Fidelity funds are a mainstay in retirement plans across America, and the best Fidelity retirement funds can go toe to toe with virtually any other major mutual fund company in terms of price and breadth of offerings.
Fidelity has been a leader in mutual funds and exchange-traded funds (ETFs), covering virtually every asset class for decades. It currently boasts more than 43 million individual investors holding $12.4 trillion in assets—scale that allows it to both add new products over time and keep lowering its already low costs.
Let’s take a look at how Fidelity funds can be used to best position your retirement portfolio. I’ll explore some of the best Fidelity mutual funds for retirement, and provide answers to some common related retirement investing questions.
Disclaimer: This article does not constitute individualized investment advice. These securities appear for your consideration and not as personalized investment recommendations. Act at your own discretion.
What Should You Want in a Retirement Fund?
When you’re ready to invest your retirement savings, you need to consider a few critical points.
- Assets: First and foremost, a diversified portfolio should include every major asset class. That’s easy to do with Fidelity mutual funds, as the company offers competitive stock funds and bond funds that are available at most major brokerage houses.
- Fees: Equally significant are the associated costs. Each dollar paid in fees and expenses is a dollar no longer available to compound your wealth.
- Income: Lastly, an ideal retirement portfolio should aim to generate consistent income. While equity funds can be subject to periodic downturns and bear markets, a bond fund focused on income can provide for your living expenses without requiring you to sell assets at what might be an inopportune time. A well-constructed retirement portfolio should include both growth and income strategies.
Fidelity is a popular choice among employers as a custodian for 401(k) plans for the very same reasons. If you’re looking for low fees and broad exposure to every major asset class, Fidelity will generally be a solid option.
Why Fidelity Mutual Funds?
Fidelity is a leader in mutual funds (and exchange-traded funds [ETFs], for that matter) and has been a force in the industry since the launch of its Fidelity Puritan Fund (FPURX) back in 1947.
Today, this premier mutual fund company has more than $12 trillion in assets under administration thanks to many successes over the intervening years. That includes star money managers such as Peter Lynch, the long-time manager of the Fidelity Magellan Fund (FMAGX) who averaged an incredible 29.2% per year between 1977 and 1990.
However, while Fidelity first built its name on actively managed funds, over the past three decades, the firm has built out its low-cost and even no-cost index funds as part of the movement to reduce expense ratios and transaction costs for individual investors.
The Best Fidelity Retirement Funds for 2024
So, with all of that as an introduction, let’s choose some of the very best Fidelity retirement funds to round out a portfolio.
Any or all of these mutual funds should be equally appropriate for a tax-deferred retirement plan like an IRA or 401(k) plan, or a regular, good old-fashioned brokerage account.
Best Fidelity Retirement Fund #1: Fidelity 500 Index Fund
- Style: U.S. large-cap blend
- Assets under management: $568.3 billion
- Expense ratio: 0.015%, or 15¢ per year for every $1,000 invested
- Dividend yield: 1.3%
- Minimum initial investment: None
As a long-term wealth builder, it’s really hard to beat the S&P 500. It’s rare to find an actively managed mutual fund that can consistently beat the S&P 500 over time, particularly after considering fees and expenses. In building out a long-term retirement portfolio, an investment in a simple S&P 500 Index fund like the Fidelity 500 Index Fund (FXAIX) is one of the absolute smartest moves you can make.
If you believe in the American growth story, then buying a basket of America’s biggest and most recognized companies makes sense. Even Warren Buffett, the Oracle of Omaha himself—considered by many to be the greatest investor in history—has said on multiple occasions that most investors, most of the time, should simply buy and hold an S&P 500 index fund and let it run.
The Fidelity 500 Index Fund has an almost nonexistent expense ratio of just 0.015%, which is just about impossible to beat. That has helped it draw an incredible $560+ billion in assets under management.
Turnover in S&P 500 index funds tends to be low at just a couple percent in any given year. That makes them an extraordinarily tax-efficient way to invest, as they generate very little in taxable capital gains. So, if you find yourself with limited IRA or 401(k) funds available to invest, it makes sense to allocate your taxable dollars to a fund like FXAIX.
Want to learn more about FXAIX? Check out the Fidelity provider site.
