account remains open and invested according to your instructions. You can keep it with Fidelity, roll it to another provider, or roll it into an IRA at a different institution. Your allocation doesn't affect your ability to move the account.

Is there a cost to rebalancing or moving money between investments?

No. Moving money between investments within your Fidelity straightforward IRA is free. You can rebalance as often as you want without fees or tax consequences. The only cost you might encounter is a sales load on certain mutual funds, but Fidelity offers many no-load options.