The Fidelity Account is a low-cost brokerage account offered by Fidelity Investments that allows investors to trade U.S. stocks, exchange-traded funds (ETFs) and options online with $0 commission fees. Fractional share trading is also available through the Fidelity mobile app.

The account is a standout for its fee structure and range of investment choices. Broker-assisted trades are pricey, but otherwise, there are few downsides. This Fidelity review is designed to help you decide if it’s the right brokerage for you.

Visit Fidelity Secured
on Fidelity’s secure website

The bottom line: Fidelity may appeal to beginning and more experienced investors alike with its diverse investment options and competitive pricing.

• Full-service broker with a strong brand reputation
• Extensive options for all investor types
• Low or no fees/commissions on most products

• What Fidelity offers and who it’s for
• Fidelity fees and costs
• Fidelity investing tools and research
• Fidelity user experience
• Fidelity investor education
• Fidelity security
• Alternatives to Fidelity to consider

What Fidelity offers and who it’s for

Fidelity is a full-service online brokerage that offers an extensive range of investment Options, including stocks, Mutual funds, ETFs, Options and precious metals. Both beginning and more experienced investors may find Fidelity‘s low trading costs an attractive incentive for opening an individual or joint brokerage account. You also may choose to invest in an IRA or Solo (401)k through Fidelity to save for your retirement.

Fractional share trading is something else that sets Fidelity apart, as not all online brokerages offer this option. In terms of where Fidelity tends to fall short, cryptocurrency and futures trading aren’t included in the list of investment Options. And if you need a broker’s help to execute a trade, that means paying an added fee.

Fidelity fees and costs

Fidelity has followed the example of other online brokerages and moved toward commission-free trading for U.S. stocks, ETFs and  Options when trading online. You can also trade Fidelity‘s impressive collection of Mutual funds with $0 commission fees.

You will, however, run into fees if you want to trade non-Fidelity funds. Again, you’ll pay $0 on purchase for no transaction fee funds from issuers other than Fidelity and $49.95 at redemption for funds held less than 60 days. Transaction fee non-Fidelity funds require a $49.95 fee per purchase but charge $0 on redemption.

Fidelity investing tools and research

• Online trading tools
• Mobile trading tools
• Active Trader Pro

Online trading tools

Fidelity‘s online trading platform includes monitoring tools to help investors:

• Track stock price movements and profit/loss positions in real time
• Research specific market sectors
• Execute trades
• Research individual securities
• Read the latest market news
• Chart their comprehensive financial picture

Investors have access to an ETF screener that allows them to compare more than 2,000 commission-free ETFs, along with mutual fund, stock and bond screeners. Fidelity aggregates investment news and reports from a variety of well-known sources, including Reuters, Zacks Investment Research and Argus Analyst.

Mobile trading tools

The Fidelity mobile app allows investors to track their portfolio on the go. The app, which is free to download for iPhone and Android, makes it easy to:

• Manage your portfolio and watch lists
• Execute trades
• Invest with fractional shares
• View balances and get real-time quotes
• Set up account alerts and notifications
• Save articles and take notes

The most notable feature of the Fidelity mobile app is the ability to trade fractional shares. Through fractional share investing, you can purchase more expensive stocks in smaller increments. With dollar-based investing from Fidelity, you can trade shares of more than 7,000 U.S. stocks and ETFs for as little as $1. That could be appealing to newer investors who are just getting started and don’t have a lot of money to put into the market.

Active Trader Pro

Active Trader Pro is Fidelity‘s dynamic online trading platform. To use Active Trader Pro, you have to request access through Fidelity. You may access this feature automatically if you trade 36 times or more in a rolling 12-month period. If you’re approved for Active Trader Pro, it’s free to use.

Once you download Active Trader Pro for PC or Mac, you’ll have access to tools and research that allow you to take an even deeper dive into trading. For example, the Trade Armor feature allows you to visualize risk and reward for a particular investment while tracking price movements. Real-time analytics make it easy to track technical indicators for stocks to identify trading opportunities.

