When I work with clients who have Fidelity 401k plans, one of the most common questions I hear is about understanding their investment options. Fidelity is one of the largest 401k providers in the country, and they offer an extensive range of investment choices that can seem overwhelming at first glance. In my experience helping families navigate their retirement planning, I’ve found that Fidelity’s investment lineup typically includes their proprietary mutual funds, index funds, target-date funds, and often third-party options as well.
For a complete overview, see how annuities work.
The specific fidelity investment options 401k participants have access to will vary by employer plan, but most Fidelity-administered 401k plans include core options like Fidelity’s ZERO funds (which have no expense ratios), their Freedom target-date series, and a selection of actively managed funds across different asset classes. Understanding these choices is crucial because the investments you select today will significantly impact your retirement income down the road.
Let me walk you through what I typically see in Fidelity 401k plans and help you understand how these options fit into your overall retirement strategy.
Core Fidelity Investment Categories
Target-Date Funds (Fidelity Freedom Series)
The most popular option I see clients gravitate toward are Fidelity’s Freedom target-date funds. These funds automatically adjust their asset allocation as you approach retirement, becoming more conservative over time.
Common Freedom Fund Options:
- Fidelity Freedom 2030 Fund (FFFEX)
- Fidelity Freedom 2035 Fund (FFTHX)
- Fidelity Freedom 2040 Fund (FFFFX)
- Fidelity Freedom 2045 Fund (FFFGX)
- Fidelity Freedom 2050 Fund (FFFDX)
- Fidelity Freedom 2055 Fund (FDEEX)
- Fidelity Freedom 2060 Fund (FDKLX)
- Fidelity Freedom 2065 Fund (FFIJX)
These funds typically have expense ratios around 0.12% to 0.75%, depending on whether your plan offers the Freedom or Freedom Index versions. The Freedom Index versions are generally less expensive.
Index Fund Options
Fidelity has made a major push into low-cost index investing, and many 401k plans now include their ZERO fee funds and other low-cost index options:
ZERO Fee Funds (0.00% expense ratio):
- Fidelity ZERO Total Market Index Fund (FZROX)
- Fidelity ZERO International Index Fund (FZILX)
- Fidelity ZERO Large Cap Index Fund (FNILX)
- Fidelity ZERO Extended Market Index Fund (FZIPX)
Other Common Index Options:
- Fidelity 500 Index Fund (FXAIX) - 0.015% expense ratio
- Fidelity Total Market Index Fund (FSKAX) - 0.015% expense ratio
- Fidelity International Index Fund (FTIAX) - 0.06% expense ratio
Active Management Options
For those who prefer actively managed funds, Fidelity typically offers selections across various asset classes:
Large-Cap Options:
- Fidelity Blue Chip Growth Fund (FBGRX) - typically 0.79% expense ratio
- Fidelity Contrafund (FCNTX) - typically 0.85% expense ratio
- Fidelity Growth Company Fund (FDGRX) - typically 0.84% expense ratio
Small and Mid-Cap Options:
- Fidelity Small Cap Index Fund (FSSNX)
- Fidelity Mid Cap Index Fund (FSKEX)
- Various actively managed small and mid-cap growth and value funds
International Options:
- Fidelity International Growth Fund (FIGFX)
- Fidelity Overseas Fund (FOSFX)
- Fidelity Emerging Markets Fund (FEMKX)
Bond and Fixed Income Choices
Most Fidelity 401k plans include several bond fund options for those seeking more conservative investments or wanting to balance their portfolio:
- Fidelity U.S. Bond Index Fund (FXNAX) - typically 0.025% expense ratio
- Fidelity Total Bond Fund (FTBFX) - typically 0.45% expense ratio
- Fidelity Intermediate Bond Fund (FGBFX)
- Fidelity Short-Term Bond Fund (FSHBX)
Some plans also include Treasury Inflation-Protected Securities (TIPS) funds and high-yield bond options.
Specialty and Sector Funds
Depending on your employer’s plan design, you might also have access to:
- Fidelity Real Estate Investment Portfolio (FREL)
- Various sector funds (technology, healthcare, financial services)
- Commodity funds
- Small-cap value and growth funds
Understanding Expense Ratios and Fees
When I review Fidelity 401k options with clients, I always emphasize the importance of understanding fees. Here’s what I typically see:
Lowest Cost Options:
- ZERO funds: 0.00%
- Fidelity index funds: 0.015% to 0.06%
- Freedom Index target-date funds: around 0.12%
Mid-Range Options:
- Freedom target-date funds: 0.50% to 0.75%
- Some actively managed funds: 0.45% to 0.65%
Higher Cost Options:
- Actively managed funds: 0.70% to 1.20%
- Specialty or sector funds: can exceed 1.00%
Fidelity BrokerageLink Option
Many Fidelity 401k plans offer something called BrokerageLink, which opens up access to thousands of additional mutual funds and ETFs beyond the core plan menu. While this gives you more choices, it often comes with additional fees and requires more hands-on management.