Related: 10 Best Fidelity Funds to Buy
Best Fidelity Retirement Fund #2: Fidelity Zero Total Market Index Fund
- Style: U.S. large-cap blend
- Assets under management: $22.4 billion
- Expense ratio: N/A
- Dividend yield: 1.2%
- Minimum initial investment: None
Fidelity has taken low-cost index investment to a new level with its ZERO line of mutual funds. These Fidelity mutual funds literally charge nothing in fees.
As a practical matter, there is not much difference between an expense ratio of 0.015% and zero. That extra 15¢ per year per $1,000 invested isn’t going to make a material difference over an investing lifespan. But if paying the absolute minimum in fees is philosophically important to you, then it’s hard to argue with the ZERO line of Fidelity mutual funds.
The Fidelity Zero Total Market Index Fund (FZROX) does provide slightly different exposure than Fidelity 500, however. With FZROX, you gain access to the entire universe of U.S. stocks by tracking the Fidelity U.S. Total Investable Market Index, a float-adjusted market cap-weighted index designed to reflect the performance of the full U.S. equity market (including large-, mid-, and small-cap stocks). To keep costs down, the mutual fund uses statistical sampling techniques to replicate the returns of the index without having to own every underlying stock. Still, this Fidelity fund currently holds nearly 2,650 stocks, making it exceptionally well diversified.
To invest in FZROX, or any other Fidelity ZERO fund, you have to have a Fidelity brokerage account. If you don’t have a Fidelity brokerage account but want comparable exposure, the Fidelity Total Market Index Fund (FSKAX) charges a barely noticeable 0.015% in annual expenses and requires zero minimum initial investment.
Want to learn more about FZROX? Check out the Fidelity provider site.
Related: 10 Best Vanguard Funds for the Everyday Investor
Best Fidelity Retirement Fund #3: Fidelity Short-Term Bond Index Fund
- Style: U.S. short-term bond
- Assets under management: $2.7 billion
- Expense ratio: 0.03%, or 30¢ per year for every $1,000 invested
- SEC yield: 4.4%
- Minimum initial investment: None
When the yield curve is inverted as it is today (meaning short-term bond rates are higher than long-term bond rates), it’s hard to justify the additional risk of longer-term bonds. Buying short-term bonds—or short-term bond mutual funds—provides higher income.
So, no list of the best Fidelity retirement funds would be complete without a short-term bond fund like the Fidelity Short-Term Bond Index Fund (FNSOX).
FNSOX tracks the performance of the Bloomberg U.S. 1-5 Year Government/Credit Bond Index, a market value-weighted index of fixed-rate investment-grade debt securities with maturities from one to five years, including U.S. Treasuries, other U.S. government-related debt, and corporate debt.
These are high-quality bonds with little in the way of credit risk. And because the bonds are short-term in nature, they have very little sensitivity to changes in market interest rates. FNSOX’s bond portfolio has a weighted average maturity of just 2.9 years and a duration of just 2.53 years. (Duration is a measure of interest-rate sensitivity. A duration of 2.53 years means that if interest rates were to rise by 1%, the portfolio would experience a short-term capital loss of about 2.53%. Likewise, a 1% fall in interest rates would mean a 2.53% increase in short-term capital gains.)
There will come a day when short-term bond funds will no longer be particularly attractive, and that day may come sooner rather than later. Currently, the futures market is pricing in aggressive rate cuts by the Federal Reserve over the course of 2024.
But for now, a ~4.0% yield is attractive and comes with very little risk. So, FNSOX remains one of the very best Fidelity retirement funds.
* SEC yield reflects the interest earned across the most recent 30-day period. This is a standard measure for funds holding bonds and preferred stocks.
Want to learn more about FNSOX? Check out the Fidelity provider site.
Related: The 10 Best Fidelity Funds You Can Own
Best Fidelity Retirement Fund #4: Fidelity International Index Fund
- Style: Foreign large-cap blend
- Assets under management: $52.6 billion
- Expense ratio: 0.035%, or 35¢ per year for every $1,000 invested
- Dividend yield: 2.9%
- Minimum initial investment: None
The United States is the world’s leading innovation hub as well as its largest economy. And if you are an American and your expenses are in dollars, it only makes sense to keep the bulk of your wealth in U.S. stock and bond funds.
