Understanding Fees: Fidelity vs. TIAA and the Impact on Your Retirement Savings

When planning your University retirement, every dollar counts—and that means fees matter more than you might think. Even small differences in fees can significantly impact your long-term retirement savings. Let’s simplify exactly what fees mean for your University Fidelity or TIAA accounts. 

Why Fees Matter 

Imagine you and a friend each invest $50,000 over 25 years, both earning 7% annually. Your fees are 0.5%, and your friend’s fees are 1.5%. Seems minor, right? Yet, by retirement, you'd have approximately $241,000, while your friend would have around $201,000—a $40,000 difference solely due to fees! 

Fidelity’s Fee Structure 

Fidelity is known for its low-cost mutual and index fund offerings: 

• Low Expense Ratios: Many funds have expense ratios below 0.5%, with some index funds at near-zero costs. 

  
  

• Flexibility: Ideal for investors who want lower fees and direct control over their investment choices. 

  
  

• Options Galore. They offer hundreds of funds covering almost every investment category. 

  
  

• Do keep in mind that Fidelity’s wide range of choices includes some actively managed funds that carry higher fees – so you still need to check each fund’s expense ratio and not assume every Fidelity option is the cheapest. 

  
  

TIAA’s Fee Structure 

TIAA offers competitive mutual fund fees but is best known for annuity products, which typically have slightly higher costs: 

• Annuity Fees: Often slightly higher than mutual funds due to built-in guarantees for lifetime income. 

  
  

• Stability and Guarantees: Suitable if predictable income and security outweigh slightly higher fees. 

  
  

• Low Fee Options: They provide mutual funds too – including index funds and target-date funds – and many of these have very competitive low fees. 

  
  

• Mutual Fund vs. Annuity Fund: Be aware of the fee difference. For example, the CREF Stock Account (a variable annuity) has low expenses by annuity standards, but TIAA often offers an equivalent mutual fund with an even lower expense ratio for those who don’t need the annuity’s income guarantees. 

  
  

Which is Better for You? 

Consider these simple questions to clarify your choice: 

• Do you prefer paying the lowest possible fees and actively managing your University investment choices? 

  
  

• Are guaranteed income and predictable retirement payouts more important than slightly higher fees? 

  
  

• How comfortable are you managing investments yourself? 

  
  

• Do you prefer to gain exposure to specific sectors? 

  
  

Make an Informed Choice 

Fees are crucial to your long-term financial security. Want clarity and confidence in your decision? Our free Fidelity vs. TIAA masterclass series at Learning with Provizr breaks down everything you need to know, clearly and simply. Start here: https://www.provizr.com/learning 

If you missed the first post in this Fidelity vs. TIAA series, “Fidelity vs. TIAA: How to Choose the Right Plan for Your Retirement” click back to it here!