Our Picks for Best Retirement Fund

A Smarter Future with the Best Retirement Fund

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John E Chambers

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Planning for retirement isn’t just about thinking about which retirement village you’ll relax in or the overseas trips you’ll finally get to take, but there’s a serious side to it, too.

A retirement fund is an easy way to prepare yourself for the future and get a guaranteed income that’ll see you through your twilight years comfortably.

What is the best retirement fund?

Choosing the right fund to invest in for your retirement requires an individual approach, as you’ll need to consider things when you plan on retiring and how much you will make in contributions.

Whichever one you choose, you want to be sure that it will provide a steady income for you when you retire, so it has to be reliable.

If you’ve already spent some time looking at retirement fund options and feel overwhelmed by the number of choices, this guide can help. We’ve hand-picked just five top performers when it comes to the best funds for income retirement so you’ll feel prepared for your financial future.

With one of the best funds for retirement income in your pocket and enough money to live off comfortably, there’s no need to fear your golden years.

Any of these funds can help you earn a steady income when you retire and make up part of your financial portfolio, with something out there to suit all incomes and goals.

Best Overall: American Balanced Fund

Short summary

American Balanced Fund continues to come out on top when looking for the best retirement funds, and its 2.2 million members and $108 billion in assets is proof of that.

This is a fund designed for long-term growth and is especially ideal for retirement investors, with a third of its investments in cash, another third in bonds, and the other 60% in stocks including technology, healthcare, and energy options.

American Balanced Fund has proven itself to investors over the years and is especially good if you want long-term growth. They’ve found a healthy balance between steadily growing capital and providing an income for their members, both of which are great points for someone investing for retirement. If you’d rather not take a risk with a retirement fund, this is one of the better options.

Another great thing about American Balanced Fund is that you don’t have to get in too early to start earning an income for your retirement. With most of their bonds being short and intermediate-term securities that are set to mature in the next 10 years, you can get in here closer to retirement and still make a good income when you’re no longer working.

There are some downsides to this investment option that might not make it a good fit for every future retiree. According to reviews, American Balanced Fund has a maximum limit on how much stock you’re able to invest in, so if your plan for a retirement fund had a lot of stocks in it, you might not be impressed. This could limit just how much you’re able to make for your future, and it may be hard to reach your financial goals

Another potential negative is that American Balanced Fund is that there are added costs with their Class A shares. Having these costs on top of the regular fees means they won’t perform as well as you’d like, and if you’re hoping for a short-term savings plan for retirement, they could end up doing more damage than good.

These issues aside, American Balanced Fund remains one of the top choices for retirement funds in the US and it currently has 2.2 million shareholder accounts that vouch for its excellence. If you’re looking for a reliable and safe place to invest your money so that you can live comfortably in retirement, American Balanced Fund provides the best of both worlds.

Best Overall
American Balanced Fund
4.6/5
American Balanced Fund

Runner Up: Dodge and Cox Income Fund

Short summary

Dodge and Cox are one of the most successful wealth managed firms in the US and their Income Fund is a clear favorite.

This fund manages over $69 billion and invests in a mixed portfolio that includes 20% in high yield and junk bonds, just for something different. Currently, Dodge and Cox Income Fund yields a return for investors of around 8.31% annually which is good news for those wanting to save some cash for retirement.

On a performance basis, Dodge and Cox is a serious contender, and it’s known for consistently achieving above-average returns for its members. Unlike others that might do this but will sometimes have less than quality investments, this fund is all about having top tier fixed income holdings that give their members peace of mind. If you want a fund that you can invest your retirement money into and never have to give it a second thought, this is it.

The best thing about this income fund is that while it continually outperforms its peers and receives four star ratings, it does so while still being relatively low in fees. One of the most important features you should look for in the best mutual funds for retirement income is that you’re not whittling away your savings in fees alone, and the Dodge and Cox Income Fund will guarantee this doesn’t happen.

One potential downside of this fund is that you need to put $2,500 as a minimum investment. Although this might not be so bad if you’ve already got some hefty savings, for those hoping to start small, it’ll mean you’re out of the race. Unless you plan on saving on the side just to get into this fund, there are others without such a high minimum investment required to get started.

As a fund that invests a large percentage in bonds, there may be some added risk here. As it’s common for funds that do this to lose some value with varying interest rates, you might be at risk of losing some of your principal. Therefore, you’ll want to seek some financial advice before putting all of your eggs into one basket with Dodge and Cox and their Income Fund.

If you prefer a tried and trusted retirement fund that has consistently performed at a safe level and managed to outdo its peers, the Dodge and Cox Income Fund is one of the best. Although their primary focus is investing in high yield bonds and you’ll need a pretty sizeable deposit to get involved, this will pay off over the long term if you’re looking for reliable retirement income in the future.

