Retirement income funds under a magnifier

9 min read
Sheyna Steiner
Sheyna Steiner

Senior investing analyst/reporter

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Retirement income funds are designed for retirees who want professional management of their portfolios and portfolio distributions without the expense of an investment adviser.

All of the funds within this category as defined by Lipper have been around less than five years. Information under the “Fund overview” tab shows the funds’ one and three-year performance compared to that of the Standard & Poor’s 500 index and the category average. Under the “Fund details” tab are the current targeted distribution rates (hover your mouse over the column at right) and each fund’s general asset allocation. The asset allocation indicates how aggressive or conservative the fund will be, which in turn will impact the performance of the fund relative to the S&P 500. For instance, a higher allocation to bonds over stocks will typically result in less volatility, but lower returns over time.

Lipper divides the category into two subsets. Nonperpetuity funds pay distributions for a finite, stated amount of time. They will have paid investors all of their principal and earnings by the time the fund is shuttered. Perpetuity funds, on the other hand, will attempt to preserve capital for as long as possible while making payments forever or until the capital is depleted.

Category average 43.87 9.03 43.01 4.09
Standard & Poor’s 500 total return          
         
Schwab Monthly Income — Maximum Payout 83.34 7.72 5.14 3.8 Schwab Monthly Income — Maximum Payout
Targeted annual payout of 5 percent to 6 percent. The fund’s actual annual payout could be higher or lower than the targeted annual payout based on the interest rate environment and other market factors occurring during that year. Although it cannot be guaranteed by the fund, the fund does not expect to make distributions that will be treated as return of capital.
Schwab Monthly Income — Enhanced Payout 70.22 11 16.01 2.77 Schwab Monthly Income — Enhanced Payout
Targeted annual payout of 4 percent to 5 percent. The fund’s actual annual payout could be higher or lower than the targeted annual payout based on the interest rate environment and other market factors occurring during that year. Although it cannot be guaranteed by the fund, the fund does not expect to make distributions that will be treated as return of capital.
Schwab Monthly Income — Moderate Payout 57.14 12.99 27.13 2.74 Schwab Monthly Income — Moderate Payout
Targeted annual payout of 3 perecent to 4 percent. The fund’s actual annual payout could be higher or lower than the targeted annual payout based on the interest rate environment and other market factors occurring during that year. Although it cannot be guaranteed by the fund, the fund does not expect to make distributions that will be treated as return of capital.
John Hancock II Retirement Distribution – A Shares 78.23 -16.51 18.47 19.81 John Hancock II Retirement Distribution – A Shares
Targeted annual distribution rate is $0.60 per share. The fund may not have sufficient income from dividends, interest and distributable capital gains to pay the targeted distribution rate. Therefore, the fund’s policy of paying consistent distributions may result in a return of capital to shareholders (i.e., a shareholder would receive a portion of his or her investment back in the form of distributions).
John Hancock II Retirement Rising Distribution – A 75.25 -26.32 21.1 29.97 John Hancock II Retirement Rising Distribution – A
Targeted annual distribution rate is $0.405 per share. The fund intends to increase the distribution rate annually by the rate of inflation as measured by the average annual change in the Consumer Price Index (All Urban Consumers) over the prior three-year period ending on November 30 of each year.
Vanguard Managed Payout Distribution Focus – Investor 24.85 -0.21 53.55 21.82 Vanguard Managed Payout Distribution Focus – Investor
Targeted distribution rate is $0.0898 per share per month.
Vanguard Managed Payout Growth and Distribution – Investor 15 0.03 63.28 21.69 Vanguard Managed Payout Growth and Distribution – Investor
Targeted distribution rate is $0.0647 per share per month.
Vanguard Managed Payout Growth Focus – Investor 5.57 -0.24 72.31 22.36 Vanguard Managed Payout Growth Focus – Investor
Targeted distribution rate is $0.0380 per share per month.
ING Global Target Payment Fund – A 28.98 5.24 59.86 5.92 ING Global Target Payment Fund – A
Twelve level monthly payments throughout each calendar year of $0.045 per share for Class A shares.
           