The Reality About 401k Limitations
Here’s where I need to be honest with you about something I’ve learned after years of helping families with retirement planning. While Fidelity offers excellent investment options with competitive fees, there are inherent limitations to 401k plans that many people don’t fully understand until they’re closer to retirement.
The biggest issue I see is what happens when it’s time to actually create retirement income from your 401k balance. Let’s say you’ve done everything right—you’ve contributed consistently, chosen low-cost funds, and built up a solid balance of $1 million. Using the widely recommended 4% withdrawal rule, that gives you $40,000 per year in retirement income. After taxes, you’re looking at maybe $30,000-$32,000 take-home. That’s about $2,500 per month to live on.
This is where I started questioning whether the traditional 401k approach was really going to be enough for most families to maintain their lifestyle in retirement.
Asset Allocation Strategies Within Fidelity Options
When working with the Fidelity investment options available in your 401k, consider these common allocation approaches:
Age-Based Allocation
A simple rule of thumb is to subtract your age from 110 to determine your stock allocation. So if you’re 40, you might consider 70% stocks and 30% bonds.
Three-Fund Portfolio Approach
Many investors build a simple but effective portfolio using:
- A total stock market index fund (like FZROX or FSKAX)
- An international stock fund (like FZILX or FTIAX)
- A bond index fund (like FXNAX)
Target-Date Fund Simplicity
If you prefer a “set it and forget it” approach, the Freedom funds automatically adjust your allocation over time.
What to Consider Beyond Fund Selection
While choosing the right Fidelity investments is important, I’ve learned that there are bigger questions most people should be asking about their retirement strategy:
Tax Diversification: Most 401k contributions are pre-tax, meaning you’ll owe taxes on every dollar you withdraw in retirement. Have you considered how tax rates might change over the next 20-30 years?
Income Generation: There’s a big difference between accumulating wealth and generating sustainable retirement income. How will you convert your 401k balance into reliable monthly income that could last 25-30 years in retirement?
Sequence of Returns Risk: What happens if the market crashes right when you’re starting to withdraw from your 401k? This is a real risk that many people don’t plan for.
Making Your Fidelity 401k Work Better
If you’re committed to maximizing your Fidelity 401k options, here are my recommendations:
- Take advantage of any employer match - this is free money
- Consider the ZERO fee funds if available - every basis point matters over decades
- Rebalance annually - don’t let your allocation drift too far from your target
- Increase contributions when possible - especially after raises or bonuses
- Understand your plan’s withdrawal options - some plans offer more flexibility than others
The Bigger Picture
While Fidelity offers some of the best 401k investment options in the industry, I’ve found that successful retirement planning often requires looking beyond just your workplace retirement plan. The families I work with who feel most confident about their retirement future typically have multiple income streams and tax-advantaged strategies working together.
Some have discovered strategies that can potentially provide higher distribution rates than the traditional 4% rule, with tax advantages that could significantly impact their retirement lifestyle. Others have found ways to create more predictable income streams that aren’t subject to market volatility during their retirement years.
Questions Worth Asking
Before you settle on your Fidelity investment allocation, consider these questions:
- Will your 401k balance actually generate enough income to maintain your current lifestyle?
- How will taxes impact your retirement withdrawals?
- What happens if you need access to your money before age 59½?
- How does your 401k fit into your overall estate planning strategy?
- Are there other tax-advantaged strategies you should consider alongside your 401k?
The answers to these questions might influence not just how you invest within your Fidelity 401k, but how much you rely on it as your primary retirement vehicle.
Your Fidelity 401k is likely an important piece of your retirement puzzle, but it’s worth making sure you understand all your options for building the retirement income you’ll actually need. I help families look at the complete picture and explore strategies that might complement their workplace retirement plans.
Want to discuss your complete retirement strategy? Reach out for a consultation and let’s talk about how all the pieces of your financial plan can work together.
- Understand that Fidelity 401k investment options vary by employer plan, but most include core choices like ZERO fee index funds, Freedom target-date funds, and actively managed options across different asset classes.
- Consider Fidelity’s Freedom target-date funds as a hands-off approach since they automatically adjust from aggressive to conservative investments as you approach your retirement date.
- Take advantage of Fidelity’s ZERO fee funds when available, as these index funds charge no expense ratios and can significantly reduce your investment costs over time.
- Compare expense ratios between similar fund options in your plan, as Freedom Index versions typically cost less than regular Freedom funds while tracking the same investments.
- Evaluate whether you prefer low-cost index funds that track market performance or actively managed funds where professional managers try to beat market returns for higher fees.
