Retirement Income Funds (RIFs) are a type of managed mutual fund that allow for conservative investments to save for retirement, but do not offer special tax advantages. They earn moderate capital gains and are subject to market volatility and fees.
Retirement Income Funds, or RIFs for short, are a type of retirement savings account. Unlike IRAs or 401ks, retirement income funds do not 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 typically actively managed mutual funds.
One of the main characteristics of a retirement income fund is that it is a managed account or portfolio. This makes the primary type of retirement income fund a mutual fund. These accounts are typically made up of bonds, mid-cap stocks, and large-cap stocks.
Another feature of these types of retirement savings accounts is that they earn moderate capital gains. This is usually possible because the retirement account is made up of moderate earnings and conservative types of investments. While the income gains aren’t huge, retirement income funds provide investment income. These accounts are actively managed, so the specific bonus funds and stocks that make up the account may change. The account manager uses the account holder’s risk tolerance and financial income objectives into consideration when choosing where to invest the money.
Although 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 offer no guarantees, unlike investing in the conservative certificates of deposit (CDs) that some rely on for their savings and retirement income. This means that when it is time to start withdrawing money from the fund, there may be little or nothing left over from the main deposit amount or income that has come into the account over the years.
Investing in these types of retirement savings accounts requires a minimum deposit to start the account. The required amount varies between funds. Typical mutual funds charge fees to investors, and the same is true of retirement income funds. While investors can find different 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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