Fidelity Annuity Review

Fidelity Personal Retirement Annuity® (FPRA) is a variable contract that requires a $10,000 minimum initial premium. Like any variable annuity, investing is the central feature. For this contract, Fidelity offers three types of investment styles:

• “Hands-off” approach: If you’re new to investing or don’t want to be responsible for each individual investment choice, you can invest in one of Fidelity’s various risk-adjusted portfolio models. These are based on various percentages of equities versus other securities.
• “Hands-on” approach: Those that feel comfortable formulating their own investment portfolio should go with this option. Fidelity offers multiple portfolio funds that you can combine, including ones focused on domestic equities, international equities, fixed-income securities, balanced allocations and money market securities.
• Sector investing approach: Should neither of the other options fit your needs, Fidelity will let you pick from portfolio funds that focus on specific market sectors, like real estate, technology, energy and more.

Fees

If you own a Fidelity Personal Retirement Annuity, your fee schedule will be based on the amount of assets that you invest. So if your initial investment is less than $1 million, you’ll be charged a 0.25% annual fee. Those who make an investment above that amount will see their annual fee dropped to 0.10%.

What makes this fee schedule so unique is that most other variable annuities charge some combination of an annual contract fee and mortality and expense risk charges. Instead, the fees are based solely on the amount of invested assets in your annuity.

When it comes to investment-related fees, the funds that Fidelity offers include expense ratios that range from 0.10% to 2.07%.

Fidelity does not have any early withdrawal charges for the FPRA, which is likewise different than most other variable annuities. However, if you make a withdrawal before age 59.5, the IRS will hit you with a 10% income tax penalty on top of your normal tax rate.

Realistic Return Expectations

Like any variable annuity, your long-term performance is dependent on what you choose to invest in. As of Feb. 2021, the various funds Fidelity offers for this annuity report five-year earnings ranging from -6.45% to 30.67%.

Fidelity only provides one annuity, so to expand its horizons, the company started what it calls The Fidelity Insurance Network. Through this, it partners with other major players in the retirement industry to bring a wide selection of annuities to prospective customers. Here’s a breakdown of what you’ll find:

• Variable annuities
  • New York Life Premier Variable Annuity–P Series with Investment Preservation Rider–P Series
• Fixed annuities
  • Guardian Fixed Target Annuity
  • MassMutual Stable Voyage
  • New York Life Secure Term MVA Fixed Annuity IV
  • Principal Select Series
  • USAA Protected Deferred Annuity
  • Western & Southern SmartSelect
• Deferred income annuities
  • Guardian SecureFuture 
  • MassMutual RetireEase Choice
  • New York Life Guaranteed Future Income Annuity II
  • Principal Deferred Income Annuity
  • Western & Southern IncomeSource® Select 
• Immediate income annuities
  • Guardian Guaranteed Income Annuity III
  • MassMutual RetireEase
  • New York Life Guaranteed Lifetime Income Annuity II/Guaranteed Period Income Annuity II
  • Principal Income Annuity
  • USAA Protected Retirement Income Annuity
  • Western & Southern IncomeSource® Annuity

Fees

The various annuities on offer have different fee structures. For example, variable annuities feature notoriously high rates, while immediate annuities have very few fees. On top of this, different companies that work with Fidelity provide different benefit riders, which often come with fees of their own. However, these riders are usually optional, so you don’t have to add them on if you don’t want to.

With any annuity, if you’re under 59.5 years old and make a withdrawal from your contract, the IRS will levy a 10% income tax penalty on you. This is in addition to the standard income taxes that apply to annuity income.

Realistic Return Expectations

Just as fees vary from annuity to annuity, so to will annuitants see a wide range of returns from the different annuities in the network.

For variable annuities investing in the stock market, there's the potential for both gains and losses, depending on the investments chosen and the performance thereof. On the other hand, income annuities are better served for those looking for financial protection in retirement; while there are no returns in the traditional sense, annuitants who outlive their life expectancy can expect to see more in payments than they paid in premiums.