Amazon 401(k) Moving to Fidelity

Key Takeaways

  • Forward-thinking employers like Amazon, Facebook, and Microsoft offer employees easy ways to save for retirement above and beyond the standard 401(k) contribution limits of $19,500 ($26,000 if over age 50).
  • By using an after-tax 401(k) feature, Amazon employees can now save an additional 10% of salary in their retirement plan every year and convert that amount to a Roth 401(k) and enjoy tax free growth.
  • Amazon moved its 401(k) plan to Fidelity in January 2020. Employees can also direct Restricted Stock Units to be deposited into a Fidelity account.

As mentioned in my earlier posts about Microsoft’s after-tax 401(k) feature and the company’s move to an automatic daily conversion, you know I’m a big fan of an after-tax 401(k). That’s why I was excited to learn that Amazon recently moved its massive 401(k) plan over to Fidelity and is now offering its employees the same after-tax 401(k) feature that Microsoft and Facebook employees have enjoyed.

As many of you know, you can contribute up to $19,500 of your salary per year to a 401(k) in 2020 (up to $26,000 a year if you are age 50-plus). If you’re an Amazon employee who has additional savings dollars above the $19,500/$26,000 limit, you can now contribute an additional 10% of your base salary into an after-tax 401(k) account. The new offering also allows for daily conversion of these contributions to a Roth 401(k). Once in the Roth 401(k), your contributions and growth are tax-free! If you ever leave Amazon, you can transfer the Roth 401(k) portion of your plan into a Roth IRA and continue enjoying the tax-free growth and future tax-free withdrawals.

Important consideration for Amazon employees

One caveat: While Amazon is finally offering this after-tax benefit to its employees, the company is limiting contributions to a maximum of 10% of base salary. Microsoft, by contrast, allows its employees to contribute up to $27,500 per year into the after-tax account, regardless of their salary. Still, it is a great benefit for Amazon savers.

Now that Amazon’s move to Fidelity is complete, employees can continue to use the same low-cost investment options as before. That’s right, even though Amazon switched to Fidelity from Vanguard, employees can still use Vanguard Target Date Funds and low-cost Vanguard Index funds.

You can now also direct your Amazon Restricted Stock Units into a Fidelity account for even easier management of your savings. Just log into your Amazon stock portal, go to “Available Brokers,” and select “Fidelity.” Don’t forget to link your bank account, too.

For Amazon employees, this move is a great opportunity. So, set aside some time today to review your account. Make sure your funds are allocated appropriately for your unique situation and risk tolerance before deciding whether or not this new after-tax 401(k) option is right for you and your family.

If you or someone you know at Amazon has questions about the move from Vanguard to Fidelity, or if you’re unsure about taking advantage of the company’s new mega backdoor Roth option, we’re happy to help.

 

James Nevers,CFP® is a Senior Advisor at Soundmark Wealth Management, LLC. James works closely with physicians, business owners, directors and executives at Amazon, Microsoft, and Boeing, and other successful individuals to help them define their financial goals and implement an ongoing financial planning process.

 

This report is intended to be used for educational purposes only and does not constitute a solicitation to purchase any security or advisory services. Past performance is no guarantee of future results. An investment in any security involves significant risks and any investment may lose value. Refer to all risk disclosures related to each security product carefully before investing. Soundmark Wealth Management, LLC, its advisors and its affiliates do not provide tax or accounting services. This material has been prepared for informational purposes only and is not intended to provide, and should not be relied on for, tax or accounting advice. Please consult with your tax advisor prior to engaging in any transaction.

 

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