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Investing Specialists

What Are Retirement Income Funds? Do You Need One?

Converting your savings to a paycheck in retirement is harder than you might think.

With the first wave of the 76 million Americans born between 1946 and 1964 now heading into retirement, there should be a huge need for products that help investors convert accumulated wealth into regular income. But retirement-income funds haven’t really taken the fund industry by storm. There are currently about 110 mutual funds and collective investment trusts (not including multiple share classes) in Morningstar’s Target-Date Retirement Category with a total of roughly $73 billion in assets. That’s a small sliver of the $1.7 trillion invested in target-date strategies overall.

Benefits of Retirement-Income funds
Retirement-income funds have a few things going for them. These funds are often designed to be the terminal portfolio for investors who are investing their retirement assets in a target-date fund. After the fund reaches its target date, many employer plans will eventually roll over the assets to a retirement income fund. Investors who like the simplicity of an all-in-one portfolio that gives them exposure to a diversified set of asset classes can therefore easily transition into a similar fund after retirement.