As the name suggests, Active Trader Pro is designed for investors who take a more active approach to portfolio management. While it’s accessible for active Fidelity investors of any skill level, it may be a little overwhelming for a beginner.

Fidelity user experience

Between online and mobile investing, Fidelity makes investor accounts easily accessible. If you’re unfamiliar with the Fidelity website and its layout, however, you could get lost when moving between different pages. The mobile app, on the other hand, is easier to navigate as you move through different screens and tabs.

In terms of customer service, Fidelity offers support by phone, live chat and secure messaging. Phone support is available 24/7 by calling 800-343-3548. You can also use live chat to connect with Fidelity Support, but it may take time to be connected to a representative. During one attempt, we were put in the queue at number 24 in line.

We also called customer support, which responded promptly with a hold time of less than a minute. Likely, this will all depend on the volume of calls at the time of your attempt. The customer service representative we spoke with on the phone was knowledgeable and able to answer all of our questions, which included requesting information on minimum deposits and how to withdraw money from a brokerage account.

Fidelity investor education

The Fidelity Learning Center offers numerous educational resources to help investors shape their portfolio strategy. The educational tools on hand include:

• Live webinars
• On-demand webinars
• Weekly Fidelity classes for beginning investors
• Interactive coaching sessions
• Investment guides
• Articles

While some online brokerages take a bare-bones approach to investor education, Fidelity equips you with plenty of tools to make informed decisions. These tools are free to access as a Fidelity customer, which is great if you don’t have a dedicated financial advisor yet because you’re unable or unwilling to pay a fee for professional investment advice.

Fidelity security

• SIPC coverage
• Online security
• Customer protection guarantee

SIPC coverage

The Securities Investor Protection Corporation (SIPC) insures against financial losses if a brokerage goes bankrupt. All Fidelity brokerage accounts have SIPC coverage, which extends to money market funds as well as other securities. The coverage limit is up to $500,000, including a $250,000 limit for cash held inside your brokerage account.

Online security

Fidelity uses a number of strategies to protect client accounts online. That includes the use of two-factor authentication to verify accounts, the ability to lock accounts to prevent money transfers, security text alerts and voice recognition through Fidelity MyVoice when accessing your account by phone.

Customer protection guarantee

Fidelity offers a Customer Protection Guarantee to reimburse investors for losses associated with unauthorized account activity. That includes both cash and securities held in Fidelity brokerage accounts. This coverage is automatic, but to use this benefit, you must contact Fidelity at 800-544-6666 as soon as you become aware of any suspicious or unauthorized activity.

Alternatives to Fidelity to consider

Fidelity could be a good fit for investors who want to make commission-free trades, invest with fractional shares or take advantage of Fidelity‘s extensive research and investment tools. It’s important, however, to consider where other brokerages might outshine Fidelity in terms of cost, investment Options and overall user experience. Here are two other Options to compare to Fidelity when opening a brokerage account.

Open account Secured

on Fidelity’s secure website

Fees

$0.00 per trade

Account Minimum

$0

Promotion

N/A

Get Started Secured

on Vanguard’s secure website

Fees

$7.00 per trade for the first 25 trades per year, $20 per trade thereafter for accounts with less than $50,000

$7 per trade for accounts with $50,000 to $500,000

Account Minimum

$1,000 for Vanguard Target Retirement Funds and Vanguard STAR® Funds; $3,000 for most other Vanguard funds

Promotion

N/A

Open account Secured

on TD Ameritrade’s secure website

Fees

$0.00 per trade

Account Minimum

$0

Promotion

N/A

Fidelity vs. Vanguard

Vanguard is a well-known name in the online brokerage space, thanks largely to its suite of low-cost index funds and ETFs. In terms of fees and account minimums, Fidelity and Vanguard are almost identical, though it will cost you slightly more per Options contract with the latter.

