Retirement income funds (RIFs) are a type of managed retirement savings account that typically consist of bonds, mid-caps, and large-caps. They provide moderate capital gains and investment income, but are subject to market volatility and provide no collateral. RIFs require a minimum deposit and charge fees, and are essentially another type of managed mutual fund.
Retirement funds, or REFs for short, are a type of retirement savings account. Unlike individual retirement accounts (IRAs) or 401k, retirement funds don’t have special tax advantages, such as allowing pre-tax contributions or tax-free growth in the account. Since retirement income funds are any group of conservative investments that allow account owners to save for retirement, there are infinite types or combinations of investments that can be put together to create retirement income funds. RIFs are usually actively managed mutual funds.
One of the key features of a retirement income fund is that it is a managed account or portfolio. This makes the primary type of retirement fund a mutual fund. These accounts typically consist of bonds, mid-caps, and large-caps.
Another feature of these types of retirement savings accounts is that they earn moderate capital gains. This is typically possible because the retirement account is composed of moderate earnings and conservative investment types. While the income gains aren’t huge, retirement income funds provide investment income. These accounts are actively managed, so it is possible for the specific bond funds and stocks that make up the account to change. The account manager takes into account the account holder’s risk tolerance and financial income goals when choosing where to invest money.
Even though these types of retirement accounts provide income and are actively managed, the account is still subject to risk. Since mutual funds are made up of bonds and stocks, market volatility affects the income the retirement fund earns. Additionally, these types of accounts provide no collateral, unlike investments in conservative certificates of deposit (CDs) that some rely on for retirement savings and income. This means that when it comes time to start withdrawing money from the fund, there may be little or nothing left of the original principal deposit amount or income that has gone into the account over the years.
To invest in these types of retirement savings accounts you need a minimum deposit to start the account. The amount requested varies between funds. Typical mutual funds charge fees to investors, and the same is true for retirement income funds. While investors may find several combinations of mutual funds and bonds that make up a managed retirement income fund, retirement income funds are essentially another type of managed mutual fund.
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