9 Best Retirement Income Funds Of 2023

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Any mutual fund that delivers regular income payments can be a retirement income fund. Dividend funds, balanced funds and bond funds are three compelling income options, although there are a range of other fund types that can provide retirees with cash flow.

Arranging a dependable stream of income is a key part of your retirement plan. Income should come from multiple sources, like Social Security, personal savings, annuities and even part-time work. Mutual funds that generate regular cash flow—so-called retirement income funds—can also play a big role.

Balanced Funds

A balanced fund owns a portfolio that includes both stocks and bonds. The fund aims to balance its potential growth by owning stocks with the stability and income generation of fixed-income assets.

Balanced funds have a target allocation between stocks and bonds, which is usually stated in the fund’s prospectus. The allocation can vary depending on the fund’s objectives and strategy. A very common target allocation is 60% stocks and 40% bonds.

Bond Funds

Bond mutual funds own fixed income assets, like government bonds, corporate bonds, municipal bonds, or a combination of these. When you invest in a bond, you are lending money to the issuer in exchange for periodic interest payments and the return of the principal amount at maturity.

By investing in a broad portfolio including hundreds or even thousands of assets, bond funds spread your investment risk across different issuers, sectors, maturities and credit ratings. By holding a diversified portfolio, managers reduce the impact of any individual bond’s performance on the overall fund.

Dividend Funds

A dividend fund owns the stocks of companies that regularly pay dividends to their shareholders. They aim to generate income from the dividend payments, and also deliver increased value from capital appreciation of the stocks.

Public companies that pay dividends are typically mature and stable firms with a history of consistent payouts. Dividend funds often target stocks with relatively higher dividend yields, seeking to provide investors with attractive income potential.