Simplicity RMD Fund FAQs
What if I want to invest in a different Simplicity RMD Fund other than the one recommended based on my age?
The Simplicity RMD Funds have target dates that reflect the year in which an investor turns 70½ and begins taking required minimum distributions (RMDs). However, customers can choose a different strategy based on other considerations including personal goals for cash/income needed in retirement, inflation; and risk tolerance, if they prefer.
Are the funds actively managed?
The Simplicity RMD Funds are actively managed, applying Fidelity's investment and research capabilities in several areas. The funds invest in multiple Fidelity-managed mutual funds which are primarily actively managed and emphasize security selection in seeking to add value over time. Additionally, the fund managers have flexibility to apply active allocation decisions by incrementally increasing or decreasing positions relative to a fund's specific strategic or benchmark asset allocation.
How will the funds' assets be allocated?
Fidelity Simplicity RMD Funds are designed to help take the guesswork out of the required minimum distribution (RMD) process and assist millions of Americans who are approaching age 70 ½ and above who turned age 70 in or within a few years of Simplicity RMD's horizon date. The funds combine an age-appropriate and professionally-managed investment option with an optional automated payment method designed to manage and satisfy annual RMD requirements on the investor's behalf.
The Simplicity RMD Funds invest in a combination of Fidelity domestic equity funds, international equity funds, bond funds, and short-term funds (underlying Fidelity funds) according to a "neutral" asset allocation strategy that adjusts over time until it reaches an allocation similar to that of the Simplicity RMD Income Fund. Each Simplicity RMD Fund name includes a date, which can help investors choose the fund that most closely aligns to the year they turn 70 ½, the year they are required to take their RMD. The foundation of the funds is the glide path, which is the strategic asset allocation designed to balance investment returns and risk in conjunction with an RMD.
Fund Stocks Bonds Short-Term Fidelity Simplicity RMD Income FundSM 19% 59% 23% Fidelity Simplicity RMD 2005 FundSM 22% 57% 21% Fidelity Simplicity RMD 2010 FundSM 31% 52% 17% Fidelity Simplicity RMD 2015 FundSM 40% 47% 13% Fidelity Simplicity RMD 2020 FundSM 49% 42% 9%*Represents a revised asset allocation strategy effective June 15, 2018, the full implementation of which is expected by the end of 2018.
Do I have to set up an automatic withdrawal or will Fidelity contact me before disbursing the RMD? What happens if I don't set it up?
Investors are not required to set up automatic withdrawals, but it is the easiest way to satisfy RMDs. Once an automatic withdrawal plan is set up, Fidelity will distribute the RMD each year based on the schedule chosen by the investor (monthly, annually, custom), helping meet IRS requirements and deadlines.
For the investors who prefer to manage withdrawals on their own, one-time distributions are an option. It's important to remember that the penalty for a missed RMD is 50% of the amount not taken on time—a potentially costly mistake if the distribution is forgotten.
What if I have multiple IRAs at Fidelity? Will this fund take RMDs for each account?
Automatic withdrawals can be set up at the individual account level or an investor can elect to set up a plan that includes multiple IRAs. The Simplicity RMD Fund itself will not satisfy RMDs without taking a withdrawal.
If I have IRAs at another provider, can I use the Fidelity account/Simplicity RMD Fund to take the RMD across all accounts that are subject to RMDs?
Fidelity automatic withdrawals can only be established for Fidelity accounts. If an investor has an IRA outside of Fidelity, a one-time withdrawal can be requested to satisfy the RMD from the Fidelity IRA.
What if I need to take out additional distributions from my retirement account beyond the RMD?
A required minimum distribution is the minimum amount an investor must withdraw in a given year, but there are no rules preventing additional distributions from being taken if cash flow is needed. Distributions from retirement accounts are generally included in taxable income so investors should consider speaking to a tax advisor about which accounts to take distributions from and the timing of their withdrawals.
What if I don't need the money? Can the distributions be made into another Fidelity account: for example, a Fidelity brokerage account?
Yes, Fidelity's automatic withdrawal process allows the investor to choose from a variety of payment options, including depositing the distribution into a nonretirement brokerage account.
What if I already have an RMD plan set up?
If your current plan is set up for proportional withdrawals, this fund will be added to that withdrawal plan automatically. If your plan is set up as a fixed percentage plan, you will need to adjust the plan to take distributions from the Simplicity RMD Fund or change your plan to proportional.
Do I need to put 100% of my IRA assets into the Simplicity RMD Fund?
No, but if you hold additional positions in your account, consider having your RMDs taken proportionately from your eligible positions.
Diversification and asset allocation do not ensure a profit or guarantee against loss.
Fidelity does not provide legal or tax advice. The information herein is general in nature and should not be considered legal or tax advice. Consult an attorney or tax professional regarding your specific situation.
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