Still, there are thousands of quality companies in developed markets like Europe, Canada, Australia, or wealthier Asian markets like Japan or South Korea, and in emerging markets (less stable but faster-growing) like China and India. And while U.S. stocks have led the world over the past decade, there are long stretches when international stocks outperform, such as the 2000-08 period most recently.
If you’re looking for broad exposure to international stocks, a very solid option is the Fidelity International Index Fund (FSPSX). This Fidelity mutual fund holds a portfolio of more than 800 international stocks, including household names like Switzerland’s Nestlé (NSRGY), Japan’s Toyota (TM) and France’s LVMH Moët Hennessy Louis Vuitton (LVMUY).
The fund is a one-stop shop for exposure to international stocks, and with an expense ratio of just 0.035%, it’s virtually free to own.
Want to learn more about FSPSX? Check out the Fidelity provider site.
Related: 7 Best Schwab Funds You Can Buy: Low Fees, Low Minimums
Best Fidelity Retirement Fund #5: Fidelity Freedom Funds
- Style: Target-date
- Expense ratio: 0.47%-0.75%, or $4.70-$7.50 per year for every $1,000 invested
- Minimum initial investment: None
One of the issues in building an appropriate allocation allocation is that your ideal mix of stock and bond funds will evolve over time based on your age and stage of life. An ideal portfolio for a 20-year-old is likely going to be very different from that of a 40-year-old, and both those portfolios will be different from what’s ideal for a 60-year-old.
This is where a target date fund can really be a lifesaver. A target-date fund—also called a life-cycle fund—is a type of mutual fund that is designed to change its asset allocation over time.
The typical target-date fund is an actively managed fund—one that will start out with a heavy allocation to stocks and then slowly transition to a heavier allocation to bonds as it approaches its target retirement date, following a glide path.
The target retirement date is intended to be a rough estimate and doesn’t need to be precise. You’re generally not going to know the precise year you plan to retire decades in advance. Fidelity, like most mutual fund families, creates its target-date funds in five-year increments of target retirement date (say, 2025, 2030, 2035, etc.).
Fidelity mutual funds have excellent reputations for their low costs and breadth of offerings, and Fidelity’s target-date fund family—the Fidelity Freedom Funds—continue that legacy. These Fidelity target-date funds hold portfolios of mostly Fidelity stock and bond mutual funds, they’re cheap, and they have no required minimum investment. They’re among of the best suites of life-cycle funds you can buy, and you can read more about them in our primer on Fidelity target-date funds.
Related: The 7 Best T. Rowe Price Funds to Buy and Hold
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Related: The 9 Best Fidelity Index Funds to Buy
Fidelity Funds for Retirement: Frequently Asked Questions (FAQs)
What are Fidelity ZERO Funds?
Fidelity ZERO Funds are a line of zero-minimum, zero-expense index funds launched by Fidelity in 2018. Currently, there are four Fidelity ZERO funds:
- Fidelity Zero International Index Fund (FZILX)
- Fidelity Zero Total Market Index Fund (FZROX)
- Fidelity Zero Extended Market Index (FZIPX)
- Fidelity Zero Large Cap Index Fund (FNILX)
The ZERO funds are true to their name: Investors literally pay nothing in management fees. But there are conditions. The Fidelity ZERO funds are only available in Fidelity brokerage accounts. That might not be a problem, as Fidelity brokerage accounts are generally well regarded and competitive with the other major online brokers. But if you do not already have a Fidelity account, you’d need to open one.
Fidelity ZERO Funds are, strictly speaking, index funds. But they are based on customized indexes that Fidelity has created in-house. The typical large-cap index fund tracks the S&P 500 or another recognized index, but they have to pay licensing fees to the index creator. Fidelity avoids the licensing fees by creating their own indexes, which allows them to pay the savings on in the form of zero fees.
The Fidelity indexes tend to be very similar to popular indexes such as the S&P 500, but they are not the same. So, if tracking a specific index is a priority for you, you should take that under advisement.
What is the minimum investment amount on a Fidelity fund?
Every Fidelity fund has its own minimum investment amount specific to that fund. But Fidelity has been a trailblazer in making its funds available to beginning investors with ultra-low minimums, and many Fidelity funds have no minimum investment at all.
Part of our criteria in selecting the best Fidelity index funds was accessibility, and every fund selected here has a minimum investment of zero, meaning you can literally start your investment with any dollar amount.