Russell 2017 Accelerated Distribution Fund – S Shares 63.15 2.59 24.3 9.95 Russell 2017 Accelerated Distribution Fund – S Shares
$0.7214 per share per year payable annually for 10 years from inception. Investors who purchase shares in subsequent years after the fund opens may not receive the same results as investors who purchase shares during the initial investment period. This may include a different payout ratio (target distribution per share divided by net asset value per share) and/or a different amount of the investor’s initial investment remaining at the end of the period.
Russell 2017 Accelerated Distribution Fund – A 60.81 2.51 26.71 9.97 Russell 2017 Accelerated Distribution Fund – A
$0.70 per share per year payable annually for 10 years from inception. Investors who purchase shares in subsequent years after the fund opens may not receive the same results as investors who purchase shares during the initial investment period. This may include a different payout ratio (target distribution per share divided by net asset value per share) and/or a different amount of the investor’s initial investment remaining at the end of the period.
Fidelity Advisor Income Replacement 2022 – A 39.95 12.18 45.16 2.71 Fidelity Advisor Income Replacement 2022 – A
10.29 percent based on the Strategic Adviser’s current schedule of of annual target payment rates. From the prospectus: Strategic Advisers has determined a schedule of annual target payment rates that is designed, but not guaranteed, to enable aggregate monthly payments from a Fidelity Income Replacement Fund to keep pace with inflation over its time horizon. A Fidelity Income Replacement Fund’s annual target payment rate will increase as a fund approaches its horizon date.
Fidelity Advisor Income Replacement 2024 – A 38.18 12.39 47.06 2.37 Fidelity Advisor Income Replacement 2024 – A
8.98 percent based on the Strategic Adviser’s current schedule of annual target payment rates. From the prospectus: Strategic Advisers has determined a schedule of annual target payment rates that is designed, but not guaranteed, to enable aggregate monthly payments from a Fidelity Income Replacement Fund to keep pace with inflation over its time horizon. A Fidelity Income Replacement Fund’s annual target payment rate will increase as a fund approaches its horizon date.
Fidelity Income Replacement 2042 28.66 3.67 64.3 3.37 Fidelity Income Replacement 2042
5.01 percent based on the Strategic Adviser’s current schedule of annual target payment rates. From the prospectus: Strategic Advisers has determined a schedule of annual target payment rates that is designed, but not guaranteed, to enable aggregate monthly payments from a Fidelity Income Replacement Fund to keep pace with inflation over its time horizon. A Fidelity Income Replacement Fund’s annual target payment rate will increase as a fund approaches its horizon date.
Fidelity Advisor Income Replacement 2026 – A 36.45 10.16 50.48 2.91 Fidelity Advisor Income Replacement 2026 – A
8.03 percent based on the Strategic Adviser’s current schedule of annual target payment rates. From the prospectus: Strategic Advisers has determined a schedule of annual target payment rates that is designed, but not guaranteed, to enable aggregate monthly payments from a Fidelity Income Replacement Fund to keep pace with inflation over its time horizon. A Fidelity Income Replacement Fund’s annual target payment rate will increase as a fund approaches its horizon date.
Fidelity Income Replacement 2040 29.02 4.32 63.34 3.32 Fidelity Income Replacement 2040
5.18 percent based on the Strategic Adviser’s current schedule of annual target payment rates. From the prospectus: Strategic Advisers has determined a schedule of annual target payment rates that is designed, but not guaranteed, to enable aggregate monthly payments from a Fidelity Income Replacement Fund to keep pace with inflation over its time horizon. A Fidelity Income Replacement Fund’s annual target payment rate will increase as a fund approaches its horizon date.
Fidelity Advisor Income Replacement 2028 – A 35.15 9.37 52.5 2.98 Fidelity Advisor Income Replacement 2028 – A
7.31 percent based on the Strategic Adviser’s current schedule of annual target payment rates. From the prospectus: Strategic Advisers has determined a schedule of annual target payment rates that is designed, but not guaranteed, to enable aggregate monthly payments from a Fidelity Income Replacement Fund to keep pace with inflation over its time horizon. A Fidelity Income Replacement Fund’s annual target payment rate will increase as a fund approaches its horizon date.
Fidelity Advisor Income Replacement 2030 – A 34.1 8.85 54.03 3.02 Fidelity Advisor Income Replacement 2030 – A
6.75 percent based on the Strategic Adviser’s current schedule of annual target payment rates. From the prospectus: Strategic Advisers has determined a schedule of annual target payment rates that is designed, but not guaranteed, to enable aggregate monthly payments from a Fidelity Income Replacement Fund to keep pace with inflation over its time horizon. A Fidelity Income Replacement Fund’s annual target payment rate will increase as a fund approaches its horizon date.
Fidelity Advisor Income Replacement 2020 – A 43.06 15.79 39.04 2.11 Fidelity Advisor Income Replacement 2020 – A
12.2 percent based on the Strategic Adviser’s current schedule of annual target payment rates. From the prospectus: Strategic Advisers has determined a schedule of annual target payment rates that is designed, but not guaranteed, to enable aggregate monthly payments from a Fidelity Income Replacement Fund to keep pace with inflation over its time horizon. A Fidelity Income Replacement Fund’s annual target payment rate will increase as a fund approaches its horizon date.
Fidelity Advisor Income Replacement 2018 – A 46.48 16.56 34.72 2.24 Fidelity Advisor Income Replacement 2018 – A
15.23 percent based on the Strategic Adviser’s current schedule of annual target payment rates. From the prospectus: Strategic Advisers has determined a schedule of annual target payment rates that is designed, but not guaranteed, to enable aggregate monthly payments from a Fidelity Income Replacement Fund to keep pace with inflation over its time horizon. A Fidelity Income Replacement Fund’s annual target payment rate will increase as a fund approaches its horizon date.
