Retirement Income Funds

For our purposes, the phrase retirement income funds includes investments packaged within certain age and risk parameters by mutual funds companies.

It also includes separate accounts with similar parameters offered by life insurance companies that market retirement plan administration.

It does not include the Canadian registered RRIF, which is similar to an annuity contract that pays out income to a beneficiary or a number of beneficiaries.

In a general sense, income funds are designed to produce consistent and reliable income over a period of time. Typically, these funds consist of bonds and money market instruments.

Dividend paying equities are also a viable component for income generation and it is quite common to use equity-income funds for revenue producing results.

The need for income is, of course, not restricted to those in retirement. Many needs can be fulfilled through the use of income funds.

Nevertheless, there is a tendency to consider income generation primarily when discussing the objective of retirement planning.

A few mutual fund companies have offered retirement income funds for many years. But, the advent of the baby-boomer phenomenon has encouraged fund companies to expand their options.

The basic strategy is to determine one's risk factor and age and invest your retirement savings into a fund that can provide the best opportunity not only to grow your account... but, at retirement, to preserve your principal throughout your expected lifetime as you receive income.

This type of investment choice can be appealing to those who want to simply set it and forget it... because it provides no ability to make changes within the diversified selection.

However, one can terminate the investment by completely exchanging into another selection.

401(k) plans are popular retirement savings programs. Several life insurance companies are not only plan administrators, but also provide the investment choices within the plan using what is referred to as separate accounts.

These are mutual fund types of investments with a wide diversity of asset classes. The retirement income funds within these separate accounts frequently provide the opportunity to convert the balance of the account into guaranteed or variable lifetime income beginning at retirement age.

Guaranteed income can be offered because life insurance companies can exchange your principal balance for an annuity contract that is backed by its credit worthiness. No other financial institution can offer this lifetime guarantee.

If the retiring plan participant selects an income that will fluctuate based on market performance, the account balance is exchanged for a variable annuity.

In a general sense, the total income received using this strategy will be considerably higher than if one were to select a guaranteed income.

To assist you in calculating how much you will need to accumulate in your retirement income funds simply use this link.