A retirement income fund (RIF) is an investment facility that is available to individuals as a way of saving for their retirement. RIF is meant to give out steady returns by providing a high yield capacity as compared to the traditional investment opportunities such as money markets. RIF’s are mutual funds that have been diversified to accommodate some mid-caps stocks and bonds. The use of RIF offers individuals the flexibility in the professional management of their income every month, depending on the type of RIF you need. RIF’s gradually return the funds invested together with capital and profits accumulated over the years until you finish liquidating the funds at a predetermined year of your choice. With this in mind, there are various types of RIF’s which include managed payout funds that provide retirees with monthly payouts. Others include:
Vanguard Managed Payout Fund Investor Shares (VGDX)
Vanguard offers retirees a 4% annual distribution charge of your investment. The firm accomplishes this by distributing and adjusting your portfolio to the current inflation rates and preserving your retirement investment by balancing the risks and returns on investments. The portfolio utilizes a ‘fund on fund’ concept that sees the investor invest in numerous bonds and stocks as per the liking of the fund manager.
Fidelity Freedom Income Fund
It provides retirees a steady income through investing in various money markets such as bonds and stocks, which is distributed to individuals after reaching their target date. They work similarly to annuities, where offer monthly incomes through payments of principal earnings over a certain amount of time. The monthly income sole purpose is to combat inflation one can cash in their investment at any time, thus securing their investment.
John Hancock’s Living Funds
Hancock offers various retirement living funds that are structured to invest one’s funds towards retirement at a particular year. The portfolio target is to generate returns of the target set and generating more after it has achieved its objective. The portfolio uses a fund on fund concept that allows your investment to be used on various stocks and bonds to achieve the target required.
There are several advantages to setting up a RIF, and they will range from financial to personal benefits. These include:
RIF’s offer individuals several tax benefits, which include the total amount of taxable income one has to pay when retiring. RIF’s enable individuals to diversify their taxes by creating several pools of investment that are tax-free or can be tax-deferred. By doing this, it allows retirees to secure their investments by maximizing the profits they achieve.
Offers Peace of Mind
RIF provides retirees peace of mind as some of the funds provide them living expenses for retirees. The managed payout retirement income fund will provide them with cash for their expenses. By doing so, it relieves them of stressful situations whereby they are not sure of how much they need to cash out for their expenses, thus providing them with a safe investment platform.
Reduces Your Financial Obligations
Planning for retirement gives one the possibility of planning ahead of time and determines the financial objectives that relate to you and evaluating them. This helps one know his tax duties when it comes to his or her future investments, whereby one is favored by acquiring a taxable account with the RIF.