WSJ Tackles Retirement Income Funds
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Monday, January 07, 2008

WSJ Tackles Retirement Income Funds

Tom Lauricella tackles retirement income funds for the Saturday WSJ Fund Track column, drawing some much needed attention to a product line that is struggling to gain a foothold in the market. The article points out the funds' attempt to replicate the predictable payouts of pensions and annuities with the simplicity and liquidity of mutual funds.

He highlights Fidelity's Income Replacement Funds (launched in October) and to product lines not yet launched. Those include Russell Investments income-focused LifePoints target-date portfolios as well as expected funds from Vanguard Group and T. Rowe Price Group.

Boyce Greer, president of fixed-income and asset allocation at Fidelity, tells Lauricella that Fidelity's funds will tell shareholders each year what they will pay for the following 12 months. Those funds will also dip into principal if need be.

Meanwhile, Vanguard's funds will maintain their NAV and use their income for payments.

Lauricella also interviewed Ellen Rinaldi, head of Vanguard's investment counseling and research group; T. Rowe's John Cammack and Russell's Timothy Noonan. Both Cammack and Noonan both noted that the devil will be in the predictability of the income stream the funds generate.

"There's no question that performance of the portfolio in its initial years is a big determinant," says Noonan about the income streams.

Our thought is that the performance will also likely determine whether the funds gain traction in the market.

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