Seeking to ensure that workers strengthen their funds against nest egg depletion, the administration has recommended the use of products such as longevity insurance, annuities, and the relatively little-known managed payout funds for employees entering retirement. These investments can augment the employee's retirement funds with regular payouts, while being better alternatives to retirement accounts or company pension plans.
Managed-payout funds are operated by companies that provide mutual funds, in the hopes of retaining client assets that could otherwise be used to purchase annuities. These managed-payout funds are simply mutual funds developed to give retirees and other investors regular income.
The downside to this type of investment is that income isn't as certain as what you would get with annuities and longevity insurance. As these funds have started to emerge in a market currently experiencing unfavorable conditions, some investors have received monthly payments at amounts lower than they expected. The payout is tied to the performance of the fund, so if the market is going south the payments could be lower than if the market is rising.
One kind of payout fund gives the user monthly income, with the end goal of liquidating all assets one to three decades after the worker receives the first payment. Another type is similar to a college endowment, which aims to generate regular payments while preserving part of the initial investment.
If you're concerned about the stability of your finances during retirement, you might want to heed the administration's recommendations and consider using managed-payout funds to add to your nest egg. This type of investment works like a pension, but can be much more reliable in helping you secure your lifetime income stream with regular payments after you make a one-time deposit. To find out if buying into managed-payout funds is right for you, right now, contact your investment advisor or retirement planner.