Best Overall
American Balanced Fund
4.6/5
American Balanced Fund

Alternative #1: Metropolitan West Total Return Bond Fund

Short summary

Metropolitan West’s Total Return Bond Fund is another great choice for retirees looking to the future, and it’s a smart option for maximizing returns in the long term.

The fund is managed by a team of veteran managers who have been in charge since it was created, and if you want something reliable and trusted, they deliver.

The investment policy of the Total Return Bond Fund sees it invest at least 80% of assets in fixed income and unrated securities, and the remaining 20% in securities that are less than investment grade.

As an intermediate term bond fund, this is a perfect choice for retirees who plan on leaving employment within 10 years. As it’s currently rated, their bonds have maturities between three and 10 years so you don’t have to wait forever to start living off your earnings. However, this means it’s probably not the best choice for those with over 10 years until retirement, so keep that in mind.

The Metropolitan West Total Return Bond Fund has one of the highest asset pools of any of the funds we’ve reviewed and it currently sits at around $90 billion. These assets are spread over more than 1,800 different holdings so you’ve got many pieces of pie earning you money. If you prefer a fund that has a healthy mix of investments, this one from Met West is ideal for your retirement.

However, this is another fund with a fairly high purchase price and you’ll need to commit to putting $5,000 of your savings in to get started. Although this will undoubtedly pay off in the long term, it’s a large chunk of money to come up with from our retirement fund or savings pool, and a huge risk for something people to take, so make sure you’re financially able to commit to the risk.

Another potential negative of the Metropolitan West Total Return Bond Fund is its performance in the last year, which is significantly less than it’s done over the last five years. In 2020, the fund returned just 1.05 percent, which isn’t that impressive when you stack it up against the competition and shows that it can be highly sensitive to falling rates. However, when looking for a retirement income fund, looking at the previous year alone isn’t enough of an indication of overall performance, even if it is worrying to some.

The Metropolitan West Total Return Bond Fund has an impressive amount of assets and a variety of holdings, giving you more chances to make money without putting all of your eggs in one basket. Although it has some downsides that you’ll have to weigh up, the overall strength of this fund and its suitability for retirees wanting to see maturities within 10 years makes the Total Return Bond Fund one of our top picks.

Best Overall
American Balanced Fund
4.6/5
American Balanced Fund

Alternative #2: Harbor Capital Appreciation Fund

Short summary

The Harbor Capital Appreciation Fund is a little different from the other retirement friendly funds we’ve seen, and their key focus is on blue chips.

At last count, their assets totaled over $40 billion which was shared amount 59 different holdings, and most of these are shares in larger companies. The fund has been managed by Spiros Segalas since 1990 and continues to show growth in their returns, year on year.

One of the best things about this retirement fund is that it’s invested in some of the most trusted names in the world of business which gives you peace of mind about where your money is going. Their current top five holdings are Tesla, Amazon, Apple, Shopify, and NVIDIA, so you don’t have to worry about any unknown or risky investments potentially holding your money back. Although it may sound boring to some, when you’re dealing with a retirement income and want to be sure you’ll have enough to live comfortably, this safe approach is sometimes best.

Another great thing about the Harbor Capital Appreciation Fund is their returns, with a recorded 43.18 in the previous year. When you compare this to other funds that aren’t even reaching over 10% at the moment, it’s a sign of what this type of investment can do for you. However, to see these types of returns you’ll need to be committed to the long run as they primarily invest in top performing companies that don’t have a lot of room to explode in a short time frame.

This fund is committed to long-term growth so it’s not as intermediate as others we’ve seen that might be better suited to retirees. According to Harbor, the average age of their growth equity client’s relationships is around 16 years, so it might be better suited to those who still have 10 to 15 years of work left. If you’re looking for something you can invest in now and reap rewards in just a few years, this won’t be it.

A potential downside to their share strategy is that there’s not a huge assortment of investments and although their focus on large and blue-chip companies has served them well recently, it may not always be that way. Some investors like knowing that their money is spread over an assortment of investments and if that sounds like your style, you probably won’t appreciate the narrow field of Harbor Capital in this fund.

If you don’t want to take a major risk with your retirement fund investment and would prefer to stick to blue-chip shares and better-known companies, the Harbor Capital Appreciation Fund is a safe bet. They’ve shown impressive returns in the last couple of years and can perform even better if given more than 10 years to mature, so consider adding this to your retirement portfolio if you have some time to kill.

Best Overall
American Balanced Fund
4.6/5
American Balanced Fund

Alternative #3: Fidelity Balanced Fund

Short summary

Fidelity Balanced Fund is one of the longest standing funds for retirees, with its inception back in 1986.

