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The Short Answer

What You Can Learn from the New Retirement Income Funds

A primer on the latest from Fidelity and Vanguard.


A new type of offering has emerged in the mutual fund market, and we think it's likely to get much more attention in coming years: funds designed to help retirees manage nest eggs to strike a healthy balance between current income and future growth. What's on the line for firms that can get such offerings right? Only the assets of a wave of baby boomers just now beginning to retire.

Some of the same shops that led the way in target-date retirement offerings, such as Fidelity, are now among the first innovators here. Fidelity recently launched "Income Replacement" funds, while Vanguard will soon offer "Managed Payout" funds. Similar offerings from Schwab and others are on the way.

In this article, we'll take a look at what the new breed of income-focused funds offer--and what they don't. We'll also discuss some of the takeaways these funds offer investors who are trying to manage their nest eggs in retirement.

Andrew Gunter does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.