Is Fidelity Good for Annuities?

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If you’re looking for a way to generate guaranteed income in retirement, buying an annuity might fit the bill. Annuities are available through insurance companies but you can also buy them through an online broker.

Fidelity is one of the largest and most trusted financial services firms in the U.S. with over $12 trillion in assets under administration. Fidelity offers access to several types of annuities from insurance partners such as New York Life. Read on to learn the types of annuities Fidelity offers, including the details of each, to find out if investing in annuities with Fidelity is a good choice for your retirement.

Fidelity Annuities

Here’s a close look at the types of annuities Fidelity offers, each designed to meet various retirement needs and financial goals.

Deferred Fixed Annuities

Fidelity offers fixed annuities that allow you to pay into them now and defer receiving payments until retirement. These deferred annuity policies are available through the Fidelity Insurance Network — which partners with top-rated insurers.

Minimum investments start at $5,000 and policies offer guaranteed interest rates from 3 to 10 years in length. There are lifetime income options available, and a minimum interest rate for fixed annuity policies. Fees vary by annuity chosen.

Fidelity Personal Retirement Annuity

The Fidelity Personal Retirement Annuity is a low-cost deferred variable annuity with access to over 60 mutual funds to grow your investments. As a variable annuity, your returns aren’t guaranteed but will be based on the returns of the investment chosen within the policy.

This annuity offers lower fees than most variable annuities, with a 0.25% fee for contracts purchased under $1 million, and just 0.10% for contracts over $1 million. You will also pay for mutual fund fees of your chosen funds within the policy. The minimum investment is $10,000.

New York Life Premier Variable Annuity — P Series

Fidelity’s partner, New York Life, offers a deferred variable annuity that protects your principal investment with an investment preservation rider. This annuity guarantees 105% of your initial investment at the end of the 10-year holding period — even if your investments underperform.

This annuity is expensive though, with an annuity charge of 1.90% plus a mutual fund annual expense ratio of 0.75%. Make sure you review the fees and performance of any variable annuity before investing. This annuity has a $25,000 minimum investment.

Deferred Income Annuities

Fidelity offers deferred income annuities or Qualified Longevity Annuity Contracts. These annuity policies are available through the Fidelity Insurance Network and offer guaranteed income for life or a set period of time.

These annuities have a minimum investment of $10,000 and you can choose policies with insurance companies like Guardian, MassMutual, New York Life and USAA. Terms, fees and limitations vary by annuity policy chosen.

New York Life Clear Income Advantage Fixed Annuity

This annuity from New York Life is a fixed deferred annuity with a guaranteed lifetime withdrawal benefit. This means you can earn a fixed interest rate for a set period of time and guaranteed income payouts for life.

This annuity has an annual fee of 0.95%, but only guarantees a 1% increase in account value each year, so it may not be the best annuity for growth. But with a guaranteed lifetime payout, it can protect against longevity risk. This annuity has a minimum investment of $50,000.

Immediate Fixed Income Annuities

Fidelity offers immediate annuities that start payouts right away. These annuities are offered through insurance partners and are funded through a lump-sum payment and are known as single-premium immediate annuities.

Minimum investments for these annuities start at $10,000, and guaranteed rate terms range from 5-to-30 years in length. You can choose a rate guarantee from 1% up to 5% annually, depending on the policy and insurer chosen. Fees vary by policy.

Deferred Variable Annuities With Guaranteed Lifetime Withdrawal Benefit

Fidelity offers several variable annuities that pay you income for life through a guaranteed lifetime withdrawal benefit. These deferred annuities allow you to fund and grow your account now and defer payments until a later date.

The structure of this annuity allows you to grow your benefit minimum based on the performance of the Fidelity VIP FundsManager 60% fund. Fees vary by policy, but the Fidelity fund fees are 0.75% annually.

Pros and Cons of Investing in Annuities

Investing in an annuity may be a good choice as part of a larger retirement plan but it might not be right for everyone. Here are a few pros and cons of investing in annuities:

Pros

• Guaranteed income in retirement
• Guaranteed minimum interest rate
• Grows tax-free until payments start
• Potential death benefits for beneficiaries — if you die before payouts begin

Cons

• Locked-in interest rate
• May not keep up with inflation
• Fixed rate only locked in for a few years in most cases

Is Fidelity Good for Annuities?

Fidelity is a large investment firm and online broker that offers a bit of everything — mutual funds, certificates of deposit, fixed-income investments, stock trading and 401(k) accounts. And while Fidelity offers several annuity products, they don’t actually carry the insurance contract for any of them.

Fidelity acts as a broker for finding an annuity that fits your needs. There are a few unique annuities offered by New York Life through Fidelity as a preferred insurer. Fidelity also offers several fixed and variable annuity products that allow you to compare and choose between one of several insurers, including:

• Guardian
• MassMutual
• New York Life
• USAA
• Western & Southern

All of these insurers are highly rated by A.M. Best and Standard & Poor’s — with a rating of A+ or better at both agencies. Policy minimums, maximums, terms and fees will vary by insurer so it’s a good idea to speak with a Fidelity agent to compare policies between companies.

But Fidelity is also a bit limited in their annuity offerings, with fixed and variable annuities available but no indexed annuities. This will limit your choices in the types of annuities you can compare and you may need to find another company that offers more annuity choices to find one that fits your needs.

Final Take

Overall, Fidelity is known for low-cost investment products and offers some decent deals on annuities. Fidelity is essentially the broker for these insurance contracts, allowing you to select between several insurers to find a policy. But as with any annuity product, you’ll want to review the terms, fees and details of the contract before purchasing one.

Information is accurate as of April 25, 2024. 

Editorial Note: This content is not provided by any entity covered in this article. Any opinions, analyses, reviews, ratings or recommendations expressed in this article are those of the author alone and have not been reviewed, approved or otherwise endorsed by any entity named in this article.

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