Fidelity Advisor Income Replacement 2032 – A 33.37 9.39 54.69 2.55 Fidelity Advisor Income Replacement 2032 – A
6.3 percent based on the Strategic Adviser’s current schedule of annual target payment rates. From the prospectus: Strategic Advisers has determined a schedule of annual target payment rates that is designed, but not guaranteed, to enable aggregate monthly payments from a Fidelity Income Replacement Fund to keep pace with inflation over its time horizon. A Fidelity Income Replacement Fund’s annual target payment rate will increase as a fund approaches its horizon date.
Fidelity Income Replacement 2038 30.24 5.67 60.86 3.23 Fidelity Income Replacement 2038
5.38 percent based on the Strategic Adviser’s current schedule of annual target payment rates. From the prospectus: Strategic Advisers has determined a schedule of annual target payment rates that is designed, but not guaranteed, to enable aggregate monthly payments from a Fidelity Income Replacement Fund to keep pace with inflation over its time horizon. A Fidelity Income Replacement Fund’s annual target payment rate will increase as a fund approaches its horizon date.
Fidelity Advisor Income Replacement 2034 – A 32.47 8.54 56.4 2.59 Fidelity Advisor Income Replacement 2034 – A
5.93 percent based on the Strategic Adviser’s current schedule of annual target payment rates. From the prospectus: Strategic Advisers has determined a schedule of annual target payment rates that is designed, but not guaranteed, to enable aggregate monthly payments from a Fidelity Income Replacement Fund to keep pace with inflation over its time horizon. A Fidelity Income Replacement Fund’s annual target payment rate will increase as a fund approaches its horizon date.
Fidelity Advisor Income Replacement 2016 – A 51.03 20.03 27.07 1.87 Fidelity Advisor Income Replacement 2016 – A
20.74 percent based on the Strategic Adviser’s current schedule of annual target payment rates. From the prospectus: Strategic Advisers has determined a schedule of annual target payment rates that is designed, but not guaranteed, to enable aggregate monthly payments from a Fidelity Income Replacement Fund to keep pace with inflation over its time horizon. A Fidelity Income Replacement Fund’s annual target payment rate will increase as a fund approaches its horizon date.
Fidelity Advisor Income Replacement 2036 – A 31.26 6.75 58.82 3.16 Fidelity Advisor Income Replacement 2036 – A
5.63 percent based on the Strategic Adviser’s current schedule of annual target payment rates. From the prospectus: Strategic Advisers has determined a schedule of annual target payment rates that is designed, but not guaranteed, to enable aggregate monthly payments from a Fidelity Income Replacement Fund to keep pace with inflation over its time horizon. A Fidelity Income Replacement Fund’s annual target payment rate will increase as a fund approaches its horizon date.
Russell 2027 Extended Distribution – S 25.99 61.79 8.32 3.9 Russell 2027 Extended Distribution – S
$0.7214 per share per year payable annually for 20 years since inception. Investors who purchase shares in subsequent years after the fund opens may not receive the same results as investors who purchase shares during the initial investment period. This may include a different payout ratio (target distribution per share divided by net asset value per share) and/or a different amount of the investor’s initial investment remaining at the end of the period.
Russell 2027 Extended Distribution – A 40.22 41.17 12.62 6 Russell 2027 Extended Distribution – A
$0.70 per share per year payable annually for 20 years since inception. Investors who purchase shares in subsequent years after the fund opens may not receive the same results as investors who purchase shares during the initial investment period. This may include a different payout ratio (target distribution per share divided by net asset value per share) and/or a different amount of the investor’s initial investment remaining at the end of the period.
Russell 2017 Retirement Distribution – S 40.05 1.83 40.1 18.02 Russell 2017 Retirement Distribution – S
$0.7214 per share per year payable annually for 10 years from inception. Investors who purchase shares in subsequent years after the fund opens may not receive the same results as investors who purchase shares during the initial investment period. This may include a different payout ratio (target distribution per share divided by net asset value per share) and/or a different amount of the investor’s initial investment remaining at the end of the period.
Russell 2017 Retirement Distribution – A 39.54 3.72 44.14 12.6 Russell 2017 Retirement Distribution – A
0.70 per share per year payable annually for 10 years from its inception date. Investors who purchase shares in subsequent years after the fund opens may not receive the same results as investors who purchase shares during the initial investment period. This may include a different payout ratio (target distribution per share divided by net asset value per share) and/or a different amount of the investor’s initial investment remaining at the end of the period.
PIMCO Real Income 2019 – A 97.22 2.78 0 0 PIMCO Real Income 2019 – A
Not specified — The monthly distribution rate will be calculated at the fund’s inception based on the portfolio manager’s estimate of the monthly distribution amount that will best allow for the fund’s assets to be fully distributed by the final maturity date of the fund. This monthly distribution amount will then be adjusted for inflation according to changes in the CPI. During periods of rising inflation the amount of the monthly distribution is expected to increase and during periods of deflation the amount of the monthly distribution is expected to decrease.
PIMCO Real Income 2029 – A 94.12 5.88 0 0 PIMCO Real Income 2029 – A
Not specified — The monthly distribution rate will be calculated at the fund’s inception based on the portfolio manager’s estimate of the monthly distribution amount that will best allow for the fund’s assets to be fully distributed by the final maturity

Source: Lipper, a Thomson Reuters company.

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