Best Retirement Funds

By Jonathan Bales , last updated January 31, 2012

Retirement income funds are all-encompassing retirement plans that provide regular retirement income. They are more customizable than annuities, but less stable. This is because each retirement fund is allocated over a series of other funds, meaning the income fluctuates based on changes in value. Due to the presence of multiple investments, however, the risk is never enormous. There are a variety of retirement funds out there, some of which are better than others. Listed below is information on four of the best retirement income funds currently available.

John Hancock's Retirement Income Funds
John Hancock offers three different types of retirement income funds. The expenses are relatively high for two of the funds, with a $50,000 minimum. The third fund has a minimum of just $500, however. They offer a payout of anywhere from four to six percent, and these payouts are given quarterly. The overall risk associated with these funds is limited because John Hancock works to limit the effect of fluctuations in value. Nonetheless, the potential volatility is still present.
Fidelity's Income Replacement Funds
Fidelity's retirement funds are set up much differently than those of John Hancock, instead acting more like an annuity. There are 14 different funds from which to choose, all of which provide monthly income. The minimum investment is $25,000. The risk associated with these funds is negligible because Fidelity pays out the entire balance to gradually liquidate your investment. Thus, all of your principal which is invested will eventually be returned to you. Each fund has a target date where upon you receive your funds.
Schwab's Monthly Income Funds
Schwab is known for doing business with the "common man," and their retirement income funds are no different. The minimum amount one must invest into the fund is just $100. With expense ratios up to .70 percent, Schwab's retirement funds are useful for both small and big investors. The major issue for those who do not invest a lot of capital is a sales charge applied to each investment. Sales charges can be avoided by investing larger amounts of money, however. The payout rates for Schwab's Monthly Income Funds vary greatly based on current interest rates and the type of fund selected. These payouts can dip to as low as two percent in situations when interest rates are very low. This is because Schwab's funds provide a lower payout rate over dishing out principal during these times.
Vanguard's Managed Payout Funds
There are three payout funds in Vanguard's retirement plans, and all of them require a minimum investment of $25,000. Funds provide monthly retirement income and the investment fees are considered low. Payout rates can grow as large as seven percent, but that depends on your fund type and the amount you invest. Unlike Schwab, Vanguard will return initial invested principal in order to meet proper payout amounts during times when interest rates are very low. Again, this will depend on the fund type you select. Some funds aim to pay more income but deliver less potential for growth, while others supply less income but offer greater growth.
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