The Best Mutual Funds for Retirement


Retired people need to consider three factors while making investments in mutual funds: expected life, rates of interest and inflation. Someone retiring at the age of sixty-five can look forward to living nineteen more years, as per data revealed by Centers for Disease Control and Prevention in its “Senior Journal” of 2007. An important fact that shouldn’t escape the mind of retired people is that inflation coupled with low rates of interest over the years is going to impact their savings adversely. So, the best mutual funds for retirement should offer them income and capital appreciation while remaining safe.

Money Market Funds

These funds remain among the safest and most convenient and thus the best mutual funds for retirement. That’s because such funds make monthly payment of dividends, irrespective of the fluctuations that keep affecting stock market. Moreover these are very safe as the funds get invested in government securities, corporate bonds and also as deposit certificates. Though the returns from such fund are usually low, these are quite safe and investors can access their money quickly as most offer check writing facility.

Bond Funds

The benefit of bond funds is that retired people get wide access to bond market. They can save part of their funds received at the time of retirement and get regular returns and thus have an additional source of regular income. Generally, bond funds invest in government treasuries, corporate bonds, municipal bonds and securities backed with mortgages and thus exposed to significantly less risk, compared to stocks. However, bond funds are subject to fluctuations in rates of interest and consequently your income from bonds may vary slightly, going up if rates of interest come down but you stand to lose when there is an upward swing in rates of interest.

Income Funds

Income funds refer to those mutual funds that offer dividends from their investments in dividend paying stocks. A lot of such funds keep producing income all through the year which is paid as annual, semi-annual or quarterly dividend. Certain mutual funds are focused on dividend paying stocks only. It’s customary for such like mutual funds to include words like dividend, appreciation and growth in their names. These are classified among the best mutual funds for retirement for their ability to assure payment of dividends. However, the return in their case is subject to market variations.

Supplementary Equity Funds

Investing a part of their funds in additional equity funds helps ensuring capital appreciation during prolonged period of investment made by retired people. Staying invested in blue chip companies allows investors the benefit of capital growth in the long run. Another option would be to invest in total stock market mutual funds, offering coverage to the full stock market, enabling you to derive benefits when the markets go bullish.

Investment Proportions

The challenging part for retired people when considering investments among the best mutual funds for retirement is composition of their portfolio. Of course, security of funds is important but opting for too much of that deprives them of the benefits of an upward swing in stock markets. Some financial consultants recommend a portfolio having 55 percent funds invested in fixed income and the remaining in equities, while others recommend a composition of fifty-fifty.  It’s worthwhile consulting a financial advisor who can help deciding allocations, depending on your risk taking capacity and retirement goals. It is also recommended to search the net and visit websites of reputable investment consultants.


  1. admin

    You should basically make sure like everything else your portfolio is diversified. I would have a mix of bonds, money markets, and etc. Hopefully the mutual funds wouldnt be the only source of income when you retire but if it is make sure you have some stocks that pay dividends as well.

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