Maximizing Fidelity 401(k) returns: a practical guide

Retirement Savings
Co-Authored and Reviewed by Gagan Sandhu, MBA - The University of Chicago Booth School of Business, CEO of Xillion
Posted on . 2 min read

The 401(k) is the best way to set yourself up for a comfortable retirement for two big reasons.

  1. Tax Benefits: Contributions are tax-deferred, meaning you only pay taxes when you withdraw during retirement.
  2. Employer Match: This is literally free money that boosts your retirement savings. No excuses; take full advantage of it!

Yet, one of the common mistakes that keeps most people from building solid retirement savings is being invested in the wrong funds. Let's dive in and make sure you're getting the most out of your Fidelity 401(k).

Default Options: A Roadblock to Your Goals

The default settings in your 401(k) are often set to conservative, high-fee, low-performing options like Target Date Funds, which keeps you away from saving a meaningful amount of money for your retirement.

To put it simply, Target Date funds have returned an average of just 6% over the last 20 years. In contrast, SPY, an index fund that tracks the S&P 500, has delivered a 10% return over the same period. That's not just better; it's significantly better.

Your Next Steps

If your Fidelity 401(k) is crawling in Target Date Funds, here's your action plan:

  1. Log into your Fidelity account.
  2. Move your money out of Target Date Funds.
  3. Invest it in low-cost, high-performing Index Funds (FXAIX, FSPTX, VOO, QQQ etc)

Meet the 401(k) Optimizer

If all this sounds complex, don't worry. We've built a simple tool—the 401k Optimizer—that will do this for you. It scans your Fidelity 401(k), flags the high fee and underperforming funds, and then recommends low-cost, high-performing funds based on your risk appetite.

401k Optimizer

This is your life, your retirement, and your future comfort. Optimize your Fidelity 401k today and your future self will thank you.

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