Retirement income funds fill the gap between having your personal retirement investment advisor, who manages your portfolio and portfolio distributions, and income annuities.
These funds offer flexibility and personalization and emphasize convenience, cost, and growth potential. They are professionally and actively managed without the direct expense of a personal investment advisor. However, it is up to you to do the research of the available funds and to finally decide which fund fits your personal risk tolerance profile. You'll have to study each fund's asset allocation to determine how conservative or aggressive that fund is.
Top-rated funds for retirement income by category are regularly ranked by the financial press. This is a very good source of information, but first define your personal requirements and expectations. How much you want to withdraw each year based on your age, goals, and risk tolerance. Each fund has a different asset allocation with a different emphasis on the goals of asset growth, income, and preservation of principal.
This type of fund is not risk free. The performance of the fund still ultimately depends on how the market performs. However, because of the much larger total amount invested by the fund, the asset allocation is spread wider than a personal portfolio could ever achieve. A fund for retirement income could actually be investing in some twenty underlying mutual funds. This built-in diversification is very appealing to any investor.
The advantages these funds have over traditional annuities is that the income and asset value can grow, and excess amounts can be left to your heirs. You can change your mind at any time and sell your investment in the fund. The disadvantages compared to annuities are that they do not guarantee your income will last for a lifetime or that it will not decline.
The challenge for you remains, when you enter retirement, to decide how to make a lifetime's worth of savings, investments, and retirement provision plan proceeds last long enough!
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