Today, the fund uses a combination of 60% stocks and 40% bonds, and although this sometimes contradicts the other funds at Fidelity, it’s still successful. With total net assets of more than $37 billion it’s one of the smaller options we’ve reviewed in this regard, but still has solid returns and a long history of success.

This is the perfect retirement investment choice for those wanting a diverse fund that doesn’t put all of its eggs in one basket. The Fidelity Balanced Fund invests 60% of its assets in stocks and equity securities, 25% in fixed income senior securities, and the remainder is a mixture of bonds and other types of debt securities. As far as diversity goes, it doesn’t get much better than Fidelity if you want to invest in it all.

The fees are low for this fund which is another bonus and their expense ratio is 0.55 percent which has been classified by Morningstar as low. For a fund that’s performing as well as it has been, especially during a tumultuous previous 12 months, knowing that you’re not spending much to be part of this fund is another financial win.

One potential drawback of this fund is that it scores higher in terms of risk, and especially when you stack it up against the others we’ve reviewed. This type of high risk investment might be better suited to those looking to make more gains in the next 10 years as it has a higher gain rating, but as a longer term investment option, it could be too much of a risk. You’ll need to consider what you’re investing now and when you’ll rely on this income for your retirement, as it might not always be a good fit.

You’ll need a minimum $2,500 investment to get connected with Fidelity Balanced Fund which might not be feasible for everyone. This type of investment would only be worth saving for if you planned on holding it for at least 10 years, otherwise there are other funds with a lower minimum that could provide better gains. However, it’s worth noting that although the startup investment is high, there’s no minimum on any future deposits you make into the fund, which is a good thing.

Fidelity Balanced Fund might do things a little differently than the other Fidelity funds on the market, but its unique approach has served its members and manager well for the last 30+ years and it remains a popular choice for a retirement investment fund. If your style of investing favors a 60/40 split of stocks and bonds and you prefer to have a more diverse selection in your portfolio, the Balanced Fund from Fidelity will be right up your alley.

Best Overall
American Balanced Fund
4.6/5
American Balanced Fund

Retirement Funds FAQ

 

Retirement Income

A retirement fund is a sensible way to plan for your future, and no matter what stage of life you invest in one, you’ll be able to reap the rewards when you choose correctly.

If you’re brand new to retirement funds and still have questions about how they work or finding the best index funds for retirement income, we’ve answered a few commonly asked ones that can give you a better understanding.

What Is The Best Investment For Retirement Income?

The best approach for choosing investments that will serve as your retirement income is to combine a healthy mix of a few.

For a solid retirement income portfolio, it’s best to have as much money as possible invested in bonds, stocks, funds, savings accounts, property, and real estate trusts, depending on your income goals.

Where Should I Put Retirement Money Now?

The most popular place to put retirement funds for employed people in the US is in a tax-advantaged retirement fund, like an IRA, 401(k), or some other type of fund or managed investment.

This enables your money to continue accruing while you’re still working and once you retire, you can withdraw it from the fund if you want to and use it as you wish.

How Can I Retire With No Money?

Best Investment For Retirement Income

It’s not recommended to retire without any money or savings in the bank, otherwise, you’ll need to live solely on Social Security payments provided by the US government, which may not be adequate to live comfortably.

Although you can make this minimum amount of money work on a tight budget, it’s smarter to start saving small amounts of cash or start investing while you’re still employed so that you can be financially secure when you retire.

What Are The Two Most Popular Personal Retirement Plans?

Two of the most popular personal retirement plans in the US are traditional pensions and 401(k) plans, each offering something unique.

However, there are lots of options out there for a retirement plan including IRAs, cash balance, and guaranteed income annuities, all of which can provide you with a solid income when you retire depending on what your needs are.

Funding Your Future

There’s nothing like the peace of mind you get knowing your financial situation will be taken care of when you retire, and investing in a fund designed for retirement is one easy way to achieve it.

With our picks for top performing funds for your future and one carefully chosen for your situation, you’ll be able to plan for a retirement where money isn’t a concern.

American Balanced Fund
4.6/5

American Balanced Fund

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John E Chambers

John E Chambers is an experienced financial advice expert. Born in Chicago, he has a master's in Industrial Finance, but he has spent decades offering investment advice to businesses and individuals alike. He is the founder of RetireeWorkforce.com and wants the website to be valuable for retirement advice. In addition, he writes articles that help users jump-start their retirement plans and choose the best investment options. If not pondering over stock market statistics or reading some magazines, you can find John spending time with his family. As an early retiree, John also offers unique insights into what post-retirement life is like.