Retirement income fund means any kind of investment product which is available to every kind of people as a stable means of saving for the near retirement. It is popularly known as RIF and is mainly investments in the form of mutual funds. The different types of mutual funds include large or mid-cap stocks and bonds. The portfolio balancing of RIF is done by allowing monetary gains moderately through orthodox approach, this is done so that the bond retains its values in its process of providing a source of income to the people who have invested in the various RIF.
RIFs are very important as they provide stable average growth of different assets of the people which they keep aside for retirement purposes and for this reason these funds are vigorously maintained. One thing people should keep in mind about RIF is that they are not treated specially by the tax department but are treated as normal mutual funds and thus are open to all kind of market risks. Although they are a traditional investment they do not guarantee secured income after retirement. Other than mutual funds there are few other types which pay at regular intervals either on monthly basis or six monthly basis and they require minimum investments.
Types of retirement income funds
There are mainly three types of income funds for retirement plan. These are as follows:
- Target date funds: this type of income fund is designed in two ways. 1. They are designed to help people who have invested for retirement funds to get through retirement ages. 2. Another way in which they are designed is such that by investing in a number of mutual funds people retire to profit from these investments. This type of investment yields low income but it gives people appreciation as this type of investment provides good exposure among the beneficial classes.
- Income replacement funds: are also known as reverse target date funds. In this type of income fund the investment company slowly returns the investor’s invested money plus any kind of capital gain before the company investment policy terminates in any particular year. This kind of income funds has both its pros and cons as people can either gain highly from this investment as the income yield is high or can go through major losses as the loss in this type of investment is steep.
- Managed payout funds: this type of income fund investment is a safe bet as it provides monthly income and there is also a scope for growth in investment. Like all over mutual funds, managed payout funds too are subjected to market risk but one advantage of this is during market lows this kind of investment can either cut its payout amount or can return the investor’s capital. An idea can be formed on how much income this type of fund will yield by looking into its yearly yields.
As retirement income funds are managed by professionals, one does not have to worry about the income distribution strategy, balancing of the income when the market changes or about the allocation of one’s assets. RIFs not only pays a stable amount of return but also keeps up with the rising or falling inflation. The best thing about investing for the future is that people can get lifelong monthly income without giving up hold on their assets.