In terms of investment offerings, they’re similar, but the main point to consider is whether you lean more toward Fidelity funds or Vanguard funds. When it comes to user experience and investment tools, Fidelity has a slight edge with Active Trader Pro. Fidelity‘s website is also easier to navigate.

Fidelity vs. TD Ameritrade

Fidelity and TD Ameritrade are neck and neck in terms of investment costs and minimums, though you will need at least $2,000 to trade on margin with TD Ameritrade. But this brokerage does offer a few things Fidelity doesn’t, including cryptocurrency and futures trading, as well as multiple online trading platforms designed to meet different investors’ needs.

One other thing worth pointing out is that TD Ameritrade‘s broker-assisted trade fee is lower than Fidelity‘s, at $25 versus $32.95. Whether it makes sense to choose Fidelity over TD Ameritrade or vice versa may ultimately come down to which brokerage’s funds you prefer.

A non-deductible IRA is a way of making contributions to an individual retirement account, not a specific type of IRA.

Anyone can contribute money to a Traditional IRA, no matter how much they make. But you can only make tax-deductible contributions to a Traditional IRA if your modified adjusted gross income (MAGI) is below certain limits set by the IRS. Meanwhile, Roth IRAs are only available to people whose income is below certain thresholds.

Non-deductible IRA contributions make sense for your retirement planning only when your annual income exceeds the limits for a Traditional IRA or a Roth IRA.

A non-deductible IRA strategy is when you contribute money to a Traditional IRA but don’t get the tax deduction benefits, says Garrett Konrad, chief operating officer at registered investment advisory firm IFC.

Tax deductions reduce your annual taxable income, thereby lowering your tax bill or increasing your tax refund. Contributions to a Traditional IRA are partially or fully deductible, depending on your income, filing status and whether you’re covered by a retirement plan through your employer. For 2021, you can deduct your entire contribution to a Traditional IRA if:

• You’re covered by a retirement plan at work, file as a single person or as a head of household, and have a modified adjusted gross income (MAGI) of $68,000 or less.
• You’re part of a married couple filing jointly with a MAGI of $105,000 or less and you’re covered by an employer’s retirement plan.
• If you file as a single person, head of household or as a married couple filing jointly, but you’re not covered by an employer’s plan.

If your tax filing status or income puts you out of range of the Traditional IRA caps outlined above, that’s when you make non-deductible IRA contributions.

Alternatively, you might consider a non-deductible IRA if your income makes you ineligible for a Roth individual retirement account. Roth IRAs provide tax-free distributions in retirement, but you can’t contribute to one if your annual income is too high. For 2021, you can’t contribute to a Roth IRA if:

• You make more than $140,000 as a single filer or head of household.
• If you make more than $208,000 as a married couple filing jointly.

Non-deductible IRA contributions are part of the backdoor Roth IRA strategy (more on that later). Just keep in mind that non-deductible IRAs are subject to the same maximum contribution limits as Traditional and Roth IRAs. For the 2021 tax year, you can contribute up to $6,000 to either type of IRA, or $7,000 if you’re age 50 or older.

How is a non-deductible IRA taxed?

A non-deductible IRA allows you to defer taxes but not escape them completely. After you pay taxes on your income, you can make non-deductible IRA contributions to a Traditional IRA. The contributions will not be taxed when you withdraw them in retirement, since you’ve already paid income taxes on them. However, you will owe income taxes on the earnings you withdraw from the account.

“Because it is a type of contribution, not a type of account, you need to be careful when non-deductible IRA contributions get mixed into an account that previously had tax-deductible contributions in it,” Konrad said. “Tax-deductible contributions are taxed upon withdrawal on the entire amount, while non-deductible contributions are only taxed on the growth of the contribution.”

