Target Retirement Funds For Bigger Savings

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Even after cutting your expenses, putting your savings in the bank, and contributing regularly to your retirement account, you may still need tools such as target-retirement funds to ensure a stable and adequate nest egg. What you've put away, what you expect to earn from your investments, and what you think you're going to receive from Social Security probably won't be enough to live on when you retire, much less ensure that you don't outlast your retirement funds.

Target-retirement funds aren't to be confused with target-date funds - the latter is made for investors who are still decades away from retirement, while the former is for workers who are already retired. These funds don't come with a given target date, and are beneficial to older investors because these help the senior's retirement portfolio by also lowering its overall risk. These funds usually employ a 30/70 allocation with 30% in stocks and the remaining 70% in cash and bonds, compared to the more aggressive plan for asset allocation that target-date funds use.

These types of retiree-focused funds are built to establish an income stream and a degree of appreciation of capital to investors. These funds do this by generating regular distributions for the investor by way of capital gains and dividends. Some funds pay monthly dividends and capital gains twice a year, for example. Investors can then use these profits by reinvesting them into the same funds or other funds, or simply take the cash payment.

These tools may have a reputation as safer, low-risk sources of income. However, performance depends heavily on market performance and changes in bond interest rates. As with all other investments, there's the risk of losing money because payments and the safety of your capital don't have the guarantees that annuities offer. On the other hand, target-retirement income funds can give you bigger payouts later on, provided that market conditions are favorable and cause your investment to appreciate.

About the Author:
Carina Smith is an author who specializes in financial topics concerning seniors. Puritan Financial Group gives seniors access to reliable investments that can help them add to what they earn from investments. For more information on how Puritan Financial Group can help you, please visit our website at http://www.puritanlife.com.



Article Originally Published On: http://www.articlesnatch.com


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