Non-deductible IRA example

Take a simplified example of a Traditional IRA that has $1,000 in deductible contributions and $1,000 in non-deductible contributions. Assuming each contribution grows by $100, the account balance would be $2,200.

If you were to withdraw the entire deductible contribution, the $100 in earnings from the deductible contribution, and the $100 in earnings for the non-deductible contribution, this $1,200 sum would be taxed. A withdrawal of the $1,000 non-deductible IRA contribution would be not taxed.

Now imagine that you have decades of deductible and non-deductible contributions — plus earnings from both sorts of contributions — in your Traditional IRA. You can imagine how managing your portfolio’s taxes would become tricky once you begin taking distributions in retirement.

Nondeductible IRA and required minimum distributions (RMDs)

There’s another factor to be aware of: Non-deductible IRA contributions are subject to required minimum distributions or RMDs. With Traditional IRAs, including those that hold non-deductible contributions, the IRS requires you to begin taking money from your account at age 72, the so-called RMDs.

The amount you’re required to withdraw is based on your account balance and life expectancy. If you don’t take your RMDs on schedule, the IRS can hit you with a steep tax penalty of 50% of the amount you were required to withdraw.

Why use a non-deductible IRA?

The most popular reason for making non-deductible IRA contributions is because you’ve exceeded the income limits to deduct Traditional IRA contributions or because you can’t contribute to a Roth, says Adam Bergman, president of the IRA Financial Trust and IRA Financial Group in Miami.

Even if you’re not able to deduct your contributions for the year or contribute to a Roth, a non-deductible IRA allows you to fully utilize an IRA as part of your retirement strategy. You can still max out the annual contribution limits this way, meaning you have more money in your IRA that can grow as a result of compounding interest.

The other reason to make non-deductible IRA contributions is as a stepping stone to a backdoor Roth IRA, says Jonathan Bednar, a certified financial planner at Paradigm Wealth Partners in Knoxville, Tenn.

Non-deductible IRA contributions and the backdoor Roth IRA

A backdoor Roth IRA is a way to get a Roth IRA and enjoy its tax benefits when you’d otherwise be ineligible for the account due to an income level that was above the IRS thresholds outlined above.

To execute a backdoor Roth IRA, you’d first open a Traditional IRA and then make a non-deductible IRA contribution. Next you convert it to a Roth account. If done immediately after making the non-deductible contribution, there’d be no taxes owed and you could reap the benefits of tax-free distributions of a Roth IRA once you retire.

However, you do have to watch out for the pro rata rule, Bergman says. This rule dictates that if you have both pretax and after-tax contributions in your IRAs, you have to use the aggregate balance to determine how much tax you’ll owe when you convert to a Roth account.

Also, keep in mind that if you’re converting your entire Traditional IRA, including both deductible and non-deductible contributions, all of the money would be taxable in the year you make the conversion. This can temporarily increase your tax liability, so it’s important to ensure you have cash on hand to cover any taxes owed associated with a Roth conversion.

Who should use a non-deductible IRA?

A non-deductible IRA isn’t the best approach for every investor when planning for retirement. Making non-deductible contributions to an IRA usually only makes sense in one of two scenarios.

“There is really no good reason to make an after-tax contribution other than not being able to make either a pretax or Roth IRA contribution,” Bergman said. “The after-tax contribution does not include a tax deduction and does not have tax-free growth as a Roth IRA.”

Making non-deductible IRA contributions could come in handy if you’ve experienced a life event that changes your tax profile, such as getting a substantial raise at work. You wouldn’t be excluded from making IRA contributions based on your income. At the same time, you could further grow your retirement wealth by maxing out your retirement contributions at work.

More importantly, adding money to a non-deductible IRA could be a good choice if you’d like to include a Roth IRA in the mix when planning for retirement. Along with tax-free distributions, the other benefit of a Roth is the ability to avoid RMDs. This means that your money can continue growing indefinitely in retirement until you need to begin withdrawing it.